# UNITED STATESSECURITIES AND EXCHANGE
COMMISSION Washington, D.C. 20549

# Form 10-KSB

| | (Mark One)
| | ----------

|X | Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ------------------------------------------------------------------------------

| | For the fiscal year ended December 31, 2005
| | -------------------------------------------

| | or
| | --

| | Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934
| | ----------------------------------------------------------------------------------
| | For the transition period from __________ to ________                             

Commission file no.
333-127409

BankGreenville Financial Corporation
(Name of Small Business Issuer in Its Charter)

|South Carolina                    |  | 20-2645711         
|--------------------------------- |  | -------------------
|(State or Other Jurisdiction      |  | (I.R.S. Employer   
|of Incorporation or Organization) |  | Identification No.)

|499 Woodruff Road                        |  |           
|---------------------------------------- |  | ----------
|Greenville, South Carolina               |  | 29607     
|(Address of Principal Executive Offices) |  | (Zip Code)

(864) 335-2200Issuers Telephone Number, Including Area Code

Securities registered pursuant to Section 12(b) of the Act:   None
Securities registered pursuant to Section 12(g) of the Act:

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) filed
all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes      No

Check if there is no disclosure of
delinquent filers in response to Item 405 of Regulation S-B 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.

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

State issuers revenue for its
most recent fiscal year. $16,546

The estimated aggregate market value of the Common Stock held by non-affiliates (shareholders holding less than
5% of an outstanding class of stock, excluding directors and executive officers) of the Company on March 14, 2006
was $10,812,025.  This calculation is based upon an estimate of the fair market value of the Common Stock of
$10.85 per share, which was the price of the last trade of which managment is aware prior to this date.

The number of shares outstanding of
the issuers one class of common equity was 1,180,000 shares at March 14, 2006.

DOCUMENTS INCORPORATED
BY REFERENCE None

Transitional Small Business Disclosure Format.   (Check one):   Yes      No

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# Part I Item 1. Description of
Business

This
Report contains statements which constitute forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and the Securities Exchange Act of 1934.
These statements are based on many assumptions and estimates and are not guarantees of
future performance. Our actual results may differ materially from those projected in any
forward-looking statements, as they will depend on many factors about which we are unsure,
including many factors which are beyond our control. The words may,
would, could, will, expect,
anticipate, believe, intend, plan, and
estimate, as well as similar expressions, are meant to identify such
forward-looking statements. Potential risks and uncertainties include, but are not limited
to, those described below under Risk Factors.

# General

BankGreenville
Financial Corporation was incorporated in South Carolina in March 2005 for purposes of
operating as a bank holding company. Our wholly-owned subsidiary, BankGreenville,
commenced business on January 30, 2006, and is primarily engaged in the business of
accepting savings, demand, and time deposits and providing mortgage, consumer and
commercial loans to the general public.

# Risk Factors

We are a new bank that
has incurred losses to date, and there is a risk we may never become profitable.

Our
bank is a de novo bank that began operations in January 2006. As is typical with most new
banks, we incurred substantial start-up expenses and are still operating with an
accumulated deficit. In order for us to become profitable, we will need to attract a large
number of clients to deposit and borrow money. Our future profitability is also dependent
on numerous other factors including the continued success of the economy of the community
and favorable government regulation. While the economy in this area has been strong in
recent years, an economic downturn in the area would hurt our business. We are also a
highly regulated institution. Our ability to grow and achieve profitability may be
adversely affected by state and federal regulations that limit a banks right to make
loans and purchase securities. Although we expect to become profitable in our third year
of operation, there is a risk that a deterioration of the local economy or adverse
government regulation could affect our plans. If this happens, we may never become
profitable and you will lose part or all of your investment.

Our decisions regarding
credit risk and reserves for loan losses may materially and adversely affect our business.

Making
loans and other extensions of credit is an essential element of our business. Although we
seek to mitigate risks inherent in lending by adhering to specific underwriting practices,
our loans and other extensions of credit may not be repaid. The risk of nonpayment is
affected by a number of factors, including:

| | o | the duration of the credit;
| | - | ---------------------------

| | o | credit risks of a particular client;
| | - | ------------------------------------

| | o | changes in economic and industry conditions; and
| | - | ------------------------------------------------

| | o | in the case of a collateralized loan, risks resulting from uncertainties about the future value of
the collateral.
| | - | ------------------------------------------------------------------------------------------------------------------

We
attempt to maintain an appropriate allowance for loan losses to provide for potential
losses in our loan portfolio. We periodically determine the amount of the allowance based
on consideration of several factors, including:

| | o | an ongoing review of the quality, mix, and size of our overall loan portfolio;
| | - | ------------------------------------------------------------------------------

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| | o | our historical loan loss experience;
| | - | ------------------------------------

| | o | evaluation of economic conditions;
| | - | ----------------------------------

| | o | regular reviews of loan delinquencies and loan portfolio quality; and
| | - | ---------------------------------------------------------------------

| | o | the amount and
quality of collateral, including guarantees, securing the loans.
| | - | -------------------------------------------------------------------------------

There
is no precise method of predicting credit losses; therefore, we face the risk that
charge-offs in future periods will exceed our allowance for loan losses and that
additional increases in the allowance for loan losses will be required. Additions to the
allowance for loan losses would result in a decrease of our net income, and possibly our
capital.

We are dependent on Russ
Williams, Paula King and our initial organizing directors and the loss of one or more ofthese
key individuals could curtail our growth and adversely affect our prospects.

Our
growth and development will largely be the result of the contributions of our chief
executive officer, Russ Williams and our chief financial officer, Paula King. The
performance of community banks, like BankGreenville, is often dependent upon the ability
of executive officers to promote the bank in the local market area. Mr. Williams and Ms.
King have extensive and long-standing ties within our primary service areas and will
provide us with an important medium through which to market our products and services. If
we lose the services of Mr. Williams or Ms. King, they would be difficult to replace and
our business and development could be materially and adversely affected. We have
employment agreements with Mr. Williams and Ms. King and carry $500,000 of life insurance
on each of these officers, payable to the bank.

Additionally,
our directors community involvement, diverse backgrounds, and extensive local
business relationships are important to our success. If any of our directors discontinues
his or her relationship with us, or if the composition of our board of directors changes
materially, our growth could be adversely affected.

Lack of seasoning of our
loan portfolio may increase the risk of credit defaults in the future.

Due
to our short operating history, the loans in our loan portfolio and our lending
relationships are of relatively recent origin. In general, loans do not begin to show
signs of credit deterioration or default until they have been outstanding for some period
of time, a process we refer to as seasoning. As a result, a portfolio of older
loans will usually behave more predictably than a newer portfolio. Because our loan
portfolio is new, the current level of delinquencies and defaults may not be
representative of the level that will prevail when the portfolio becomes more seasoned,
which may be higher than current levels. If delinquencies and defaults increase, we may be
required to increase our provision for loan losses, which would adversely affect our
results of operations and financial condition.

We
face strong competition for clients, which could prevent us from obtaining clients and
may cause us to payhigher interest rates to attract clients.

The
banking business is highly competitive, and we experience competition in our market from
many other financial institutions. We compete with commercial banks, credit unions,
savings and loan associations, mortgage banking firms, consumer finance companies,
securities brokerage firms, insurance companies, money market funds, and other mutual
funds, as well as other super-regional, national, and international financial institutions
that operate offices in our primary market areas and elsewhere. We compete with these
institutions both in attracting deposits and in making loans. In addition, we have to
attract our client base from other existing financial institutions and from new residents.
Many of our competitors are well-established, larger financial institutions. These
institutions offer some services, such as extensive and established branch networks, that
we do not currently provide. There is a risk that we will not be able to compete
successfully with other financial institutions in our market, and that we may have to pay
higher interest rates to attract deposits, resulting in reduced profitability. In
addition, competitors that are not depository institutions are generally not subject to
the extensive regulations that apply to us.

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We are subject to
extensive regulation that could limit or restrict our activities. This regulation is forprotection
of the banks depositors and not for the investors.

We
operate in a highly regulated industry and are subject to examination, supervision, and
comprehensive regulation by various regulatory agencies. Our compliance with these
regulations is costly and restricts certain of our activities, including payment of
dividends, mergers and acquisitions, investments, loans and interest rates charged,
interest rates paid on deposits, and locations of offices. We are also subject to
capitalization guidelines established by our regulators, which require us to maintain
adequate capital to support our growth.

The
laws and regulations applicable to the banking industry could change at any time, and we
cannot predict the effects of these changes on our business and profitability. Because
government regulation greatly affects the business and financial results of all commercial
banks and bank holding companies, our cost of compliance could adversely affect our
ability to operate profitably.

Although
we are subject to extensive and comprehensive regulation by various banking regulatory
agencies such as the FDIC and the South Carolina Board of Financial Institution, the
purpose of these banking regulatory agencies is to protect and insure the interests and
deposits of our banks depositors. These agencies do not consider preserving or
maximizing the investment made by the companys investors when regulating the
banks activities.

We will face risks with
respect to future expansion and acquisitions or mergers.

Although
we do not have any current plans to do so, we may seek to acquire other financial
institutions or parts of those institutions. We may also expand into new markets or lines
of business or offer new products or services. These activities would involve a number of
risks, including:

| | o | taking additional time and creating expense associated with identifying and evaluating
potential acquisitions and merger partners;
| | - | ----------------------------------------------------------------------------------------------------------------------------------

| | o | using inaccurate estimates and judgments to evaluate credit, operations, management, and
market risks with respect to the target institution or assets;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | diluting our existing shareholders in an acquisition;
| | - | -----------------------------------------------------

| | o | taking additional time and creating expense associated with evaluating new markets for
expansion, hiring experienced local management, and opening new offices, as there may be a
substantial time lag between these activities before we generate sufficient assets and
deposits to support the costs of the expansion;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | taking a significant amount of time negotiating a transaction or working on expansion
plans, resulting in managements attention being diverted from the operation of our
existing business;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | taking time and creating expense integrating the operations and personnel of the combined
businesses;
| | - | -----------------------------------------------------------------------------------------------------

| | o | creating an adverse short-term effect on our results of operations; and
| | - | -----------------------------------------------------------------------

| | o | losing key
employees and clients as a result of an acquisition that is poorly received.
| | - | ---------------------------------------------------------------------------------------

We
have never acquired another institution before, so we lack experience in handling any of
these risks. There is also a risk that any expansion effort will not be successful.

The costs of being an SEC
registered company are proportionately higher for small companies such as BankGreenville Financial
Corporation because of the requirements imposed by the Sarbanes-Oxley Act.

The
Sarbanes-Oxley Act of 2002 and the related rules and regulations promulgated by the
Securities and Exchange Commission have increased the scope, complexity, and cost of
corporate governance, reporting, and disclosure practices. These regulations are
applicable to our company. We expect to experience increasing compliance costs, including
costs related to internal controls, as a result of the Sarbanes-Oxley Act. These

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necessary costs are proportionately
higher for a company of our size and will affect our profitability more than that of some
of our larger competitors.

An economic downturn,
especially one affecting Greenville County and the surrounding communities, could reduceour
client base, our level of deposits, and demand for financial products such as loans.

Our
success will significantly depend upon the growth in population, income levels, deposits,
and housing starts in our market and the surrounding communities. If the community in
which we operate does not grow or if prevailing economic conditions locally or nationally
are unfavorable, our business may not succeed. An economic downturn would likely
contribute to the deterioration of the quality of our loan portfolio and reduce our level
of deposits, which in turn would hurt our business. If an economic downturn occurs in the
economy as a whole, or in our primary market, borrowers may be less likely to repay their
loans as scheduled. Moreover, the value of real estate or other collateral that may secure
our loans could be adversely affected. Unlike many larger institutions, we are not able to
spread the risks of unfavorable local economic conditions across a large number of
diversified economies. An economic downturn could, therefore, result in losses that
materially and adversely affect our business.

Changes in prevailing
interest rates may reduce our profitability.

Our
results of operations depend in large part upon the level of our net interest income,
which is the difference between interest income from interest-earning assets, such as
loans and mortgage-backed securities, and interest expense on interest-bearing
liabilities, such as deposits and other borrowings. Depending on the terms and maturities
of our assets and liabilities, a significant change in interest rates could have a
material adverse effect on our profitability. Many factors cause changes in interest
rates, including governmental monetary policies and domestic and international economic
and political conditions. While we intend to manage the effects of changes in interest
rates by adjusting the terms, maturities, and pricing of our assets and liabilities, our
efforts may not be effective and our financial condition and results of operations could
suffer.

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# General

We
formally initiated activity to organize BankGreenville in February 2005 and
incorporated BankGreenville Financial Corporation as a South Carolina corporation on
March 18, 2005 to function as a holding company to own and control all of the capital
stock of BankGreenville. We initially will engage in no business other than owning and
managing the bank.

We
have chosen this holding company structure because we believe it will provide flexibility
that would not otherwise be available. Subject to Federal Reserve Board debt guidelines,
the holding company structure can assist the bank in maintaining its required capital
ratios by borrowing money and contributing the proceeds to the bank as primary capital.
Additionally, a holding company may engage in non-banking activities that the Federal
Reserve Board has deemed to be closely related to banking. Although we do not presently
intend to engage in other activities, we will be able to do so with a proper notice or
filing to the Federal Reserve if we believe that there is a need for these services in our
market area and that the activities could be profitable.

We
filed applications with the South Carolina Board of Financial Institutions to organize the
bank as a South Carolina state bank and with the FDIC to obtain deposit insurance on
June 7, 2005. We received preliminary approval from the South Carolina Board of
Financial Institutions in September 2005 and from the FDIC in October 2005. We also filed
an application with the Board of Governors of the Federal Reserve System for approval to
become a bank holding company and in December 2005 received preliminary approval. We
received final regulatory approval from these regulators in January 2006, and opened the
bank on January 30, 2006. The bank engages in general commercial and consumer banking
business as described below.

# Marketing Opportunities

Our
service area is Greenville County, with a primary focus on the City of Greenville and the
surrounding bedroom communities of Mauldin, Simpsonville, Greer and Taylors. Our office is
located at a centrally located site near the intersection of Woodruff Road and Laurens
Road within the Greenville city limits. This site sits on the edge of the recently
announced 1,100-acre Verdae master planned development. Woodruff Road is a well traveled
thoroughfare with reasonable traffic counts and excellent accessibility but this new
development effort is expected to increase the quality of this already excellent site. We
are temporarily located in a modular facility on a site adjacent to our future bank
permanent headquarters site. Our anticipated expansion plans include opening our permanent
main office in the first year of operation. We do not currently have plans to establish
another branch office in the next three years. We plan to take advantage of existing
contacts and relationships with individuals and companies in this area to more effectively
market the services of the bank.

We
are focusing on providing high quality, consultative service to small-to-medium-sized
businesses and the professional segment of the growing Greenville area market and are
offering a full complement of business and consumer services while placing particular
emphasis on that portion of the market that values small business expertise and
relationship-oriented service. We believe a community bank that focuses on personalized
client service can better serve the local business community than a branch or subsidiary
of a larger banking organization headquartered outside of the city or state.

