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

# Form 10-KSB/AAmendment No. 1

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

| | ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
| | ------------------------------------------------------------------------------

| | For the Fiscal Year Ended:   December 31, 2007.
| | -----------------------------------------------

| | TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
| | ----------------------------------------------------------------------------------
| | For the transition period from __________ to ________                             

Commission file number
333-127409

BankGreenville Financial Corporation
(Name of small business issuer in its charter)

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

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

Issuers telephone
number: (864) 335-2200

Issuers telephone
number: (864) 335-2200

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

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

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 past 90 days.      Yes          
No

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

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 revenues for its
most recent fiscal year. $2,856,267

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 7, 2008 was $7,131,240. This calculation is based upon an estimate of the
fair market value of the Common Stock of $7.10 per share, which was the price of the last
trade of which management 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 7, 2008.

DOCUMENTS INCORPORATED
BY REFERENCE 

None.

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

Explanatory Note:

This corrected Form 10-KSB Amendment No. 1 hereby amends and supersedes the version filed earlier today,
March 26, 2008, in order to correct a scrivener's error. No other changes have occurred to the Form
10-KSB.

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|         | 
|-------- | 
|PART I   | 
|         | 
|Item 1.  | 
|Item 2.  | 
|Item 3.  | 
|Item 4.  | 
|         | 
|PART II  | 
|         | 
|Item 5.  | 
|Item 6.  | 
|Item 7.  | 
|Item 8.  | 
|Item 8A. | 
|         | 
|PART III | 
|         | 
|Item 9.  | 
|Item 10. | 
|Item 11. | 
|Item 12. | 
|Item 13. | 
|Item 14. | 

SIGNATURES

EXHIBIT INDEX

EX-21 (032508)

EX-31 (032508)

EX-31 (032508)

EX-32 (032508)

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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 Section 21E of the Securities Exchange
Act of 1934. Forward-looking statements may relate to our financial condition, results of
operations, plans, objectives, or future performance. 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 as well as the following:

| |  | significant increases in competitive pressure in the banking and financial services
industries;
| | - | -----------------------------------------------------------------------------------------------

| |  | changes in the interest rate environment which could reduce anticipated or
actual margins;
| | - | ------------------------------------------------------------------------------------------

| |  | changes in political conditions or the legislative or regulatory
environment;
| | - | -----------------------------------------------------------------------------

| |  | general economic conditions, national, regional and in our primary service
area, which may become less favorable than expected resulting in, among other things, a deterioration in credit
quality;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | changes occurring in business conditions or inflation;
| | - | ------------------------------------------------------

| |  | changes in technology;
| | - | ----------------------

| |  | changes in monetary and tax policies;
| | - | -------------------------------------

| |  | the level of allowance for loan losses;
| | - | ---------------------------------------

| |  | the rate of delinquencies and amounts of charge-offs;
| | - | -----------------------------------------------------

| |  | the rate of loan growth;
| | - | ------------------------

| |  | adverse changes in asset quality and resulting credit risk-related losses;
| | - | --------------------------------------------------------------------------

| |  | loss of consumer confidence and economic disruptions resulting in terrorist activities;
| | - | ---------------------------------------------------------------------------------------

| |  | changes in the securities market; and
| | - | -------------------------------------

| |  | other risks and uncertainties detailed from time to time in our filings with
the Securities and Exchange Commission.
| | - | --------------------------------------------------------------------------------------------------------------------

# General

BankGreenville
Financial Corporation was incorporated in South Carolina on March 18, 2005 for purposes of
operating as a bank holding company pursuant to the South Carolina Bank Holding Company
Act, and to own and control all of the capital stock of BankGreenville, a state-chartered
bank. 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. From our inception in March 2005 and
before opening the bank, we engaged in organizational and pre-opening activities necessary
to obtain regulatory approvals and to prepare our subsidiary bank to commence business.

# Marketing Focus and
service area

Our
service area is Greenville County, with a primary focus on Greater Greenville, including
the City of Greenville and the surrounding bedroom communities of Mauldin, Simpsonville,
Greer and Taylors. Our office is centrally located near the intersection of Woodruff Road
and Laurens Road within the Greenville city limits and is situated on the edge of the
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 enhance the quality of this already excellent location.
We moved into our permanent headquarters building in April 2007. We do not currently have
plans to establish branch offices 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.

3

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We
focus on providing high quality, consultative service to small-to-medium-sized businesses
and the professional segment of the growing Greenville area market and offer 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.

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.

# Location

Our
permanent headquarters is located at the corner of Woodruff Road and Rocky Slope Road near
Laurens Road and the 1,100-acre Verdae master planned development. Our headquarters
building, approximating 10,700 square feet, was completed and we moved into this building
in April 2007. We opened on January 30, 2006 in a temporary full-service banking facility,
while our permanent headquarters building was under construction.

# Lending Activities

General.       
          We emphasize a range of lending services, including real estate, commercial,
          home equity lines 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. For larger dollar loans, we can sell
participations to other financial institutions, which allow us to manage the risk
associated with these loans and meet the lending needs of credit-worthy clients.

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.
Any loan, the lesser of $500,000 or five percent of capital, to any director of the bank
is approved by the board of directors of the bank and all loans to directors are 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.

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.

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. Due to our lack
of history in our loan portfolio, our allowance for loan losses is approximately 1.23% of
the outstanding balance of our loans, based on our consideration of several factors,
including regulatory guidelines, 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:

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| | 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
regulators;
|- | ------------------------------------------------------------------------------------------------------------------

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

Real
Estate Loans. Loans secured by first or second mortgages on real estate make up
approximately 78% 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 real estate loans for sale to 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 payments may be structured on a longer
amortization basis. Most loans mature and require payment in full upon the sale or
completion of the property. Loan proceeds are typically 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.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | 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 act as brokers and
receive a brokerage fee, for most or all of the long-term first mortgage residential real
estate loans that we generate in the secondary market. 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 acting as a broker, 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
generally 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) and SBAs 504 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.

We
also offer home equity lines of credit. Our underwriting criteria for and the risks
associated with home equity 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

6

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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 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. Additionally, we solicit brokered deposits.

# 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 the STAR and Cirrus ATM networks, which allow the banks clients to
use other bank and third-party ATMs throughout the country as well as internationally. We
also waive our clients foreign ATM charges for a certain number of monthly ATM
transactions at third-party ATMs. 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.

# Competition and market
share

The
Greenville market is highly competitive, with all of the largest banks in the state, as
well as super regional banks, represented. The competition among the various financial
institutions is based upon a variety of factors, including interest rates offered on
deposit accounts, interest rates charged on loans as well as legal lending limits to any
one borrower, credit and service charges, the quality of services rendered, and the
convenience of banking facilities. In addition to banks and savings associations, we
compete with other financial institutions including securities firms, insurance companies,
credit unions, leasing companies and finance companies. Size gives larger banks certain
advantages in competing for business from large corporations. These advantages include
higher lending limits and the ability to offer services on a statewide basis. We generally
do not attempt to compete for the banking relationships of large corporations, but
concentrate our efforts on small to medium-sized businesses and individuals. We believe we
compete effectively in this market by offering relationship banking and high quality
service.

7

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According
to FDIC data at June 2007, the deposit base in the Greenville Metropolitan Statistical
Area amounted to approximately $11.7 billion. At December 31, 2007, we believe the
banks deposits represented approximately .26% of this market.

# Employees

As
of March 7, 2008, we had 13 full-time employees and no part-time employees.

# Risk Factors

# We expect to incur losses
for at least our first two years, 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 break even in the first quarter of 2008 and become profitable on a
monthly basis in 2008, 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:

| |  | the duration of the credit;
| | - | ---------------------------

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

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

| |  | 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:

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

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

| |  | evaluation of economic conditions;
| | - | ----------------------------------

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

| |  | 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.

8

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# We may have higher loan
losses than we have allowed for in our allowance for loan losses.

Our
loan losses could exceed our allowance for loan losses. Our average loan size continues to
increase and reliance on our historic allowance for loan losses may not be adequate.
Approximately 75% of our loan portfolio is composed of construction, commercial mortgage
and commercial loans. Repayment of such loans is generally considered riskier than
residential mortgage loans. Industry experience shows that a portion of loans will become
delinquent and a portion of loans will require partial or entire charge-off. Regardless of
the underwriting criteria used, losses may be experienced as a result of various factors
beyond our control, including among other things, changes in market conditions affecting
the value of loan collateral and problems affecting the credit of our borrowers.

# We are dependent on key
individuals and the loss of one or more of these 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 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 pay higher 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.

9

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# We are subject to
extensive regulation that could limit or restrict our activities. This regulation is for
protection 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 Institutions, 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.

The
Sarbanes-Oxley Act of 2002, and the related rules and regulations promulgated by the
Securities and Exchange Commission that are now applicable to us, have increased the
scope, complexity, and cost of corporate governance, reporting, and disclosure practices.
We have experienced, and we expect to continue to experience, greater compliance costs,
including costs related to internal controls, as a result of the Sarbanes-Oxley Act.

# We 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:

| |  | additional time and expense associated with identifying and evaluating potential
acquisitions and merger partners;
| | - | ------------------------------------------------------------------------------------------------------------------

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

| |  | dilution of our existing shareholders in an acquisition;
| | - | --------------------------------------------------------

| |  | additional time and 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;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 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;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | time and expense integrating the operations and personnel of the combined businesses;
| | - | -------------------------------------------------------------------------------------

| |  | the potential for an adverse short-term effect on our results of operations; and
| | - | --------------------------------------------------------------------------------

| |  | loss of 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.

10

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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 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, could reduce our client base, our level of
deposits, and demand for financial products such as loans.

Our
success significantly depends 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.

# Our small to medium-sized
business target markets may have fewer financial resources to weather a downturn in
the economy.

We
target the banking and financial services needs of small and medium-sized business. These
businesses generally have fewer financial resources in terms of capital borrowing capacity
than larger entities. If general economic conditions negatively impact these businesses in
the markets in which we operate, our business, financial condition and results of
operations may be adversely affected.

# 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 investment 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.

# Our pace of growth may
require us to raise additional capital in the future, and that capital may not be available
when it is needed.

We
are required by our regulators to maintain adequate levels of capital to support our
operations. To support continued growth, we may need to raise additional capital in the
future. Our ability to raise additional capital, if needed, will depend in part on
conditions in the capital markets at that time, which are beyond our control. We cannot
make assurances as to our ability to raise additional capital, if needed, on terms
acceptable to us. If we cannot raise additional capital when needed, our ability to expand
our operations through internal growth and acquisitions could be materially affected. In
addition, if we decide to raise additional capital, your interest could be diluted.

11

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# A significant portion of
our loan portfolio is secured by real estate, and events that negatively impact the real
estate market could hurt our business.

As
of December 31, 2007, approximately 78% of our loans had real estate as a primary or
secondary component of collateral. The real estate collateral in each case provides an
alternate source of repayment in the event of default by the borrower and may deteriorate
in value during the time the credit is extended. A weakening of the real estate market in
our primary market area could result in an increase in the number of borrowers who default
on their loans and a reduction in the value of the collateral securing their loans, which
in turn could have an adverse effect on our profitability and asset quality. If we are
required to liquidate the collateral securing a loan to satisfy the debt during a period
of reduced real estate values, our earnings and capital could be adversely affected. Acts
of nature, including hurricanes, tornados, earthquakes, fires and floods, which may cause
uninsured damage and other loss of value to real estate that secures these loans, may also
negatively impact our financial condition.

# There is no public market
for our shares, and we do not believe that we have enough shareholders or outstanding shares
to support an active trading market, even if we are eventually listed on a recognized trading
exchange.

There
is currently no established market for our common stock, and we have no current plans to
list our stock on NASDAQ or any other exchange. For these reasons, we do not expect a
liquid market for our common stock to develop for several years, if at all.

# SUPERVISION AND
REGULATION

Both
BankGreenville Financial Corporation and BankGreenville are subject to extensive state and
federal banking regulations that impose restrictions on and provide for general regulatory
oversight of their operations. These laws generally are intended to protect depositors and
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. Our operations may be 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.

# BankGreenville Financial
Corporation.

We
own 100% of the outstanding capital stock of the bank, and therefore we are considered to
be a bank holding company under the federal Bank Holding Company Act of 1956 (the
Bank Holding Company Act). As a result, we are primarily subject to the
supervision, examination and reporting requirements of the Board of Governors of the
Federal Reserve (the Federal Reserve) under the Bank Holding Company Act and
its regulations promulgated thereunder. As a bank holding company located in South
Carolina, the South Carolina Board of Financial Institutions also regulates and monitors
all significant aspects of our operations.

Permitted
Activities. Under the Bank Holding Company Act, a bank holding company is
generally permitted to engage in, or acquire direct or indirect control of more than 5% of
the voting shares of any company engaged in, the following activities:

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

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

| |  | any activity that the Federal Reserve determines to be so closely related to banking as to
be a proper incident to the business of banking.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------

12

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Activities
that the Federal Reserve has found to be so closely related to banking as to be a proper
incident to the business of banking include:

| |  | factoring accounts receivable;
| | - | ------------------------------

| |  | making, acquiring, brokering or servicing loans and usual related activities;
| | - | -----------------------------------------------------------------------------

| |  | leasing personal or real property;
| | - | ----------------------------------

| |  | operating a non-bank depository institution, such as a savings association;
| | - | ---------------------------------------------------------------------------

| |  | trust company functions;
| | - | ------------------------

| |  | financial and investment advisory activities;
| | - | ---------------------------------------------

| |  | conducting discount securities brokerage activities;
| | - | ----------------------------------------------------

| |  | underwriting and dealing in government obligations and money market instruments;
| | - | --------------------------------------------------------------------------------

| |  | providing specified management consulting and counseling activities;
| | - | --------------------------------------------------------------------

| |  | performing selected data processing services and support services;
| | - | ------------------------------------------------------------------

| |  | acting as agent or broker in selling credit life insurance and other types of insurance in
connection with credit transactions; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------

| |  | performing selected insurance underwriting activities.
| | - | ------------------------------------------------------

As
a bank holding company we also can elect to be treated as a financial holding
company, which would allow us engage in a broader array of activities. In sum, a
financial holding company can engage in activities that are financial in nature or
incidental or complementary to financial activities, including insurance underwriting,
sales and brokerage activities, providing financial and investment advisory services,
underwriting services and limited merchant banking activities. We have not sought
financial holding company status, but may elect such status in the future as our business
matures. If we were to elect in writing for financial holding company status, each insured
depository institution we control would have to be well capitalized, well managed and have
at least a satisfactory rating under the CRA (discussed below).

The
Federal Reserve has the authority to order a bank holding company or its subsidiaries to
terminate any of these activities or to terminate its ownership or control of any
subsidiary when it has reasonable cause to believe that the bank holding companys
continued ownership, activity or control constitutes a serious risk to the financial
safety, soundness or stability of it or any of its bank subsidiaries.

Change
in Control.In addition, and subject to certain exceptions, the Bank
Holding Company Act and the Change in Bank Control Act, together with regulations
promulgated there under, require Federal Reserve approval prior to any person or company
acquiring control of a bank holding company. Moreover, the South Carolina
Board of Financial Institutions also must approve an acquisition of a South Carolina 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. | 
| | - | --------------------------------------------------------------------------------------------------------------- | 

13

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Our
common stock is not registered under Section 12 of the Securities Exchange Act of 1934. If
we have more than 500 shareholders of record on December 31 of any year, we will be
required to register our common stock under Section 12 of the Securities Exchange Act
during the first 120 days of the following year. Any shareholder of 10% or more but less
than 25% of any class of our voting securities would be required to either file as a
controlling shareholder of the company or rebut the presumption of control in accordance
with Federal Reserve regulations. The regulations provide a procedure for rebutting
control when ownership of any class of voting securities is below 25%.

Source
of Strength. 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. If the bank were
to become under-capitalized (see below BankGreenvillePrompt Corrective
Action), we would be required to provide a guarantee of the banks plan to
return to capital adequacy. Additionally, 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. Further, any loans by bank holding company to a
subsidiary bank are subordinate in right of payment to deposits and certain other
indebtedness of the subsidiary bank. In the event of a bank holding companys
bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency
to maintain the capital of a subsidiary bank at a certain level would be assumed by the
bankruptcy trustee and entitled to priority payment.

Capital
Requirements. The Federal Reserve Board imposes certain capital
requirements on the bank holding 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 essentially the same as those that apply to
the bank and 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
depends on the banks ability to pay dividends to us, which is subject to regulatory
restrictions as described below in BankGreenville Dividends. We are also
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.

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 S.C. 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 and
the FDIC.

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

| |  | security devices and procedures;
| | - | --------------------------------

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

14

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| |  | loans;
| | - | ------

| |  | investments;
| | - | ------------

| |  | borrowings;
| | - | -----------

| |  | deposits;
| | - | ---------

| |  | mergers;
| | - | --------

| |  | issuances of securities;
| | - | ------------------------

| |  | payment of dividends;
| | - | ---------------------

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

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

| |  | establishment of branches;
| | - | --------------------------

| |  | corporate reorganizations;
| | - | --------------------------

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

| |  | 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.

