UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                   FORM 10-KSB

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

For the Fiscal Year Ended December 31, 2004                File Number 000-31937

                            GRANDSOUTH BANCORPORATION
                 (Name of Small Business Issuer in its Charter)

             South Carolina                              57-1104394
    (State or Other Jurisdiction            (IRS Employer Identification Number)
      of Incorporation or Organization)

                381 Halton Road, Greenville, South Carolina 29606
                (Address of Principal Executive Office, Zip Code)

         Issuer's Telephone Number, Including Area Code: (864) 770-1000

    Securities Registered Pursuant to Section 12(b) of the Exchange Act: None

      Securities Registered Pursuant to Section 12(g) of the Exchange Act:
                           Common Stock, No Par Value
                                (Title of Class)

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  Registrant was required to file such reports),  and (2)
has been subject to such filing  requirements for the past 90 days.

          Yes [X] No [ ]

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

         The issuer's revenues for its most recent fiscal year were $10,909,630.

     There is no established  market for the Registrant's  voting common equity.
The Registrant has no non-voting common equity  outstanding.  The aggregate book
value of the voting common equity held by  non-affiliates  on March 1, 2005, was
approximately  $9,353,244.  (In the absence of an active  trading market for the
Registrant's common equity, book value is used as a proxy for market value.) For
purposes of the foregoing calculation only, all directors and executive officers
of the Registrant have been deemed affiliates.

         As of March 31, 2005,  there were 2,382,357  shares of the Registrant's
Common Stock, no par value, outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

(1)  Portions of the Annual Report to  Shareholders  for the year ended December
     31, 2004 - Parts I and II

(2)  Portions of the Registrant's Proxy Statement for the 2005 Annual Meeting of
     Shareholders - Part III


    Transitional Small Business Disclosure Format (check one): Yes [ ] No [x]

<PAGE>



                          10-KSB CROSS REFERENCE INDEX

                                     Part I                                 Page
Item 1   Description of Business ........................................      2
Item 2   Description of Property ........................................      8
Item 3   Legal Proceedings ..............................................      9
Item 4   Submission of Matters to a Vote of Security Holders ............      9
                                     Part II
Item 5   Market for Common Equity, Related Stockholder Matters
            and Small Business Issuer Purchases of Securities ...........      9
Item 6   Management's Discussion and Analysis or Plan of Operation ......      *
Item 7   Financial Statements ...........................................      *
Item 8   Changes In and Disagreements with Accountants
           on Accounting and Financial Disclosure .......................     10
Item 8A  Controls and Procedures ........................................     10
Item 8B  Other Information ..............................................     10
                                    Part III
Item 9   Directors, Executive Officers, Promoters and Control
         Persons; Compliance With Section 16(a) of the Exchange Act .....     11
Item 10  Executive Compensation .........................................     **
Item 11  Security Ownership of Certain Beneficial Owners and Management
         and Related Stockholder Matters ................................     11
Item 12  Certain Relationships and Related Transactions .................     **
                                     Part IV
Item 13  Exhibits .......................................................     12
Item 14  Principal Accountant Fees and Services .........................     **

*Incorporated by reference to the Registrant's Annual Report to Shareholders for
 the year ended December 31, 2004.

**Incorporated by reference to the  Registrant's  Proxy  Statement  for the 2005
  Annual Meeting of Shareholders

<Page>

                           FORWARD-LOOKING STATEMENTS

         This Report of GrandSouth Bancorporation (the "Company") on Form 10-KSB
may contain  forward-looking  statements relating to such matters as anticipated
financial  performance,  business  prospects,  technological  developments,  new
products and similar  matters.  Statements  included in this report that are not
historical   facts  are   intended   to  be  and  are   hereby   identified   as
"forward-looking"  statements.  The  words  "estimate",   "project",   "intend",
"expect",  "believe",  "anticipate",  "plan", and similar  expressions  identify
forward-looking  statements.  These  forward-looking  statements  are  based  on
current  expectations,  estimates and  projections  about the banking  industry,
management's  beliefs,  and  assumptions  made by management.  Such  information
includes,  without  limitation,   discussions  as  to  estimates,  expectations,
beliefs,  plans,  strategies,  and objectives  concerning  future  financial and
operating performance. These statements are not guarantees of future performance
and are subject to risks,  uncertainties  and assumptions  that are difficult to
predict. Therefore, actual results may differ materially from those expressed or
forecasted in such forward-looking statements.