The
Greenville banking market has seen a significant amount of consolidation as larger
out-of-market institutions have acquired local community banks. While larger banks may
target the small-and-medium-sized business market, we believe that through more
personalized client service and local decision making, we can effectively source loan and
deposit business from these clients, even without a large operational infrastructure. We
are targeting businesses with less than $15 million in annual revenues as well as
their related owners and employees. Through our relationships and contacts in and around
Greenville, we believe that we can attract business and consumer banking clients who
desire consistent and personal banking relationships.

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# Location and Service Area

Our
permanent headquarters site is located at the corner of Woodruff Road and Rocky Slope Road
near the 1,100-acre Verdae master planned development. We purchased approximately 1.23
acres on January 30, 2006, and our headquarters building will be approximately 10,700
square feet. We expect to complete construction in the fourth quarter of 2006. We opened
on January 30, 2006 and are currently in a temporary full-service banking facility on a
site adjacent to the permanent headquarters site.

# Lending Activities

General.
          We emphasize a range of lending services, including real estate, commercial, and
          equity-line and consumer loans to individuals, small-to-medium-sized businesses,
          and professional concerns that are located in or conduct a substantial portion
          of their business in the banks market area.

Lending
Limits. The banks lending activities are subject to a variety of lending limits
imposed by state law. In general, the bank is subject to a legal limit on loans to a
single borrower equal to 15% of the banks capital and unimpaired surplus. Different
limits may apply based on the type of loan or the nature of the borrower, including the
borrowers relationship to the bank. These limits will increase or decrease as the
banks capital increases or decreases. Unless the bank is able to sell participations
in its loans to other financial institutions, the bank will not be able to meet all of the
lending needs of loan clients requiring aggregate extensions of credit above these limits.

Loan
Approval and Review. Our loan approval policies provide for various levels of officer
lending authority. When the amount of aggregate loans to a single borrower exceeds that
individual officers lending authority, the loan request is considered and approved
by an officer with a higher lending limit or the board of directors loan committee.
We do not make any loans to any director of the bank unless the loan is approved by the
board of directors of the bank and is made on terms not more favorable to the person than
would be available to a person not affiliated with the bank. The bank currently adheres to
Federal National Mortgage Association and Federal Home Loan Mortgage Corporation
guidelines in its mortgage loan review process, but may choose to alter this policy in the
future. The bank expects to sell residential mortgage loans that it originates on the
secondary market.

Credit
Risk. The principal credit risk associated with each category of loans is the
creditworthiness of the borrower. Borrower creditworthiness is affected by general
economic conditions and the strength of the manufacturing, services, and retail market
segments. General economic factors affecting a borrowers ability to repay include
interest, inflation, employment rates, and the strength of local and national economy, as
well as other factors affecting a borrowers clients, suppliers, and employees.

Loan
Distribution. We estimate that our initial percentage distribution of our loans for
the first year will be as follows:

|                                | 
|------------------------------- | 
|Real Estate                     | 
|Commercial Loans                | 
|Equity Lines and Consumer Loans | 
|Residential Mortgage Loans      | 
|                                | 
|Total                           | 
|                                | 

These are estimates only. Our actual
deposit and loan distribution will depend on our clients and vary initially and over time.

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Allowance
for Loan Losses. We maintain an allowance for loan losses, which we have established
through a provision for loan losses charged against income. We charge loans against this
allowance when we believe that the collectibility of the principal is unlikely. The
allowance is an estimated amount that we believe will be adequate to absorb losses
inherent in the loan portfolio based on evaluations of its collectibility. Initially, our
allowance for loan losses is approximately 1.50% of the average outstanding balance of our
loans, based on our consideration of several factors, including regulatory guidelines,
expected mix of our loan portfolio, and evaluations of local economic conditions as well
as peer data. Over time, we will periodically determine the amount of the allowance based
on our consideration of several factors, including:

 an ongoing review of the
quality, mix, and size of our overall loan portfolio;  our historical loan loss
experience;  evaluation of economic conditions;  specific problem loans and
commitments that may affect the borrowers ability to pay;  regular reviews of
loan delinquencies and loan portfolio quality by our internal auditors and our bank and the amount and quality of collateral, including guarantees, securing the loans.

Real
Estate Loans. We expect that loans secured by first or second mortgages on real estate
will make up approximately 75% of the banks loan portfolio. These loans generally
include commercial real estate loans, construction and development loans, and residential
real estate loans secured by first or second mortgages on real estate. Each of these
categories is discussed in more detail below, including their specific risks. Interest
rates for all categories may be fixed or adjustable, and are more likely to be fixed for
shorter-term loans. The bank generally charges an origination fee on each loan.

Real
estate loans are subject to the same general risks as other loans. Real estate loans are
also sensitive to fluctuations in the value of the real estate securing the loan. On first
and second mortgage loans we do not advance more than regulatory limits. We require a
valid mortgage lien on all real property loans along with a title policy or
attorneys opinion which insures the validity and priority of the lien. We also
require borrowers to obtain hazard insurance policies and flood insurance if applicable.
Additionally, certain types of real estate loans have specific risk characteristics that
vary according to the collateral type securing the loan and the terms and repayment
sources for the loan.

We
have the ability to originate some real estate loans for sale into the secondary market.
We can limit our interest rate and credit risk on these loans by locking the interest rate
for each loan with the secondary investor and receiving the investors underwriting
approval prior to originating the loan.

| | 
Commercial Real Estate Loans. Commercial real estate loans generally have terms of
five years or less, although payments may be structured on a longer amortization basis.
Inherent in commercial real estate loans credit risk is the risk that the primary
source of repayment, the operating companys cash flow or the cash flow from the real
estate, will be insufficient to service the debt. If a real estate loan is in default, we
also run the risk that the value of a commercial real estate loans secured real
estate will decrease, and thereby be insufficient to satisfy the loan. To mitigate these
risks, we evaluate each borrower on an individual basis and attempt to determine its
business risks and credit profile. We attempt to reduce credit risk in the commercial real
estate portfolio by emphasizing loans on owner-occupied office and retail buildings where
the loan-to-value ratio is established by independent appraisals. We typically review the
personal financial statements of the principal owners and require their personal
guarantees. These reviews often reveal secondary sources of payment and liquidity to
support a loan request. Risks associated with commercial real estate loans include
fluctuations in the value of the real estate, new job creation trends, tenant vacancy
rates, and the quality of the borrowers management. We seek to limit risk by
analyzing borrowers cash flow and collateral value on an ongoing basis.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 
Construction and Development Real Estate Loans. We offer adjustable and fixed rate
residential and commercial construction loans to builders and developers and to consumers
who wish to build their own home. The term of construction and development loans is
generally limited to 18 months, although
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | payments
may be structured on a longer amortization basis. Most loans mature and require payment in
full upon the sale of the property. Loan proceeds would typically be disbursed based on
the percentage of completion and only after the project has been inspected by an
experienced construction lender or independent appraiser. Construction and development
loans generally carry a higher degree of risk than long term financing of existing
properties. Repayment usually depends on the ultimate completion of the project within
cost estimates and on the sale of the property. Risks associated with construction loans
include fluctuations in the value of real estate, mismanaged construction, rising interest
rates which may prevent sale of the property, and failure to sell completed projects in a
timely manner.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | We
attempt to reduce risk by obtaining personal guarantees where possible, and by keeping the
loan-to-value ratio of the completed project below specified percentages. We may also
reduce risk by selling participations in larger loans to other institutions when possible.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 
Residential Real Estate Loans. These loans generally have longer terms, up to
30 years. We offer fixed and adjustable rate mortgages, and we intend to sell most or
all of the residential real estate loans that we generate in the secondary market soon
after we originate them. We do not intend to retain servicing rights for these loans.
Inherent in residential real estate loans credit risk is the risk that the primary
source of repayment, the residential borrowers cash flow, will be insufficient to
service the debt. If a real estate loan is in default, we also run the risk that the value
of a residential real estate loans secured real estate will decrease, and thereby be
insufficient to satisfy the loan. To mitigate these risks, we evaluate each borrower on an
individual basis and attempt to determine its credit profile. By selling these loans in
the secondary market, we can significantly reduce our exposure to credit risk because the
loans will be underwritten through a third party agent without any recourse against the
bank.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Commercial
Loans. The bank makes loans for commercial purposes in various lines of businesses. We
focus our efforts on commercial loans of $1,000,000 or less. The terms of these loans vary
by purpose and by type of underlying collateral.

| | 
Equipment Loans. We typically make equipment loans for a term of five years or less
at fixed or variable rates, with the loan fully amortized over the term and secured by the
financed equipment. We expect that with appropriate loan-to-value ratios there will be
sufficient collateral to compensate for fluctuations in the market value of the collateral
and will minimize losses that result from poor maintenance or the introduction of updated
equipment models into the market.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 
Working Capital Loans. Loans to support working capital typically have terms not
exceeding one year and are usually secured by accounts receivable, inventory, or personal
guarantees of the principals of the business. For loans secured by accounts receivable or
inventory, principal will typically be repaid as the assets securing the loan are
converted into cash, and in other cases principal will typically be due at maturity. The
quality of the commercial borrowers management and its ability to both properly
evaluate changes in the supply and demand characteristics affecting its markets for
products and services and to effectively respond to such charges are significant factors
in a commercial borrowers creditworthiness. General risks affecting a commercial
borrowers ability to repay include demand for the borrowers products and
services and changes in the local economy or industry in which the borrower operates.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We
also offer small business loans utilizing government enhancements such as the Small
Business Administrations 7(a) program and SBAs 504 and LowDoc
programs. These loans are typically partially guaranteed by the government which may help
to reduce the banks risk. Government guarantees of SBA loans will not exceed 80% of
the loan value, and will generally be less.

Consumer
Loans. The bank makes a variety of loans to individuals for personal and household
purposes, including secured and unsecured installment loans and revolving lines of credit
such as credit cards. Installment loans typically carry balances of less than $50,000 and
are amortized over periods up to 60 or more months. Consumer loans may be offered on a
single maturity basis where a specific source of repayment is available. Revolving loan
products typically require monthly payments of interest and a portion of the principal.

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We
also offer home equity loans. Our underwriting criteria for and the risks associated with
home equity loans and lines of credit are generally the same as those for first mortgage
loans. Home equity lines of credit typically have terms of 15 years or less, carry
balances less than $125,000, and may extend up to 90% of the available equity of each
property.

Consumer
loans are generally considered to have greater risk than first or second mortgages on real
estate because the value of the secured property may depreciate rapidly, they are often
dependent on the borrowers employment status as the sole source of repayment, and
some of them are unsecured. To mitigate these risks, we analyze selective underwriting
criteria for each prospective borrower, which may include the borrowers employment
history, income history, credit bureau reports, or debt to income ratios. If the consumer
loan is secured by property, such as an automobile loan, we attempt to offset the risk of
rapid depreciation of the collateral with a shorter loan amortization period. Despite
these efforts to mitigate our risks, consumer loans have a higher rate of default than
real estate loans. For this reason, we attempt to reduce our loss exposure to these types
of loans by limiting their sizes relative to other types of loans.

Relative
Risks of Loans. Each category of loan has a different level of credit risk. Real
estate loans are generally safer than loans secured by other assets because the value of
the underlying security, real estate, is generally ascertainable and does not fluctuate as
much as some other assets. Certain real estate loans are less risky than others.
Residential real estate loans are generally the least risky type of real estate loan,
followed by commercial real estate loans and construction and development loans.
Commercial loans, which can be secured by real estate or other assets, or which can be
unsecured, are generally more risky than real estate loans, but less risky than consumer
loans. Finally, consumer loans, which can also be secured by real estate or other assets,
or which can also be unsecured, are generally considered to be the most risky of these
categories of loans. Any type of loan which is unsecured is generally more risky than
secured loans. These levels of risk are general in nature, and many factors including the
creditworthiness of the borrower or the particular nature of the secured asset may cause
any type of loan to be more or less risky than another. Additionally, these levels of risk
are limited to an analysis of credit risk, and they do not take into account other risk
factors associated with making loans such as the interest rate risk inherent in long-term,
fixed-rate loans.

# Deposit Services

We
offer a full range of deposit services that are typically available in most banks and
savings and loan associations. These services include checking accounts, commercial
accounts, savings accounts, and other time deposits of various types, ranging from daily
money market accounts to longer-term certificates of deposit. The transaction accounts and
time certificates are tailored to our principal market area at rates competitive to those
offered in the Greenville area. In addition, we offer certain retirement account services,
including IRAs. We solicit these accounts from individuals, businesses, and other
organizations. We obtain these deposits through personal solicitation by our officers and
directors, direct mail solicitations, and advertisements published in the local media. We
do not initially intend to solicit brokered deposits.

Deposit
Distribution. We estimate that our initial percentage distribution of our deposits for
the first year will be as follows:

|                                                           | 
|---------------------------------------------------------- | 
|Demand Deposit, NOW accounts                               | 
|Savings & Money Market                                     | 
|Time Deposits                                              | 
|Consumer/Commercial DDA's Public/Gov't                     | 
|Consumer/Commercial Time and Savings Deposits Public/Gov't | 
|                                                           | 
|Total                                                      | 
|                                                           | 

10

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# Other Banking Services

We
offer cashiers checks, banking by mail, direct deposit of payroll and social
security checks, United States Savings Bonds, and travelers checks.  The bank is
associated with ATM networks, which allow the banks clients to use other bank ATMs,
known as foreign ATMs, throughout the country as well as internationally. We also waive
our clients foreign ATM charges for a certain number of monthly foreign ATM
transactions. We offer debit card and credit card services through a correspondent bank as
an agent for the bank. Additionally, we offer lines of credit, 24-hour telephone banking,
personal and corporate on-line banking and corporate cash management services as well as a
variety of loan types discussed herein under Lending Activities.

# Competition

We
compete with commercial banks, credit unions, savings and loan associations, mortgage
banking firms, consumer finance companies, securities brokerage firms, insurance
companies, money market funds, and other mutual funds, as well as other super-regional,
national, and international financial institutions that operate offices in our primary
market areas and elsewhere. We compete with these institutions both in attracting deposits
and in making loans. In addition, we have to attract our client base from other existing
financial institutions and from new residents. Many of our competitors are
well-established, larger financial institutions. These institutions offer some services,
such as extensive and established branch networks, that we do not currently provide. There
is a risk that we will not be able to compete successfully with other financial
institutions in our market, and that we may have to pay higher interest rates to attract
deposits, resulting in reduced profitability. In addition, competitors that are not
depository institutions are generally not subject to the extensive regulations that apply
to us.

# Employees

As
of March 14, 2006, we had 10 full-time employees and no part-time employees.

11

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# SUPERVISION AND
REGULATION

Both
the company and the bank are subject to extensive state and federal banking laws and
regulations that impose specific requirements or restrictions on and provide for general
regulatory oversight of virtually all aspects of our operations. These laws and
regulations are generally intended to protect depositors, not shareholders. The following
summary is qualified by reference to the statutory and regulatory provisions discussed.
Changes in applicable laws or regulations may have a material effect on our business and
prospects. Beginning with the enactment of the Financial Institutions Reform Recovery and
Enforcement Act in 1989 and followed by the FDIC Improvement Act in 1991 and the
Gramm-Leach-Bliley Act in 1999, numerous additional regulatory requirements have been
placed on the banking industry in the past several years, and additional changes have been
proposed. Our operations are affected by legislative changes and the policies of various
regulatory authorities. We cannot predict the effect that fiscal or monetary policies,
economic control, or new federal or state legislation may have on our business and
earnings in the future.