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 has developed 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:

| |  | internal controls;
| | - | ------------------

| |  | information systems and audit systems;
| | - | --------------------------------------

| |  | loan documentation;
| | - | -------------------

| |  | credit underwriting;
| | - | --------------------

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

| |  | asset quality.
| | - | --------------

15

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Prompt
Corrective Action.As an insured depository institution, the bank is
required to comply with the capital requirements promulgated under the Federal Deposit
Insurance Act and the regulations thereunder, which set forthfive capital
categories, each with specific regulatory consequences. Under these regulations, the
categories are:

| |  | Well Capitalized  The institution exceeds the required minimum level for each
relevant capital measure. A well capitalized institution is one (i) having a total
capital ratio of 10% or greater, (ii) having a tier 1 capital ratio of 6% or greater,
(iii) having a leverage capital ratio of 5% or greater and (iv) that is not
subject to any order or written directive to meet and maintain a specific capital level
for any capital measure.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Adequately Capitalized  The institution meets the required minimum level for each
relevant capital measure. No capital distribution may be made that would result in the
institution becoming undercapitalized. An adequately capitalized institution is one
(i) having a total capital ratio of 8% or greater, (ii) having a tier 1 capital
ratio of 4% or greater and (iii) having a leverage capital ratio of 4% or greater or
a leverage capital ratio of 3% or greater if the institution is rated composite 1 under
the CAMELS (Capital, Assets, Management, Earnings, Liquidity and Sensitivity to market
risk) rating system.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Undercapitalized  The institution fails to meet the required minimum level for any
relevant capital measure. An undercapitalized institution is one (i) having a total
capital ratio of less than 8% or (ii) having a tier 1 capital ratio of less than 4%
or (iii) having a leverage capital ratio of less than 4%, or if the institution is rated a
composite 1 under the CAMELS rating system, a leverage capital ratio of less than 3%.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Significantly Undercapitalized  The institution is significantly below the required
minimum level for any relevant capital measure. A significantly undercapitalized
institution is one (i) having a total capital ratio of less than 6% or
(ii) having a tier 1 capital ratio of less than 3% or (iii) having a leverage
capital ratio of less than 3%.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Critically Undercapitalized  The institution fails to meet a critical capital level
set by the appropriate federal banking agency. A critically undercapitalized institution
is one having a ratio of tangible equity to total assets that is equal to or less than 2%.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If
the FDIC determines, after notice and an opportunity for hearing, that the bank is in an
unsafe or unsound condition, the regulator is authorized to reclassify the bank to the
next lower capital category (other than critically undercapitalized) and require the
submission of a plan to correct the unsafe or unsound condition.

If
the bank is not well capitalized, it cannot accept brokered deposits without prior FDIC
approval and, if approval is granted, cannot offer an effective yield in excess of 75
basis points on interests paid on deposits of comparable size and maturity in such
institutions normal market area for deposits accepted from within its normal market
area, or national rate paid on deposits of comparable size and maturity for deposits
accepted outside the banks normal market area. Moreover, if the bank becomes less
than adequately capitalized, it must adopt a capital restoration plan acceptable to the
FDIC. The bank also would become subject to increased regulatory oversight, and is
increasingly restricted in the scope of its permissible activities. Each company having
control over an undercapitalized institution also must provide a limited guarantee that
the institution will comply with its capital restoration plan. Except under limited
circumstances consistent with an accepted capital restoration plan, an undercapitalized
institution may not grow. An undercapitalized institution may not acquire another
institution, establish additional branch offices or engage in any new line of business
unless determined by the appropriate Federal banking agency to be consistent with an
accepted capital restoration plan, or unless the FDIC determines that the proposed action
will further the purpose of prompt corrective action. The appropriate federal banking
agency may take any action authorized for a significantly undercapitalized institution if
an undercapitalized institution fails to submit an acceptable capital restoration plan or
fails in any material respect to implement a plan accepted by the agency. A critically
undercapitalized institution is subject to having a receiver or conservator appointed to
manage its affairs and for loss of its charter to conduct banking activities.

16

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An
insured depository institution may not pay a management fee to a bank holding company
controlling that institution or any other person having control of the institution if,
after making the payment, the institution, would be undercapitalized. In addition, an
institution cannot make a capital distribution, such as a dividend or other distribution
that is in substance a distribution of capital to the owners of the institution if
following such a distribution the institution would be undercapitalized. Thus, if payment
of such a management fee or the making of such would cause the bank to become
undercapitalized, it could not pay a management fee or dividend to us.

As
of December 31, 2007, the bank was deemed to be well capitalized.

Standards
for Safety and Soundness. The FDIA also requires
the federal banking regulatory agencies to prescribe, by regulation or guideline,
operational and managerial standards for all insured depository institutions relating to:
(i) internal controls, information systems and internal audit systems; (ii) loan
documentation; (iii) credit underwriting; (iv) interest rate risk exposure; and
(v) asset growth. The agencies also must prescribe standards for asset quality,
earnings, and stock valuation, as well as standards for compensation, fees and benefits.
The federal banking agencies have adopted regulations and Interagency Guidelines
Prescribing Standards for Safety and Soundness to implement these required standards.
These guidelines set forth the safety and soundness standards that the federal banking
agencies use to identify and address problems at insured depository institutions before
capital becomes impaired. Under the regulations, if the FDIC determines that the bank
fails to meet any standards prescribed by the guidelines, the agency may require the bank
to submit to the agency an acceptable plan to achieve compliance with the standard, as
required by the FDIC. The final regulations establish deadlines for the submission and
review of such safety and soundness compliance plans.

Deposit
Insurance and Assessments. Deposits at the bank are insured by the Deposit
Insurance Fund (the DIF) as administered by the FDIC, up to the applicable
limits established by lawgenerally $100,000 per accountholder and $250,000 for
certain retirement accountholders. In November 2006, the FDIC adopted final regulations
that set the deposit insurance assessment rates that took effect in 2007. The FDIC uses a
risk-based assessment system that assigns insured depository institutions to one of four
risk categories based on three primary sources of informationsupervisory risk
ratings for all institutions, financial ratios for most institutions, including the
company, and long-term debt issuer ratings for large institutions that have such ratings.
The new premium rate structure imposes a minimum assessment of from five to seven cents
for every $100 of domestic deposits on institutions that are assigned to the lowest risk
category. This category is expected to encompass substantially all insured institutions,
including the bank. A one time assessment credit is available to offset up to 100% of the
2007 assessment. Any remaining credit can be used to offset up to 90% of subsequent annual
assessments through 2010. For institutions assigned to higher risk categories, the premium
that took effect in 2007 ranges from ten cents to forty-three cents per $100 of deposits.

The
FDIC also collects a deposit-based assessment from insured financial institutions on
behalf of The Financing Corporation (FICO). The funds from these assessments are used to
service debt issued by FICO in its capacity as a financial vehicle for the Federal
Savings and Loan Insurance Corporation. The FICO assessment rate is set quarterly and
in 2006 ranged from 1.32 cents to 1.24 cents per $100 of assessable deposits. For the
first quarter of 2007, the FICO assessment rate was 1.22 cents per $100 of assessable
deposits.

Transactions
with Affiliates and Insiders. The company is a legal entity separate and
distinct from the bank and its other subsidiaries. Various legal limitations restrict the
bank from lending or otherwise supplying funds to the company or its non-bank
subsidiaries. The company and the bank are subject to Sections 23A and 23B of the Federal
Reserve Act and Federal Reserve Regulation W. Section 23A of the Federal Reserve Act
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. The bank is
forbidden to purchase low quality assets from an affiliate.

17

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Section 23B
of the Federal Reserve Act, 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.

Regulation
W generally excludes all non-bank and non-savings association subsidiaries of banks from
treatment as affiliates, except to the extent that the Federal Reserve Board decides to
treat these subsidiaries as affiliates. The regulation also limits the amount of loans
that can be purchased by a bank from an affiliate to not more than 100% of the banks
capital and surplus.

The
bank is also 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.

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. However, South Carolina
          law, with limited exceptions, currently permits branching across state lines
          only through interstate mergers.

Anti-Tying
Restrictions.Under amendments to the BHCA and Federal Reserve regulations,
a bank is prohibited from engaging in certain tying or reciprocity arrangements with its
customers. In general, a bank may not extend credit, lease, sell property, or furnish any
services or fix or vary the consideration for these on the condition that (i) the
customer obtain or provide some additional credit, property, or services from or to the
bank, the bank holding company or subsidiaries thereof or (ii) the customer may not
obtain some other credit, property, or services from a competitor, except to the extent
reasonable conditions are imposed to assure the soundness of the credit extended. Certain
arrangements are permissible: a bank may offer combined-balance products and may otherwise
offer more favorable terms if a customer obtains two or more traditional bank products;
and certain foreign transactions are exempt from the general rule. A bank holding company
or any bank affiliate also is subject to anti-tying requirements in connection with
electronic benefit transfer services.

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. Additionally, we must publicly disclose the terms of various
Community Reinvestment Act-related agreements. The FDIC conducted our first CRA
examination in January 2008.

Finance
Subsidiaries. Under the Gramm-Leach-Bliley Act (the GLBA),
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 GLBA 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 GLBA imposes new restrictions on transactions between a bank and its
financial subsidiaries similar to restrictions applicable to transactions between banks
and non-bank affiliates.

Consumer
Protection Regulations. Activities of the bank are subject to a variety of
statutes and regulations designed to protect consumers. Interest and other charges
collected or contracted for by the bank are

18

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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 the:

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

| |  | 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;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| |  | The Fair Credit Reporting Act of 1978, as amended by the Fair and Accurate Credit
Transactions Act, governing the use and provision of information to credit reporting
agencies, certain identity theft protections and certain credit and other disclosures;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| |  | The Rules and regulations of the various federal agencies charged with the responsibility
of implementing these federal laws.
| | - | -----------------------------------------------------------------------------------------------------------------------------

The deposit operations of the bank also are subject to:

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

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

Enforcement
Powers. The bank and its institution-affiliated parties,
including its management, employees, agents, independent contractors, and consultants such
as attorneys and accountants and others who participate in the conduct of the financial
institutions affairs, are subject to potential civil and criminal penalties for
violations of law, regulations or written orders of a government agency. 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 $1,000,000 a day for such violations. Criminal penalties for some
financial institution crimes have been increased to twenty 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, indemnifications 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.

Anti-Money
Laundering.Financial institutions must maintain anti-money laundering
programs that include established internal policies, procedures, and controls; a
designated compliance officer; an ongoing employee training program; and testing of the
program by an independent audit function. The company and the bank are also prohibited
from entering into specified financial transactions and account relationships and must
meet enhanced standards for due diligence and knowing your customer in their
dealings with foreign financial institutions and foreign customers. Financial institutions
must take reasonable steps to conduct enhanced scrutiny

19

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of account relationships to guard
against money laundering and to report any suspicious transactions, and recent laws
provide law enforcement authorities with increased access to financial information
maintained by banks. Anti-money laundering obligations have been substantially
strengthened as a result of the USA Patriot Act, enacted in 2001 and renewed in 2006. Bank
regulators routinely examine institutions for compliance with these obligations and are
required to consider compliance in connection with the regulatory review of applications.
The regulatory authorities have been active in imposing cease and desist
orders and money penalty sanctions against institutions found to be violating these
obligations.

USA
PATRIOT Act.The USA PATRIOT Act became effective on
October 26, 2001, amended, in part, the bank Secrecy Act, and provides, in part, for
the facilitation of information sharing among governmental entities and financial
institutions for the purpose of combating terrorism and money laundering by enhancing
anti-money laundering and financial transparency laws, as well as enhanced information
collection tools and enforcement mechanics for the U.S. government, including:
(i) requiring standards for verifying customer identification at account opening;
(ii) rules to promote cooperation among financial institutions, regulators, and law
enforcement entities in identifying parties that may be involved in terrorism or money
laundering; (iii) reports by nonfinancial trades and businesses filed with the
Treasury Departments Financial Crimes Enforcement Network for transactions exceeding
$10,000; and (iv) filing suspicious activities reports by brokers and dealers if they
believe a customer may be violating U.S. laws and regulations and requires enhanced due
diligence requirements for financial institutions that administer, maintain, or manage
private bank accounts or correspondent accounts for non-U.S. persons. Bank regulators
routinely examine institutions for compliance with these obligations and are required to
consider compliance in connection with the regulatory review of applications.

Under
the USA PATRIOT Act, the FBI can send our banking regulatory agencies lists of the names
of persons suspected of involvement in terrorist activities. The bank can be requested, to
search its records for any relationships or transactions with persons on those lists. If
the bank finds any relationships or transactions, it must file a suspicious activity
report and contact the FBI.

The
Office of Foreign Assets Control (OFAC), which is a division of the U.S.
Department of the Treasury, is responsible for helping to insure that United States
entities do not engage in transactions with enemies of the United States, as
defined by various Executive Orders and Acts of Congress. OFAC has sent, and will send,
our banking regulatory agencies lists of names of persons and organizations suspected of
aiding, harboring or engaging in terrorist acts. If the bank finds a name on any
transaction, account or wire transfer that is on an OFAC list, it must freeze such
account, file a suspicious activity report and notify the FBI. The bank has appointed an
OFAC compliance officer to oversee the inspection of its accounts and the filing of any
notifications. The bank actively checks high-risk OFAC areas such as new accounts, wire
transfers and customer files. The bank performs these checks utilizing software, which is
updated each time a modification is made to the lists provided by OFAC and other agencies
of Specially Designated Nationals and Blocked Persons.

Privacy
and Credit Reporting.Financial institutions are required to disclose their
policies for collecting and protecting confidential information. Customers generally may
prevent financial institutions from sharing nonpublic personal financial information with
nonaffiliated third parties except under narrow circumstances, such as the processing of
transactions requested by the consumer or when the financial institution is jointly
sponsoring a product or service with a nonaffiliated third party. 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
consumers. It is the banks policy not to disclose any personal information unless
required by law.

Like
other lending institutions, the bank utilizes credit bureau data in its underwriting
activities. Use of such data is regulated under the Federal Credit Reporting Act on a
uniform, nationwide basis, including credit reporting, prescreening, sharing of
information between affiliates, and the use of credit data. The Fair and Accurate Credit
Transactions Act of 2003 (the FACT Act) authorizes states to enact identity
theft laws that are not inconsistent with the conduct required by the provisions of the
FACT Act.

Payment
of 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

20

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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 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.

Check
21. The Check Clearing for the 21st Century Act 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 include:

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

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

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

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

| |  | 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
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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 bank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.

# Item 2.   Description of
Property

Our
permanent headquarters building is located at the corner of Woodruff Road and Rocky Slope
Road near Laurens Road, at 499 Woodruff Road, Greenville, South Carolina 29607. The
building is a full service banking facility with three drive-thru lanes and a drive-thru
ATM. The site is approximately 1.23 acres and the building is approximately 10,700 square
feet. We believe that the property is adequately covered by insurance.

21

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# 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 have no
current plans to seek listing on any stock exchange, and we do not expect to qualify for
listing on NASDAQ or any other exchange for at least several years. The OTC Bulletin Board
prices are quotations, which reflect inter-dealer prices, without retail mark-up, markdown
or commissions and may not represent actual transactions.

As
of March 7, 2008, there were 1,180,000 shares of common stock outstanding held by 134
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 $10.00. The following table shows the reported
high and low bid information as quoted on the OTC Bulletin Board since our common stock
began trading publicly:

|                    | High | Low
|------------------- | ---- | ---
|First quarter 2007  |      |    
|Second quarter 2007 |      |    
|Third quarter 2007  |      |    
|Fourth quarter 2007 |      |    

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.

22

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

# General

Our
bank opened for business on January 30, 2006. Accordingly, the year ended December 31,
2006 included approximately eleven months of banking operations. The comparison of the
years ended December 31, 2007 and December 31, 2006 should be read in that context. From
January 1, 2006 to January 30 2006, we engaged in pre-opening activities, including,
without limitation, the pursuit of regulatory approvals from the FDIC and the South
Carolina Board of Financial Institutions to charter the bank and from the Federal Reserve
to become a bank holding company.

Like
most community banks, we derive most of our income from interest we receive on our loans
and investments. Our primary source of funds for making these loans and investments is our
deposits, on which we pay interest. Consequently, one of the key measures of our success
is our amount of net interest income, or the difference between the income on our
interest-earning assets, such as loans and investments, and the expense on our
interest-bearing liabilities, such as deposits, also known as net interest margin. Another
key measure is the spread between the yield we earn on these interest-earning assets and
the rate we pay on our interest-bearing liabilities, which is referred to as net interest
spread.

There
are risks inherent in all loans, so we maintain an allowance for loan losses to absorb
probable losses on existing loans that may become uncollectible. We establish and maintain
this allowance by charging a provision for loan losses against our operating earnings. In
the following section we have included a detailed discussion of this process.

In
addition to earning interest on our loans and investments, we earn income through fees and
other expenses we charge to our clients. We describe the various components of this
non-interest income, as well as our non-interest expense, in the following discussion.

The
following discussion and analysis also identifies significant factors that have affected
our financial position and operating results during the periods included in the
accompanying financial statements. We encourage you to read this discussion and analysis
in conjunction with our financial statements and the other statistical information
included in this report.

# CRITICAL ACCOUNTING
POLICIES

We
have adopted various accounting policies that govern the application of accounting
principles generally accepted in the United States and with general practices within the
banking industry in the preparation of our financial statements. Our significant
accounting policies are described in footnote 1 to our audited consolidated financial
statements as of December 31, 2007, included herein.

Certain
accounting policies involve significant judgments and assumptions by us that have a
material impact on the carrying value of certain assets and liabilities. We consider these
accounting policies to be critical accounting policies. The judgment and assumptions we
use are based on historical experience and other factors, which we believe to be
reasonable under the circumstances. Because of the nature of the judgment and assumptions
we make, actual results could differ from these judgments and estimates that could have a
material impact on the carrying values of our assets and liabilities and our results of
operations.

# Allowance for Loan Losses

We
believe the allowance for loan losses is the critical accounting policy that requires the
most significant judgment and estimates used in preparation of our consolidated financial
statements. Some of the more critical judgments supporting the amount of our allowance for
loan losses include judgments about the creditworthiness of borrowers, the estimated value
of the underlying collateral, the assumptions about cash flow, determination of loss
factors for estimating credit losses, the impact of current events, and conditions, and
other factors impacting the level of probable inherent losses.

23

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Under
different conditions or using different assumptions, the actual amount of credit losses
incurred by us may be different from managements estimates provided in our
consolidated financial statements. Refer to the portion of this discussion that addresses
our allowance for loan losses for a more complete discussion of our processes and
methodology for determining our allowance for loan losses.