         The Private  Securities  Litigation  Reform Act of 1995 provides a safe
harbor for forward-looking statements. In order to comply with terms of the safe
harbor,  the Company  notes that a variety of factors  could cause the Company's
actual results and experience to differ materially from the anticipated  results
or other expectations expressed in the Company's forward-looking statements. The
risks  and   uncertainties   that  may  affect  the  operations,   performances,
development and results of the Company's  business include,  but are not limited
to, the  following:  risks from  changes in economic  and  industry  conditions;
changes in interest rates; risks inherent in making loans,  including  repayment
risks  and value of  collateral;  adequacy  of the  allowance  for loan  losses;
dependence on senior management;  and recently-enacted or proposed  legislation.
Statements  contained in this report regarding the demand for GrandSouth  Bank's
products and services,  changing economic conditions,  interest rates,  consumer
spending and numerous  other factors may be  forward-looking  statements and are
subject to uncertainties and risks.

          The Company  undertakes no obligation to publicly update or revise any
forward-looking  statements,  whether  as a result  of new  information,  future
events or otherwise.  In light of these risks,  uncertainties,  and assumptions,
the forward-looking events discussed in this report might not occur.

                                     PART I

Item 1.  Description of Business.

General

         The Company is a South Carolina corporation organized in 2000 under the
laws of South Carolina for the purpose of being a holding company for GrandSouth
Bank (the "Bank").  On October 2, 2000,  pursuant to a Plan of Exchange approved
by the shareholders,  all of the outstanding shares of capital stock of the Bank
were  exchanged for shares of common stock of the Company and the Company became
the  owner of all of the  outstanding  capital  stock of the Bank.  The  Company
presently  engages in no business  other than that of owning the Bank and has no
employees.

         The Bank is a South  Carolina  state  bank which was  incorporated  and
commenced  operations as a commercial  bank in 1998.  The Bank operates from its
offices in  Greenville  and Fountain  Inn,  South  Carolina.  The main office is
located at 381 Halton Road, in Greenville, South Carolina, and the branch office
is located at 325 South Main Street, in Fountain Inn, South Carolina.

         The Bank  offers a full  array of  commercial  bank  services.  Deposit
services include business and personal checking accounts, NOW accounts,  savings
accounts,  money market  accounts,  various term  certificates  of deposit,  IRA
accounts, and other deposit services.  Most of the Bank's deposits are attracted
from individuals and small businesses. The Bank does not offer trust services.

         The Bank  offers  secured  and  unsecured,  short-to-intermediate  term
loans,  with  floating and fixed  interest  rates for  commercial,  consumer and
residential purposes. Consumer loans include: car loans, home equity improvement
loans  (secured  by first and second  mortgages),  personal  expenditure  loans,
education  loans,  overdraft  lines of credit,  and the like.  Commercial  loans
include short term  unsecured  loans,  short and  intermediate  term real estate
mortgage  loans,  loans  secured by listed  stocks,  loans  secured by equipment
inventory,  accounts  receivable,  and the like.  Management  believes  that the
credit staff possesses  knowledge of the community and lending skills sufficient
to enable the Bank to maintain a sufficient volume of high quality loans.


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         Management of the Bank  believes that the loan  portfolio is adequately
diversified.  There are no significant concentrations of loans in any particular
individuals,  industries or groups of related  individuals or industries and the
Bank has no foreign  loans.  The loan portfolio  consists  primarily of mortgage
loans and extensions of credit to businesses and individuals in its service area
within  Greenville  County,  South  Carolina.   The  economy  of  this  area  is
diversified  and does  not  depend  on any one  industry  or  group  of  related
industries.  Management has established loan policies and practices that include
set limitations on  loan-to-collateral  value for different types of collateral,
requirements  for  appraisals,  obtaining  and  maintaining  current  credit and
financial information on borrowers, and credit approvals.

         Other services  offered by the Bank include safe deposit  boxes,  night
depository service,  VISA(R) and MasterCard(R)  charge cards, tax deposits,  and
traveler's checks.

         At March 1, 2005, the Bank employed 31 persons  full-time.  The Company
has no employees.  Management  of the Bank believes that its employee  relations
are excellent.