The
following discussion is not intended to be a complete list of all the activities regulated
by the banking laws or of the impact of such laws and regulations on our operations. It is
intended only to briefly summarize some material provisions.

# USA PATRIOT Act of 2002

In
October 2002, the USA PATRIOT Act of 2002 was enacted in response to the terrorist attacks
in New York, Pennsylvania, and Washington D.C. that occurred on September 11, 2001. The
PATRIOT Act is intended to strengthen U.S. law enforcements and the intelligence
communities abilities to work cohesively to combat terrorism on a variety of fronts.
The potential impact of the PATRIOT Act on financial institutions is significant and wide
ranging. The PATRIOT Act contains sweeping anti-money laundering and financial
transparency laws and imposes various regulations, including standards for verifying
client identification at account opening, and rules to promote cooperation among financial
institutions, regulators, and law enforcement entities in identifying parties who may be
involved in terrorism or money laundering.

# Check 21

On
October 28, 2003, President Bush signed into law the Check Clearing for the 21st Century
Act, also known as Check 21. Check 21 gives substitute checks, such as a
digital image of a check and copies made from that image, the same legal standing as the
original paper check. Some of the major provisions of Check 21 include:

| | o | allowing check truncation without making it mandatory;
| | - | ------------------------------------------------------

| | o | demanding that every financial institution communicate to accountholders in writing a
description of its substitute check processing program and their rights under the law;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | legalizing substitutions for and replacements of paper checks without agreement from
consumers;
| | - | -----------------------------------------------------------------------------------------------

| | o | retaining in place the previously mandated electronic collection and return
of checks between financial institutions only when individual agreements are in place;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | requiring that when accountholders request verification, financial institutions produce
the original check (or a copy that accurately represents the original) and demonstrate
that the account debit was accurate and valid; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | requiring recrediting of funds to an individuals account on the next business day
after a consumer proves that the financial institution has erred.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------

This
legislation will likely affect bank capital spending as many financial institutions assess
whether technological or operational changes are necessary to stay competitive and take
advantage of the new opportunities presented by Check 21.

12

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# BankGreenville Financial
Corporation

We
own 100% of the outstanding capital stock of the bank, and therefore are considered to be
a bank holding company under the federal Bank Holding Company Act of 1956 and the South
Carolina Banking and Branching Efficiency Act.

The
Bank Holding Company Act. Under the Bank Holding Company Act, we are subject to
periodic examination by the Federal Reserve and are required to file periodic reports of
our operations and any additional information that the Federal Reserve may require. Our
activities at the bank and holding company levels are limited to:

| | o | banking and managing or controlling banks;
| | - | ------------------------------------------

| | o | furnishing services to or performing services for our subsidiaries; and
| | - | -----------------------------------------------------------------------

| | o | engaging in other activities that the Federal Reserve determines to be so closely related
to banking and managing or controlling banks as to be a proper incident thereto.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Investments,
Control, and Activities. With certain limited exceptions, the Bank Holding Company Act
requires every bank holding company to obtain the prior approval of the Federal Reserve
before:

| | o | acquiring substantially all the assets of any bank;
| | - | ---------------------------------------------------

| | o | acquiring direct or indirect ownership or control of any voting shares of any bank if
after the acquisition it would own or control more than 5% of the voting shares of such
bank (unless it already owns or controls the majority of such shares); or
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | merging or consolidating with another bank holding company.
| | - | -----------------------------------------------------------

In
addition, and subject to certain exceptions, the Bank Holding Company Act and the Change
in Bank Control Act, together with regulations promulgated thereunder, require Federal
Reserve approval prior to any person or company acquiring control of a bank
holding company. Control is conclusively presumed to exist if an individual or company
acquires 25% or more of any class of voting securities of a bank holding company. Control
is rebuttably presumed to exist if a person acquires 10% or more, but less than 25%, of
any class of voting securities and either the company has registered securities under
Section 12 of the Securities Exchange Act of 1934 or no other person owns a greater
percentage of that class of voting securities immediately after the transaction. We do not
currently have a class of equity securities registered under Section 12 of the Securities
Exchange Act. Because as of December 31, 2005 we had only 21 shareholders of record, we do
not anticipate that we will register our class of common stock under Section 12 of the
Securities Exchange Act prior to April 2007. The regulations provide a procedure for
rebutting control when ownership of any class of voting securities is below 25%.

Under
the Bank Holding Company Act, a bank holding company is generally prohibited from engaging
in, or acquiring direct or indirect control of more than 5% of the voting shares of any
company engaged in, nonbanking activities unless the Federal Reserve Board, by order or
regulation, has found those activities to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. Some of the activities that the
Federal Reserve Board has determined by regulation to be proper incidents to the business
of a bank holding company include:

| | o | making or servicing loans and certain types of leases;
| | - | ------------------------------------------------------

| | o | engaging in certain insurance and
discount brokerage activities;
| | - | ----------------------------------------------------------------

| | o | performing certain data processing services;
| | - | --------------------------------------------

| | o | acting in
certain circumstances as a fiduciary or investment or financial adviser;
| | - | ----------------------------------------------------------------------------------

| | o | owning savings
associations; and
| | - | --------------------------------

| | o | making investments in certain corporations or projects designed primarily to promote
community welfare.
| | - | -------------------------------------------------------------------------------------------------------

13

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The
Federal Reserve Board imposes certain capital requirements on the company under the Bank
Holding Company Act, including a minimum leverage ratio and a minimum ratio of
qualifying capital to risk-weighted assets. These requirements are described
below under - BankGreenville  Capital Regulations. Subject to our
capital requirements and certain other restrictions, we are able to borrow money to make a
capital contribution to the bank, and these loans may be repaid from dividends paid from
the bank to the company. Our ability to pay dividends will be subject to regulatory
restrictions as described below in -BankGreenville Financial Corporation 
Dividends. We will also be able to raise capital for contribution to the bank by
issuing securities without having to receive regulatory approval, subject to compliance
with federal and state securities laws.

Source
of Strength; Cross-Guarantee. In accordance with Federal Reserve Board policy, we are
expected to act as a source of financial strength to the bank and to commit resources to
support the bank in circumstances in which we might not otherwise do so. Under the Bank
Holding Company Act, the Federal Reserve Board may require a bank holding company to
terminate any activity or relinquish control of a nonbank subsidiary, other than a nonbank
subsidiary of a bank, upon the Federal Reserve Boards determination that such
activity or control constitutes a serious risk to the financial soundness or stability of
any depository institution subsidiary of the bank holding company. Further, federal bank
regulatory authorities have additional discretion to require a bank holding company to
divest itself of any bank or nonbank subsidiaries if the agency determines that
divestiture may aid the depository institutions financial condition.

The
Gramm-Leach-Bliley Act. The Gramm-Leach-Bliley Act was signed into law on November 12,
1999. Among other things, the Act repealed the restrictions on banks affiliating with
securities firms contained in sections 20 and 32 of the Glass-Steagall Act. The Act also
permits bank holding companies that become financial holding companies to engage in a
statutorily provided list of financial activities, including insurance and securities
underwriting and agency activities, merchant banking, and insurance company portfolio
investment activities. The Act also authorizes activities that are
complementary to financial activities. We have not elected to become a
financial holding company.

The
Act is intended, in part, to grant to community banks certain powers as a matter of right
that larger institutions have accumulated on an ad hoc basis. Nevertheless, the Act may
have the result of increasing the amount of competition that we face from larger
institutions and other types of companies. In fact, it is not possible to predict the full
effect that the Act will have on us.

South
Carolina State Regulation. As a South Carolina bank holding company under the South
Carolina Banking and Branching Efficiency Act, we are subject to limitations on sale or
merger and to regulation by the South Carolina Board of Financial Institutions. We are not
required to obtain the approval of the Board prior to acquiring the capital stock of a
national bank, but we must notify them at least 15 days prior to doing so. We must receive
the Boards approval prior to engaging in the acquisition of a South Carolina state
chartered bank or another South Carolina bank holding company.

# BankGreenville

The
bank operates as a state bank incorporated under the laws of the State of South Carolina
and is subject to examination by the South Carolina Board of Financial Institutions.
Deposits in the bank are insured by the FDIC up to a maximum amount, which is generally
$100,000 per depositor subject to aggregation rules.

The
South Carolina Board of Financial Institutions and the FDIC regulate or monitor virtually
all areas of the banks operations, including:

| | o | security devices and procedures;
| | - | --------------------------------

| | o | adequacy of capitalization and loss reserves;
| | - | ---------------------------------------------

| | o | loans;
| | - | ------

| | o | investments;
| | - | ------------

14

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| | o | borrowings;
| | - | -----------

| | o | deposits;
| | - | ---------

| | o | mergers;
| | - | --------

| | o | issuances of securities;
| | - | ------------------------

| | o | payment of dividends;
| | - | ---------------------

| | o | interest rates payable on deposits;
| | - | -----------------------------------

| | o | interest rates or fees chargeable on loans;
| | - | -------------------------------------------

| | o | establishment of branches;
| | - | --------------------------

| | o | corporate reorganizations;
| | - | --------------------------

| | o | maintenance of books and records; and
| | - | -------------------------------------

| | o | adequacy of staff training to carry on safe lending and deposit gathering practices.
| | - | ------------------------------------------------------------------------------------

The
South Carolina Board of Financial Institutions requires the bank to maintain specified
capital ratios and imposes limitations on the banks aggregate investment in real
estate, bank premises, and furniture and fixtures. The South Carolina Board of Financial
Institutions also requires the bank to prepare quarterly reports on the banks
financial condition in compliance with its minimum standards and procedures.

Under
the FDIC Improvement Act, all insured institutions must undergo regular on-site
examinations by their appropriate banking agency. The cost of examinations of insured
depository institutions and any affiliates may be assessed by the appropriate agency
against each institution or affiliate as it deems necessary or appropriate. Insured
institutions are required to submit annual reports to the FDIC, their federal regulatory
agency, and their state supervisor when applicable. The FDIC Improvement Act directs the
FDIC to develop a method for insured depository institutions to provide supplemental
disclosure of the estimated fair market value of assets and liabilities, to the extent
feasible and practicable, in any balance sheet, financial statement, report of condition
or any other report of any insured depository institution. The FDIC Improvement Act also
requires the federal banking regulatory agencies to prescribe, by regulation, standards
for all insured depository institutions and depository institution holding companies
relating, among other things, to the following:

| | o | internal controls;
| | - | ------------------

| | o | information systems and audit systems;
| | - | --------------------------------------

| | o | loan documentation;
| | - | -------------------

| | o | credit underwriting;
| | - | --------------------

| | o | interest rate risk exposure; and
| | - | --------------------------------

| | o | asset quality.
| | - | --------------

Holding
companies which have been registered or have undergone a change in control within the past
two years or which have been deemed by the Federal Reserve Board to be troubled
institutions must give the Federal Reserve Board 30 days prior notice of the
appointment of any senior executive officer or director. Within the 30 day period, the
Federal Reserve Board, as the case may be, may approve or disapprove any such appointment.

Deposit
Insurance. The FDIC has adopted a risk-based assessment system for determining an
insured depository institutions insurance assessment rate. The system takes into
account the risks attributable to different categories and concentrations of assets and
liabilities. An institution is placed into one of three capital categories: (1) well
capitalized; (2) adequately capitalized; or (3) undercapitalized. The FDIC also assigns an
institution to one of three supervisory subgroups, based on the FDICs determination
of the institutions financial condition and the risk posed to the deposit insurance
funds. Assessments range from 0 to 27 cents per $100 of deposits, depending on the
institutions capital group and supervisory subgroup. In addition, the FDIC imposes
assessments to help pay off the $780 million in annual interest payments on the $8 billion
Financing Corporation (FICO) bonds issued in the late 1980s as part of the government
rescue of the thrift industry. New changes have been proposed recently regarding these
assessments, including an increase in the amount of the FDIC insurance, but at this time
it is not possible to predict whether the changes will be implemented or what their effect
would be. Generally, we expect that increases in deposit insurance premiums or

15

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changes in risk classification will
increase the banks cost of funds, and we may not be able to pass these costs on to
our clients. Although we will pay a quarterly FICO assessment, the FDIC assessment rate on
our bank deposits will initially be zero, but may change in the future. The FDIC may
increase or decrease the assessment rate schedule on a semiannual basis. An increase in
the BIF assessment rate could have a material adverse effect on our earnings, depending on
the amount of the increase.

The
FDIC may terminate its insurance of deposits if it finds that the institution has engaged
in unsafe and unsound practices, is in an unsafe or unsound condition to continue
operations, or has violated any applicable law, regulation, rule, order, or condition
imposed by the FDIC.

Transactions
With Affiliates and Insiders.The bank is subject to the provisions of Section 23A of
the Federal Reserve Act, which places limits on the amount of loans or extensions of
credit to, or investments in, or certain other transactions with, affiliates and on the
amount of advances to third parties collateralized by the securities or obligations of
affiliates. The aggregate of all covered transactions is limited in amount, as to any one
affiliate, to 10% of the banks capital and surplus and, as to all affiliates
combined, to 20% of the banks capital and surplus. Furthermore, within the foregoing
limitations as to amount, each covered transaction must meet specified collateral
requirements. Compliance is also required with certain provisions designed to avoid the
taking of low quality assets.

The
bank is subject to the provisions of Section 23B of the Federal Reserve Act which, among
other things, prohibits an institution from engaging in certain transactions with certain
affiliates unless the transactions are on terms substantially the same, or at least as
favorable to such institution or its subsidiaries, as those prevailing at the time for
comparable transactions with nonaffiliated companies. The bank is subject to certain
restrictions on extensions of credit to executive officers, directors, certain principal
shareholders, and their related interests. Such extensions of credit (i) must be made on
substantially the same terms, including interest rates and collateral, as those prevailing
at the time for comparable transactions with third parties and (ii) must not involve more
than the normal risk of repayment or present other unfavorable features.

The
Federal Reserve Board has recently issued Regulation W, which codifies prior regulations
under Sections 23A and 23B of the Federal Reserve Act and interpretative guidance with
respect to affiliate transactions. Regulation W incorporates the exemption from the
affiliate transaction rules but expands the exemption to cover the purchase of any type of
loan or extension of credit from an affiliate. In addition, under Regulation W:

| | o | a bank and its subsidiaries may not purchase a low-quality asset from an affiliate;
| | - | -----------------------------------------------------------------------------------

| | o | covered transactions and other specified transactions between a bank or its subsidiaries and an
affiliate
must be on terms and conditions that are consistent with safe and sound banking practices;
and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | with some exceptions, each loan or extension of credit by a bank to an affiliate must be
secured by collateral with a market value ranging from 100% to 130%, depending on the type
of collateral, of the amount of the loan or extension of credit.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Regulation
W generally excludes all nonbank and nonsavings association subsidiaries of banks from
treatment as affiliates, except to the extent that the Federal Reserve Board decides to
treat these subsidiaries as affiliates. Concurrently with the adoption of Regulation W,
the Federal Reserve Board has proposed a regulation which would further limit the amount
of loans that could be purchased by a bank from an affiliate to not more than 100% of the
banks capital and surplus. This regulation has not yet been adopted.