# Income Taxes

We
use 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 our 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
reevaluated on a continual basis as regulatory and business factors change. No assurance
can be given that either the tax returns submitted by us 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.

# Results of Operations

General

Our
net loss for the year ended December 31, 2007 was $494,350, or $0.42 per share, compared
to $785,385, or $0.67 per share, for the same period in 2006, an improvement of $291,035,
or 37%.

Our
net loss for the fourth quarter of 2007 was $39,682, or $0.03 per share, compared to
$145,414, or $0.12 per share for the same period in 2006, an improvement of $105,732, or
73%.

We
incurred $48,502 in pre-opening expenses for the period January 1, 2006 to January 30,
2006, the date our bank opened for business, and only had approximately eleven months of
banking operations in 2006. Our organizational costs were expensed when incurred in
accordance with FASB Statement of Position (SOP) 98-5, Reporting on the Costs of
Start-Up Activities.

Net Interest Income

Our
primary source of revenue is net interest income. Net interest income is the difference
between income earned on interest-bearing assets and interest paid on deposits and
borrowings used to support such assets. The level of net interest income is determined by
the balances of interest-earning assets and interest-bearing liabilities and corresponding
interest rates earned and paid on those assets and liabilities, respectively. In addition
to the volume of and corresponding interest rates associated with these interest-earning
assets and interest-bearing liabilities, net interest income is affected by the timing of
the repricing of these interest-earning assets and interest-bearing liabilities.

Net
interest income was $1,388,109 for the year ended December 31, 2007, an increase of
$597,343 or 76% over net interest income of $790,766 for the year ended December 31, 2006.
Interest income of $2,796,235 for the year ended December 31, 2007 included $1,894,835 on
loans, $707,096 on investment securities and $194,304 on federal funds sold. Loan interest
and related fees improved $1,341,279 or 242% over 2006, due to continued growth in the
loan portfolio volume. Total interest expense of $1,408,126 for the year ended December
31, 2007 included $1,400,145 related to deposit accounts and $7,981 on federal funds
purchased and Federal Home Loan Bank borrowings. Interest expense on deposits increased
$1,014,728, or 263%, due to continued growth in deposits, primarily certificates of
deposit.

24

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The
following table sets forth information related to our average balance sheet, average
yields on assets, and average costs of liabilities. We derived these yields by dividing
income or expense by the average balance of the corresponding assets or liabilities. We
derived average balances from the daily balances throughout the periods indicated. The net
amount of capitalized loan fees is amortized into interest income over the life of the
loans.

# Average Balances,
Income and Expenses, Yields and RatesFor the Years Ended December 31,

|                                           | 2007 | 2006
|------------------------------------------ | ---- | ----
|
|
|
|Interest-earning assets:                   |      |     
|Federal funds sold                         |      |     
|Investment securities and FHLB stock       |      |     
|Loans (1)                                  |      |     
|                                           |      |     
|Total interest-earning  assets             |      |     
|Non-earning assets                         |      |     
|                                           |      |     
|Total assets                               |      |     
|                                           |      |     
|Interest-bearing liabilities:              |      |     
|Interest checking                          |      |     
|Savings and money market                   |      |     
|Time deposits                              |      |     
|Federal funds purchased                    |      |     
|FHLB borrowings                            |      |     
|                                           |      |     
|Total interest-bearing liabilities         |      |     
|                                           |      |     
|Non-interest bearing liabilities           |      |     
|Shareholders equity                       |      |     
|                                           |      |     
|Total liabilities and shareholders' equity |      |     
|                                           |      |     
|Net interest spread                        |      |     
|                                           |      |     
|Net interest income/margin                 |      |     
|                                           |      |     

(1)  
          Loan fees, which are immaterial, are included in interest income. There were no
          nonaccrual loans for either period.

Our
consolidated net interest margin for the year ended December 31, 2007 was 3.58%, a
decrease of 64 basis points from the net interest margin of 4.22% for the year ended
December 31, 2006. This decrease can be attributed to the costs of our funding sources. We
relied on a higher volume of certificates of deposits, both local and brokered, to fund
the growth of our loan portfolio in 2007. These deposits are priced higher than core
deposits and our average cost on time deposits increased from 5.06% to 5.29%.
Additionally, for the first time in 2007, we utilized alternative funding sources of
federal funds purchased and FHLB borrowings. Earning assets averaged $38.8 million for the
year ended December 31, 2007, increasing from $18.7 million for the year ended December
31, 2006. The net interest margin is calculated by dividing net interest income by
year-to-date average earning assets. Our net interest spread was 2.50% for the year ended
December 31, 2007. The net interest spread is the difference between the yield we earn on
our interest-earning assets and the rate we pay on our interest-bearing liabilities. In
pricing deposits, we consider our liquidity needs, the direction and levels of interest
rates and local market conditions. As such, higher rates have been paid initially to
attract deposits.

Rate/Volume Analysis

Net
interest income can be analyzed in terms of the impact of changing interest rates and
changing volume. The following table sets forth the effect which the varying levels of
interest-earning assets and interest-bearing liabilities and the applicable rates had on
changes in net interest income for the comparative periods presented. Changes attributed
to both rate and volume, have been allocated on a pro rata basis.

25

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|                                            | 2007 Compared to 2006
|------------------------------------------- | ---------------------
|
|
|
|Interest-earning assets:                    |                      
|Federal funds sold                          |                      
|Investment securities and FHLB stock        |                      
|Loans                                       |                      
|                                            |                      
|Total interest income                       |                      
|                                            |                      
|Interest-bearing liabilities:               |                      
|Interest-bearing deposits                   |                      
|Federal funds purchased and FHLB borrowings |                      
|                                            |                      
|Total interest expense                      |                      
|                                            |                      
|Net interest income                         |                      
|                                            |                      

Provision for Loan Losses

We
have established an allowance for loan losses through a provision for loan losses charged
as a non-cash expense to our statement of operations. We review our loan portfolio
periodically to evaluate our outstanding loans and to measure both the performance of the
portfolio and the adequacy of the allowance for loan losses. Please see the discussion
below under Provision and Allowance for Loan Losses for a description of the
factors we consider in determining the amount of the provision we expense each period to
maintain this allowance.

Our
provision for loan losses for the year ended December 31, 2007 was $238,821, an increase
of $28,442 or 14% over our provision of $210,379 for the year ended December 31, 2006. The
allowance as a percentage of gross loans decreased to 1.23% at December 31, 2007 from
1.50% at December 31, 2006, due to managements continued evaluation of the adequacy
of the reserve for possible loan losses given the size, mix, and quality of the current
loan portfolio. Management also relies on our limited history of past-dues and
charge-offs, as well as peer data to determine our loan loss allowance.

Noninterest Income

Noninterest
income for the year ended December 31, 2007 was $60,032 compared to $27,016 for the year
ended December 31, 2006. Service charges and other fees on deposit accounts were $19,163
for the year ended December 31, 2007, an improvement of $11,767 over the year ended
December 31, 2006 due to an increase in deposit accounts. For the year ended December 31,
2007, mortgage loan origination fees were $37,556, an increase of $17,936, or 91% from
2006, as we continued to increase the volume of mortgage loans originated. In 2007, we
sold one investment security and recognized a gain of $3,313. There were no sales in 2006.

Noninterest Expenses

The
following table sets forth information related to our noninterest expenses for the year
ended December 31, 2007 and 2006.

|                                                      | 2007 | 2006
|----------------------------------------------------- | ---- | ----
|Compensation and benefits                             |      |     
|Occupancy and equipment                               |      |     
|Data processing and related costs                     |      |     
|Marketing, advertising and shareholder communications |      |     
|Legal and audit                                       |      |     
|Other professional fees                               |      |     
|Supplies, postage and telephone                       |      |     
|Insurance                                             |      |     
|Credit related expenses                               |      |     
|Courier and armored carrier service                   |      |     
|Regulatory fees and FDIC insurance                    |      |     
|Other                                                 |      |     
|                                                      |      |     
|Total noninterest expense                             |      |     
|                                                      |      |     

26

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Noninterest
expenses were $1,703,670 for the year ended December 31, 2007 compared to $1,392,788 for
the year ended December 31, 2006. The most significant component of noninterest expense is
compensation and benefits, which totaled $953,430 for the year ended December 31, 2007,
compared to $759,828 for the year ended December 31, 2006. The increase primarily related
to staff additions associated with the banks growth, performance raises and
increases in bank-paid employee health care and other insurance costs. Occupancy and
equipment expense of $205,765 in 2007 decreased from $250,008 in 2006. Occupancy and
equipment costs were higher in 2006 due to site preparation costs associated with our
temporary modular facility site. Data processing and related expense increased from
$103,374 in 2006 to $179,646 in 2007, primarily due to an increase in our core processor
charges because of the increased volume of new accounts. Other professional fees increased
from $3,475 in 2006 to $53,396 in 2007, primarily due to a search firm fee paid in
conjunction with the hiring of a senior lender during the first quarter of 2007, as well
as additional third-party consultant costs incurred for compliance, loan and internal
audit reviews. Regulatory fees and FDIC insurance increased from $7,356 in 2006 to $24,602
in 2007 as we began incurring FDIC assessments in 2007. These assessments are based on
deposit levels.

Income Tax Benefit

The Company had no currently taxable income for the years ended December 31, 2007 and
2006. The Company has recorded a valuation allowance equal to the net deferred tax asset
as the realization of this asset is dependent on the Companys ability to generate
future taxable income during the periods in which temporary differences become deductible.

Balance Sheet Review

General

At
December 31, 2007, total assets were $58.6 million compared to $31.7 million at December
31, 2006, for an increase of $26.9 million, or 85%. The increase in assets resulted from
volume increases in our loan and investment portfolios and related increases in our
funding sources of deposits and other borrowings. Interest-earning assets comprised
approximately 94% and 91% of total assets at December 31, 2007 and December 31, 2006.
Gross loans totaled $36.2 million, an increase of $22.2 million, or 158% from $14.0
million at December 31, 2006. Investment securities and Federal Home Loan Bank stock were
$18.7 million, an increase of $8.9 million or 91% from $9.8 million at December 31, 2006.
Investment in overnight federal funds decreased $5.0 million to $-0- at December 31, 2007.
During 2007, we moved these funds into higher yielding securities available for sale and
loans, and at December 31, 2007, we were in a federal funds purchased (borrowing) position
of $1.6 million. We completed our permanent headquarters on March 31, 2007 and the costs
of $1.3 million included in building construction in progress at December 31,
2006 were transferred to property and equipment, which totaled $2.9 million,
at December 31, 2007.

Deposits
totaled $44.1 million at December 31, 2007, a $23.2 million, or 111% increase from $20.9
million at December 31, 2006. Federal funds purchased and Federal Home Loan Bank
borrowings were $1.6 million and $2.4 million, respectively, at December 31, 2007. No
amounts were outstanding at December 31, 2006. Shareholders equity was $9.7 million
and $10.1 million at December 31, 2007 and December 31, 2006, respectively.

Investments

At
December 31, 2007, our investment securities portfolio was $18.5 million and represented
approximately 32% of our total assets. Investments increased $8.7 million from $9.8
million at December 31, 2006. Our portfolio consisted of U.S. government sponsored
agencies of $7.6 million, mortgage-backed agencies of $9.9 million, taxable municipal securities
of $0.4 million and corporate bonds of $0.5 million. All of our investment securities are
classified available for sale.

27

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Contractual
maturities and yields on our investment securities available for sale at December 31, 2007
are shown in the following table. Expected maturities may differ from contractual
maturities because issuers may have the right to call or prepay obligations with or
without call or prepayment penalties. The average life and modified duration of our
investments securities portfolio were 5.28 and 3.92 years, respectively, at December 31,
2007. The average yields are based on amortized cost.

|                  | Less than | One year to | Five years |   | 
|----------------- | --------- | ----------- | ---------- | - | 
|
|
|
|U.S. Government   |           |             |            |   | 
|sponsored         |           |             |            |   | 
|agencies          |           |             | $          | - | 
|Mortgage-backed   |           |             |            |   | 
|agencies          |           |             |            | - | 
|Taxable municipal |           |             |            |   | 
|securities        |           |             |            | - | 
|Corporate bonds   |           |             |            | - | 
|                  |           |             |            |   | 
|Total             |           |             | $          | - | 
|                  |           |             |            |   | 

The amortized costs and the fair value of our investment securities at December 31, 2007
and 2006 are shown in the following table.

|                                   | 2007 | 2006
|---------------------------------- | ---- | ----
|
|
|
|U.S. Government sponsored agencies |      |     
|Mortgage-backed agencies           |      |     
|Taxable municipal securities       |      |     
|Corporate bonds                    |      |     
|                                   |      |     
|Total                              |      |     
|                                   |      |     

We
believe, based on industry analyst reports and credit ratings, the deterioration in fair
values of individual investment securities available for sale is attributed to changes in
market interest rates and not in the credit quality of the issuer and therefore, these
losses are not considered other-than-temporary. We have the ability and intent to hold
these securities until such time as the value recovers or the securities mature.

Investment
securities with market values of approximately $5.9 million and $1.0 million at December
31, 2007 and 2006, respectively, were pledged to secure public deposits and Federal Home
Loan Bank borrowings.

Gross
realized gains on the sale of available for sale securities for the year ended December
31, 2007 were $3,313. We had no sales of investment securities in 2006.

In
2007, we became a member of the Federal Home Loan Bank, and at December 31, 2007, we held
non-marketable equity securities, which consisted of Federal Home Loan Bank stock of
$183,000. This investment is carried at cost, which approximates fair market value. This
stock pays a quarterly dividend, which is currently 6%.

28

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Loans

Since
loans typically provide higher interest yields than other interest-earning assets, it is
our goal to ensure that the highest percentage of our earning assets is invested in our
loan portfolio. Gross loans outstanding at December 31, 2007 were $36.2 million, or 66% of
interest-earning and 62% of total assets, compared to $14.0 million, or 49% of
interest-earning and 44% of total assets at December 31, 2006.

Loans
secured by real estate mortgages comprised approximately 78% of loans outstanding at
December 31, 2007 and 66% at December 31, 2006. Most of our real estate loans are secured
by residential and commercial properties. We do not generally originate traditional long
term residential mortgages, but we do issue traditional second mortgage residential real
estate loans and home equity lines of credit. We obtain a security interest in real estate
whenever possible, in addition to any other available collateral. This collateral is taken
to increase the likelihood of the ultimate repayment of the loan. Generally, we limit the
loan-to-value ratio on loans we make to 80%.

Commercial
loans and lines of credit represented approximately 19% and 34% of our loan portfolio at
December 31, 2007 and 2006, respectively.

Our
construction and development, and land loan portfolio increased in 2007, due primarily to
the significant amount of construction activity in Greenville County in 2007. These loans
represented approximately 34% and 14% at December 31, 2007 and 2006, respectively.

Due
to the short time our portfolio has existed, the loan mix shown below may not be
indicative of the ongoing portfolio mix. We attempt to maintain a relatively diversified
loan portfolio to help reduce the risk inherent in concentration of certain types of
collateral.

The following table summarizes the composition of our loan portfolio as of December 31, 2007
and 2006.

|                                      | 2007 | 2006
|------------------------------------- | ---- | ----
|
|
|
|Real Estate:                          |      |     
|Construction and development and land |      |     
|Commercial                            |      |     
|Residential mortgages                 |      |     
|Home equity lines                     |      |     
|                                      |      |     
|Total real estate                     |      |     
|                                      |      |     
|Commercial                            |      |     
|Consumer                              |      |     
|Deferred origination fees, net        |      |     
|                                      |      |     
|Gross loans                           |      |     
|                                      |      |     
|Less allowance for loan losses        |      |     
|                                      |      |     
|Total loans, net                      |      |     
|                                      |      |     

29

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Maturities and
Sensitivity of Loans to Changes in Interest Rates

The
information in the following tables is based on the contractual maturities of individual
loans, including loans which may be subject to renewal at their contractual maturity.
Renewal of such loans is subject to review and credit approval, as well as modification of
terms upon maturity. Actual repayments of loans may differ from the maturities reflected
below because borrowers have the right to prepay obligations with or without prepayment
penalties.

The
following table summarizes the loan maturity distribution by composition and interest rate
types at December 31, 2007.

|                                   |  | After one |   |           
|---------------------------------- |  | --------- | - | ----------
|
|
|Real estate- mortgage              |  |           | $ | 2,256,525 
|Real estate- construction          |  |           |   | 7,943,273 
|                                   |  |           |   |           
|Total real estate                  |  |           |   | 10,199,798
|                                   |  |           |   |           
|Commercial                         |  |           |   | 3,989,257 
|Consumer- other                    |  |           |   | 336,899   
|                                   |  |           |   |           
|Gross loans                        |  |           | $ | 14,525,954
|                                   |  |           |   |           
|                                   |  |           |   |           
|Deferred origination fees, net     |  |           |   |           
|                                   |  |           |   |           
|Gross loans, net of deferred fees  |  |           |   |           
|                                   |  |           |   |           
|Loans maturing after one year with |  |           |   |           
|Fixed interest rates               |  |           |   |           
|                                   |  |           |   |           
|Floating interest rates            |  |           |   |           
|                                   |  |           |   |           

Provision and Allowance
for Loan Losses

We
have established an allowance for loan losses through a provision for loan losses charged
to expense on our consolidated statement of operations. The allowance for loan losses was
$446,184 and $210,379 as of December 31, 2007 and December 31, 2006, respectively, and
represented 1.23% of outstanding loans at December 31, 2007 and 1.50% at December 31,
2006. The allowance for loan losses represents an amount which we believe will be adequate
to absorb probable losses on existing loans that may become uncollectible. Our judgment as
to the adequacy of the allowance for loan losses is based on a number of assumptions about
future events, which we believe to be reasonable, but which may or may not prove to be
accurate. Our determination of the allowance for loan losses is based on evaluations of
the collectibility of loans, including consideration of factors such as the balance of
impaired loans, the quality, mix, and size of our overall loan portfolio, economic
conditions that may affect the borrowers ability to repay, the amount and quality of
collateral securing the loans, our historical loan loss experience, and a review of
specific problem loans. We also consider subjective issues such as changes in the lending
policies and procedures, changes in the local/national economy, changes in volume or type
of credits, changes in volume/severity of problem loans, quality of loan review and board
of director oversight, concentrations of credit, and peer group comparisons. Due to our
limited operating history, to date the provision for loan losses has been made primarily
as a result of our assessment of general loan loss risk compared to banks of similar size
and maturity.