Competition

         The Bank competes in the South Carolina county of Greenville, for which
the most recent  market share data  available  is as of June 30,  2004.  At that
time,  25 banks,  and  savings  banks  with 153  branch  locations  competed  in
Greenville County for aggregate deposits of approximately $7.4 billion.

         Banks generally compete with other financial  institutions  through the
savings  products and services  offered,  the pricing of services,  the level of
service provided,  the convenience and availability of services,  and the degree
of expertise  and  personal  concern  with which  services  are  offered.  South
Carolina law permits statewide branching by banks and savings institutions,  and
many financial  institutions  in the state have branch  networks.  Consequently,
commercial  banking  in  South  Carolina  is  highly  competitive.  Furthermore,
out-of-state  banks may commence  operations  and compete in the Bank's  primary
service area. Many large banking organizations,  several of which are controlled
by out-of-state ownership, currently operate in the Bank's market area.


         In the conduct of certain areas of its business, the Bank competes with
commercial banks, savings and loan associations, credit unions, consumer finance
companies,  insurance  companies,  money market mutual funds and other financial
institutions, some of which are not subject to the same degree of regulation and
restriction  imposed upon the Bank. Many of these competitors have substantially
greater  resources and lending limits than the Bank and offer certain  services,
such as international  banking  services and trust services,  that the Bank does
not provide.  Moreover,  most of these  competitors  have more  numerous  branch
offices located throughout their market areas, a competitive  advantage that the
Bank  does  not  have to the  same  degree.  Such  competitors  may also be in a
position to make more effective use of media advertising,  support services, and
electronic technology than can the Bank.

         The banking industry is significantly  affected by prevailing  economic
conditions as well as by government policies and regulations  concerning,  among
other things,  monetary and fiscal affairs,  the housing  industry and financial
institutions.  Deposits at banks are influenced by a number of economic factors,
including interest rates, competing  instruments,  levels of personal income and
savings,  and the extent to which interest on retirement savings accounts is tax
deferred.  Lending  activities  are  also  influenced  by a number  of  economic
factors,  including  demand  for  and  supply  of  housing,  conditions  in  the
construction  industry,  and availability of funds. Primary sources of funds for
lending  activities  include savings  deposits,  income from  investments,  loan
principal  repayments,   and  proceeds  from  sales  of  loans  to  conventional
participating lenders.

Effect of Government Regulation

         Bank  holding  companies  and banks  are  extensively  regulated  under
federal and state law. To the extent that the  following  information  describes
statutory  and  regulatory  provisions,  it is  qualified  in  its  entirety  by
reference to such  statutes and  regulations.  Any change in  applicable  law or
regulation  may have a material  effect on the  business  of the Company and the
Bank.

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<Page>

General

         As a bank holding  company under the Bank Holding Company Act ("BHCA"),
the  Company  obtained  the  approval of the Board of  Governors  of the Federal
Reserve System (the "Federal Reserve") to acquire the Bank and is subject to the
regulations of the Federal Reserve. Under the BHCA, the Company's activities and
those of its subsidiaries are limited to banking, managing or controlling banks,
furnishing  services to or performing  services for its subsidiaries or engaging
in any other  activity  which the Federal  Reserve  determines  to be so closely
related to banking or managing or controlling  banks as to be a proper  incident
thereto. The Company may engage in a broader range of activities if it becomes a
"financial  holding company"  pursuant to the  Gramm-Leach-Bliley  Act, which is
described below under the caption "Recent  Legislation."  The BHCA prohibits the
Company  from  acquiring  direct  or  indirect  control  of more  than 5% of the
outstanding  voting stock or substantially all of the assets of any bank or from
merging or  consolidating  with  another  bank  holding  company  without  prior
approval of the Federal  Reserve.  Additionally,  the BHCA prohibits the Company
from engaging in or from  acquiring  ownership or control of more than 5% of the
outstanding voting stock of any company engaged in a non-banking business unless
such business is determined by the Federal  Reserve to be so closely  related to
banking as to be properly  incident  thereto.  The BHCA generally does not place
territorial   restrictions  on  the  activities  of  such  non-banking   related
activities.