Dividends.       
          A South Carolina state bank may not pay dividends from its capital. All
          dividends must be paid out of undivided profits then on hand, after deducting
          expenses, including reserves for losses and bad debts. The bank is authorized to
          pay cash dividends up to 100% of net income in any calendar year without
          obtaining the prior approval of the South Carolina Board of Financial
          Institutions, provided that the bank received a composite rating of one or two
          at the last federal or state regulatory examination. The bank must

16

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obtain approval from the South
Carolina Board of Financial Institutions prior to the payment of any other cash dividends.
In addition, under the FDICIA, the bank may not pay a dividend if, after paying the
dividend, the bank would be undercapitalized.

Branching.       
          Under current South Carolina law, we may open branch offices throughout South
          Carolina with the prior approval of the South Carolina Board of Financial
          Institutions. In addition, with prior regulatory approval, the bank will be able
          to acquire existing banking operations in South Carolina. Furthermore, federal
          legislation has been passed that permits interstate branching by banks if
          allowed by state law, and interstate merging by banks. South Carolina law, with
          limited exceptions, currently permits branching across state lines through
          interstate mergers, but not de-novo branching across state lines.

Community
Reinvestment Act. The Community Reinvestment Act requires that, in connection with
examinations of financial institutions within their respective jurisdictions, a financial
institutions primary regulator, which is the FDIC for the bank, shall evaluate the
record of each financial institution in meeting the credit needs of its local community,
including low and moderate income neighborhoods. These factors are also considered in
evaluating mergers, acquisitions, and applications to open a branch or facility. Failure
to adequately meet these criteria could impose additional requirements and limitations on
our bank.

The
Gramm-Leach-Bliley Act. Under the Gramm-Leach-Bliley Act, subject to certain
conditions imposed by their respective banking regulators, national and state-chartered
banks are permitted to form financial subsidiaries that may conduct financial
or incidental activities, thereby permitting bank subsidiaries to engage in certain
activities that previously were impermissible. The Gramm-Leach-Bliley Act imposes several
safeguards and restrictions on financial subsidiaries, including that the parent
banks equity investment in the financial subsidiary be deducted from the banks
assets and tangible equity for purposes of calculating the banks capital adequacy.
In addition, the Gramm-Leach-Bliley Act imposes new restrictions on transactions between a
bank and its financial subsidiaries similar to restrictions applicable to transactions
between banks and nonbank affiliates.

The
Gramm-Leach-Bliley Act also contains provisions regarding consumer privacy. These
provisions require financial institutions to disclose their policy for collecting and
protecting confidential information. Clients generally may prevent financial institutions
from sharing personal financial information with nonaffiliated third parties except for
third parties that market an institutions own products and services. Additionally,
financial institutions generally may not disclose consumer account numbers to any
nonaffiliated third party for use in telemarketing, direct mail marketing, or other
marketing to the consumer.

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
loan operations are also subject to federal laws applicable to credit transactions, such
as:

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

| | o | the 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;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

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

In
addition, the deposit operations of the bank are subject to:

17

---

| | o | 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; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | the Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve Board to
implement that Act, which govern automatic deposits to and withdrawals from deposit
accounts and clients rights and liabilities arising from the use of automated teller
machines and other electronic banking services.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Capital
Regulations. The federal bank regulatory authorities have adopted risk-based capital
guidelines for banks and bank holding companies that are designed to make regulatory
capital requirements more sensitive to differences in risk profiles among banks and bank
holding companies and account for off-balance sheet items. The guidelines are minimums,
and the federal regulators have noted that banks and bank holding companies contemplating
significant expansion programs should not allow expansion to diminish their capital ratios
and should maintain ratios in excess of the minimums. The current guidelines require all
bank holding companies and federally-regulated banks to maintain a minimum risk-based
total capital ratio equal to 8%, of which at least 4% must be Tier 1 capital. Tier 1
capital includes common shareholders equity, qualifying perpetual preferred stock,
and minority interests in equity accounts of consolidated subsidiaries, but excludes
goodwill and most other intangibles and excludes the allowance for loan and lease losses.
Tier 2 capital includes the excess of any preferred stock not included in Tier 1 capital,
mandatory convertible securities, hybrid capital instruments, subordinated debt and
intermediate term-preferred stock, and general reserves for loan and lease losses up to
1.25% of risk-weighted assets.

The
Federal Reserve guidelines also contain an exemption from the capital requirements for
small bank holding companies. Currently, this exception applies to any bank holding
company with less than $150 million in consolidated assets, which includes BankGreenville
Financial Corporation. On February 27, 2006, the Federal Reserve approved a new rule
expanding the definition of a small bank holding company. The new definition
will include bank holding companies with less than $500 million in total assets. However,
bank holding companies will not qualify under the new definition if they (i) are engaged
in significant nonbanking activities either directly or indirectly through a subsidiary,
(ii) conduct significant off-balance sheet activities, including securitizations or
managing or administering assets for third parties, or (iii) have a material amount of
debt or equity securities (including trust preferred securities) outstanding that are
registered with the SEC. The new rule will be effective on March 30, 2006. Although we
have less than $500 million in assets, it is unclear at this point whether we otherwise
meet the requirements for qualifying as a small bank holding company.
According to the Federal Reserve Board, the revision of the criterion to exclude any bank
holding company that has outstanding a material amount of SEC-registered debt or equity
securities reflects the fact that SEC registrants typically exhibit a degree of complexity
of operations and access to multiple funding sources that warrants excluding them from the
new policy statement and subjecting them to the capital guidelines. In the adopting
release for the new rule, the Federal Reserve Board stated that what constitutes a
material amount of SEC-registered debt or equity for a particular bank holding
company depends on the size, activities and condition of the relevant bank holding
company. In lieu of using fixed measurable parameters of materiality across all
institutions, the rule provides the Federal Reserve with supervisory flexibility in
determining, on a case-by-case basis, the significance or materiality of activities or
securities outstanding such that a bank holding company should be excluded from the policy
statement and subject to the capital guidelines. Until the Federal Reserve provides
further guidance on the new rules, it will be unclear whether our holding company will
become subject to the exemption from the capital requirements for small bank holding
companies. Regardless, our bank falls under these minimum capital requirements as set per
bank regulatory agencies, and both our bank and our holding company would be considered
well capitalized under these guidelines.

Under
these guidelines, banks and bank holding companies assets are given
risk-weights of 0%, 20%, 50%, or 100%. In addition, certain off-balance sheet items are
given credit conversion factors to convert them to asset equivalent amounts to which an
appropriate risk-weight applies. These computations result in the total risk-weighted
assets. Most loans are assigned to the 100% risk category, except for first mortgage loans
fully secured by residential property and, under certain circumstances, residential
construction loans, both of which carry a 50% rating. Most investment securities are
assigned to the 20% category, except for municipal or state

18

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revenue bonds, which have a 50%
rating, and direct obligations of or obligations guaranteed by the United States Treasury
or United States Government agencies, which have a 0% rating.

The
federal bank regulatory authorities have also implemented a leverage ratio, which is equal
to Tier 1 capital as a percentage of average total assets less intangibles, to be used as
a supplement to the risk-based guidelines. The principal objective of the leverage ratio
is to place a constraint on the maximum degree to which a bank holding company may
leverage its equity capital base. The minimum required leverage ratio for top-rated
institutions is 3%, but most institutions are required to maintain an additional cushion
of at least 100 to 200 basis points.

The
FDIC Improvement Act established a new capital-based regulatory scheme designed to promote
early intervention for troubled banks which requires the FDIC to choose the least
expensive resolution of bank failures. The new capital-based regulatory framework contains
five categories of compliance with regulatory capital requirements, including well
capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized.
To qualify as a well capitalized institution, a bank must have a leverage
ratio of no less than 5%, a Tier 1 risk-based ratio of no less than 6%, and a total
risk-based capital ratio of no less than 10%, and the bank must not be under any order or
directive from the appropriate regulatory agency to meet and maintain a specific capital
level. Initially, we qualify as well capitalized.

Under
the FDIC Improvement Act regulations, the applicable agency can treat an institution as if
it were in the next lower category if the agency determines (after notice and an
opportunity for hearing) that the institution is in an unsafe or unsound condition or is
engaging in an unsafe or unsound practice. The degree of regulatory scrutiny of a
financial institution increases, and the permissible activities of the institution
decrease, as it moves downward through the capital categories. Institutions that fall into
one of the three undercapitalized categories may be required to do some or all of the
following:

| | o | submit a capital restoration plan;
| | - | ----------------------------------

| | o | raise additional capital;
| | - | -------------------------

| | o | restrict their growth, deposit interest rates, and other activities;
| | - | --------------------------------------------------------------------

| | o | improve their
management;
| | - | -------------------------

| | o | eliminate management fees; or
| | - | -----------------------------

| | o | divest themselves of all or a part of their
operations.
| | - | -------------------------------------------------------

A
bank that is not well capitalized is also subject to certain limitations
relating to so-called brokered deposits. Bank holding companies controlling
financial institutions can be called upon to boost the institutions capital and to
partially guarantee the institutions performance under their capital restoration
plans.

These
capital guidelines can affect us in several ways. If we grow at a rapid pace, our capital
may be depleted too quickly, and a capital infusion from the holding company may be
necessary which could impact our ability to pay dividends. Our capital levels will
initially be more than adequate; however, rapid growth, poor loan portfolio performance,
poor earnings performance, or a combination of these factors could change our capital
position in a relatively short period of time.

Failure
to meet these capital requirements would mean that a bank would be required to develop and
file a plan with its primary federal banking regulator describing the means and a schedule
for achieving the minimum capital requirements. In addition, such a bank would generally
not receive regulatory approval of any application that requires the consideration of
capital adequacy, such as a branch or merger application, unless the bank could
demonstrate a reasonable plan to meet the capital requirement within a reasonable period
of time.

19

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Enforcement
Powers. The Financial Institutions Reform Recovery and Enforcement Act expanded and
increased civil and criminal penalties available for use by the federal regulatory
agencies against depository institutions and certain institution-affiliated
parties. Institution-affiliated parties primarily include management, employees, and
agents of a financial institution, as well as independent contractors and consultants such
as attorneys and accountants and others who participate in the conduct of the financial
institutions affairs. These practices can include the failure of an institution to
timely file required reports or the filing of false or misleading information or the
submission of inaccurate reports. Civil penalties may be as high as $1.0 million a day for
such violations. Criminal penalties for some financial institution crimes have been
increased to 20 years. In addition, regulators are provided with greater flexibility to
commence enforcement actions against institutions and institution-affiliated parties.
Possible enforcement actions include the termination of deposit insurance. Furthermore,
banking agencies power to issue cease-and-desist orders were expanded. Such orders
may, among other things, require affirmative action to correct any harm resulting from a
violation or practice, including restitution, reimbursement, indemnification or guarantees
against loss. A financial institution may also be ordered to restrict its growth, dispose
of certain assets, rescind agreements or contracts, or take other actions as determined by
the ordering agency to be appropriate.

Effect
of Governmental Monetary Policies. Our earnings are affected by domestic economic
conditions and the monetary and fiscal policies of the United States government and its
agencies. The Federal Reserve Boards monetary policies have had, and are likely to
continue to have, an important impact on the operating results of commercial banks through
its power to implement national monetary policy in order, among other things, to curb
inflation or combat a recession. The monetary policies of the Federal Reserve Board have
major effects upon the levels of bank loans, investments and deposits through its open
market operations in United States government securities and through its regulation of the
discount rate on borrowings of member banks and the reserve requirements against member
bank deposits. It is not possible to predict the nature or impact of future changes in
monetary and fiscal policies.

Proposed
Legislation and Regulatory Action. New regulations and statutes are regularly proposed
that contain wide-ranging proposals for altering the structures, regulations, and
competitive relationships of the nations financial institutions. We cannot predict
whether or in what form any proposed regulation or statute will be adopted or the extent
to which our business may be affected by any new regulation or statute.

20

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# Item 2. Description of
Property

Our
permanent headquarters building will be located at the corner of Woodruff Road and Rocky
Slope Road at 499 Woodruff Road, Greenville, South Carolina 29607, and is scheduled for
completion in 2006. Currently, we are located in a full-service temporary banking facility
on a site adjacent to our permanent headquarters site. The temporary facility is being
leased for an initial nine-month lease term, while the land is leased, under a ground
lease agreement, for an initial six-month lease term. Both leases have renewal options.
Lease payments total $2,600 and $1,250 per month on the temporary facility and land,
respectively.

# Item 3. Legal
Proceedings.

We
are not a party to, nor are any of our properties subject to, any material legal
proceedings, other than routine litigation incidental to our business.

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

No
matter was submitted to a vote of security holders during the fourth quarter of the fiscal
year covered by this report.

# Part II.

# Item 5. Market for
Common Equity and Related Stockholder Matters.

We
are currently quoted on the OTC Bulletin Board under the symbol BGVF and have
a sponsoring broker-dealer to match buy and sell orders for our common stock. Although we
are quoted on the OTC Bulletin Board, the trading markets on the OTC Bulletin Board lack
the depth, liquidity, and orderliness necessary to maintain a liquid market. We do not
expect to qualify for listing on Nasdaq or any other exchange for at least several years.

As
of March 6, 2006, there were 1,180,000 shares of common stock outstanding held by
approximately 120 shareholders of record. All of our currently issued and outstanding
common stock was issued in our initial public offering which was completed in December
2005. The price per share in our initial public offering was $10. The following sets forth
the high and low sales price information as quoted on the OTC Bulletin Board since our
common stock began trading publicly:

First quarter 2006

|     |        
|---- | -------
|High | $12.00 
|Low  | $  9.60

We
have not declared or paid any cash dividends on our common stock since our inception. For
the foreseeable future we do not intend to declare cash dividends. We intend to retain
earnings to grow our business and strengthen our capital base. Our ability to pay
dividends depends on the ability of our subsidiary, BankGreenville, to pay dividends to
us. As a South Carolina state bank, BankGreenville may only pay dividends out of its net
profits, after deducting expenses, including losses and bad debts. In addition, the bank
is prohibited from declaring a dividend on its shares of common stock until its surplus
equals its stated capital. At December 31, 2005, BankGreenville was prohibited from
declaring a dividend because it was in organization and did not receive final regulatory
approvals until January 2006.

21

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The
following table sets forth equity compensation plan information at December 31, 2005.