Due
to our short operating history, the loans in our loan portfolio and our lending
relationships are of very 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 known 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. Periodically, we will adjust the amount of the allowance based on changing
circumstances. We will charge recognized losses to the allowance and add subsequent
recoveries back to the allowance for loan losses.

30

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There can be no assurance that
charge-offs of loans in future periods will not exceed the allowance for loan losses as
estimated at any point in time or that provisions for loan losses will not be significant
to a particular accounting period.

Because
of our short operating history and the lack of seasoning of our loan portfolio, we do not
allocate the allowance for loan losses to specific categories of loans. Instead, we
evaluate the adequacy of the allowance for loan losses on an overall portfolio basis
utilizing our credit grading system which we apply to each loan. We have retained an
independent consultant to review the loan files on a test basis to assess the grading of
samples of loans.

Charge-offs
totaled $3,279 and recoveries were $263 in 2007 and were related to a commercial loan.
There were no charge-offs in 2006. There were no nonaccrual or nonperforming loans at
December 31, 2007 or 2006, and no accruing loans which were contractually past due 90 days
or more as to principal or interest payments. Generally, a loan will be placed on
nonaccrual status when it becomes 90 days past due as to principal or interest, or when
management believes, after considering economic and business conditions and collection
efforts, that the borrowers financial condition is such that collection of the loan
is doubtful. A payment of interest on a loan that is classified as nonaccrual will be
recognized as income when received.

At
December 31, 2007, we were not aware of any potential problem loans, nor any loans
considered impaired.

Deposits

Our
primary source for our loans and investments is our deposits. Total deposits as of the
years ended December 31, 2007 and 2006 were $44.1 million and $20.9 million, respectively.
The following table shows the balance outstanding and the average rates paid on deposits
during 2007 and 2006.

|                                           | 2007 | 2006
|------------------------------------------ | ---- | ----
|
|
|Non-interest bearing demand deposits       |      |     
|Interest-bearing checking                  |      |     
|Money market and savings                   |      |     
|Time deposits less than $100,000           |      |     
|Time deposits $100,000 and over            |      |     
|Brokered time deposits, less than $100,000 |      |     
|                                           |      |     
|Total                                      |      |     
|                                           |      |     

Core
deposits, which exclude time deposits of $100,000 or more and brokered certificates of
deposit, provide a relatively stable funding source for our loan portfolio and other
earning assets. Our core deposits were $20.4 million at December 31, 2007. Our
loan-to-deposit ratio was 82% and 67% at December 31, 2007 and 2006, respectively. Due to
the competitive interest rate environment in our market, we utilized brokered certificates
of deposit as a funding source in 2007 when we were able to procure these certificates at
interest rates less than those in the local market. Brokered certificates of deposit
purchased outside our primary market totaled $12.2 million at December 31, 2007. All of
our time deposits are certificates of deposits.

The
maturity distribution of our time deposits of $100,000 or more and brokered time deposits
at December 31, 2007 was as follows:

|                               | 
|------------------------------ | 
|Three months or less           | 
|Over three through six months  | 
|Over six through twelve months | 
|Over twelve months             | 
|                               | 
|Total                          | 
|                               | 

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Borrowings and lines of
credit

At
December 31, 2007, the bank had short-term lines of credit with correspondent banks to
purchase a maximum of $5.4 million in unsecured federal funds on a one to fourteen day
basis for general corporate purposes. The interest rate on borrowings under these lines is
the prevailing market rate for federal funds purchased. These accommodation lines of
credit are renewable annually and may be terminated at any time at the correspondent
banks sole discretion. The Bank utilized these lines of credit during the third
quarter of 2007. The highest month-end amount outstanding was $2,670,000 at November 30,
2007, and the average interest rate paid on these borrowings during the third quarter was
4.50%. At December 31, 2007, $1,648,000 was outstanding at an interest rate of 4.60%. No
amounts were outstanding at December 31, 2006, or during the year then ended.

We
are also a member of the Federal Home Loan Bank. At December 31, 2007, we had $2.4 million
outstanding in Federal Home Loan Bank borrowings. This advance matures on December 27,
2010 and has a one-year call option on December 27, 2008. The interest rate on this
advance is 3.64%. Available credit with the Federal Home Loan Bank was approximately $3.4
million at December 31, 2007. Refer to Liquidity below for further discussion.

# Capital Resources

Total
shareholders equity was $9.7 million at December 31, 2007 a decrease of $387,971
from $10.1 million at December 31, 2006. Common stock increased due to stock compensation
expense of $58,107 in 2007. Shareholders equity was reduced by our net loss of
$494,350 for the year ended December 31, 2007. Unrealized gains on investment securities
available for sale increased shareholders equity by $48,272 during 2007.

The
Federal Reserve and bank regulatory agencies require bank holding companies and financial
institutions to maintain capital at adequate levels based on a percentage of assets and
off-balance sheet exposures, adjusted for risk weights ranging from 0% to 100%. The
Federal Reserve guidelines contain an exemption from the capital requirements for
small bank holding companies, which in 2006 were amended to cover most bank
holding companies with less than $500 million in total assets that do not have a material
amount of debt or equity securities outstanding registered with the SEC. Although we file
periodic reports with the SEC, we believe that because our stock is not registered under
Section 12 of the Securities Exchange Act and is not listed on any exchange or otherwise
actively traded, the Federal Reserve Board will interpret its new guidelines to mean that
we qualify as a small bank holding company. Nevertheless, our Bank remains subject to
these capital requirements. Failure to meet minimum capital requirements can initiate
certain mandatory and possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Banks financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve quantitative measures
of the Banks assets, liabilities and certain off-balance sheet items as calculated
under regulatory accounting practices. The Banks capital amounts and classifications
are also subject to qualitative judgments by the regulators about components, risk
weightings, and other factors. Regardless, our Bank is well capitalized under
these minimum capital requirements as set per bank regulatory agencies.

Under
the capital adequacy guidelines, regulatory capital is classified into two tiers. These
guidelines require an institution to maintain a certain level of Tier 1 and Tier 2 capital
to risk-weighted assets. Tier 1 capital consists of common shareholders equity,
excluding the unrealized gain or loss on securities available for sale, minus certain
intangible assets. In determining the amount of risk-weighted assets, all assets,
including certain off-balance sheet assets, are multiplied by a risk-weight factor of 0%
to 100% based on the risks believed to be inherent in the type of asset. Tier 2 capital
consists of Tier 1 capital plus the general reserve for loan losses, subject to certain
limitations. We are also required to maintain capital at a minimum level based on total
average assets, which is known as the Tier 1 leverage ratio.

At
the bank level, we are subject to various regulatory capital requirements administered by
the federal banking agencies. To be considered adequately capitalized under
these capital guidelines, we must maintain a minimum total risk-based capital of 8%, with
at least 4% being Tier 1 capital. In addition, we must maintain a minimum Tier 1 leverage
ratio of at least 4%. To be considered well-capitalized, we must maintain
total risk-based capital of at least 10%, Tier 1 capital of at least 6%, and a leverage
ratio of at least 5%.

32

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The
following table sets forth the holding company and the bank capital ratios at December 31,
2007 and 2006. For all periods, the bank was considered well capitalized.

|                          | 2007 | 2006
|------------------------- | ---- | ----
|
|
|Total risk-based capital  |      |     
|Tier 1 risk-based capital |      |     
|Leverage capital          |      |     

We
believe that our capital is sufficient to fund the activities of the bank in its initial
stages of operation and that the rate of asset growth will not negatively impact the
capital base. We have no plans for significant capital expenditures in 2008. All
outstanding commitments at December 31, 2006 and associated with the construction of our
headquarters building were paid in 2007.

# Return on Equity and
Assets

The
following table shows the return on average assets (net income (loss) divided by average
total assets), return on average equity (net income (loss) divided by average equity), and
equity to assets ratio (average equity divided by average total assets) for the year ended
December 31, 2007 and 2006. Since our inception, we have not paid cash dividends.

|                         | 2007 | 2006
|------------------------ | ---- | ----
|
|Return on average assets |      |     
|                         |      |     
|Return on average equity |      |     
|                         |      |     
|Equity to assets ratio   |      |     

# Effect of Inflation and
Changing Prices

The
effect of relative purchasing power over time due to inflation has not been taken into
account in our consolidated financial statements. Rather, our financial statements have
been prepared on an historical cost basis in accordance with accounting principles
generally accepted in the United States of America.

Unlike
most industrial companies, our assets and liabilities are primarily monetary in nature.
Therefore, the effect of changes in interest rates will have a more significant impact on
our performance than will the effect of changing prices and inflation in general. In
addition, interest rates may generally increase as the rate of inflation increases,
although not necessarily in the same magnitude. We attempt to manage the relationships
between interest-sensitive assets and liabilities in order to protect against wide rate
fluctuations, including those resulting from inflation.

# Off-Balance Sheet Risk

Through the bank, we have made
contractual commitments to extend credit in the ordinary course of our business
activities. These commitments are legally binding agreements to lend money to our clients
at predetermined interest rates for a specified period of time. We evaluate each
clients creditworthiness on a case-by-case basis. The amount of collateral obtained,
if deemed necessary by us upon extension of credit, is based on our credit evaluation of
the borrower. Collateral varies but may include accounts receivable, inventory, property,
plant and equipment, commercial and residential real estate. We manage the credit risk on
these commitments by subjecting them to

33

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normal underwriting and risk
management processes. At December 31, 2007, we had issued commitments to extend credit of
approximately $5.6 million through various types of lending arrangements. Included in
these commitments were standby letters of credit of $72,519. Fixed rate commitments were
$0.6 million and variable rate commitments were $5.0 million. At December 31, 2006,
commitments to extend credit amounted to $3.1 million.

Commitments
generally have fixed expiration dates or other termination clauses and may require the
payment of a fee. A significant portion of the unfunded commitments relate to consumer
equity lines of credit and commercial lines of credit. Based on historical experience, we
anticipate that a portion of these lines of credit will not be funded.

Except
as disclosed in this document, we are not involved in off-balance sheet contractual
relationships, unconsolidated related entities that have off-balance sheet arrangements or
transactions that could result in liquidity needs or other commitments that significantly
impact earnings.

# Liquidity

Liquidity
represents the ability of a company to convert assets into cash or cash equivalents
without significant loss, and the ability to raise additional funds by increasing
liabilities. Liquidity management involves monitoring our sources and uses of funds in
order to meet our day-to-day cash flow requirements while maximizing profits. Liquidity
management is made more complicated because different balance sheet components are subject
to varying degrees of management control. For example, the timing of maturities of our
investment portfolio is fairly predictable and subject to a high degree of control at the
time investment decisions are made. However, net deposit inflows and outflows are far less
predictable and are not subject to the same degree of control.

At
December 31, 2007, our liquid assets, consisting of cash and due from banks and federal
funds sold, amounted to $830,543, or approximately 1.42% of total assets. Our investment
securities available for sale at December 31, 2007 amounted to $18.5 million or
approximately 31.6% of total assets. Unpledged investment securities traditionally provide
a secondary source of liquidity since they can be converted into cash in a timely manner.
At December 31, 2007, $5.9 million of our investment securities were pledged to secure
public entity deposits and as collateral for Federal Home Loan Bank borrowings.

Our
ability to maintain and expand our deposit base and borrowing capabilities serves as our
primary source of liquidity. We plan to meet our future cash needs through the liquidation
of temporary investments and the generation of deposits. In addition, we will receive cash
upon the maturities and sales of loans and maturities, calls and prepayments on investment
securities. We maintain federal funds purchased lines of credit with correspondent banks
totaling $5.4 million. Availability on these lines of credit was $3.8 million at December
31, 2007. We are a member of the Federal Home Loan Bank (FHLB), from which
applications for borrowings can be made. The FHLB requires that investment securities or
qualifying mortgage loans be pledged to secure advances from them. We are also required to
purchase FHLB stock in a percentage of each advance. The unused borrowing capacity
available from the FHLB at December 31, 2007 was approximately $3.4 million, assuming that
the above pledging and stock purchase requirements can be met. We believe that our
existing stable base of core deposits along with continued growth in this deposit base
will enable us to successfully meet our long term liquidity needs.

# Market Risk

Market
risk is the risk of loss from adverse changes in market prices and rates, which
principally arises from interest rate risk inherent in our lending, investing, deposit
gathering, and borrowing activities. Other types of market risks, such as foreign currency
exchange rate risk and commodity price risk, do not generally arise in the normal course
of our business.

We
actively monitor and manage our interest rate risk exposure principally by measuring our
interest sensitivity gap, which is the positive or negative dollar difference
between assets and liabilities that are subject to interest rate repricing within a given
period of time. Interest rate sensitivity can be managed by repricing assets or
liabilities, selling securities available for sale, replacing an asset or liability at
maturity, or adjusting the interest rate during the life of an asset or liability.
Managing the amount of assets and liabilities repricing in this same time interval helps
to hedge the risk and minimize the impact on net interest income of rising or falling
interest rates. We

34

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generally would benefit from
increasing market rates of interest when we have an asset-sensitive gap position and
generally would benefit from decreasing market rates of interest when we are
liability-sensitive. The analysis presents only a static view of the timing of maturities
and repricing opportunities, without taking into consideration that changes in interest
rates do not affect all assets and liabilities equally. For example, rates paid on a
substantial portion of core deposits may change contractually within a relatively short
time frame, but those rates are viewed by us as significantly less interest-sensitive than
market-based rates such as those paid on noncore deposits. Net interest income may be
affected by other significant factors in a given interest rate environment, including
changes in the volume and mix of interest-earning assets and interest-bearing liabilities.

# Interest Rate Sensitivity

Asset-liability
management is the process by which we monitor and control the mix and maturities of our
assets and liabilities. The essential purposes of asset-liability management are to ensure
adequate liquidity and to maintain an appropriate balance between interest sensitive
assets and liabilities in order to minimize potentially adverse impacts on earnings from
changes in market interest rates. Our asset-liability management committee monitors and
considers methods of managing exposure to interest rate risk. The asset-liability
management committee is responsible for maintaining the level of interest rate sensitivity
of our interest sensitive assets and liabilities within board-approved limits.

The
following table sets forth information regarding our rate sensitivity, as of December 31,
2007 at each of the time intervals. The information in the table may not be indicative of
our rate sensitivity position at other points in time. In addition, the repricing
distribution indicated in the table differs from the contractual maturities of certain
interest-earning assets and interest-bearing liabilities presented due to consideration of
prepayment speeds under various interest rate change scenarios in the application of the
interest rate sensitivity methods described above.

|                                 |  | After three | After one but |            |  
|-------------------------------- |  | ----------- | ------------- | ---------- | -
|
|
|
|Interest-earning assets:         |  |             |               |            |  
|Federal funds sold               |  |             | $             | -          |  
|Investment securities            |  |             |               | 978,678    |  
|FHLB stock                       |  |             |               | -          |  
|Loans                            |  |             |               | 24,575,361 |  
|                                 |  |             |               |            |  
|Total interest-earning assets    |  |             | $             | 25,554,039 |  
|                                 |  |             |               |            |  
|Interest-bearing liabilities:    |  |             |               |            |  
|Interest-bearing checking        |  |             | $             | 2,563,965  |  
|Money market and savings         |  |             |               | 8,909,714  |  
|Time deposits                    |  |             |               | 4,436,314  |  
|Federal funds purchased          |  |             |               | 1,648,000  |  
|FHLB borrowings                  |  |             |               | -          |  
|                                 |  |             |               |            |  
|Total interest-bearing           |  |            
|liabilities                      |  |             | $             | 17,557,993 |  
|                                 |  |             |               |            |  
|Period gap                       |  |             | $             | 7,996,046  |  
|Cumulative gap                   |  |             |               | 7,996,046  |  
|Ratio of cumulative gap to total |  |             |               |            |  
|interest-earning assets          |  |             |               | 14.57      | %

# Recently issued
accounting standards

The
following is a summary of recent authoritative pronouncements that could impact the
accounting, reporting and/or disclosure of financial information by the company.

35

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In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
(SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring
fair value in generally accepted accounting principles, and expands disclosures about fair
value measurements. This standard eliminates inconsistencies found in various prior
pronouncements but does not require any new fair value measurements. SFAS 157 is effective
for the Company on January 1, 2008 and will not impact the companys accounting
measurements but it is expected to result in additional disclosures.

In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities  Including an amendment of FASB Statement No.
115 (SFAS 159). This statement permits, but does not require, entities
to measure many financial instruments at fair value. The objective is to provide entities
with an opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge
accounting provisions. Entities electing this option will apply it when the entity first
recognizes an eligible instrument and will report unrealized gains and losses on such
instruments in current earnings. This statement 1) applies to all entities, 2) specifies
certain election dates, 3) can be applied on an instrument-by-instrument basis with some
exceptions, 4) is irrevocable and 5) applies only to entire instruments. One exception is
demand deposit liabilities which are explicitly excluded as qualifying for fair value.
With respect to SFAS 115, available-for-sale and held-to-maturity securities at the
effective date are eligible for the fair value option at that date. If the fair value
option is elected for those securities at the effective date, cumulative unrealized gains
and losses at that date shall be included in the cumulative-effect adjustment and
thereafter, such securities will be accounted for as trading securities. SFAS 159 is
effective for the company on January 1, 2008. The company is currently analyzing the fair
value option that is permitted, but not required, under SFAS 159.