         The Company is also subject to regulation and  supervision by the South
Carolina  State Board of Financial  Institutions  (the "State  Board").  A South
Carolina bank holding company must provide the State Board with information with
respect to the financial  condition,  operations,  management and  inter-company
relationships of the holding company and its subsidiaries.  The State Board also
may require such other information as is necessary to keep itself informed about
whether the  provisions  of South  Carolina law and the  regulations  and orders
issued  thereunder  by the State Board have been  complied  with,  and the State
Board may examine any bank holding company and its subsidiaries.

Obligations of the Company to its Subsidiary Bank

         A number of obligations  and  restrictions  are imposed on bank holding
companies  and their  depository  institution  subsidiaries  by Federal  law and
regulatory  policy that are designed to reduce  potential  loss  exposure to the
depositors of such  depository  institutions  and to the FDIC insurance funds in
the event the depository  institution  is in danger of becoming  insolvent or is
insolvent.  For example, under the policy of the Federal Reserve, a bank holding
company is required to serve as a source of financial strength to its subsidiary
depository  institutions and to commit resources to support such institutions in
circumstances  where it might not do so absent such  policy.  In  addition,  the
"cross-guarantee"  provisions of the Federal  Deposit  Insurance Act, as amended
("FDIA"),  require  insured  depository  institutions  under  common  control to
reimburse the FDIC for any loss suffered or reasonably anticipated by either the
Savings  Association  Insurance Fund ("SAIF") or the Bank Insurance Fund ("BIF")
of the  FDIC  as a  result  of the  default  of a  commonly  controlled  insured
depository  institution or for any assistance provided by the FDIC to a commonly
controlled  insured  depository  institution in danger of default.  The FDIC may
decline to enforce the cross-guarantee provisions if it determines that a waiver
is in the best  interest  of the SAIF or the BIF or both.  The FDIC's  claim for
damages  is  superior  to  claims  of  shareholders  of the  insured  depository
institution  or its holding  company but is subordinate to claims of depositors,
secured  creditors and holders of subordinated  debt (other than  affiliates) of
the commonly controlled insured depository institutions.

         The FDIA also provides that amounts  received from the  liquidation  or
other resolution of any insured  depository  institution by any receiver must be
distributed (after payment of secured claims) to pay the deposit  liabilities of
the  institution  prior to payment  of any other  general  or  unsecured  senior
liability,   subordinated  liability,  general  creditor  or  shareholder.  This
provision gives depositors a preference over general and subordinated  creditors
and  shareholders  in the event a receiver is appointed to distribute the assets
of the Bank.

         Any capital  loans by a bank holding  company to any of its  subsidiary
banks are  subordinate  in right of payment  to  deposits  and to certain  other
indebtedness of such subsidiary  bank. In the event of a bank holding  company's
bankruptcy,  any  commitment  by the bank  holding  company  to a  federal  bank


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regulatory  agency to maintain the capital of a subsidiary  bank will be assumed
by the bankruptcy trustee and entitled to a priority of payment.

Capital Adequacy Guidelines for Bank Holding Companies and State Banks

         The various federal bank regulators,  including the Federal Reserve and
the FDIC have adopted  risk-based and leverage capital  adequacy  guidelines for
assessing bank holding company and bank capital adequacy. These standards define
what qualifies as capital and establish minimum capital standards in relation to
assets and off-balance sheet exposures, as adjusted for credit risks.

         Failure to meet capital  guidelines could subject the Bank to a variety
of enforcement  remedies,  including the termination of deposit insurance by the
FDIC and a prohibition on the taking of brokered deposits.

         The risk-based  capital standards of both the Federal Reserve Board and
the FDIC explicitly identify  concentrations of credit risk and the risk arising
from non-traditional  activities,  as well as an institution's ability to manage
these risks,  as  important  factors to be taken into account by the agencies in
assessing an institution's overall capital adequacy. The capital guidelines also
provide that an institution's exposure to a decline in the economic value of its
capital  due to changes in interest  rates be  considered  by the  agencies as a
factor in evaluating a bank's capital  adequacy.  The Federal Reserve Board also
has issued additional  capital guidelines for bank holding companies that engage
in certain trading activities.

Payment of Dividends

         The  Company is a legal  entity  separate  and  distinct  from its bank
subsidiary.  Most of the  revenues of the  Company  are  expected to result from
dividends  paid to the Company by the Bank.  There are statutory and  regulatory
requirements  applicable to the payment of dividends by subsidiary banks as well
as by the Company to its  shareholders.