# Equity Compensation
Plan Information

|                          |  |  | Number of securities
|------------------------- |  |  | --------------------
|
|
|
|Equity compensation plans |  |  |                     
|not approved by security  |  |  |                     
|holders (1)               |  | 

(1)    
          Each of our organizing directors received, for no additional consideration, a
          warrant to purchase three shares of common stock for each four shares purchased
          in our initial public offering, up to a maximum of 10,000 shares, at a price of
          $10 per share. The warrants are represented by separate warrant agreements. All
          warrants vested immediately upon closing of the offering, and are exercisable in
          whole or in part during the ten-year period following this date. The warrants
          may not be assigned, pledged, or hypothecated in any way. The 107,500 shares
          issued pursuant to the warrant agreements are transferable, subject to
          compliance with applicable securities laws. If the South Carolina Board of
          Financial Institutions or the FDIC issues a capital directive or other order
          requiring the bank to obtain additional capital, the warrants will be forfeited
          if not immediately exercised.

Our
registration statement on Form SB-2 (file no. 333-127409), which registered the issuance
of the shares to be sold in our initial public offering, was declared effective on
December 12, 2005. The offering commenced on October 11, 2005 and terminated on December
16, 2005. We registered the issuance of a total of 1,467,000 shares in the offering and
110,000 warrants for an aggregate offering price of $15,770,000. We sold 1,180,000 shares
of common stock at an offering price of $10 per share for aggregate proceeds of
$11,800,000. On December 23, 2005, we issued 107,500 warrants to the organizers of the
bank in recognition of the financial risk and efforts they have undertaken in organizing
the bank.

As
of December 31, 2005, we had not adopted any stock incentive plans. However, on February
14, 2006, our board adopted a stock incentive plan and authorized the issuance of 212,400
shares under the stock incentive plan. We also authorized the issuance of options to
several employees at $10 per share. We anticipate that we will issue these options during
the second quarter of 2006. Upon shareholder approval, these options will be qualified
stock options. We anticipate that all of the options we issue will have a ten year
exercise period and a five year vesting period. We will not issue stock options at less
than the fair market value of the common stock on the date of grant.

We
incurred $764,987 in expenses in connection with the issuance and distribution of the
common stock in the offering. All of these expenses were paid directly or indirectly to
persons or entities other than directors, officers, persons owning 10% or more of the
companys securities, or affiliates of the company.

We
used $11,000,000 of the proceeds to capitalize the bank, $136,083 to pay the offering
expenses, and $628,940 to pay the underwriting fee. The remaining proceeds were placed in
the holding companys bank account.

22

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# Item 6.
Managements Discussion and Analysis or Plan of Operation

# General

BankGreenville
Financial Corporation was formed to organize and own all of the capital stock of
BankGreenville. On June 7, 2005, our organizers filed applications with the South
Carolina Board of Financial Institutions to charter BankGreenville as a state bank and
with the FDIC to receive federal deposit insurance. We received final approvals from the
South Carolina Board of Financial Institutions and the FDIC as well as from the Federal
Reserve Bank to become a bank holding company in January 2006 and BankGreenville opened
for business on January 30, 2006.

We
sold 1,180,000 shares of common stock at $10 per share and raised $11.8 million in an
initial public offering, which was completed on December 16, 2005. The directors and
officers of the company purchased 183,500 shares in the offering at $10 share for an
initial investment of $1,835,000. Proceeds, net of an underwriting fee and other
offering costs, totaled $11,035,013 and BankGreenville was capitalized with $11 million of
the net proceeds. As of December 31, 2005, we had met all of the requirements to close the
stock offering and funds were released from escrow.

# Managements
Discussion and Analysis

This
discussion is intended to assist in understanding the financial condition and results of
our operations. The following is a discussion of our financial condition as of December
31, 2005, and the results of operations for the period March 18, 2005 (date of inception)
through December 31, 2005. These comments should be read in conjunction with the financial
statements and related notes contained elsewhere in this report.

Our
principal activities through December 31, 2005 related to our organization,
capital-raising efforts of our initial public offering, and receipt of approvals from the
South Carolina State Board of Financial Institutions for our application to charter the
Bank, from the FDIC for our application for deposit insurance, and from the Federal
Reserve Board to form a holding company.

# Critical Accounting
Policies

We
have adopted various accounting policies, which govern the application of accounting
principles generally accepted in the United States of America in the preparation of our
financial statements. The significant accounting policies are described in the notes to
the financial statements.

Certain
accounting policies involve significant judgments and assumptions by management, which
have a material impact on the carrying value of certain assets and liabilities. Management
considers such accounting policies to be critical accounting policies. The judgments and
assumptions used by management are based on historical experience and other factors which
are believed to be reasonable under the circumstances. Because of the nature of the
judgments and assumptions made by management, actual results could differ from these
judgments and estimates, which could have a material impact on the carrying values of
assets and liabilities and the results of operations.

We
believe the allowance for loan losses is a critical accounting policy that requires the
most significant judgments and estimates used in preparation of our financial statements.
Refer to section Allowance for Loan Losses for a more detailed description of
the methodology related to the allowance for loan losses.

Management
uses assumptions and estimates in determining income taxes payable or refundable for the
current year, deferred income tax liabilities and assets for events recognized differently
in its financial statements and income tax returns, and income tax expense. Determining
these amounts requires analysis of certain transactions and interpretation of tax laws and
regulations. Management exercises judgment in evaluating the amount and timing of
recognition of resulting tax liabilities and assets. These judgments and estimates are

23

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reevaluated on a continual basis as
regulatory and business factors change. No assurance can be given that either the tax
returns submitted by management or the income tax reported on the financial statements
will not be adjusted by either adverse rulings by the United States Tax Court, changes in
the tax code, or assessments made by the Internal Revenue Service. We are subject to
potential adverse adjustments, including, but not limited to, an increase in the statutory
federal or state income tax rates, the permanent nondeductibility of amounts currently
considered deductible either now or in future periods, and the dependency on the
generation of future taxable income, including capital gains, in order to ultimately
realize deferred income tax assets.

# Forward Looking
Statements

This
report contains forward-looking statements relating to, without limitation,
future economic performance, plans and objectives of management for future operations, and
projections of revenues and other financial items that are based on the beliefs of
management, as well as assumptions made by and information currently available to
management. The words may, will, anticipate,
should, would, believe, contemplate,
expect, estimate, continue, may, and
intend, as well as other similar words and expressions of the future, are
intended to identify forward-looking statements. Potential risks and uncertainties
include, but are not limited to those described under the heading Risk Factors
in our Form 10-KSB for the year ended December 31, 2005.

# Financial Condition

At
December 31, 2005, we had total assets of $10,938,809, comprised primarily of federal
funds sold of $10,695,000, deposits on bank equipment and data processing systems of
$82,836, and equipment, net of accumulated depreciation, of $42,401. Additionally, we had
a $20,000 earnest money deposit on our permanent bank headquarters site, and our prepaid
expenses, including prepaid insurance, totaled $35,196. Our liabilities totaled $145,703
and represented accounts payable and accrued liabilities. After deducting offering costs
of $764,987, which included an underwriting fee of $628,940, legal costs of approximately
$62,900 and printing costs of approximately $52,700, our net offering proceeds totaled
$11,035,013 and we capitalized our bank with $11 million.

# Results of Operations

Our
net loss from March 18, 2005 (inception) to December 31, 2005 totaled $241,907.
Organizational expenses of $258,453 included salaries, payroll taxes and benefits of
$170,118, rent and occupancy of $15,327, legal fees of $14,350 and charter application and
other filing fees of $11,724. Additionally, we incurred $12,289 in marketing and board
training costs. Interest income of $16,546 represented interest earned on the offering
proceeds as we met the requirements to break escrow and transferred the funds to
interest-bearing federal funds sold in December 2005.

In
December 2004, the Financial Accounting Standards Board issued SFAS No. 123
(revised 2004), Share-Based Payment (SFAS No.123(R)). On February 14,
2006 we adopted a stock incentive plan through which we issued options to several
employees and through which we anticipate issuing additional options to employees in the
future. Each option issued has and each option to be issued will likely have a vesting
period of five years. Because of SFAS No. 123(R), we will incur compensation expense each
year until these options fully vest. We cannot yet determine the amount of this
compensation expense.

# Liquidity and Interest
Rate Sensitivity

Liquidity
represents the ability to convert assets into cash or cash equivalents and the ability to
raise additional funds by increasing liabilities. Our organizational and pre-opening
expenses were paid from initial organizers contribution deposits of $90,000 as well
as from availability on a $500,000 line of credit secured on July 18, 2005. Both the
organizers contribution deposits and the balance on the credit line were

24

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repaid in December 2005 with proceeds
from the stock offering. At December 31, 2005, we had liquid assets of $10,729,271, or 98%
of total assets.

We
believe that the net proceeds of $11,035,013 from the offering will satisfy our cash
requirements for at least 12 months. We will manage our liquidity by actively monitoring
our sources and uses of funds to meet cash flow requirements and maximize profits.

BankGreenville,
like most banks, will depend on net interest income for our primary source of earnings.
Net interest income approximates the difference between the interest we charge on our
loans and receive from our investments (our earning assets), and the interest we pay on
deposits and other interest-bearing liabilities. Movements in interest rates will cause
our earnings to fluctuate. To lessen the impact of these margin swings, we intend to
structure our balance sheet so that we can reprice the rates applicable to our assets and
liabilities in roughly equal amounts at approximately the same time. We will manage our
asset mix by regularly evaluating the yield, credit quality, funding sources, and
liquidity of our assets. We will manage the banks liability mix by expanding our
deposit base and converting assets to cash as necessary. If there is an imbalance in our
ability to reprice assets and liabilities at any point in time, our earnings may increase
or decrease with changes in the interest rates, creating interest rate sensitivity.
Interest rates have historically varied widely, and we cannot control or predict them.
Despite the measures we plan to take to lessen the impact of interest rate fluctuations,
large moves in interest rates may decrease or eliminate our profitability.

# Impact of Inflation

The
financial statements presented herein have been prepared in accordance with accounting
principles generally accepted in the United States of America which require the
measurement of financial position and operating results in terms of historical dollars,
without considering changes in relative purchasing power over time due to inflation.
Virtually all of the assets and liabilities of a financial institution are monetary in
nature. As a result, interest rates generally have a more significant impact on a
financial institutions performance than does the effect of inflation.

While
the effect of inflation on a bank is normally not as significant as its influence on those
businesses that have large investments in plant and inventories, it does have an effect.
Interest rates generally increase as the rate of inflation increases, but the magnitude of
the change in rates may not be the same. While interest rates have traditionally moved
with inflation, the effect on income is diminished because both interest earned on assets
and interest paid on liabilities vary directly with each other. Also, increases in the
price of goods and services will generally result in increased operating expenses.

# Capital Adequacy

Bank
holding companies, such as ours, and their banking subsidiaries are required by banking
regulators to meet certain minimum levels of capital adequacy, which are expressed in the
form of certain ratios. Capital is separated into Tier 1 capital (essentially common
shareholders equity less intangible assets) and Tier 2 capital (essentially the
allowance for loan losses limited to 1.25% of risk-weighted assets). The first two ratios,
which are based on the degree of credit risk in our assets, provide the weighting of
assets based on assigned risk factors and include off-balance sheet items such as loan
commitments and stand-by letters of credit. The ratio of Tier 1 capital to risk-weighted
assets must be at least 4.0% and the ratio of total capital (Tier 1 capital plus Tier 2
capital) to risk-weighted assets must be at least 8.0%. The capital leverage ratio
supplements the risk-based capital guidelines.

The
Federal Reserve guidelines also contain an exemption from the capital requirements for
bank holding companies with less than $150 million in consolidated assets. Because
BankGreenville Financial Corporation has less than $150 million in assets, we are not yet
required to maintain these minimum capital requirements at the holding company level.
However, BankGreenville falls under these rules as set by bank regulatory agencies.

25

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As
noted above under Supervision and Regulation section  Capital
Regulations, the Federal Reserve is changing the rules relating to when a company
would become subject to these minimum capital regulations. The new rules go into effect
March 30, 2006 and exempt from these requirements certain bank holding companies which
have less than $500 million in total assets. It is unclear at this point whether our
company will qualify under this exemption.

Banks
and bank holding companies are required to maintain a minimum capital ration of Tier 1
capital to adjusted quarterly average total assets of 3.0%. The bank was well-capitalized
when it opened on January 30, 2006.

# Allowance for Loan Losses

The
allowance is maintained at a level that we believe to be sufficient to cover losses in the
loan portfolio at a specific point in time. Assessing the adequacy of the allowance
requires considerable judgment. The adequacy of the allowance is analyzed using an
internal analysis model. For purposes of this analysis, adequacy is defined as a level
sufficient to absorb probable losses in the portfolio. The methodology relies upon our
judgment. Our judgments are based on our assessment of various issues, including, but not
limited to, the pace of loan growth, emerging portfolio concentrations, the risk
management system relating to lending activities, entry into new markets, new product
offerings, loan portfolio quality trends, and uncertainty in current economic and business
conditions. An allowance model is used that takes into account factors including the
composition of the loan portfolio such as risk grade classifications, historical asset
quality trends including, but not limited to, previous loss experience ratios, our
assessment of current economic conditions, and reviews of specific high risk sectors of
the portfolio. Loans are graded at inception and are reviewed on a periodic basis to
ensure that assigned risk grades are proper based on the definition of such
classification. The value of underlying collateral is considered during such analysis. Our
analysis of allowance adequacy includes consideration for loan impairment. While we use
the best information available at the time to make evaluations, future adjustments to the
allowance may be necessary if results differ substantially from the assumptions used in
making the evaluations.

The
methodology for assessing the adequacy of the allowance establishes both an allocated and
unallocated component of the contra asset balance. The allocated component is based
principally on current loan grades and historical loss rates. The unallocated component is
the result of the portion of the assessment that estimates probable losses in the
portfolio that are not fully captured in the allocated allowance. This analysis includes,
but is not necessarily be limited to, industry concentrations, future market expansions,
model imprecision, and the estimated impact of then current economic conditions on
historical loss rates. We monitor trends within the portfolio, both quantitative and
qualitative, and assess the reasonableness of the unallocated component.

The
allowance is also subject to examination and adequacy testing by regulatory agencies. In
addition, such regulatory agencies could require allowance adjustments based on
information available to them at the time of their examination.

# Income Taxes

Income
taxes are provided for the tax effects of transactions reported in the financial
statements and consist of taxes currently due plus deferred taxes related primarily to
differences between the financial reporting and income tax bases of assets and
liabilities. At December 31, 2005, no taxable income had been generated and therefore, no
tax provision has been included in these financial statements.

# Recently Issued
Accounting Standards

The
following is a summary of recent authoritative pronouncements that affect our accounting,
reporting, and disclosure of financial information:

26

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In
December 2004, the Financial Accounting Standards Board issued SFAS No. 123
(revised 2004), Share-Based Payment (SFAS No.123(R)). SFAS No. 123(R)
will require companies to measure all employee stock-based compensation awards using a
fair value method and record such expense in its financial statements. In addition, the
adoption of SFAS No. 123(R) requires additional accounting and disclosure related to
the income tax and cash flow effects resulting from share-based payment arrangements. SFAS
No. 123(R) is effective beginning as of the first interim or annual reporting period
beginning after December 15, 2005. We are currently evaluating the impact that the
adoption of SFAS No. 123(R) will have on our financial position, results of
operations, and cash flows.