In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations,
(SFAS 141(R)) which replaces SFAS 141. SFAS 141(R) establishes principles and
requirements for how an acquirer in a business combination recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed, and any
controlling interest; recognizes and measures goodwill acquired in the business
combination or a gain from a bargain purchase; and determines what information to disclose
to enable users of the financial statements to evaluate the nature and financial effects
of the business combination. FAS 141(R) is effective for acquisitions by the company
taking place on or after January 1, 2009. Early adoption is prohibited. Accordingly, a
calendar year-end company is required to record and disclose business combinations
following existing accounting guidance until January 1, 2009. The company will assess the
impact of SFAS 141(R) if and when a future acquisition occurs.

In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements  an amendment of ARB No. 51 (SFAS
160). SFAS 160 establishes new accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary.
Before this statement, limited guidance existed for reporting noncontrolling interests
(minority interest). As a result, diversity in practice exists. In some cases minority
interest is reported as a liability and in others it is reported in the mezzanine section
between liabilities and equity. Specifically, SFAS 160 requires the recognition of a
noncontrolling interest (minority interest) as equity in the consolidated financials
statements and separate from the parents equity. The amount of net income
attributable to the noncontrolling interest will be included in consolidated net income on
the face of the income statement. SFAS 160 clarifies that changes in a parents
ownership interest in a subsidiary that do not result in deconsolidation are equity
transactions if the parent retains its controlling financial interest. In addition, this
statement requires that a parent recognize gain or loss in net income when a subsidiary is
deconsolidated. Such gain or loss will be measured using the fair value of the
noncontrolling equity investment on the deconsolidation date. SFAS 160 also includes
expanded disclosure requirements regarding the interests of the parent and its
noncontrolling interests. SFAS 160 is effective for the company on January 1, 2009.
Earlier adoption is prohibited. The company is currently evaluating the impact, if any,
that the adoption of SFAS 160 will have on its consolidated financial statements.

In
June 2006, the FASB issued Interpretation No. 48 (FIN 48), Accounting for
Uncertainty in Income Taxes, to clarify the accounting and disclosure for
uncertainty in tax positions, as defined. FIN 48 seeks to reduce the diversity in
practice associated with certain aspects of the recognition and measurement related to
accounting for income taxes. The Company implemented the provisions of FIN 48 as of
January 1, 2007, and has analyzed filing positions in all of the federal and state
jurisdictions where it is required to file income tax returns, as well as all open tax
years in these jurisdictions. The Company believes that its income tax filing positions
taken or expected to be taken in its tax returns will more
likely than not be sustained upon audit by the taxing authorities and does not anticipate
any adjustments that will result in a material adverse impact on the Companys
financial condition, results of operations, or cash flow. Therefore, no reserves for
uncertain income tax positions have been recorded pursuant to FIN 48. In addition,
the Company did not record a cumulative effect adjustment related to the adoption of
FIN 48.

36

---

Other
accounting standards that have been issued or proposed by the FASB or other
standards-setting bodies are not expected to have a material impact on the companys
financial position, results of operations or cash flows.

37

---

# Item 7.  Financial
Statements

# INDEX TO FINANCIAL
STATEMENTS

# FOR THE YEAR ENDED DECEMBER
31, 2007 AND DECEMBER 31, 2006

|                                                                                  | 
|--------------------------------------------------------------------------------- | 
|Report of Independent Registered Public Accounting Firm                           | 
|                                                                                  | 
|Consolidated Financial Statements:                                                | 
|Consolidated Balance Sheets                                                       | 
|Consolidated Statements of Operations                                             | 
|Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Loss | 
|Consolidated Statements of Cash Flows                                             | 
|                                                                                  | 
|Notes to Consolidated Financial Statements                                        | 

38

---

# REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors BankGreenville Financial
Corporation and SubsidiaryGreenville, South Carolina

We have audited the accompanying
consolidated balance sheets of BankGreenville Financial Corporation and Subsidiary as of
December 31, 2007 and 2006, and the related consolidated statements of operations, changes
in shareholders equity and comprehensive loss, and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits 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 audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects, the
financial position of BankGreenville Financial Corporation and Subsidiary as of December
31, 2007 and 2006 and the results of their operations and their cash flows for the years
then ended in conformity with accounting principles generally accepted in the United
States of America.

We were not engaged to examine
managements assertion about the effectiveness of BankGreenville Financial
Corporation and Subsidiarys internal control over financial reporting as of December
31, 2007 included in the accompanying Managements Report on Internal Controls Over
Financial Reporting and, accordingly, we do not express an opinion thereon.

/s/ Elliott Davis, LLC

Elliott Davis, LLCGreenville,
South Carolina March 17, 2008

39

---

BANKGREENVILLE
FINANCIAL CORPORATION CONSOLIDATED BALANCE SHEETS

|                                                       | December 31
|------------------------------------------------------ | -----------
|
|Assets                                                 |            
|Cash and due from banks                                |            
|Federal funds sold                                     |            
|                                                       |            
|Total cash and cash equivalents                        |            
|Investment securities available for sale               |            
|Federal Home Loan Bank stock                           |            
|Loans, net                                             |            
|Property and equipment, net                            |            
|Building construction in progress                      |            
|Accrued interest receivable                            |            
|Other assets                                           |            
|                                                       |            
|Total assets                                           |            
|                                                       |            
|Liabilities and Shareholders Equity                   |            
|Liabilities                                            |            
|Deposits                                               |            
|Non-interest bearing                                   |            
|Interest bearing                                       |            
|                                                       |            
|Total deposits                                         |            
|Accrued interest on deposits                           |            
|Federal funds purchased                                |            
|Federal Home Loan Bank advances                        |            
|Accounts payable and accrued liabilities               |            
|                                                       |            
|Total liabilities                                      |            
|                                                       |            
|Commitments and contingencies - note 9                 |            
|                                                       |            
|Shareholders Equity                                   |            
|Preferred stock, no par value; 10,000,000 shares       |            
|authorized; none issued and outstanding                |            
|Common stock, no par value; 10,000,000 shares          |            
|authorized; 1,180,000 shares issued and outstanding at |            
|December 31, 2007 and 2006                             |            
|Accumulated other comprehensive income                 |            
|Retained deficit                                       |            
|                                                       |            
|Total shareholders' equity                             |            
|                                                       |            
|Total liabilities and shareholders' equity             |            
|                                                       |            

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

40

---

# BANKGREENVILLE
FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                             | For the years ended December 31
|------------------------------------------------------------ | -------------------------------
|
|Interest income                                              |                                
|Loans and fees                                               |                                
|Investment securities                                        |                                
|Federal funds sold                                           |                                
|                                                             |                                
|Total interest income                                        |                                
|                                                             |                                
|Interest expense                                             |                                
|Deposits                                                     |                                
|Other                                                        |                                
|                                                             |                                
|Total interest expense                                       |                                
|                                                             |                                
|Net interest income                                          |                                
|                                                             |                                
|Provision for loan losses                                    |                                
|                                                             |                                
|Net interest income after provision for loan losses          |                                
|                                                             |                                
|Non-interest income                                          |                                
|Gain on investment securities sales                          |                                
|Mortgage brokerage fees                                      |                                
|Other                                                        |                                
|                                                             |                                
|Total non-interest income                                    |                                
|                                                             |                                
|Non-interest expense                                         |                                
|Compensation and employee benefits                           |                                
|Occupancy and equipment                                      |                                
|Data processing and related costs                            |                                
|Marketing, advertising and shareholder communications        |                                
|Legal and audit                                              |                                
|Other professional fees                                      |                                
|Supplies, postage and telephone                              |                                
|Insurance                                                    |                                
|Credit related expenses                                      |                                
|Courier and armored carrier service                          |                                
|Regulatory fees and FDIC insurance                           |                                
|Other                                                        |                                
|                                                             |                                
|Total non-interest expense                                   |                                
|                                                             |                                
|Loss before income tax benefit                               |                                
|Income tax benefit                                           |                                
|                                                             |                                
|Net loss                                                     |                                
|                                                             |                                
|Basic and diluted loss per common share                      |                                
|                                                             |                                
|Weighted average common shares outstanding-basic and diluted |                                
|                                                             |                                

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

41

---

# BANKGREENVILLE
FINANCIAL CORPORATIONCONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY AND COMPREHENSIVE LOSS
For the years ended December 31, 2007 and December 31, 2006

|                               |  |  | Accumulated |           | 
|------------------------------ |  |  | ----------- | --------- | 
|
|
|
|
|Balance, December 31, 2005     |  |  |             |           | 
|(Development stage enterprise) |  |  |             | 1,180,000 | 
|                               |  |  |             |           | 
|Adjustment of 2005 accrued     |  |  |             |           | 
|offering expenses to actual    |  |  |             | -         | 
|                               |  |  |             |           | 
|Stock compensation expense     |  |  |             | -         | 
|                               |  |  |             |           | 
|Comprehensive loss:            |  |  |             |           | 
|                               |  |  |             |           | 
|Net loss                       |  |  |             | -         | 
|                               |  |  |             |           | 
|Unrealized gains on investment |  |  |             |           | 
|securities available for sale, |  |  |             |           | 
|no tax effect                  |  |  |             | -         | 
|                               |  |  |             |           | 
|Total comprehensive loss       |  |  |             | -         | 
|                               |  | 
|Balance, December 31, 2006     |  |  |             | 1,180,000 | 
|                               |  |  |             |           | 
|Stock compensation expense     |  |  |             | -         | 
|                               |  |  |             |           | 
|Comprehensive loss:            |  |  |             |           | 
|                               |  |  |             |           | 
|Net loss                       |  |  |             | -         | 
|                               |  |  |             |           | 
|Unrealized gains on investment |  |  |             |           | 
|securities available for sale, |  |  |             |           | 
|no tax effect                  |  |  |             | -         | 
|                               |  |  |             |           | 
|Total comprehensive loss       |  |  |             | -         | 
|                               |  | 
|Balance, December 31, 2007     |  |  |             | 1,180,000 | 
|                               |  | 

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

42

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# BANKGREENVILLE
FINANCIAL CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                       | For the years ended December 31,
|---------------------------------------------------------------------- | --------------------------------
|
|Operating activities                                                   |                                 
|Net loss                                                               |                                 
|Provision for loan losses                                              |                                 
|Stock compensation expense                                             |                                 
|Depreciation                                                           |                                 
|Accretion of discounts on investment securities, net                   |                                 
|Amortization of land improvements                                      |                                 
|Earnest money deposit on land                                          |                                 
|Gain on the sale of investment securities                              |                                 
|Increase in interest receivable                                        |                                 
|Decrease (increase) in other assets                                    |                                 
|Increase in accrued interest payable on deposits                       |                                 
|(Decrease) increase in accounts payable and accrued liabilities        |                                 
|                                                                       |                                 
|Net cash used in operating activities                                  |                                 
|                                                                       |                                 
|Investing activities                                                   |                                 
|Increase in loans, net                                                 |                                 
|Purchase of investment securities available for sale                   |                                 
|Proceeds from sales and calls of investment securities                 |                                 
|Proceeds from principal paydowns on mortgage-backed securities         |                                 
|Purchase of Federal Home Loan Bank stock                               |                                 
|Purchase of property and equipment                                     |                                 
|Disposal of fixed assets                                               |                                 
|Building construction in progress                                      |                                 
|                                                                       |                                 
|Net cash used for investing activities                                 |                                 
|                                                                       |                                 
|Financing activities                                                   |                                 
|Net increase in common stock due to adjustment in stock offering costs |                                 
|Increase in deposits, net                                              |                                 
|Increase in notes payable to Federal Home Loan Bank                    |                                 
|Increase in federal funds purchased                                    |                                 
|                                                                       |                                 
|Net cash provided from financing activities                            |                                 
|                                                                       |                                 
|Net decrease in cash and cash equivalents                              |                                 
|Cash and cash equivalents, beginning of year                           |                                 
|                                                                       |                                 
|Cash and cash equivalents, end of year                                 |                                 
|                                                                       |                                 
|Supplemental information                                               |                                 
|Cash paid for:                                                         |                                 
|Interest                                                               |                                 
|                                                                       |                                 
|Schedule of non-cash transactions:                                     |                                 
|Increase in unrealized gains on investment securities, no income tax   |                                 
|                                                                       |                                 

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

43

---

BANKGREENVILLE
FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

# NOTE 1  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES

BankGreenville
Financial Corporation (the Company) is a South Carolina corporation organized
to operate as a bank holding company pursuant to the Federal Bank Holding Company Act of
1956 and the South Carolina Bank Holding Company Act, and to own and control all of the
capital stock of BankGreenville (the Bank). The Bank is a state chartered
institution organized under the laws of South Carolina to conduct general banking business
in Greenville, South Carolina. From our inception on March 18, 2005 and before opening the
Bank for business on January 30, 2006, we engaged in organizational and pre-opening
activities necessary to obtain regulatory approvals and to prepare our subsidiary, the
Bank, to commence business as a financial institution. The Company sold 1,180,000 shares
of its common stock at $10.00 per share and raised $11.8 million in its initial public
offering. Proceeds, net of brokerage commissions and other offering costs totaled
approximately $11.04 million and the Bank was capitalized with $11 million of the net
proceeds. The Bank is primarily engaged in the business of accepting deposits, insured by
the FDIC, and providing commercial, consumer and mortgage loans to the general public in
Greenville County, South Carolina.

The
following is a description of the more significant accounting and reporting policies that
the Company follows in preparing and presenting consolidated financial statements.

# Basis of presentation

The
accompanying consolidated financial statements include the accounts of the Company and its
wholly owned subsidiary, the Bank. In consolidation, all significant intercompany
transactions have been eliminated. The 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.

Until
the Bank opened for business on January 30, 2006, the Company was accounted for as a
development stage enterprise as defined by Statement of Financial Accounting Standards
(SFAS) No. 7, Accounting and Reporting by Development Stage
Enterprises, as the Company devoted substantially all of its efforts to establishing
a new business. When the Bank opened, certain reclassifications and adjustments were made
to the financial statements to reflect that the Company is now accounted for as an
operating company. Such adjustments are included in the financial statements.

# Managements
estimates

The
preparation of consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities as of the date of the consolidated financial
statements and the reported amount of income and expenses during the reporting periods.
Actual results could differ from those estimates.

Material
estimates that are particularly susceptible to significant change include the
determination of the allowance for losses on loans, including valuation allowances for
impaired loans, and the valuation of real estate acquired in connection with foreclosures
or in satisfaction of loans. In connection with the determination of the allowances for
losses on loans and valuation of foreclosed real estate, management obtains independent
appraisals for significant properties.

Management
must also make estimates in determining the estimated useful lives and methods for
depreciating premises and equipment. While management uses available information to
recognize losses on loans and foreclosed real estate, changes in local economic conditions
as well as a variety of other factors may require additions to the allowance.

44

---

NOTE 1  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, continued

In
addition, as an integral part of their examination process, regulatory agencies
periodically review the Companys allowances for losses on loans and foreclosed real
estate. Such agencies may require the Company to recognize additions to the allowances
based on their judgments about information available to them at the time of their
examination. Because of these factors, it is reasonably possible that the allowances for
losses on loans and foreclosed real estate may change materially in the near term.

# Risks and uncertainties

In the normal course of its business the Company encounters two significant types of
risks: economic and regulatory. There are three main components of economic risk: interest
rate risk, credit risk and market risk. The Company is subject to interest rate risk to
the degree that its interest-bearing liabilities mature or reprice at different speeds, or
on different bases, than its interest-earning assets. Credit risk is the risk of default
within the Companys loan portfolio that results from borrowers inability or
unwillingness to make contractually required payments. Market risk reflects changes in the
value of collateral underlying loans receivable and the valuation of real estate held by
the Company.

The
Company is subject to the regulations of various governmental agencies. These regulations
can and do change significantly from period to period. The Company also undergoes periodic
examinations by the regulatory agencies, which may subject it to changes with respect to
valuation of assets, amount of required loss allowance and operating restrictions
resulting from the regulators judgments based on information available to them at
the time of their examinations. The Bank makes loans to individuals and businesses in and
around Greenville County, South Carolina for various consumer and commercial purposes. The
Bank has a diversified loan portfolio. Borrowers ability to repay their loans is not
dependent upon any specific economic sector.

# Investment securities

Investment securities are accounted for in accordance with SFAS No. 115, Accounting
for Certain Investments in Debt and Equity Securities.  Management classifies
securities at the time of purchase into securities held to maturity, trading securities
and securities available for sale. Securities held to maturity are securities which the
Company has the positive intent and ability to hold to maturity, and are reported at
amortized cost. Trading securities are purchased and held principally for the purpose of
selling them in the near future and are reported at fair value with unrealized gains and
losses included in earnings. Securities available for sale are securities that may be sold
under certain conditions, and are reported at fair value, with unrealized gains and losses
excluded from earnings and reported as a separate component of shareholders equity
as accumulated other comprehensive income (loss). At December 31, 2007 and 2006, the
Companys investment securities were classified available for sale. The amortization
of premiums and accretion of discounts on investment securities are recorded as
adjustments to interest income. Gains or losses on sales of investment securities are
based on the net proceeds and the adjusted carrying amount of the securities sold, using
the specific identification method. Unrealized losses on securities, reflecting a decline
in value or impairment judged by the Company to be other than temporary, are charged to
earnings in the consolidated statements of operations.

# Federal Home Loan Bank
stock

The Bank is a member of the Federal Home Loan Bank, (FHLB), and is
required to own FHLB stock. The amount of FHLB stock owned is determined based on the
Banks balance of residential mortgages and outstanding advances. FHLB stock was
$183,000 and $-0- at December 31, 2007 and 2006, respectively. No ready market or quoted
market value exists for this stock. Because redemption of FHLB stock has historically been
at par value, the carrying amount is deemed to be a reasonable estimate of fair value.