Certain Transactions by the Company with its Affiliates

         Federal  law   regulates   transactions   among  the  Company  and  its
affiliates,  including  the  amount of the  Bank's  loans to or  investments  in
nonbank affiliates and the amount of advances to third parties collateralized by
securities of an affiliate.  Further,  a bank holding company and its affiliates
are prohibited  from engaging in certain tie-in  arrangements in connection with
any extension of credit, lease or sale of property or furnishing of services.

FDIC Insurance Assessments

         Because the Bank's deposits are insured by the BIF, the Bank is subject
to insurance assessments imposed by the FDIC. Currently, the assessments imposed
on all FDIC deposits for deposit insurance have an effective rate ranging from 0
to 27 basis points per $100 of insured deposits,  depending on the institution's
capital position and other supervisory factors. Legislation enacted in 1996 also
requires that both SAIF-insured and BIF-insured  deposits pay a pro rata portion
of the  interest  due on the  obligations  issued by the  Financing  Corporation
("FICO").  The FICO  assessment is adjusted  quarterly to reflect changes in the
assessment  bases of the  respective  funds based on  quarterly  Call Report and
Thrift Financial Report submissions.

Regulation of the Bank

         The Bank is subject to regulation  and  examination by the State Board.
In  addition,  the Bank is subject to various  other state and federal  laws and
regulations,  including state usury laws, laws relating to fiduciaries, consumer
credit laws and laws relating to branch banking.  The Bank's loan operations are
also subject to


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certain federal  consumer credit laws and  regulations  promulgated  thereunder,
including,  but not  limited  to: the federal  Truth-In-Lending  Act,  governing
disclosures of credit terms to consumer borrowers;  the Home Mortgage Disclosure
Act, requiring financial  institutions to provide certain information concerning
their mortgage  lending;  the Equal Credit  Opportunity Act and the Fair Housing
Act,  prohibiting  discrimination on the basis of certain  prohibited factors in
extending credit; the Fair Credit Reporting Act, governing the use and provision
of information to credit reporting agencies; the Bank Secrecy Act, dealing with,
among other things, the reporting of certain currency transactions; and the Fair
Debt  Collection  Act,  governing  the  manner  in which  consumer  debts may be
collected by collection  agencies.  The deposit  operations of the Bank are also
subject to the Truth in Savings Act,  requiring certain  disclosures about rates
paid on savings accounts; the Expedited Funds Availability Act, which deals with
disclosure of the availability of funds deposited in accounts and the collection
and return of checks by banks; the Right to Financial Privacy Act, which imposes
a duty to maintain certain confidentiality of consumer financial records and the
Electronic  Funds Transfer Act and  regulations  promulgated  thereunder,  which
govern  automatic   deposits  to  and  withdrawals  from  deposit  accounts  and
customers'  rights and  liabilities  arising  from the use of  automated  teller
machines and other electronic banking services.

         The  Bank  is  also  subject  to  the  requirements  of  the  Community
Reinvestment  Act (the  "CRA").  The CRA imposes on  financial  institutions  an
affirmative  and  ongoing  obligation  to meet the credit  needs of their  local
communities,  including low- and moderate-income neighborhoods,  consistent with
the safe and sound operation of those institutions. Each financial institution's
actual performance in meeting community credit needs is evaluated as part of the
examination process, and also is considered in evaluating mergers,  acquisitions
and applications to open a branch or facility.

Other Safety and Soundness Regulations

         Prompt  Corrective  Action.  The federal  banking  agencies  have broad
powers under  current  federal law to take prompt  corrective  action to resolve
problems of insured depository institutions.  The extent of these powers depends
upon whether the  institutions in question are "well  capitalized,"  "adequately
capitalized,"    "undercapitalized,"    "significantly    undercapitalized"   or
"critically undercapitalized."

         A bank that is "undercapitalized"  becomes subject to provisions of the
FDIA:   restricting  payment  of  capital  distributions  and  management  fees;
requiring the FDIC to monitor the condition of the bank; requiring submission by
the bank of a capital  restoration  plan;  restricting  the growth of the bank's
assets and requiring prior approval of certain expansion proposals.  A bank that
is  "significantly   undercapitalized"   is  also  subject  to  restrictions  on
compensation  paid  to  senior  management  of  the  bank,  and a bank  that  is
"critically   undercapitalized"  is  further  subject  to  restrictions  on  the
activities of the bank and restrictions on payments of subordinated  debt of the
bank.  The  purpose  of these  provisions  is to  require  banks  with less than
adequate  capital to act quickly to restore  their  capital and to have the FDIC
move  promptly  to take over  banks  that are  unwilling  or unable to take such
steps.