In
March 2004, the SEC issued SAB No. 105, Application of Accounting Principles
to Loan Commitments, to inform registrants of the SEC staffs view that the fair
value of the recorded loan commitments should not consider the expected future cash flows
related to the associated servicing of the future loan. The provisions of SAB No. 105
must be applied to loan commitments accounted for as derivatives that are entered into
after March 31, 2004. We do not expect the adoption of SAB No. 105 to have a
material impact on our financial condition or results of operations.

In
April 2005, the Securities and Exchange Commissions Office of the Chief Accountant
and its Division of Corporation Finance released Staff Accounting Bulletin (SAB) No.107 to
provide guidance regarding the application of FASB Statement No.123 (revised 2004),
Share-Based Payment. Statement No.123(R) covers a wide range of share-based compensation
arrangements including share options, restricted share plans, performance-based awards,
share appreciation rights, and employee share purchase plans. SAB 107 provides
interpretive guidance related to the interaction between Statement No.123R and certain SEC
rules and regulations, as well as the staffs views regarding the valuation of
share-based payment arrangements for public companies. SAB 107 also reminds public
companies of the importance of including disclosures within filings made with the SEC
relating to the accounting for share-based payment transactions, particularly during the
transition to Statement No.123R.

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

27

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# Item 7. Financial
Statements

# REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of DirectorsBankGreenville Financial CorporationGreenville, South Carolina

We
have audited the balance sheet of BankGreenville Financial
Corporation (a development stage enterprise) (the Company) as
of December 31, 2005, and the related statements of operations, shareholders equity,
and cash flows for the period from March 18, 2005 (inception) through December 31,
2005. These financial statements are the responsibility of the Companys management.
Our responsibility is to express an opinion on these financial statements based on our
audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of BankGreenville Financial
Corporation (a development stage enterprise) as of December 31, 2005 and
the results of its operations and its cash flows for the period from March 18, 2005
(inception) through December 31, 2005 in conformity with accounting principles generally
accepted in the United States of America.

/s/ Elliott Davis, LLC
Greenville, South Carolina February 17, 2006

28

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# BANKGREENVILLE
FINANCIAL CORPORATION (A DEVELOPMENT STAGEBALANCE SHEETDecember 31, 2005

|                                                                              | 
|----------------------------------------------------------------------------- | 
|ASSETS                                                                        | 
|Cash and due from banks                                                       | 
|Federal funds sold                                                            | 
|                                                                              | 
|Total cash and cash equivalents                                               | 
|Building construction in progress                                             | 
|Equipment, net                                                                | 
|Deposits on bank equipment and data processing systems                        | 
|Earnest money deposit on land                                                 | 
|Prepaid expenses                                                              | 
|Interest receivable                                                           | 
|Prepaid insurance                                                             | 
|                                                                              | 
|Total assets                                                                  | 
|                                                                              | 
|LIABILITIES AND SHAREHOLDERS' EQUITY                                          | 
|LIABILITIES                                                                   | 
|Accounts payable and accrued liabilities                                      | 
|                                                                              | 
|COMMITMENTS AND CONTINGENCIES--Note 2                                         | 
|SHAREHOLDERS' EQUITY                                                          | 
|Preferred stock, no par value, 10,000,000 shares authorized, no shares issued | 
|Common stock, no par value, 10,000,000 shares authorized, 1,180,000           | 
|shares issued and outstanding                                                 | 
|Deficit accumulated during the development stage                              | 
|                                                                              | 
|Total shareholders' equity                                                    | 
|                                                                              | 
|Total liabilities and shareholders' equity                                    | 
|                                                                              | 

The
accompanying notes are an integral part of this financial statement.

29

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# BANKGREENVILLE
FINANCIAL CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) STATEMENT OF OPERATIONSFor the period from
March 18, 2005 (inception)through December 31,
2005

|                                       | 
|-------------------------------------- | 
|INTEREST INCOME                        | 
|                                       | 
|EXPENSES                               | 
|Salaries, payroll taxes and benefits   | 
|Rent and occupancy                     | 
|Legal fees                             | 
|Marketing, dues and subscriptions      | 
|Charter application and filing fees    | 
|Other professional fees                | 
|Office supplies and postage            | 
|Interest                               | 
|Equipment                              | 
|Travel and entertainment               | 
|Insurance                              | 
|Other                                  | 
|                                       | 
|Total expenses                         | 
|                                       | 
|Loss before provision for income taxes | 
|PROVISION FOR INCOME TAXES             | 
|                                       | 
|Net loss                               | 
|                                       | 

The
accompanying notes are an integral part of this financial statement.

30

---

# BANKGREENVILLE
FINANCIAL CORPORATION(A DEVELOPMENT STAGE ENTERPRISE)STATEMENT OF
SHAREHOLDERS EQUITYFor the period from March 18, 2005 (inception)through
December 31, 2005

|                                                    | Common Stock |  | 
|--------------------------------------------------- | ------------ |  | 
|
|
|
|Net proceeds from the sale of stock (less brokerage |              |  | 
|commission and offering costs of $764,987)          |              |  | 
|Net loss                                            |              |  | 
|                                                    |              |  | 
|Balance, December 31, 2005                          |              |  | 
|                                                    |              |  | 

The
accompanying notes are an integral part of this financial statement.

31

---

# BANKGREENVILLE
FINANCIAL CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) STATEMENT OF CASH FLOWSFor the period from
March 18, 2005 (inception) through December 31, 2005

|                                                            | 
|----------------------------------------------------------- | 
|NET CASH USED FOR ORGANIZATIONAL AND PRE-OPENING ACTIVITIES | 
|Net loss                                                    | 
|Depreciation                                                | 
|Earnest money deposit on land                               | 
|Prepaid insurance                                           | 
|Interest receivable                                         | 
|Prepaid expenses                                            | 
|Accounts payable and accrued liabilities                    | 
|                                                            | 
|Net cash used for organizational and pre-opening activities | 
|                                                            | 
|INVESTING ACTIVITIES                                        | 
|Purchase of equipment                                       | 
|Equipment and data processing systems deposits              | 
|Building construction in progress                           | 
|                                                            | 
|Net cash used for investing activities                      | 
|FINANCING ACTIVITIES                                        | 
|Net proceeds from sale of stock                             | 
|Proceeds from organizers' contribution deposits             | 
|Repayment of organizers' contribution deposits              | 
|Proceeds from organizational line of credit                 | 
|Repayment of organizational line of credit                  | 
|Net cash provided from financing activities                 | 
|                                                            | 
|Net increase in cash                                        | 
|CASH AND CASH EQUIVALENTS, MARCH 18, 2005 (inception)       | 
|CASH AND CASH EQUIVALENTS, END OF PERIOD                    | 
|                                                            | 

The
accompanying notes are an integral part of this financial statement.

32

---

# BANKGREENVILLE
FINANCIAL CORPORATION (A DEVELOPMENT STAGE ENTERPRISE)NOTES TO FINANCIAL
STATEMENTS

NOTE 1  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES

Organization and operation

| | BankGreenville
Financial Corporation (the Company) was formed to organize and
own all of the capital stock of BankGreenville (the Bank). On June 7,
2005, our organizers filed applications with the South Carolina Board of Financial
Institutions to charter the Bank as a state bank and with the FDIC to receive federal
deposit insurance. We received final approvals from the South Carolina Board of Financial
Institutions and the FDIC as well as from the Federal Reserve Bank to become a bank
holding company in January 2006 and the Bank opened for business on January 30, 2006.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company is a development stage enterprise as defined by Statement of Financial Accounting
Standard (SFAS) No. 7, Accounting and Reporting by Development Stage
Enterprises, as it devotes substantially all of its efforts to establishing a new
business. The Companys planned principal operations had not commenced and revenue
had not been recognized from the planned principal operations as of December 31, 2005.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Company sold 1,180,000 shares of common stock at $10 per share and raised $11.8 million in
an initial public offering, which was completed on December 16, 2005. Proceeds, net of
brokerage commissions and other offering costs totaled $11,035,013 and the Bank was
capitalized with $11 million of the net proceeds. As of December 31, 2005, the Company had
met all of the requirements to close the stock offering and funds were released from
escrow.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Basis of presentation

| | The
Companys accounting and reporting policies conform to accounting principles
generally accepted in the United States of America and to general practices in the banking
industry. The Company uses the accrual basis of accounting. During the period of
organization from March 18, 2005 (inception) until May 19, 2005, the Company
operated as NGCB, Inc. All activity and agreements of NGCB, Inc. were assigned
to BankGreenville Financial Corporation at the time of the filing of
an amendment to change the name of the entity.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Stock Offering

| | Stock
offering costs were incurred by the Company in connection with the offering and issuance
of its stock. These costs included legal, audit and printing and were charged against the
Companys capital stock after the completion of the initial stock offering.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Year-end

| | The
Company has adopted a fiscal year ending on December 31, effective for the period
ending December 31, 2005.
| | ---------------------------------------------------------------------------------------------------------------

Estimates

| | The
financial statements include estimates and assumptions that affect the Companys
financial position and results of operations and disclosure of contingent assets and
liabilities. Actual results could differ from these estimates.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cash Equivalents

| | The
Company considers all highly liquid investments with original maturities of three months
or less to be cash equivalents. The Company places its temporary cash investments with
high quality financial institutions. At times, such investments may be in excess of the
FDIC insurance limits. Cash equivalents include federal funds sold.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Equipment

| | Equipment
is stated at cost less accumulated depreciation, computed by the straight line method over
the estimated useful lives of the assets. Maintenance and repairs are included in
operating expense, while the cost of improvements is capitalized.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(Continued)

33

---

NOTE 1  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, Continued

Warrants
and stock options

| | In
recognition of the financial risk and efforts the undertaken by the organizing directors
in organizing the bank, the Company agreed to issue stock warrants to the organizing
directors for the purchase of three shares of common stock at $10 per share for every four
shares purchased in the stock offering, up to a maximum of 10,000 shares per director.
Upon the closing of the stock offering in December 2005, the Company issued 107,500
warrants which immediately vested. On February 14, 2006, the Company adopted a stock
option plan. At that time, the Company also authorized the issuance of 212,400 shares
under the stock option plan and authorized the issuance of options to several employees at
$10 per share. The Company intends to issue stock options with a five year vesting period
to several employees during the second quarter of 2006. The Company will account for the
warrants and stock options under the recognition and measurement principles of Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees and related interpretations. All warrants and stock options granted under
these plans will have an exercise price equal to the market value of the underlying common
stock on the date of grant; therefore, no stock-based compensation cost will be reflected
in the results of operations. On January 1, 2006, the Company will be required to
adopt SFAS No. 123(R), Share-Based Payment. The Company is currently
evaluating the impact that the adoption of SFAS No. 123(R) will have on the
Companys financial position, results of operations and cash flows.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Organization
costs

| | The
Company has incurred organization costs, which include incorporation, registration and
legal fees incurred in connection with establishing the Company. In accordance with
Statement of Position (SOP) 98-5, Reporting on the Costs of Start-Up Activities,
organization costs are expensed when incurred.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Income
taxes

| | Income
taxes are provided for the tax effects of transactions reported in the financial
statements and consist of taxes currently due plus deferred taxes related primarily to
differences between the financial reporting and income tax bases of assets and
liabilities. At December 31, 2005, no taxable income has been generated and therefore, no
tax provision has been included in these financial statements. The deferred tax asset
related to the future benefit from operating loss carry-forwards for income tax purposes
has been offset by a valuation allowance as it is not more than likely that such losses
will be used.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Recently
issued accounting standards

| | In
December 2004, the Financial Accounting Standards Board issued SFAS No. 123
(revised 2004), Share-Based Payment (SFAS No.123(R)). SFAS
No. 123(R) will require companies to measure all employee stock-based compensation
awards using a fair value method and record such expense in its financial statements. In
addition, the adoption of SFAS No. 123(R) requires additional accounting and
disclosure related to the income tax and cash flow effects resulting from share-based
payment arrangements. SFAS No. 123(R) is effective beginning as of the first interim
or annual reporting period beginning after December 15, 2005. We are currently
evaluating the impact that the adoption of SFAS No. 123(R) will have on our financial
position, results of operations, and cash flows.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
March 2004, the SEC issued SAB No. 105, Application of Accounting Principles
to Loan Commitments, to inform registrants of the SEC staffs view that the fair
value of the recorded loan commitments should not consider the expected future cash flows
related to the associated servicing of the future loan. The provisions of SAB No. 105
must be applied to loan commitments accounted for as derivatives that are entered into
after March 31, 2004. We do not expect the adoption of SAB No. 105 to have a
material impact on our financial condition or results of operations.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

NOTE 2  COMMITMENTS
AND CONTINGENCIES

| | Effective
July 1, 2005, the board of directors approved employment agreements with the
president and chief executive officer and the executive vice president and chief financial
officer. These agreements include provisions regarding term, compensation, benefits,
incentive bonus program, stock option plan and non-compete clauses in the event of
termination.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company entered into various agreements with providers of bank computer systems and
equipment. The initial investment in these systems and equipment is expected to
total approximately $295,000. At December 31, 2005, we had paid $105,000 in deposits on these
systems and equipment. Initial investments in our systems and equipment will be
capitalized and depreciated over their respective asset lives. The initial investment in
our core processing system will be expensed over the term of the agreement. Monthly fees
pursuant to various agreements are expected to average no less than $8,500 per month over
the terms of these agreements.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

34

---

NOTE 2  COMMITMENTS
AND CONTINGENCIES, Continued

| | The
Company intends to initially locate in a temporary modular facility on a site adjacent to
our permanent headquarters site, while the bank headquarters is being constructed. The
Company entered into an agreement with a contractor for site work associated with this
temporary facility. Costs are expected to approximate $156,000. Of this amount,
approximately $48,000 will be capitalized and depreciated and the balance will be expensed
over the temporary facility occupancy term. The Company entered into agreements with
modular facility providers for our temporary banking facility. At December 31, 2005,
refundable rental deposits totaled $7,481 on this facility and we expect to incur
approximately $18,000 in rental expense over the lease terms. The Company entered into a
furniture lease for our temporary modular facility. Payments over the lease term are
expected to total $14,000.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company entered into an agreement with an architectural firm to design the banks
permanent headquarters facility. Architectural fees are expected to approximate $123,000.
At December 31, 2005, progress payments totaled $24,463.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 3  RELATED
PARTY TRANSACTIONS

| | The
Company purchased approximately 1.23 acres at the corner of Woodruff Road and Rocky Slope
Road for $614,238 on January 30, 2006 with proceeds from our stock offering. Additionally,
at closing, we paid $31,320 to the sellers for our portion of the maintenance costs of a
shared storm water retention system. We anticipate that completion of our permanent
headquarters will occur in 2006. The Company entered into a six-month ground lease on our
temporary facility site adjacent to the Banks permanent headquarters site. Ground
lease payments are expected to total $7,500 over the lease term and the agreement provides
for a six-month extension. An entity known as Woodvan, LLC owned 50 percent of the site we
purchased and owns 50 percent of the temporary facility site. A family partnership of one
of our organizers is a one-third partner in Woodvan, LLC.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
law firm of Gallivan White & Boyd PA, in which one of our organizers and chairman
of our board is a shareholder, assisted in the negotiation and preparation of the land
purchase/ground lease option agreement and closing of our permanent bank headquarters
site. The fee for these services totaled $4,326. In January 2006, the law firm negotiated
a ground lease agreement for our temporary modular facility site. The Company incurred
$2,592 for this service.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | One
of our organizers is the owner and president of Jeff Dezen Public Relations, a marketing
and public relations firm, and has assisted us with our press releases and media relations
to date. Expenses incurred through December 31, 2005 totaled $2,000.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 4  SUBSEQUENT
EVENTS

| | In
January 2006, the Company entered into a six-month ground lease on our temporary facility
site adjacent to the Banks permanent headquarters site. Ground lease payments are
expected to total $7,500 over the lease term. The agreement provides for a six-month
extension.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Bank received all final regulatory approvals in January 2006 and opened for business on
January 30, 2006.
| | -------------------------------------------------------------------------------------------------------------

| | On
January 30, 2006, the Company purchased approximately 1.23 acres at the corner of Woodruff
Road and Rocky Slope Road for $614,238 with proceeds from our stock offering.
Additionally, at closing, we paid $31,320 to the sellers for our portion of the
maintenance costs of a shared storm water retention system.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

35

---

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

None.