# Loans receivable

Loans are stated at their unpaid principal balance. Interest income is computed using the
simple interest method and is recorded in the period earned. Fees earned on loans are
amortized over the life of the loan.

45

---

NOTE 1  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, continued

When
serious doubt exists as to the collectibility of a loan or when a loan becomes
contractually 90 days past due as to principal or interest, interest income is generally
discontinued unless the estimated net realizable value of collateral exceeds the principal
balance and accrued interest. When interest accruals are discontinued, income earned but
not collected is reversed. The Company identifies impaired loans through its normal
internal loan review process.

Loans
on the Companys problem loan watch list are considered potentially impaired loans.
These loans are evaluated in determining whether all outstanding principal and interest
are expected to be collected in accordance with the contractual terms. Loans are not
considered impaired if a minimal payment delay occurs and all amounts due, including
accrued interest at the contractual interest rate for the period of delay, are expected to
be collected. At December 31, 2007, management has determined that the Company had no
impaired loans.

# Allowance for loan losses

An
allowance for loan losses is maintained at a level deemed appropriate by management to
provide adequately for known and inherent losses in the loan portfolio. The determination
of the allowance for loan losses is based on evaluations of the collectibility of loans,
including consideration of factors such as the balance of impaired loans, the quality,
mix, and size of the overall loan portfolio, economic conditions that may affect the
borrowers ability to repay, the amount and quality of collateral securing the loans,
historical loan loss experience, and a review of specific problem loans. Management also
considers subjective issues such as changes in lending policies and procedures, changes in
the local/national economy, changes in volume or type of credits, changes in
volume/severity of problem loans, quality of loan review and board of director oversight,
concentrations of credit, and peer group comparisons.

The
allowance consists of an evaluation of certain individual loans, including impairment
determination and a general evaluation of groups of loans with similar risk
characteristics. For loans that are considered impaired, an allowance is established when
the discounted cash flows or collateral value or observable market price of the impaired
loan is lower that the carrying value of the loan. The general component covers groups of
loans with similar risk characteristics and is based on historical loss experience
adjusted for qualitative factors. An unallocated component is maintained to cover
uncertainties that could affect managements estimate of probable losses. The
unallocated component of the allowance reflects the margin of imprecision inherent in the
underlying assumptions used in the methodologies for estimating individual and general
losses in the portfolio.

A
loan is considered impaired when, based on current information, it is probable that the
Bank will be unable to collect the scheduled payments of principal and interest when due
according to the contractual terms of the loan agreement. Factors considered by management
in determining impairment include payment status, collateral value, and the probability of
collecting scheduled principal and interest payments when due. Loans that experience
insignificant payment delays or payment shortfalls generally are not considered impaired.
Management determines the significance of payment delays and shortfalls on a case-by-case
basis and takes into consideration all of the circumstances surrounding the loan and the
borrower.

Due
to the Companys limited operating history, to date the provision for loan losses has
been made primarily as a result of the assessment of general loan loss risk compared to
banks of similar size and maturity. Due to the Companys short operating history, the
loans in the loan portfolio and the lending relationships are of very 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 known as seasoning. As a result,
a portfolio of older loans will usually behave more predictably than a newer portfolio.
Because the 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. Management evaluates current and future
anticipated economic conditions which may affect borrowers ability to pay and the
underlying collateral value of the loans in determining the estimate of the allowance for
loan losses. Loans which are deemed to be uncollectible are charged off and deducted from
the allowance. The provision for loan losses and recoveries of loans previously charged
off are added to the allowance.

46

---

# NOTE
1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, continued

# Property and equipment

Property and equipment are stated at cost, less accumulated depreciation. The provision
for depreciation is computed by the straight-line method, based on the estimated useful
lives for buildings of 40 years and for furniture and equipment of 5 to 10 years.
Leasehold improvements are amortized over the life of the lease. The cost of assets sold
or otherwise disposed of and the related allowance for depreciation are eliminated from
the accounts and the resulting gains or losses are reflected in the statement of
operations when incurred. Maintenance and repairs are charged to current expense. The
costs of major renewals and improvements are capitalized.

# Building construction in
progress

Building
construction in progress includes architectural and construction costs for our permanent
headquarters building. We completed our permanent headquarters on March 31, 2007 and the
costs included in building construction in progress were transferred to
property and equipment.

# Residential loan
origination fees

The
Company offers residential loan origination services to its clients. The loans are offered
on terms and prices offered by the Companys correspondents and are closed in the
name of the correspondents. The Company receives fees for services it provides in
conjunction with the origination services it provides. The fees are recognized at the time
the loans are closed by the Companys correspondent. The Company does not retain
servicing rights.

# Income taxes

Income taxes are accounted for in accordance with SFAS No. 109, Accounting for
Income Taxes. Under the asset and liability method of SFAS No. 109, deferred tax
assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets andliabilities and their respective tax bases. Deferred tax assets and liabilities are
measured using the enacted rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. Under SFAS No. 109,
the effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date. Valuation allowances are
established to reduce deferred tax assets if it is determined to be more likely than not
that all or some portion of the potential deferred tax asset will not be realized.

In
June 2006, the FASB issued Interpretation No. 48 (FIN 48), Accounting for
Uncertainty in Income Taxes, to clarify the accounting and disclosure for
uncertainty in tax positions, as defined. FIN 48 seeks to reduce the diversity in
practice associated with certain aspects of the recognition and measurement related to
accounting for income taxes. The Company implemented the provisions of FIN 48 as of
January 1, 2007, and has analyzed filing positions in all of the federal and state
jurisdictions where it is required to file income tax returns, as well as all open tax
years in these jurisdictions. The Company believes that its income tax filing positions
taken or expected to be taken in its tax returns will more likely than not be sustained
upon audit by the taxing authorities and does not anticipate any adjustments that will
result in a material adverse impact on the Companys financial condition, results of
operations, or cash flow. Therefore, no reserves for uncertain income tax positions have
been recorded pursuant to FIN 48. In addition, the Company did not record a
cumulative effect adjustment related to the adoption of FIN 48.

# Advertising and marketing

Marketing,
promotional and other advertising costs generally are expensed when incurred.

# Net loss per share

Basic
loss per share represents net loss available to shareholders divided by the
weighted-average number of common shares outstanding during the period. Potential common
shares that may be issued by the Company relate to outstanding stock options and warrants,
and are determined using the treasury stock method. For the years ended December 31, 2007 and 2006, the
stock options and warrants were not in-the-money. The exercise price of the
stock options and warrants exceeded the weighted average fair market value of the common
stock. The outstanding stock options and warrants were anti-dilutive, and basic and
dilutive shares and loss per common share, respectively, were the same.

47

---

NOTE 1  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, continued

# Stock compensation plans

Upon
completion of the offering, the Company issued stock warrants to the organizing directors
for the purchase of three shares of common stock at $10.00 per share for every four shares
purchased in the stock offering, up to a maximum of 10,000 warrants per director. The
Company issued a total of 107,500 warrants, all of which immediately vested upon
completion of the offering. 10,000 of these warrants expired in February 2008, due to the
death of one of our organizing directors in 2007. The average fair value per share of
warrants issued amounted to approximately $1.83.  The fair value of each warrant
granted was estimated on the date of grant using the Black-Scholes pricing model with the
following assumptions used for grants:  expected volatility of 6%, risk-free interest
rate of 4.0%, dividend rate of 0%, and expected lives of five years.

In
addition, during 2006, the Company adopted a stock option plan. 212,400 shares are
authorized under the plan. 100,650 options to purchase common stock at $10.00 per share
were granted in 2006 and 1,250 options were forfeited. 11,500 options were granted in 2007
and 5,000 options were forfeited. 105,900 options were outstanding at December 31, 2007.
The options vest over a five year period from the date of grant and have a contractual
term of ten years.

On
January 1, 2006, the Company adopted the fair value recognition provisions of FASB SFAS
No. 123(R), Accounting for Stock-Based Compensation, to account for
compensation costs under its stock option plan. Previously, stock option plans were
accounted for using the intrinsic value method under Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees (as amended)" (APB
25). Under the intrinsic value method prescribed by APB 25, the Company would not
have recognized compensation cost for stock options because the option exercise price in
its plan equals the market price on the date of grant. In adopting SFAS No. 123(R), the
Company elected to use the modified prospective method to account for the transition from
the intrinsic value method to the fair value recognition method. Under the modified
prospective method, compensation cost is recognized from the grant date for all new stock
options granted and for any outstanding unvested awards, applying the fair value method to
those awards as of the date of grant, and is expensed over the employees requisite
service period.

At
December 31, 2007, the Company had 105,900 options outstanding at $10.00 per share, of
which 18,880 were vested. At December 31, 2006, there were 99,400 options outstanding at
$10.00 per share, of which none were vested. The options have a weighted average remaining
contractual term of approximately 8.25 years. Total unrecognized compensation cost related
to non-vested options granted as of December 31, 2007 was $185,827, and is expected to be
expensed ratably over the remaining vesting periods of the stock options. Net loss, as
reported, included stock-based employee compensation expense of $58,107 and $49,275 for
the years ended December 31, 2007 and 2006, respectively. The exercise or conversion ratio
of all stock options granted was 1:1 and the aggregate intrinsic value of the stock
options was zero at December 31, 2007.

The
weighted average fair value per share of options granted in 2007 amounted to $3.10. 
The fair value of each option granted was estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions used for grants: 
expected volatility of 4%, risk-free interest rate of 5.01%, dividend rate of 0%, and
expected lives of seven and a half years.

The
weighted average fair value per share of options granted in 2006 amounted to $2.82. 
The fair value of each option granted was estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions used for grants: 
expected volatility of 6%, risk-free interest rate of 4.45%, dividend rate of 0%, and
expected lives of seven and a half years.

48

---

NOTE 1  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, continued

# Statement of cash flows

For
purposes of reporting cash flows, cash equivalents include amounts due from banks and
federal funds sold. Generally, federal funds are sold for one-day periods.

# Reclassifications

Certain
amounts previously reported, have been reclassified to state all periods on a comparable
basis. These reclassified amounts had no impact on the Companys retained deficit or
net loss.

# Recently issued
accounting standards

The
following is a summary of recent authoritative pronouncements that could impact the
accounting, reporting and/or disclosure of financial information by the Company.

In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
(SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring
fair value in generally accepted accounting principles, and expands disclosures about fair
value measurements. This standard eliminates inconsistencies found in various prior
pronouncements but does not require any new fair value measurements. SFAS 157 is effective
for the Company on January 1, 2008 and will not impact the Companys accounting
measurements but it is expected to result in additional disclosures.

In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities  Including an amendment of FASB Statement No.
115 (SFAS 159). This statement permits, but does not require, entities
to measure many financial instruments at fair value. The objective is to provide entities
with an opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge
accounting provisions. Entities electing this option will apply it when the entity first
recognizes an eligible instrument and will report unrealized gains and losses on such
instruments in current earnings. This statement 1) applies to all entities, 2) specifies
certain election dates, 3) can be applied on an instrument-by-instrument basis with some
exceptions, 4) is irrevocable and 5) applies only to entire instruments. One exception is
demand deposit liabilities which are explicitly excluded as qualifying for fair value.
With respect to SFAS 115, available-for-sale and held-to-maturity securities at the
effective date are eligible for the fair value option at that date. If the fair value
option is elected for those securities at the effective date, cumulative unrealized gains
and losses at that date shall be included in the cumulative-effect adjustment and
thereafter, such securities will be accounted for as trading securities. SFAS 159 is
effective for the Company on January 1, 2008. The Company is currently analyzing the fair
value option that is permitted, but not required, under SFAS 159.

In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations,
(SFAS 141(R)) which replaces SFAS 141. SFAS 141(R) establishes principles and
requirements for how an acquirer in a business combination recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed, and any
controlling interest; recognizes and measures goodwill acquired in the business
combination or a gain from a bargain purchase; and determines what information to disclose
to enable users of the financial statements to evaluate the nature and financial effects
of the business combination. FAS 141(R) is effective for acquisitions by the Company
taking place on or after January 1, 2009. Early adoption is prohibited. Accordingly, a
calendar year-end company is required to record and disclose business combinations
following existing accounting guidance until January 1, 2009. The Company will assess the
impact of SFAS 141(R) if and when a future acquisition occurs.

In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements  an amendment of ARB No. 51 (SFAS
160). SFAS 160 establishes new accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary.
Before this statement, limited guidance existed for reporting noncontrolling interests
(minority interest). As a result, diversity in practice exists. In some cases
minority interest is reported as a liability and in others it is reported in the mezzanine
section between liabilities and equity. Specifically, SFAS 160 requires the recognition of
a noncontrolling interest (minority interest) as equity in the consolidated financials
statements and separate from the parents equity. The amount of net income
attributable to the noncontrolling interest will be included in consolidated net income on
the face of the income statement. SFAS 160 clarifies that changes in a parents
ownership interest in a subsidiary that do not result in deconsolidation are equity
transactions if the parent retains its controlling financial interest. In addition, this
statement requires that a parent recognize gain or loss in net income when a subsidiary is
deconsolidated. Such gain or loss will be measured using the fair value of the
noncontrolling equity investment on the deconsolidation date. SFAS 160 also includes
expanded disclosure requirements regarding the interests of the parent and its
noncontrolling interests. SFAS 160 is effective for the Company on January 1, 2009.
Earlier adoption is prohibited. The Company is currently evaluating the impact, if any,
that the adoption of SFAS 160 will have on its consolidated financial statements.

49

---

NOTE 1  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, continued

Other
accounting standards that have been issued or proposed by the FASB or other
standards-setting bodies are not expected to have a material impact on the Companys
financial position, results of operations or cash flows.

NOTE 2  INVESTMENT
SECURITIES

The
amortized costs and fair values of investment securities available for sale were as
follows at December 31, 2007 and 2006.

|                             |  | Gross Unrealized |  
|---------------------------- |  | ---------------- | -
|
|U. S. Government             |  |                  |  
|sponsored agencies           |  |                  | $
|Mortgage-backed agencies     |  |                  |  
|Taxable municipal securities |  |                  |  
|Corporate bonds              |  |                  |  
|                             |  |                  |  
|Total                        |  |                  | $
|                             |  |                  |  
|                             |  |                  |  
|December 31, 2006            |  |                  |  
|U. S. Government             |  |                  |  
|sponsored agencies           |  |                  | $
|Mortgage-backed agencies     |  |                  |  
|                             |  |                  |  
|Total                        |  |                  | $
|                             |  |                  |  

The
following table shows the gross unrealized losses and fair values, by investment category,
and length of time that individual investment securities has been in a continuous
unrealized loss position at December 31, 2007.

|                         | Less Than Twelve Months | Over Twelve Months
|------------------------ | ----------------------- | ------------------
|
|
|Mortgage-backed agencies |                         |                   
|Corporate bonds          |                         |                   
|                         |                         |                   
|Total                    |                         |                   
|                         |                         |                   

At
December 31, 2007, one individual security, a Fannie Mae mortgage-backed agency, had been
in a continuous loss position for 12 months or more. The unrealized loss on this
investment security was $310 at December 31, 2007. The Company believes, based on industry
analyst reports and credit ratings that the deterioration in fair value of individual
investment securities available for sale is attributed to changes in market interest rates
and not in the credit quality of the issuer and therefore, these losses are not considered
other-than-temporary. The Company has the ability and intent to hold these securities
until such time as the value recovers or the securities mature.

50

---

NOTE 2  INVESTMENT
SECURITIES, continued

The
amortized costs and fair values of investment securities available for sale at December
31, 2007, by contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because issuers have the right to prepay the obligations.

|                                    | Amortized | 
|----------------------------------- | --------- | 
|
|
|Due after five but within ten years |           | 
|Due after ten years                 |           | 
|                                    |           | 
|Total                               |           | 
|                                    |           | 

Investment
securities with market values of approximately $5.9 million and $1.0 million at December
31, 2007 and 2006, respectively, were pledged to secure public deposits and Federal Home
Loan Bank borrowings.

Gross
realized gains on the sale of available for sale securities for the year ended December
31, 2007 were $3,313. We had no sales of investment securities in 2006.

NOTE 3  LOANS

Major
loan categories and corresponding amounts outstanding at December 31, 2007 and 2006 were
as follows.

|                                      | December 31,
|------------------------------------- | ------------
|
|Real estate:                          |             
|Construction and development and land |             
|Commercial                            |             
|Residential mortgages                 |             
|Home equity lines                     |             
|                                      |             
|Total real estate secured loans       |             
|                                      |             
|Commercial                            |             
|Consumer                              |             
|Deferred origination fees, net        |             
|                                      |             
|Gross loans                           |             
|Less allowance for loan losses        |             
|                                      |             
|Loans, net                            |             
|                                      |             

At
December 31, 2007 and 2006, the Company had no non-accrual loans or loans past-due 90 days
or more. For the years ended December 31, 2007 and 2006, there was no forgone interest
income on non-accrual loans. At December 31, 2007 and 2006, and during the years then
ended, there were no loans considered impaired.

The
Bank makes loans to individuals and small to medium sized businesses for various personal
and commercial purposes primarily in Greenville County, South Carolina. The Company has a
diversified loan portfolio and the portfolio is not dependent on any specific economic
segment or industry. The Company regularly monitors credit concentration based on loan
purpose, collateral type, industry type and loan amounts outstanding to any one borrower.
At December 31, 2007, there were no material concentrations of credit risk within the
Companys loan portfolio.

Directors,
executive officers and related parties of these groups are clients of and have
transactions with the Bank in the ordinary course of business. Included in these
transactions are outstanding loans and commitments, all of which are made under
substantially the same credit terms, including interest rates charged and collateral
requirements, as those prevailing at the time for comparable transactions with unrelated
parties and do not involve more than the normal risk of collectibility.