         Brokered Deposits.  Under current FDIC regulations,  "well capitalized"
banks may accept brokered deposits without restriction, "adequately capitalized"
banks may accept  brokered  deposits  with a waiver  from the FDIC  (subject  to
certain  restrictions on payment of rates), while  "undercapitalized"  banks may
not accept brokered  deposits.  The regulations  provide that the definitions of
"well capitalized", "adequately capitalized" and "undercapitalized" are the same
as the  definitions  adopted by the agencies to implement the prompt  corrective
action  provisions  described in the  previous  paragraph.  Management  does not
believe  that  these  regulations  will have a  material  adverse  effect on the
operations of the Bank.

Interstate Banking

         Under the Riegle-Neal  Interstate Banking and Branching  Efficiency Act
of 1994 the Company and any other  adequately  capitalized  bank holding company
located in South  Carolina can acquire a bank located in any other state,  and a
bank  holding  company  located  outside  South  Carolina  can acquire any South
Carolina-based  bank, in either case subject to certain  deposit  percentage and
other restrictions.  Unless prohibited by state law, adequately  capitalized and
managed bank holding  companies are permitted to  consolidate  their  multistate

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bank operations into a single bank subsidiary and to branch  interstate  through
acquisitions. De novo branching by an out-of-state bank is permitted only if the
laws of the host state expressly permit it. The authority of a bank to establish
and operate  branches within a state continue to be subject to applicable  state
branching  laws.  South  Carolina law was amended,  effective  July 1, 1996,  to
permit such  interstate  branching but not de novo branching by an  out-of-state
bank.

Gramm-Leach-Bliley Act

         The  Gramm-Leach-Bliley  Act,  which  makes it easier for  affiliations
between banks,  securities firms and insurance  companies to take place,  became
effective  in March  2000.  The Act  removes  Depression-era  barriers  that had
separated  banks and  securities  firms,  and seeks to  protect  the  privacy of
consumers' financial information.

         Under  provisions of the new  legislation  and  regulations  adopted by
appropriate regulators, banks, securities firms and insurance companies are able
to structure new affiliations  through a holding company  structure or through a
financial subsidiary. The legislation creates a new type of bank holding company
called a "financial  holding  company" which has powers much more extensive than
those of standard holding companies.  These expanded powers include authority to
engage in "financial activities," which are activities that are (1) financial in
nature;  (2)  incidental  to  activities  that are  financial in nature;  or (3)
complementary  to a  financial  activity  and that do not  impose  a safety  and
soundness risk. Significantly,  the permitted financial activities for financial
holding  companies include authority to engage in merchant banking and insurance
activities,  including insurance portfolio investing. A bank holding company can
qualify as a financial holding company and expand the services it offers only if
all of its subsidiary depository institutions are well-managed, well-capitalized
and  have  received  a  rating  of   "satisfactory"   on  their  last  Community
Reinvestment Act examination.

         The  legislation  also  creates  another  new type of  entity  called a
"financial subsidiary." A financial subsidiary may be used by a national bank or
a group of national banks to engage in many of the same activities permitted for
a financial holding company, though several of these activities,  including real
estate development or investment,  insurance or annuity underwriting,  insurance
portfolio  investing and merchant  banking,  are reserved for financial  holding
companies.  A bank's  investment  in a financial  subsidiary  affects the way in
which the bank calculates its regulatory capital, and the assets and liabilities
of financial  subsidiaries  may not be consolidated  with those of the bank. The
bank must also be certain that its risk  management  procedures  are adequate to
protect it from  financial and  operational  risks created both by itself and by
any financial subsidiary.  Further, the bank must establish policies to maintain
the separate corporate  identities of the bank and its financial  subsidiary and
to prevent each from becoming liable for the obligations of the other.