# Item 8A. Controls and
Procedures

As
of the end of the period covered by this report, we carried out an evaluation, under the
supervision and with the participation of our management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and
procedures as defined in Exchange Act Rule 15d-15(e). Based upon that evaluation, our
Chief Executive Officer and Chief Financial Officer have concluded that our current
disclosure controls and procedures are effective as of December 31, 2005. There have been
no significant changes in our internal controls over financial reporting during the fourth
fiscal quarter ended December 31, 2005 that have materially affected, or are reasonably
likely to materially affect, our internal controls over financial reporting.

The
design of any system of controls and procedures is based in part upon certain assumptions
about the likelihood of future events. There can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions, regardless of
how remote.

# Item 8B. Other
Information

None.

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

The
following sets forth information regarding our executive officers and directors. Our
bylaws provide for a classified board of directors, so that, as nearly as possible,
one-third of the directors are elected each year to serve three-year terms. The terms of
office of the classes of directors expire as follows: Class I at the 2006 annual meeting
of shareholders, Class II at the 2007 annual meeting of shareholders, and Class III at the
2008 annual meeting of shareholders. Our executive officers serve at the discretion of our
board of directors.

|                     |  | Year First |  |   
|-------------------- |  | ---------- |  | --
|
|
|Jeffrey L. Dezen     |  |            |  | 50
|Roger H. Gower       |  |            |  | 54
|Frank B. Halter, Jr  |  |            |  | 50
|R. Bruce Harman      |  |            |  | 51
|Arthur L. Howson, Jr |  |            |  | 54
|Paula S. King        |  |            |  | 45
|Robert L. Kunz       |  |            |  | 73
|Jonathan T. McClure  |  |            |  | 46
|David A. Merline, Jr |  |            |  | 47
|William H. Pelham    |  |            |  | 51
|Russel T. Williams   |  |            |  | 45

Jeffrey
L. Dezen, Class I director, has been president of Jeff Dezen Public Relations,
a marketing and communications consulting firm in Greenville, South Carolina which
provides public relations counsel to a diverse group of national and regional
corporations, since 1991. Mr. Dezens experience includes sports and manufacturing
sectors, professional services, the health care, not-for-profit and hospitality markets,
as well as retail and business-to-business channels. He earned a B.A. from Dickinson
College and a Masters degree in English at Pennsylvania State University. In addition to
having held faculty positions at several universities,

36

---

including Clemson University and
Frostburg State University, Mr. Dezen serves on the board of directors of The Alliance for
Quality Education, the Greater Greenville YMCA board and serves on the Greenville
Technical College Marketing Advisory board. He is past-president of Greenville High
Schools Parent-Teacher Association. Mr. Dezen has been a Greenville resident since
1985.

Roger
H. Gower,Class I director, is a fifth generation native Greenvillian who
returned to Greenville to join Greenville Ob-Gyn Associates in 1982 after graduating from
Emory University with a B.A. in chemistry in 1973 and a medical degree from the Medical
University of South Carolina in 1977. Dr. Gower was certified by the American College of
Ob-Gyn in 1982 and has been annually recertified since 1999. He has been active in medical
staff services with the Greenville Hospital System as chairman of planning, medical staff
president and chairman of credentialing, as well as serving on the boards of the
Greenville Health Corporation and the Physician Hospital Organization. Professionally, he
is a fellow of the American College of Ob-Gyn, a member of the American Medical
Association, South Carolina and Greenville County medical societies and the South Atlantic
Society of Ob-Gyn. He serves as the physician manager of Greenville Ob-Gyn Associates, an
eight-doctor group. In the community, he has been involved with the Rotary Club,
Westminster Presbyterian Church, the United Way, the American Red Cross and the Greenville
County Historical Society, serving on the latter two boards.

Frank
B. Halter, Jr., Class I director, a third-generation Greenvillian and Realtor,
has served as president of Coldwell Banker Caine Residential, a real estate brokerage
company, since 1999. He manages that companys residential, relocation and property
management and new homes groups. Mr. Halter received his B.S. in finance from the
University of South Carolina and has earned the Graduate Realtors Institute and the
Certified Real Estate Broker designations from the National Association of Realtors. Mr.
Halter is a member of the South Carolina Association of Realtors board of directors, and
is president of the Greenville Downtown Business Association. He also serves on the
Greenville Hospital System Advisory Board. Mr. Halter is a past director of the Greater
Greenville Association of Realtors, past president of the Associations Multiple
Listing Service, and past chairman of the Associations Professional Standards
Committee.

R.
          Bruce Harman, Class II director and Audit Committee Chairman, has
          been employed in various positions since 1986 with R. L. Kunz, Inc., a
          manufacturers representative for industrial and commercial air handling
          equipment, and has served as president of the company since 2001. Mr. Harman is
          also a shareholder in the company and is corporate secretary. He attended
          Clemson University on a basketball scholarship and graduated in 1976 with a B.S.
          degree in administrative management. In 1979, Mr. Harman obtained an M.B.A.
          degree in management and marketing from Concordia University in Montreal,
          Quebec. Since 1986, Mr. Harman has been a licensed certified public accountant
          in the state of South Carolina and is a member of the American Institute of
          Certified Public Accountants and the South Carolina Association of Certified
          Public Accountants.

Arthur
L. Howson, Jr., Class II director and chairman of our board, is a shareholder
of Gallivan, White & Boyd, P.A., where he has practiced since 1981, specializing in
real estate, banking, and corporate law. He is a member of the South Carolina Bar, the
Greenville County Bar, and the American Bar Association. Mr. Howson received an A.B.
degree in History from the University of North Carolina at Chapel Hill in 1973 and a J.D.
degree from the University of South Carolina School of Law in 1976. While in law school,
Mr. Howson was a member of the Order of Wig and Robe. He was admitted to practice law in
the State of South Carolina in 1976. Mr. Howson has been active in the community through
business, civic, and church activities. He has served as president of Senior Action, Inc.,
the Greenville Chorale, and Greenville Friends of the Zoo and has served as a member of
the board of directors of Gateway House, Inc. He is a member of Westminster Presbyterian
Church, where he has served as an elder and has sung in the Sanctuary Choir since 1981. He
is also a member of the Real Estate Economic Development Committee of the Greenville
Chamber of Commerce.

Paula
S. King, CPA, Class II director, is our executive vice president and chief financial
officer. Ms. King is a Greenville native with over 20 years in the banking and financial
services industry. Ms. King began her career in the financial services industry as vice
president of Shelter Mortgage and Investment Company, a commercial mortgage loan brokerage
firm. She began her banking career in 1992 as senior vice president and controller of
Greenville National Bank and served in that capacity until the banks acquisition by
Regions Bank in 1999. In 1999, Ms. King became the senior vice president and chief
financial officer of New Commerce Bank,

37

---

serving in this role from the
banks start-up until 2002. From 2002 until 2003, Ms. King was a consultant for de
novo banks, providing board and senior management training. Most recently she was employed
in the banking group of Elliott Davis, LLC from 2004 until she began organizing efforts
for our bank in February 2005. Ms. King is a 1982 graduate of Furman University with a
B.A. in accounting and business administration and is a member of the South Carolina
Association of Certified Public Accountants and American Institute of CPAs. She has
attended the AICPAs National Banking School at the University of Virginia. Ms. King
has served on the South Carolina Bankers Associations (SCBA) Asset-Liability
committee and is a past chairman of the SCBAs Operations committee. She has served
in leadership roles with Greenville United Way and is a past chairman of the board of
Junior Achievement of Greenville.

Robert
L. Kunz, Class II director, is the founder of R.L Kunz, Inc., a
manufacturers representative for industrial and commercial air handling equipment
since 1964. Mr. Kunz retired from the company in 2002. He remains active with the company
as chairman of the board. Mr. Kunz graduated from the University of Michigan in 1955 with
a B.S. degree in industrial engineering and came to Greenville in 1958. In 1969, Mr. Kunz
co-founded American Fan Company in Cincinnati, Ohio, and was actively involved in sales
and as a board member until 1986. Mr. Kunz was on the original advisory board of the HVAC
department at Greenville Technical College and is a life member of the American Society of
Heating, Refrigeration and Air Conditioning Association.

Jonathan
T. McClure, Class III director, is a Greenville native and founder and chief
executive officer of ISO Poly Films, Inc., a plastic films provider founded in 1998 and
located in Gray Court, South Carolina. Mr. McClure attended Liberty University from 1979
to 1981 and received his B.S. degree in business administration in 1983 from the
University of South Carolina Upstate. In 2001 and 2002, Mr. McClure was named Ernst &
Youngs South Carolina Entrepreneur of the Year and in 2002 was elected to the
E&Y Entrepreneur Hall of Fame. Mr. McClures company was recognized by
Entrepreneur Magazine and Dun & Bradstreet as one of the Hot 100 Small
Businesses in the United States from 1999 to 2001. In 2002, then-Governor Jim Hodges named
Mr. McClure as an economic ambassador for South Carolina. Mr. McClure received the Silver
Crescent Award for Manufacturing Excellence & Manufacturer of the Year in 2003 and his
company was named one of the Top 25 Fastest Growing Companies in South
Carolina in 2002. He has made numerous presentations to the Darla Moore School of Business
of the University of South Carolina, the Clemson University School of Business, and the
Kenan-Flagler Business School at the University of North Carolina. Mr. McClure is
president of the board of directors of the Boys Home of the South and serves on the board
of the Laurens County Chamber of Commerce.

David
A. Merline, Jr., Class III director, is a shareholder and the president of Merline
& Meacham, P.A. where he has practiced law since 1984. He is a certified specialist in
the fields of both taxation law and estate planning/probate law by the Supreme Court of
South Carolina. He is listed in the book The Best Lawyers in America in the
following three fields: employee benefits law, taxation law, and trusts and estates law.
Mr. Merline received his B.A. degree, magna cum laude, from Furman University, his J.D.
degree from the University of South Carolina School of Law, and his Master of Laws In
Taxation degree from the University of Miami School of Law. He is a Fellow of the American
College of Trust and Estate Counsel. He is a past chairman of the South Carolina Estate
Planning and Probate Law Specialization Advisory Board and a past member of the board of
directors of the University of South Carolina Law School Association. He is a past
president of the Greenville County Taxation, Estate Planning, Probate and Trust Law
Section, and the Greenville Young Lawyers Association. Mr. Merline is the author of
numerous articles and co-author of two books: South Carolina Limited Liability
Companies & Limited Liability Partnerships, South Carolina Bar CLE Division (3d
Ed. 2000), and South Carolina Corporate Practice Manual, South Carolina Bar CLE
Division (2d Ed. 2005). He is a member of Buncombe Street United Methodist Church and the
Rotary Club of Greenville and coaches and serves on the board of directors of Greenville
Little League.

William
H. Pelham, Class III director,is a Greenville native who has been the owner
and president of Pelham Architects, L.L.C. since its founding in 1983. The architectural
firm specializes in residential projects, including new houses, renovations and additions,
and historic preservation. Mr. Pelham, a registered architect, graduated from Clemson
University in 1977 with a B.A. degree in pre-architecture and in 1981 with a masters
degree in architecture. Mr. Pelham is a partner in RPM Partnership

38

---

LLP, a downtown
property owner, and other real estate interests. Mr.
Pelham currently serves as vice chair of the Christ Church Episcopal School Annual Fund,
on the board of directors of the Warehouse Theatre, on the City of Greenvilles Art
in Public Places Commission, on the Greenville Hospice House Division II fundraising
committee, and on the board of governors of the Poinsett Club. He is a past member and
chair of the City of Greenvilles Zoning Adjustments and Appeals board, former chair
and member of the Poinsett Club Building & Grounds committee, and former member of the
Poinsett Club membership committee. His involvement with the Warehouse Theatre includes
serving as president and as chair of the director search and building committees. Mr.
Pelham is a member of AIA Greenville, SC/AIA, the American Institute of Architects, the
National Trust for Historic Preservation, Upstate Forever, the Greater Greenville Chamber
of Commerce, the Better Business Bureau, and Buncombe Street United Methodist Church.

Russel
T. Williams, Class III director, is our president and chief executive officer. From
2001 to 2005 Mr. Williams served as senior vice president, Commercial Lending with
Palmetto Bank, a $900 million Upstate-based community bank. Mr. Williams began his career
with The C&S National Bank of South Carolina in 1985 and has served in positions of
increasing responsibility in the commercial lending and credit administration areas of
several other South Carolina financial institutions. His background includes service as a
commercial lender with Carolina First, Greenville Area Executive with NBSC, and chief
credit officer with New Commerce Bank. Mr. Williams also has five years of experience as a
senior lender and manager in the government guaranteed small business lending industry.
Mr. Williams is a 1983 graduate of Davidson College, a 1985 graduate of the University of
Tennessee M.B.A. program, and a 1992 graduate with honors from the American
Bankers Association Stonier Graduate School of Banking. He is a graduate of
Leadership Greenville Class XVIII. Mr. Williams serves on the Greenville United Way Impact
Council for Strengthening Families and Neighborhoods as well as on the board of the
Internal Medicine Associates patient care center. He has served as past board president of
The Juvenile Diabetes Research Foundation-Upstate South Carolina Chapter and the Speech,
Hearing and Learning Center. Mr. Williams has been active in the South Carolina Bankers
Association, having served as a board member of the SCBA Young Bankers Division and a
member of the SCBA Credit Committee. Mr. Williams has been a Greenville resident for 20
years.

# Audit Committee
Financial Expert

Our
audit committee includes Messrs. Harman, McClure, Merline and Pelham. Our board has
determined that Mr. Harman, our audit committee chairman, qualifies as an audit
committee financial expert as defined under the rules of the Securities and Exchange
Commission. Additionally, the board has determined that each member is fully qualified to
monitor the performance of management, the public disclosures by the company of its
financial condition and performance, our internal accounting operations, and our
independent auditors.