51

---

NOTE 3  LOANS,
continued

Related
party loan activity for the years ended December 31, 2007 and 2006 is shown below. Amounts
are approximate.

|                                             | 2007 | 2006
|-------------------------------------------- | ---- | ----
|Loans outstanding, beginning of year         |      |     
|New loans and advances on lines of credit    |      |     
|Repayments on loans                          |      |     
|                                             |      |     
|Related party loans outstanding, end of year |      |     
|                                             |      |     

At
December 31, 2007 and 2006, there were commitments to extend credit of approximately
$501,000 and $247,000, respectively, to related parties.

The
amounts of fixed and variable rate loans included in the loan portfolio at December 31,
2007 and 2006 were as follows:

|                    | 2007 | 2006
|------------------- | ---- | ----
|Variable rate loans |      |     
|Fixed rate loans    |      |     
|                    |      |     
|Gross loans         |      |     
|                    |      |     

The
allowance for loan losses is available to absorb future loan charge-offs. The allowance is
increased by the provision charged to operating income and by recoveries on loans
previously charged-off, and is decreased by loans deemed uncollectible and charged-off.
The allowance for loan losses at December 31, 2007 and 2006 is shown below.

|                                           | December 31,
|------------------------------------------ | ------------
|
|Balance, beginning of year                 |             
|Provision for loan losses                  |             
|Loans charged off                          |             
|Recoveries of loans previously charged off |             
|                                           |             
|Balance, end of year                       |             
|                                           |             

NOTE 4  PROPERTY
AND EQUIPMENT

Property and equipment are stated at cost less accumulated depreciation. Components
of property and equipment are shown below at December 31, 2007 and 2006.

|                                | December 31,
|------------------------------- | ------------
|
|Land and land improvements      |             
|Building and improvements       |             
|Equipment                       |             
|                                |             
|Total property and equipment    |             
|Less:  accumulated depreciation |             
|                                |             
|Property and equipment, net     |             
|                                |             

Depreciation
expense for the years ended December 31, 2007 and 2006 was $87,659 and $32,555,
respectively. Accumulated depreciation was reduced by $4,485 for the disposal of an asset
in 2007.

52

---

NOTE 5  DEPOSITS

The
following shows the components of deposit accounts at December 31, 2007 and 2006.

|                                           | 2007 | 2006
|------------------------------------------ | ---- | ----
|Non-interest bearing demand deposits       |      |     
|Interest bearing checking                  |      |     
|Money market and savings                   |      |     
|Time deposits, less than $100,000          |      |     
|Time deposits, $100,000 and over           |      |     
|Brokered time deposits, less than $100,000 |      |     
|                                           |      |     
|Total deposits                             |      |     
|                                           |      |     

Interest
expense on time deposits greater than $100,000 was $506,769 and $124,704 for the years
ended December 31, 2007 and 2006, respectively. Related party deposits totaled
approximately $3.1 million and $4.9 million at December 31, 2007 and 2006, respectively.
Public deposits totaled $2,553,383 at December 31, 2007, and $1,053,383 at December 31,
2006, and investment securities were pledged to secure these deposits.

At December 31, 2007, the scheduled maturities of certificates of deposit were as follows.

|                    | 
|------------------- | 
|2008                | 
|2009                | 
|2010                | 
|2011 and thereafter | 
|                    | 
|Total               | 
|                    | 

NOTE 6  BORROWINGS
AND UNUSED LINES OF CREDIT

At
December 31, 2007, the Bank had short-term lines of credit with correspondent banks to
purchase a maximum of $5,400,000 in unsecured federal funds. The interest rate on
borrowings under these lines of credit is the prevailing market rate for federal funds
purchased. The lines of credit are available on a one to fourteen day basis for general
corporate purposes. These accommodation lines of credit are renewable annually, and may be
terminated at any time at the correspondent banks sole discretion. The Bank utilized
these lines of credit during the third quarter of 2007. The highest month-end amount
outstanding was $2,670,000 at November 30, 2007, and the average interest rate paid on
these borrowings during the third quarter was 4.50%. At December 31, 2007, $1,648,000 was
outstanding at an interest rate of 4.60%. No amounts were outstanding at December 31,
2006, or during the year then ended.

Additionally
in 2007, the Bank became a member of the FHLB. At December 31, 2007, the Bank had one FHLB
advance outstanding of $2,440,000 secured by investment securities and available
borrowings of approximately $3.4 million. The interest rate on the advance outstanding is
3.64%. The advance has a maturity date of December 27, 2010 with a call option on December
27, 2008.

NOTE 7  INCOME TAXES

Income
tax expense for the years ended December 31, 2007 and 2006 is summarized as follows:

|                              | 2007 | 2006
|----------------------------- | ---- | ----
|Current portion               |      |     
|Federal                       |      |     
|State                         |      |     
|                              |      |     
|Total current expense         |      |     
|                              |      |     
|Deferred expense (benefit)    |      |     
|Change in valuation allowance |      |     
|                              |      |     
|Income tax expense            |      |     
|                              |      |     

53

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NOTE 7  INCOME
TAXES, continued

The
gross amounts of deferred tax assets and deferred tax liabilities for the years ended
December 31, 2007 and 2006 are as follows:

|                                     | December 31,
|------------------------------------ | ------------
|
|Deferred tax assets                  |             
|Allowance for loan losses            |             
|Organization and start-up costs      |             
|Accrual to cash method of accounting |             
|Net operating loss carryforward      |             
|                                     |             
|Total deferred tax assets            |             
|Less valuation allowance             |             
|                                     |             
|                                     |             
|                                     |             
|Deferred tax liabilities             |             
|Accrual to cash method of accounting |             
|Other                                |             
|                                     |             
|Total deferred tax liabilities       |             
|                                     |             
|Net deferred tax asset               |             
|                                     |             

Deferred
tax assets represent the future tax benefit of deductible differences and, if it is more
likely than not that a tax asset will not be realized, a valuation allowance is required
to reduce the recorded deferred tax assets to net realizable value. As of December 31,
2007 and 2006, in consideration of the lack of an established earnings history, management
has provided valuation allowances of 100% to reflect its estimate of net realizable value.

A
reconciliation between the income tax expense and the amount computed by applying the
Federal statutory rate of 34% for 2007 and 2006 to income before income taxes follows:

|                              | 2007 | 2006
|----------------------------- | ---- | ----
|
|Tax benefit at statutory rate |      |     
|Change in valuation allowance |      |     
|Other                         |      |     
|                              |      |     
|Income tax expense            |      |     
|                              |      |     

The
Company has analyzed the tax positions taken or expected to be taken in its tax returns
and concluded it has no liability related to uncertain tax positions in accordance with
FIN 48.

NOTE 8  RELATED
PARTY TRANSACTIONS

On
January 30, 2006, the Company purchased approximately 1.23 acres on which to build its
headquarters building, at the corner of Woodruff Road and Rocky Slope Road. A family
partnership of one of our directors is a one-third partner in an entity which owned fifty
percent of the site. The cost of the site was $614,238. Additionally in 2006, the Company
incurred $31,320 for its portion of the maintenance costs of a shared storm water
retention system. This same family partnership is a one-third partner in the entity which
owns 100 percent of our temporary facility site. No costs associated with this family
partnership were incurred in 2007.

The
law firm in which our chairman of the board is a shareholder assisted in the negotiation
and preparation of our land purchase agreement and the closing of the headquarters site,
as well as the negotiation of the ground lease agreement for our temporary facility site.
The fees for these services totaled $-0- and $6,918 for the years ended December 31, 2007
and 2006, respectively.

54

---

NOTE 8  RELATED PARTY TRANSACTIONS, continued

In
2006 and 2007, one of our directors, who is an attorney, prepared employee welfare plan
documents for the Company at no cost.

In
the ordinary course of business, the Bank transacts loan and deposit business with
directors and executive officers as well as their immediate families and business
interests. This business with related parties is conducted on substantially the same
terms, including interest rates and credit requirements, as those prevailing at the time
for comparable transactions with unrelated parties and do not involve more than normal
risk. Refer to Notes 3 and 5 for related party loans and deposits, respectively.

NOTE 9  COMMITMENTS
AND CONTINGENCIES

The
Bank has entered into an agreement with a core data processing provider to provide item
and core processing services. At December 31, 2007, the agreement had a remaining term of
forty-three months. The monthly cost of this service is based on account and activity
volumes, but is expected to be no less than $10,000 per month.

The
Board of Directors has 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 programs,
stock option plans and severance and non-compete provisions.

The
Bank may become a party to litigation and claims in the normal course of business. At
December 31, 2007, management believes there is no material litigation pending.

NOTE 10  FINANCIAL
INSTRUMENTS WITH OFF-BALANCE SHEET RISK

In
the ordinary course of business and to meet the financing needs of its clients, the Bank
is a party to various financial instruments with off-balance sheet risk. These financial
instruments, which include commitments to extend credit and standby letters of credit,
involve, to varying degrees, elements of credit and interest rate risk in excess of the
amounts recognized in the balance sheet. The contract amount of those instruments reflects
the extent of involvement the Bank has in particular classes of financial instruments.

The
Bank has made contractual commitments to extend credit in the ordinary course of its
business activities. These commitments are legally binding agreements to lend money to our
clients at predetermined interest rates for a specified period of time. We evaluate each
clients credit worthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by us upon extension of credit, is based on our credit
evaluation of the borrower. Collateral varies but may include accounts receivable,
inventory, property, plant and equipment, commercial and residential real estate. We
manage the credit risk on these commitments by subjecting them to normal underwriting and
risk management processes.

At
December 31, 2007, the Bank had unfunded commitments to extend credit of approximately
$5.6 million through various types of lending arrangements. Included in these commitments
were standby letters of credit of $72,519. Fixed rate commitments were $0.6 million and
variable rate commitments were $5.0 million. At December 31, 2006, commitments to extend
credit amounted to $3.1 million.

NOTE 11  STOCK
COMPENSATION PLANS

On February 14, 2006, the Company adopted a stock option plan for the benefit of
officers and employees. The Board of Directors may grant up to 212,400 options at an
option price per share not less than the fair market value of the stock on the date of
grant. The options granted to officers and employees vest over five years and expire 10
years from the date of grant. A summary of the status of the plan and changes for the
years ended December 31, 2007 and 2006 is shown below.

55

---

NOTE 11  STOCK
COMPENSATION PLANS, continued

|                                 |  | December 31
|-------------------------------- |  | -----------
|
|
|
|
|
|Outstanding, beginning of year   |  |            
|Granted                          |  |            
|Exercised                        |  |            
|Forfeited                        |  |            
|                                 |  |            
|Options outstanding, end of year |  |            
|                                 |  |            
|Options exercisable at year-end  |  |            
|                                 |  |            
|Shares available for grant       |  |            
|                                 |  |            

Upon
completion of the stock offering, the Company issued warrants to each of its organizing
directors to purchase up to an additional total of 107,500 shares of common stock at
$10.00 per share. These warrants were immediately vested and exercisable and expire in
2015. 10,000 of these warrants expired unexercised in February 2008 due to the death of
one of our organizing directors. No warrants were exercised in 2007 or 2006.

NOTE 12  REGULATORY
MATTERS

The
Bank is subject to various regulatory capital requirements administered by the federal
banking agencies. Failure to meet minimum capital requirements can initiate certain
mandatory, and possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material impact on the Banks financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve quantitative measures
of the Banks assets, liabilities, and certain off-balance sheet items as calculated
under regulatory accounting practices. The Banks capital amounts and classification
are also subject to qualitative judgments by the regulators about components, risk
weighting, and other factors.

Quantitative
measures established by regulation to ensure capital adequacy require the Bank to maintain
minimum ratios of Tier 1 and total capital as a percentage of assets and off-balance-sheet
exposures, adjusted for risk weights ranging from 0% to 100%. Tier 1 capital consists of
common shareholders equity, excluding the unrealized gain or loss on securities
available for sale, minus certain intangible assets. Tier 2 capital consists of the
allowance for loan losses subject to certain limitations. Total regulatory minimum
requirements are 4% for Tier 1 and 8% for total risk-based capital.

The Bank is also required to maintain capital at a minimum level based on average assets,
which is known as the leverage ratio. Banks are to maintain capital at the minimum
requirement of 4%.

As
of December 31, 2007, the most recent notification from the Banks primary regulator
categorized the Bank as well-capitalized under the regulatory framework for prompt
corrective action. There are no conditions or events that management believes have changed
the Banks category since that notification.

The
following table summarizes the capital amounts and ratios of the Bank and the regulatory
minimum requirements at December 31, 2007 and 2006.

56

---

NOTE 12  REGULATORY
MATTERS, continued

|                          |  |  |   |            | To be well capitalized
|------------------------- |  |  | - | ---------- | ----------------------
|
|
|
|
|
|Total capital to risk     |  |  |   |            |                       
|weighted assets           |  |  | $ | 10,031,000 |                       
|Tier 1 capital to risk    |  |  |   |            |                       
|weighted assets           |  |  |   | 9,585,000  |                       
|Tier 1 capital to average |  |  |   |            |                       
|assets (leverage ratio)   |  |  |   | 9,585,000  |                       

|                          |  |  |   |            | To be well capitalized
|------------------------- |  |  | - | ---------- | ----------------------
|
|
|
|
|
|Total capital to risk     |  |  |   |            |                       
|weighted assets           |  |  | $ | 10,232,000 |                       
|Tier 1 capital to risk    |  |  |   |            |                       
|weighted assets           |  |  |   | 10,022,000 |                       
|Tier 1 capital to average |  |  |   |            |                       
|assets (leverage ratio)   |  |  |   | 10,022,000 |                       

The
Federal Reserve Board has similar requirements for bank holding companies. The Company is
currently not subject to these requirements because the Federal Reserve guidelines contain
an exemption for bank holding companies of less than $500 million in consolidated assets.

NOTE 13 
RESTRICTIONS ON SUBSIDIARY DIVIDENDS, LOANS, OR ADVANCES

The
ability of the Company to pay cash dividends is dependent upon receiving cash in the form
of dividends from the Bank. However, certain restrictions exist regarding the ability of
the subsidiary to transfer funds to the Company in the form of cash dividends, loans, or
advances. As a South Carolina state bank, the 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 obtain approval from the South
Carolina Board of Financial Institutions prior to the payment of any other cash dividends.

57

---

NOTE 14 FAIR VALUE
OF FINANCIAL INSTRUMENTS

SFAS
No. 107, Disclosures about Fair Value of Financial Instruments requires
disclosure of fair value information, whether or not recognized in the consolidated
balance sheets, when it is practical to estimate the fair value. SFAS No. 107 defines a
financial instrument as cash, evidence of an ownership interest in an entity or
contractual obligations which require the exchange of cash or other financial instruments.
Certain items are specifically excluded from the disclosure requirements, including the
Companys common stock, property and equipment and other assets and liabilities.

Fair
value approximates carrying value for cash and due from banks and federal funds sold due
to the short-term nature of the instrument. Investment securities are valued at fair
market values.

Fair value for variable rate loans that reprice frequently and for loans that mature in
less than one year is based on the carrying value. Fair value for fixed rate mortgage
loans, personal loans and all other loans maturing after one year is based on the
discounted present value of the estimated future cash flows. Discount rates used in these
computations approximate the rates currently offered for similar loans of comparable terms
and credit quality.

Fair
value for demand deposit accounts and interest-bearing accounts with no fixed maturity
date is equal to the carrying value. Certificate of deposit accounts with a maturity
within one year are valued at their carrying value. The fair value of certificate of
deposit accounts with a maturity after one year is estimated by discounting cash flows
from expected maturities using current interest rates on similar instruments.

Fair
value approximates carrying value for federal funds purchased due to the short term nature
of the instrument. Fair value of FHLB advances with a maturity after one year is estimated
by discounting cash flows from expected maturities using current interest rates.

The Company has used managements best estimate of fair value based on the above
assumptions. Thus, the fair values presented may not be the amounts that could be realized
in an immediate sale or settlement of the instrument. In addition, any income taxes or
other expenses, which would be incurred in an actual sale or settlement, are not taken
into consideration in the fair value presented.

The
carrying amounts and estimated fair values, rounded to the nearest thousand, of the
Companys financial instruments at December 31, 2007 and 2006 were as follows:

|                                         | 2007 | 2006
|---------------------------------------- | ---- | ----
|
|
|Financial assets:                        |      |     
|Cash and due from banks                  |      |     
|Federal funds sold                       |      |     
|Investment securities available for sale |      |     
|Federal Home Loan Bank stock             |      |     
|Loans, net                               |      |     
|                                         |      |     
|Financial liabilities:                   |      |     
|Deposits                                 |      |     
|Federal funds purchased                  |      |     
|FHLB borrowings                          |      |     

58

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NOTE 15 PARENT
COMPANY FINANCIAL INFORMATION

Following
is condensed financial information of BankGreenville Financial Corporation (parent company
only):

Condensed Balance Sheets

|                              | December 31
|----------------------------- | -----------
|
|Assets:                       |            
|Cash and cash equivalents     |            
|Investment in subsidiary bank |            
|Due from subsidiary bank      |            
|                              |            
|Total assets                  |            
|                              |            
|Shareholders equity          |            
|                              |            

# Condensed Statements
of Operations For the years ended December 31,

|                                                      | 2007 | 2006
|----------------------------------------------------- | ---- | ----
|Payment from subsidiary bank for organizational costs |      |     
|Equity in undistributed net loss of subsidiary bank   |      |     
|                                                      |      |     
|Net loss                                              |      |     
|                                                      |      |     

# Condensed Statements
of Cash Flows For the years ended December 31,

|                                              | 2007 | 2006
|--------------------------------------------- | ---- | ----
|Operating activities                          |      |     
|Net loss                                      |      |     
|Adjustments to reconcile net loss to net cash |      |     
|provided by operating activities              |      |     
|Equity in undistributed net loss of           |      |     
|subsidiary bank                               |      |     
|Decrease in other assets                      |      |     
|Decrease in accrued expenses                  |      |     
|                                              |      |     
|Net cash provided by operating activities     |      |     
|                                              |      |     
|Investing activities                          |      |     
|Investment in subsidiary bank                 |      |     
|Due from subsidiary bank                      |      |     
|                                              |      |     
|Net cash used in investing activities         |      |     
|                                              |      |     
|Financing activities                          |      |     
|Increase in net proceeds from offering        |      |     
|due to adjustment of stock offering costs     |      |     
|Stock based compensation                      |      |     
|                                              |      |     
|Net cash provided by financing activities     |      |     
|                                              |      |     
|Decrease in cash and cash equivalents         |      |     
|Cash and cash equivalents, beginning of year  |      |     
|                                              |      |     
|Cash and cash equivalents, end of year        |      |     
|                                              |      |     

59

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

None.