         The Act also  establishes  the  concept  of  "functional  supervision,"
meaning that  similar  activities  should be  regulated  by the same  regulator.
Accordingly,  the Act spells out the regulatory authority of the bank regulatory
agencies,  the Securities and Exchange Commission and state insurance regulators
so that each type of activity is  supervised by a regulator  with  corresponding
expertise.  The Federal  Reserve Board is intended to be an umbrella  supervisor
with the  authority  to  require a bank  holding  company or  financial  holding
company  or any  subsidiary  of  either  to  file  reports  as to its  financial
condition,  risk management  systems,  transactions with depository  institution
subsidiaries  and  affiliates,  and compliance  with any federal law that it has
authority to enforce.

         Although the Act reaffirms that states are the regulators for insurance
activities  of  all  persons,  including   federally-chartered  banks,  the  Act
prohibits  states from preventing  depository  institutions and their affiliates
from conducting insurance activities.

         The Act also  establishes  a minimum  federal  standard  of  privacy to
protect the confidentiality of a consumer's  personal financial  information and
gives the consumer the power to choose how personal financial information may be
used by financial institutions.

                                       7
<PAGE>

         The Act and the  regulations  adopted  pursuant  to the Act  create new
opportunities  for the Company to offer  expanded  services to  customers in the
future,  though  the  Company  has not yet  determined  what the  nature  of the
expanded  services  might be or when the Company might find it feasible to offer
them. The Act has increased competition from larger financial  institutions that
are  currently  more  capable  than  the  Company  of  taking  advantage  of the
opportunity  to  provide a  broader  range of  services.  However,  the  Company
continues to believe that its commitment to providing high quality, personalized
service to customers will permit it to remain competitive in its market area.

Legislative Proposals

         Proposed  legislation which could significantly  affect the business of
banking is  introduced  in Congress  from time to time.  Management  of the Bank
cannot predict the future course of such  legislative  proposals or their impact
on the Company and the Bank should they be adopted.

Sarbanes-Oxley Act of 2002

         The  Sarbanes-Oxley  Act was enacted in 2002,  and  mandated  extensive
reforms and requirements for public companies. The SEC has adopted extensive new
regulations  pursuant  to  the  requirements  of  the  Sarbanes-Oxley  Act.  The
Sarbanes-Oxley  Act and the SEC's new  regulations  have increased the Company's
cost of doing  business,  particularly  its fees for internal and external audit
services  and  legal  services,  and the law and  regulations  are  expected  to
continue  to do so.  However,  the  Company  does  not  believe  that it will be
affected  by  Sarbanes-Oxley  and the  new SEC  regulations  in  ways  that  are
materially  different or more  onerous  than those of other public  companies of
similar size and in similar businesses.

Fiscal and Monetary Policy

           Banking is a business  which  depends to a large  extent on  interest
rate  differentials.  In general,  the difference between the interest paid by a
bank on its deposits and its other  borrowings,  and the interest  received by a
bank on its loans and securities  holdings,  constitutes  the major portion of a
bank's  earnings.  Thus, the earnings and growth of the Company and the Bank are
subject to the  influence of economic  conditions  generally,  both domestic and
foreign,  and also to the monetary and fiscal  policies of the United States and
its agencies,  particularly the Federal Reserve.  The Federal Reserve  regulates
the supply of money through  various means,  including  open market  dealings in
United States government securities, the discount rate at which banks may borrow
from the Federal Reserve, and the reserve  requirements on deposits.  The nature
and timing of any changes in such  policies  and their impact on the Company and
the Bank cannot be predicted.

Further Information

         Further  information  about the business of the Company and the Bank is
set  forth in this  Form  10-KSB  under  Item 6  -"Management's  Discussion  and
Analysis or Plan of Operation."

Item 2.    Description of Property.

         The Bank leases  property at the  intersection of Halton Road and Rocky
Slope Road in  Greenville,  South  Carolina  where its main  office  facility is
located.  The  property is leased  until 2021 for $1,000 per month for years one
through  five,  $1,322 per month for years six through  fifteen,  and $1,521 per
month for years sixteen through the end of the lease term. This facility,  which
was completed in August 2002, is a 20,000 square foot, three story building. The
cost of building and furnishing the new facility totaled $2.9 million.

         The Bank  leases  property  at the corner of South Main Street and East
Knight Street in Fountain Inn where a branch office is located.  The property is
leased until 2018 for $800 per month from Blake P. Garrett,  Jr., Trustee,  with
four five year  renewal  options.  Lease  payments  are  subject to  increase to
reflect  increases in the Consumer  Price Index.  Blake P. Garrett,  Jr., is the
brother of Mason Y.  Garrett,  Chairman of the Board of  Directors  of the Bank.
Blake P. Garrett, Jr., is trustee for a partnership which owns the property.