Our
board of directors has implemented a process for shareholders of the company to send
communications to the board. Each of our directors may receive mail at our principal
office location. Any shareholder desiring to communicate with the board, or with specific
individual directors, may so do by writing to the board or board member at BankGreenville
Financial Corporation, P. O. Box 6246, Greenville, South Carolina 29606.

We
do not have a class of securities registered under Section 12 of the Securities Exchange
Act of 1934. Therefore, our directors, executive officers, promoters and control persons
are not required to comply with Section 16(a) of the Exchange Act.

# Code of Ethics

We
have adopted a Code of Ethics that applies to our directors, principal executive officer,
principal financial officer, principal accounting officer or controller, persons
performing similar functions and all other employees. The Code of Ethics is available
without charge to shareholders upon request. Shareholders may contact Ms. Paula S. King,
BankGreenville Financial Corporation, P. O. Box 6246, Greenville, South Carolina 20606, to
obtain a copy.

39

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# Item 10. Executive
Compensation

The
following table shows the cash compensation we paid to our chief executive officer for the
year ended December 31, 2005, including total annual compensation, including salary and
bonus. None of our other executives earned total annual compensation, including salary and
bonus, in excess of $100,000 in 2005.

# Summary Compensation
Table

|                        |  |  |      |  | Long-Term | 
|----------------------- |  |  | ---- |  | --------- | 
|
|
|
|
|
|
|
|Russel T. Williams      |  |  | 2005 |  |           | 
|Chief Executive Officer |  | 

# Employment Agreements

Russel T. Williams. On
July 1, 2005, we entered into an employment agreement with Mr. Williams, under
which he agreed to serve as chief executive officer of BankGreenville Financial
Corporation and BankGreenville for a term of three years. Mr. Williams
employment with the company will be automatically extended for additional terms of one
year each unless the company delivers a notice of termination at least six months prior to
the end of the term. During this term, Mr. Williams is entitled to:

 Base salary of $95,000 per
year, which increased to $110,000 on January 30, 2006, the date we opened our bank for
business. Beginning January 1, 2007, the board (or an appropriate committee of the
board) shall review the executives performance and salary at least annually and may
increase, but not decrease, his salary;

 An annual cash bonus of up to
45% of his annual salary based on achievement of overall bank financial performance
benchmarks, which will be established by the board of directors annually. The board will
consider factors such as comparison to peer data, actual to projected performance, and
other measurements as deemed appropriate from time to time;

 Options to purchase 47,200
shares of common stock. These options were approved and issued on February 14, 2006. The
award agreement for the stock option provides that one-fifth of the shares subject to the
option will vest on each of the first five anniversaries of the opening date of the bank,
but only if the executive remains employed by the company or one of its subsidiaries on
such date, and shall contain other customary terms and conditions. These options are a
portion of the options available for issuance under the companys stock incentive
plan.

 Reasonable car allowance not
to exceed $700 per month;

 Participation in our
retirement, welfare, and other benefit programs;

 Payment of club dues and
related assessments; and

 Reimbursement for travel and
business expenses.

Pursuant
to the terms of his employment agreement, Mr. Williams is prohibited from disclosing
our trade secrets or confidential information. If we terminate Mr. Williams
employment without cause, he will be entitled to severance equal to 12 months of his
then base salary. In addition, following a change in control, if

40

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Mr. Williams terminates his
employment for a good reason within a 90-day period beginning on the 30th day
following a change in control or within a 90-day period beginning on the one year
anniversary of the change in control, he will be entitled to severance equal to
24 months of his then base salary. Finally, during his employment and for a period of
12 months thereafter, Mr. Williams may not, subject to limited exceptions,
(a) compete with us by forming, serving as an organizer, director, or officer of, or
acquiring or maintaining an ownership interest in, a depository financial institution or
holding company of a depository financial institution, if the depository institution or
holding company has one or more offices or branches within our territory, (b) solicit
our clients for a competing business, or (c) solicit our employees for a competing
business.

Paula
S. King. On July 1, 2005, we also entered into an employment agreement with
Ms. King to serve as the chief financial officer of BankGreenville Financial
Corporation and BankGreenville for a term of three years. Ms. Kings employment
with the company will be automatically extended for additional terms of one year each
unless the company delivers a notice of termination at least six months prior to the end
of the term. During this term, Ms. King is entitled to:

 Base salary of $93,000 per
year, which increased to $106,000 on January 30, 2006, the date we opened our bank for
business. Beginning January 1, 2007, the board (or an appropriate committee of the
board) shall review the executives performance and salary at least annually and may
increase, but not decrease, her salary;

 An annual cash bonus of up to
45% of her annual salary based on achievement of overall bank financial performance
benchmarks, which will be established by the board of directors annually. The board will
consider factors such as comparison to peer data, actual to projected performance, and
other measurements as deemed appropriate from time to time;

 Options to purchase 47,200
shares of common stock. These options were approved and issued on February 14, 2006. The
award agreement for the stock option provides that one-fifth of the shares subject to the
option will vest on each of the first five anniversaries of the opening date of the bank,
but only if the executive remains employed by the company or one of its subsidiaries on
such date, and shall contain other customary terms and conditions. These options are a
portion of the options available for issuance under the companys stock incentive
plan.

 Reasonable car allowance not
to exceed $500 per month;

 Participation in our
retirement, welfare, and other benefit programs;

 Payment of professional dues
and continuing professional education costs associated with her CPA designation; and

 Reimbursement for travel and business
expenses.

Pursuant
to the terms of her employment agreement, Ms. King is prohibited from disclosing our
trade secrets or confidential information. If we terminate Ms. Kings employment
without cause, she will be entitled to severance equal to 12 months of her then base
salary. In addition, following a change in control, if Ms. King terminates her
employment for a good reason within a 90-day period beginning on the 30th day
following a change in control or within a 90-day period beginning on the one year
anniversary of the change in control, she will be entitled to severance equal to
24 months of her then base salary. Finally, during her employment and for a period of
12 months thereafter, Ms. King may not, subject to limited exceptions,
(a) compete with us by forming, serving as an organizer, director, or officer of, or
acquiring or maintaining an ownership interest in, a depository financial institution or
holding company of a depository financial institution, if the depository institution or
holding company has one or more offices or branches within our territory, (b) solicit
our clients for a competing business, or (c) solicit our employees for a competing
business.

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# Director Compensation

Our
bylaws permit our directors to receive reasonable compensation as determined by a
resolution of the board of directors. We did not pay any directors fees during the
fiscal year ended December 31, 2005. However, we may, pursuant to our bylaws, begin to
compensate our directors at some time in the future.

In
December 2005, each of our organizers, all of whom also serve as directors, received for
no additional consideration a warrant to purchase three shares of common stock for $10.00
per share for every four shares they purchased in the offering, up to a maximum of 10,000
shares per organizer. The warrants are represented by separate warrant agreements and were
issued in recognition of the financial risk and efforts undertaken by the organizers in
organizing the bank. The warrants vested immediately upon the closing of the offering, and
they are exercisable in whole or in part during the 10 year period following that date. If
the South Carolina Board of Financial Institutions or the FDIC issues a capital directive
or other order requiring the bank to obtain additional capital, the warrants will be
forfeited if not immediately exercised.

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

The
following table shows how much common stock in our company is owned by the directors,
certain executive officers, and owners of more than 5% of the outstanding common stock, as
of March 6, 2006. Unless otherwise indicated, the address of each beneficial owner is c/o
BankGreenville Financial Corporation, P. O. Box 6246, Greenville, South Carolina 29606.

|                                     | Number of |  | % of Beneficial
|------------------------------------ | --------- |  | ---------------
|
|Jeffrey L. Dezen                     |           |  |                
|Roger H. Gower                       |           |  |                
|Frank B. Halter, Jr                  |           |  |                
|R. Bruce Harman                      |           |  |                
|Arthur L. Howson, Jr                 |           |  |                
|Paula S. King                        |           |  |                
|Robert L. Kunz                       |           |  |                
|Jonathan T. McClure                  |           |  |                
|David A. Merline, Jr                 |           |  |                
|William H. Pelham                    |           |  |                
|Russel T. Williams                   |           |  |                
|All executive officers and directors |           | 
|(11 persons)                         |           |  |                

______________________*Indicates less than 1% ownership.

|(1) |  | Includes shares for which the named person has sole voting and investment power,
          has shared voting and investment power, or holds in an IRA or other retirement
          plan program, unless otherwise indicated in these footnotes.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Includes shares that may be acquired within the next 60 days of March 6, 2006 by
          exercising vested stock options or warrants but does not include any unvested
          stock options or warrants.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | For each individual, this percentage is determined by assuming the named person
          exercises all options and warrants which he or she has the right to acquire
          within 60 days, but that no other persons exercise any options or warrants. For
          the directors and executive officers as a group, this percentage is determined
          by assuming that each director and executive officer exercises all options or
          warrants which he or she has the right to acquire within 60 days, but that no
          other persons exercise any options. The calculations are based on 1,180,000
          shares of common stock outstanding on March 6, 2006.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Item 12. Certain
Relationships and Related Transactions

| | We
enter into banking and other transactions in the ordinary course of business with our
directors and officers and their affiliates. It is our policy that these transactions be
on substantially the same terms (including price, or interest rates and collateral) as
those prevailing at the time for comparable transactions with unrelated parties. We do not
expect these transactions to involve more than the normal risk of collectibility nor
present other unfavorable features to us. Loans to individual directors and officers must
also comply with our banks lending policies and statutory lending limits, and
directors with a personal interest in any loan application are excluded from the
consideration of the loan application. We intend for all of our transactions with our
affiliates to be on terms no less favorable to us than could be obtained from an
unaffiliated third party and to be approved by a majority of disinterested directors.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | We
purchased approximately 1.23 acres, on which to build our permanent headquarters building
on January 30, 2006. A family partnership of one of our directors is a one-third partner
in an entity, which owned fifty percent of the property. The purchase price of the
property was $614,238, and we obtained an MAI appraisal,
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | which
values the property at $655,000. Additionally, we entered into a six-month ground lease on
our temporary facility site in January 2006. A family partnership of one of our directors
is a one-third partner in an entity, which owns fifty percent of this site. Ground lease
payments are $1,250 per month. One of our organizers and chairman of our board is a
shareholder in a local law firm, which assisted in the negotiation and preparation of our
land purchase agreement and closing on our headquarters site. The firm also negotiated the
ground lease agreement for our temporary modular banking facility site. The fee for these
services totaled $6,918.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | One
of our organizers is the owner and president of Jeff Dezen Public Relations, a marketing
and public relations firm, and has assisted us with our press releases and media relations
to date. Expenses incurred through December 31, 2005 totaled $2,000.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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# Item 13. Exhibits.

|     | 
|---- | 
|3.1  | 
|     | 
|3.2  | 
|4.1  | 
|     | 
|     | 
|4.2  | 
|     | 
|10.1 | 
|     | 
|10.2 | 
|     | 
|10.3 | 
|     | 
|10.4 | 
|     | 
|     | 
|10.5 | 
|10.6 | 
|10.7 | 
|21.1 | 
|24.1 | 
|31.1 | 
|31.2 | 
|32   | 

______________________
* Management contract of compensatory plan or arrangement required to be filed as an Exhibit to this Annual Report on Form 10-KSB.

45

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# Item 14. Principal
Accountant Fees and Services

Elliott
Davis LLC was our auditor during the fiscal year ended December 31, 2005. The following
table shows the fees that we paid for services performed in fiscal year ended December 31,
2005:

|                   | Year Ended
|------------------ | ----------
|
|Audit Fees         |           
|Audit-Related Fees |           
|Tax Fees           |           
|                   |           
|Total              |           
|                   |           

Audit
Fees. This category includes the aggregate fees billed or accrued for professional
services rendered by the independent auditors during the companys 2005 fiscal year
for the audit of the registrants annual financial statements or services that are
normally provided by the accountant in connection with statutory and regulatory filings or
engagements.

Audit-Related
Fees. This category includes the aggregate fees billed for non-audit services,
exclusive of the fees disclosed relating to audit fees, during the fiscal year ended
December 31, 2005. These services related to the audit of the development stage financial
statements and procedures related to SEC filing of Form SB-2 in connection with the
Companys registration statement as well as the issuance of a comfort letter in
conjunction with a firm commitment underwriting of the initial public offering.

Tax
Fees. This category includes the aggregate fees billed for professional services
rendered by the principal accountant for tax compliance, tax advice, and tax planning.

Oversight
of Accountants; Approval of Accounting Fees.Under the provisions of its charter, the
audit committee is responsible for the retention, compensation, and oversight of the work
of the independent auditors. The charter provides that the audit committee must
pre-approve the fees paid for the audit. The policy specifically prohibits certain
non-audit services that are prohibited by securities laws from being provided by an
independent auditor. All of the accounting services and fees reflected in the table above
were reviewed and approved by the audit committee, and none of the services were performed
by individuals who were not employees of the independent auditor.

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# SIGNATURES

In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.

|                      |  | BANKGREENVILLE FINANCIALCORPORATION  
|--------------------- |  | -------------------------------------
|                      |  |                                      
|Date:  March 30, 2006 |  | By:   /s/  Russel T. Williams        
|                      |  | Russel T. Williams                   
|                      |  | President and Chief Executive Officer

KNOW
ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Russel T. Williams, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments to this Annual Report on Form 10-KSB,
and to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto attorney-in-fact and
agent full power and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.

In
accordance with the Exchange Act, this report has been signed below by the following
persons on behalf of the registrant in the capacities and on the dates indicated.

|                         |  | 
|------------------------ |  | 
|
|Signature                |  | 
|/s/ Jeffrey L. Dezen     |  | 
|Jeffrey L. Dezen         |  | 
|/s/ Roger H. Gower       |  | 
|Roger H. Gower           |  | 
|/s/ Frank B. Halter, Jr  |  | 
|Frank B. Halter, Jr      |  | 
|/s/ R. Bruce Harman      |  | 
|R. Bruce Harman          |  | 
|/s/ Arthur L. Howson, Jr |  | 
|Arthur L. Howson, Jr     |  | 
|/s/ Paula S. King        |  | 
|Paula S. King            |  | 
|/s/ Robert L. Kunz       |  | 
|Robert L. Kunz           |  | 
|/s/ Jonathan T. McClure  |  | 
|Jonathan T. McClure      |  | 

47

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|                         |  | 
|------------------------ |  | 
|/s/ David A. Merline, Jr |  | 
|David A. Merline, Jr     |  | 
|/s/ William H. Pelham    |  | 
|William H. Pelham        |  | 
|/s/ Russel T. Williams   |  | 
|Russel T. Williams       |  | 

48

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# Exhibit Index

|     | 
|---- | 
|3.1  | 
|     | 
|3.2  | 
|4.1  | 
|     | 
|     | 
|4.2  | 
|     | 
|10.1 | 
|     | 
|10.2 | 
|     | 
|10.3 | 
|     | 
|10.4 | 
|     | 
|     | 
|10.5 | 
|10.6 | 
|10.7 | 
|21.1 | 
|24.1 | 
|31.1 | 
|31.2 | 
|32   | 

49