# Item 8A.   Controls and
Procedures

# Evaluation of Disclosure
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 13a-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, 2007. There have been
no significant changes in our internal controls over financial reporting during the fourth
fiscal quarter ended December 31, 2007 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.

# Managements Report
on Internal Controls Over Financial Reporting

Management
is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in the Exchange Act Rules 13a-15(f). A system of
internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles.

Under
the supervision and with the participation of management, including the principal
executive officer and the principal financial officer, the Companys management has
evaluated the effectiveness of its internal control over financial reporting as of
December 31, 2007 based on the criteria established in a report entitled Internal
Control  Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission and the interpretive guidance issued by the Commission in
Release No. 34-55929. Based on this evaluation, the Companys management has
evaluated and concluded that the Companys internal control over financial reporting
was effective as of December 31, 2007.

The
Company is continuously seeking to improve the efficiency and effectiveness of its
operations and of its internal controls. This results in modifications to its processes
throughout the Company. However, there has been no change in its internal control over
financial reporting that occurred during the Companys most recent fiscal quarter
that has materially affected, or is reasonably likely to materially affect, the
Companys internal control over financial reporting.

This
annual report does not include an attestation report of the Companys registered
public accounting firm regarding internal control over financial reporting.
Managements report was not subject to attestation by the Companys registered
public accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit the Company to provide only managements report in this annual
report.

# Item 8B.   Other
Information

None.

60

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# Part III

# Item 9.   Directors,
Executive Officers, Promoters, Control Persons, and Corporate Governance; 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 III at the 2008 annual meeting
of shareholders, Class I at the 2009 annual meeting of shareholders and Class II at the
2010 annual meeting of shareholders. Our executive officers serve at the discretion of our
board of directors.

|                      |  | Year First |  |   
|--------------------- |  | ---------- |  | --
|
|
|
|Jeffrey L. Dezen      |  |            |  | 52
|Roger H. Gower        |  |            |  | 56
|Frank B. Halter, Jr.  |  |            |  | 52
|R. Bruce Harman       |  |            |  | 53
|Arthur L. Howson, Jr. |  |            |  | 56
|Paula S. King         |  |            |  | 48
|Jonathan T. McClure   |  |            |  | 48
|David A. Merline, Jr. |  |            |  | 49
|William H. Pelham     |  |            |  | 53
|J. Matthew Shouse     |  |            |  | 39
|Russel T. Williams    |  |            |  | 47

Jeffrey
L. Dezen, 52, Class I director,is 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. 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, including Clemson University and Frostburg
State University, Mr. Dezen serves on the board of directors of The Alliance for Quality
Education, 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,56,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., 52, 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

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is a member of the City Board of Zoning Appeals, of the Greater Greenville Chamber of Commerce Board of Governors
and a director of the Greenville Convention and Visitors Bureau (CVB). 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,53, 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.,56, 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, and is listed
in the book The Best Lawyers in America in the field of Real Estate Law. 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, 48, Class II director, is our executive vice president and chief
financial officer. Ms. King, a Greenville native, began her career in the financial
services industry in 1986 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, 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 National Banking School at the University of Virginia.
Ms. King serves on the South Carolina Bankers Associations Community Bankers Council
and is a past chairman of the SCBA Operations committee. She serves on the Greenville
United Way Helping Youth Succeed Impact Council and Evaluation Committee, and the Palmetto
Society Womens Leadership Council and is chairman of the Women in Banking Committee.

Jonathan
T. McClure,48, 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

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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., 49, 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 four fields: corporate law, 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.

William
H. Pelham,53,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 LLP, a downtown
property owner, and on the board of directors of Central Realty Corporation, Central
Associates, LP, and CI, Inc. Mr. Pelham currently serves as chair of the Christ Church
Episcopal School Annual Fund, on the City of Greenvilles Art in Public Places
Commission, and as president of 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.

J. Matthew Shouse, 39, Class II director, has been employed by Lazarus-Shouse
          Communities, a residential development and home building company with operations
          in the Upstate area, since 2000 and recently became co-owner of Lazarus-Shouse
          Homes, focusing solely on single-family residential construction. A lifelong
          resident of Greenville, Mr. Shouse earned a B.A. in Business Economics from
          Wofford College in 1991 and was involved with convenience store operations,
          container sales and commercial real estate prior to joining the
          development/building industry. He is an active member of The Rotary Club of
          Greenville, past chairman of the Clubs Roper Mountain Holiday Lights and
          of the Rotary Family Literacy Center at the YWCA project, and past president of
          the Club. He is also a past member of the boards of directors of The Roper
          Mountain Science Center Association and the YMCA Camp Greenville. Mr. Shouse
          currently serves as a member of The Rotary Club of Greenville board of directors
          and as secretary of the Rotary Charities, Inc. board of directors. Mr. Shouse is
          a member of Buncombe Street United Methodist Church board of stewards and past
          co-chair of its recent capital campaign that raised money for debt reduction and
          funding assistance for the Triune Mercy Center.

Russel
T. Williams, 47, 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

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Greenville United Way Impact Council
for Strengthening Families and Neighborhoods. He has served as past board president of The
Juvenile Diabetes Research Foundation-Upstate South Carolina Chapter and the Speech,
Hearing and Learning Center, and is a past member of the board of the Internal Medicine
Associates Patient Care 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 23
years.

# Audit Committee

The
companys board of directors has appointed a number of committees, including audit,
compensation, corporate governance and nominating, and asset-liability committees.
Information about the audit committee is provided in this section. See the discussion
under Item 12 below for information on the other committees.

The
audit committee is composed of Mr. Harman, Mr. McClure, Mr. Merline and Mr. Pelham. Each
of these members is considered independent under Rule 4350 of the National
Association of Securities Dealers listing standards. The audit committee met four
times in 2007.

The
Board of Directors has determined that Mr. Harman is an audit committee financial
expert as defined in Item 401(e)(2) of the SECs Regulation S-B. Mr. Harman is
independent as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the
Securities Exchange Act of 1934. 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.

The
audit committee functions are set forth in its charter, which was adopted on February 14,
2006. A copy of the audit charter is available on our website. The audit committee has the
responsibility for reviewing financial statements, evaluating internal accounting
controls, reviewing reports of regulatory authorities, and determining that all audits and
examinations required by law are performed. The committee recommends to the board the
appointment of the independent auditors for the next fiscal year, reviews and approves the
auditors audit plans, and reviews with the independent auditors the results of the
audit and managements responses. The audit committee is responsible for overseeing
the entire audit function and appraising the effectiveness of internal and external audit
efforts. The audit committee reports its findings to the board of directors.

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 29606, to
obtain a copy.

# Item 10.   Executive
Compensation

The
following table shows the compensation we paid to our two executive officers for the
year ended December 31, 2007.

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# Summary Compensation
Table

|                   |  |  |  |      |  | Non- | Non-    |  |  
|------------------ |  |  |  | ---- |  | ---- | ------- |  | -
|
|
|
|
|
|Russel T. Williams |  |  |  | 2007 |  | $    | 128,000 |  | $
|Chief Executive    |  |  |  | 2006 |  |      | 108,750 |  |  
|Officer            |  |  |  |      |  |      |         |  |  
|Paula S. King      |  |  |  | 2007 |  | $    | 126,000 |  |  
|Chief Financial    |  |  |  | 2006 |  |      | 104,917 |  |  
|Officer            |  |  |  |      |  |      |         |  |  

|(1) |  | On February 14, 2006, each of our named executive officers was granted stock
               options for 47,200 shares of common stock exercisable at $10.00 per share. The
               options vest at 20% per year over a five-year vesting period. The options must
               be exercised within ten years from the grant date. There were no forfeitures
               during 2007. Refer to Note 1, stock compensation plans in the Notes
               to Consolidated Financial Statements for a discussion of the assumptions used in
               the valuation of the option awards
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Includes car allowance of $8,400, club dues of $5,802 and insurance premiums of
               $5,269.
|--- |  | ------------------------------------------------------------------------------------------------------

|(3) |  | Includes car allowance of $6,000, and insurance premiums of $6,663
|--- |  | ------------------------------------------------------------------

# 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;

65

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    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 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

66

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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.

# Outstanding Equity
Awards at Fiscal Year-End

# Option awards:

|                   |  |  | Equity incentive |       | 
|------------------ |  |  | ---------------- | ----- | 
|
|
|
|
|
|
|
|Russel T. Williams |  |  |                  | 9,440 | 
|Paula S. King      |  |  |                  | 9,440 | 

There
were no stock awards granted as of December 31, 2007, so corresponding table headings have
been omitted. All options were granted on February 14, 2006 and vest at 20% per year over
a five-year vesting period.

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, 2007 and 2006, so the corresponding table has been omitted.
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. These warrants vested immediately upon the closing of the offering
in December 2005, as they were issued in recognition of the financial risk and efforts
undertaken by the organizers in organizing the bank. Therefore, no compensation related to
stock warrants is shown for 2007. The warrants are represented by separate warrant
agreements 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 7, 2008. Unless otherwise indicated, the address of each beneficial owner is c/o
BankGreenville Financial Corporation, P. O. Box 6246, Greenville, South Carolina 29606.

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

__________________*Indicates less than 1% ownership.

|    | 
|--- | 
|(1) | 
|    | 
|    | 
|(2) | 
|    | 
|(3) | 
|    | 
|    | 
|    | 
|    | 
|    | 
|    | 
|(4) | 
|    | 
|    | 
|(5) | 
|(6) | 
|(7) | 
|(8) | 
|(9) | 

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The following table sets forth equity
compensation plan information at December 31, 2007.

# Equity Compensation Plan Information

|                             | Number of securities to | Weighted-average | Number of securities
|---------------------------- | ----------------------- | ---------------- | --------------------
|
|
|
|Equity compensation plans    |                         |                  |                     
|approved by security holders |                         |                  |                     
|                             |                         |                  |                     
|Equity compensation plans    |                         |                  |                     
|not approved by security     |                         |                  |                     
|holders                      |                         |                  |                     
|                             |                         |                  |                     

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 $10.00 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. In February 2008, 10,000 warrants expired due to the death of one of our
organizing directors. Warrants outstanding have been adjusted to 97,500.

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 and issued stock options
to several employees at $10.00 per share in 2006 and 2007. The stock incentive plan was
approved by our shareholders at our 2006 annual meeting and is a qualified stock incentive
plan. All of the options we have issued to date 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.

# Item 12.   Certain
Relationships and Related Transactions, and Director Independence.

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
believe that these transactions 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. All of our transactions with our affiliates are 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, 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 100 percent of this site. Ground lease payments were $1,250 per
month and ended in April 2007, when we moved into our permanent headquarters building. 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 in 2006. The firm also negotiated the ground lease agreement for

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our temporary modular banking
facility site in 2006. The fee for these services totaled $-0- and $6,918 for the years
ended December 31, 2007 and 2006, respectively.

One
of our directors, who is an attorney, has prepared employee welfare plan documents for us
in 2006 and 2007. There have been no costs associated with these services.

Our
board of directors has determined that, with the exception of Mr. Williams and Ms. King,
who also serve as executive officers of the company, all of our directors are considered
independent directors, based upon the independence criteria set forth in the
corporate governance listing standards of The NASDAQ Stock Market, the exchange that we
selected in order to determine whether its directors and committee members meet the
independence criteria of a national securities exchange, as required by Item 407(a) of
Regulation S-B.

Our
board of directors has created an audit committee, a nominating committee and a
compensation committee of the board. The members of each of these committees are
independent as contemplated in the listing standards of The NASDAQ Stock
Market.

Our
compensation committee is composed of Mr. Dezen, Mr. Gower, Mr. McClure, and Mr. Merline.
The compensation committee has the responsibility of annually reviewing the performance of
our executive officers and approving the specific compensation for all executive officers.
The company does not use a third party consultant to assist in determining or recommending
the amount or form of executive officer compensation, but does receive input on
compensation amounts from its executive officers. The committee is also responsible for
reviewing all benefit plans initially as well as any significant changes to our benefit
plans.

The
corporate governance and nominating committee includes Mr. Gower, Mr. Halter, Mr. Howson
and Mr. Merline. This committee considers whether to recommend to the Board the nomination
of those directors for re-election for another term of service. The nominating committee
also considers whether to recommend to the Board the nomination of persons to serve as
directors whose nominations have been recommended by shareholders.

Any
shareholder may recommend the nomination of any person to serve on the Board. Our bylaws
require a shareholder to submit the name of the person to our secretary in writing no
later than (i) with respect to an election to be held at an annual meeting of
shareholders, 90 days in advance of such meeting; and (ii) with respect to an election to
be held at a special meeting of shareholders for the election of directors, no more than
seven days after notice of the special meeting is given to shareholders. Each notice must
set forth: (i) the name and address of the shareholder who intends to make the nomination
and of the person or persons to be nominated; (ii) a representation that the shareholder
is a holder of record of stock of the company entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting to nominate the person or persons specified
in the notice; (iii) a description of all arrangements or understandings between the
shareholder and each nominee and any other person or persons (naming such person or
persons) pursuant to which the nomination or nominations are to be made by the
shareholder; (iv) such other information regarding each nominee proposed by such
shareholder as would be required to be included in a proxy statement filed pursuant to
these proxy rules of the Securities and Exchange Commission, had the nominee been
nominated, or intended to be nominated, by the Board of Directors; and (v) the consent of
each nominee to serve as a director of the company if so elected. The chairman of the
meeting may refuse to acknowledge the nomination of any person not made in compliance with
the foregoing procedure.

The
nominating committee considers a number of factors in determining whether to recommend to
the Board the nomination of any person for election as a director. While no single factor
is determinative, the committee considers skills and business background, ability to
devote the requisite time to service, reputation in the community, character and
integrity, and actual and potential conflicts of interest.

In
addition to the above factors, in determining whether to nominate any person for election
by the shareholders, the Board assesses the appropriate size of the Board of Directors,
consistent with the bylaws of the company, and whether any vacancies on the Board are
expected due to retirement or otherwise. If vacancies are anticipated, or otherwise arise,
the Board will consider various potential candidates for director recommended by the
nominating committee. Candidates may come to the attention of the nominating committee or
Board through a variety of sources including, but not limited to, current members of the
Board, shareholders, or other persons. The nominating committee and Board of Directors
consider properly submitted recommendations by shareholders who

70

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are not directors, officers, or
employees of the company on the same basis as candidates recommended by any other person.

The
company does not pay a third party to assist in identifying and evaluating candidates.

The asset-liability
committee is composed of Mr. Gower, Mr. Harman, Mr. Howson, Ms. King, and Mr. Williams.
The asset-liability committee met one time in 2007. The asset-liability committee has the
responsibility of reviewing the asset-liability management policy, investment policy, and
the banks asset/liability structure.

# 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 | 
|     | 
|23.1 | 
|     | 
|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.

71

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# Item 14.   Principal
Accountant Fees and Services

Elliott
Davis, LLC was our auditor during the fiscal years ended December 31, 2007 and 2006. The
following table shows the fees that we incurred for services performed in fiscal year
ended December 31, 2007 and 2006.

|                   | 2007 | 2006
|------------------ | ---- | ----
|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 2007 and 2006
fiscal years for the audits of our annual financial statements in 2007 and 2006 and
reports on Form 10-QSB in 2007 and 2006.

Audit-Related
Fees.This category includes the aggregate fees billed for non-audit services,
exclusive of the fees disclosed relating to audit fees. 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.

Supplemental Information
To Be Furnished With Reports Filed Pursuant to Section 15(d) of the Exchange Act by
Non-Reporting Issuers

We will furnish our proxy materials
and audited financial statements to security holders subsequent to the filing of the
annual report on this Form 10-KSB, and will furnish copies of such materials to the SEC
when they are sent to security holders.

72

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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 FINANCIAL CORPORATION 
|--------------------- |  | -------------------------------------
|                      |  |                                      
|Date:  March 26, 2008 |  | By:   /s/  Russel T. Williams        
|                      |  | Russel T. Williams                   
|                      |  | President and Chief Executive Officer

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             |  | 
|                      |  | 
|Jeffrey L. Dezen      |  | 
|*                     |  | 
|Roger H. Gower        |  | 
|*                     |  | 
|Frank B. Halter, Jr.  |  | 
|*                     |  | 
|R. Bruce Harman       |  | 
|*                     |  | 
|Arthur L. Howson, Jr. |  | 
|/s/ Paula S. King     |  | 
|Paula S. King         |  | 
|*                     |  | 
|Jonathan T. McClure   |  | 
|*                     |  | 
|David A. Merline, Jr. |  | 
|                      |  | 
|William H. Pelham     |  | 

73

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|                             |  | 
|---------------------------- |  | 
|
|*                            |  | 
|J. Matthew Shouse            |  | 
|/s/ Russel T. Williams       |  | 
|Russel T. Williams           |  | 
|                             |  | 
|*By:  /s/ Russel T. Williams |  | 
|Russel T. Williams           |  | 
|Attorney-in-Fact             |  | 
|March 26, 2008               |  | 

# 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 | 
|     | 
|23.1 | 
|     | 
|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.

74