         From its opening until July 2003,  the Bank also operated in a building
in  Simpsonville,  South  Carolina.  That  office is also  leased  from Blake P.
Garrett,  Jr.,  as  Trustee,  for $3,000 per month for three years with two five
year renewal  options.  Mason Y. Garrett is a 10.3% partner in the  partnership.
This office was closed in July 2003, and the lease terminated in September 2004.

                                       8
<PAGE>

Item 3.    Legal Proceedings.

           The Bank is from time to time a party to  various  legal  proceedings
arising in the ordinary  course of business,  but  management of the Bank is not
aware  of  any  pending  or  threatened   litigation  or  unasserted  claims  or
assessments  that are  expected  to  result in  losses,  if any,  that  would be
material to the Bank's business and operations.

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

           No matters were submitted to a vote of security holders in the fourth
quarter of 2004.

                                     PART II

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

         Although the common stock of the Company is traded from time to time on
an individual basis, no active trading market has developed and none is expected
to  develop in the  foreseeable  future.  The common  stock is not traded on any
exchange or on the NASDAQ  National  Market System.  During 2004,  management is
aware of a few  transactions  in  which  the  Company's  common  stock  has been
transferred in a range of $6.51 to $8.96 per share. However,  management has not
ascertained that these transactions are the result of arm's length  negotiations
between the parties, and because of the limited number of shares involved,  such
prices may not be  indicative  of the market value of the common  stock.  Prices
above have been  adjusted for 10% stock  dividends  declared in January 2004 and
February 2005.

         As of March 1, 2005, there were  approximately 566 holders of record of
the  Company's  common  stock,  excluding  individual  participants  in security
position listings.

         The Company did not pay any cash dividends  prior to 2003. In 2003, the
Company paid cash dividends  totaling $.04 per share.  In 2004, the Company paid
cash dividends  totaling $.08 per share.  The dividend  policy of the Company as
well as the Bank is  subject to the  discretion  of their  respective  Boards of
Directors and depends upon a number of factors,  including  earnings,  financial
conditions,  cash needs and general business  conditions,  as well as applicable
regulatory  considerations.  South  Carolina  banking  regulations  restrict the
amount of cash dividends that can be paid to the Company by the Bank, and all of
the Bank's cash  dividends  to the Company are subject to the prior  approval of
the South Carolina Commissioner of Banking.

Securities Authorized for Issuance under Equity Compensation Plans

         The information  required by Item 201(d) of Regulation S-B is set forth
in Item 11 of this Form 10-KSB.

Sales of Unregistered Securities

         The Company did not sell any securities  during the year ended December
31, 2004.

Purchases of Equity Securities by the Company and Affiliated Purchasers

         Neither  the Company nor any  "affiliated  purchaser"  as defined in 17
C.F.R.  240.10b-18(a)(3)  purchased  any  shares  or units  of any  class of the
Company's  equity  securities  that is registered  pursuant to Section 12 of the
Exchange Act during the fourth  quarter of 2004.  Accordingly,  no disclosure is
required pursuant to 17 C.F.R. Section 228.703.




                                       9
<PAGE>

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

         The  information set forth under the caption  "Management's  Discussion
and Analysis or Plan of  Operation"  in the  Registrant's  2004 Annual Report is
incorporated herein by reference.

Item 7.  Financial Statements.

         The Consolidated  Financial  Statements,  including Notes thereto,  set
forth in the  Registrant's  2004 Annual Report to Shareholders  are incorporated
herein by reference.

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

         Not Applicable.

Item 8A.  Controls and Procedures.

         Based on the evaluation required by 17 C.F.R. Section  240.13a-15(b) or
240.15d-15(b) of the Company's disclosure controls and procedures (as defined in
17  C.F.R.  Sections  240.13a-15(e)  or  240.15d-15(e)),   the  Company's  chief
executive  officer and chief financial  officer concluded that such controls and
procedures,  as of the end of the period  covered by this  annual  report,  were
effective.

         No disclosure is required under 17 C.F.R.  Section  228.308 (a) or (b).
There  has been no change  in the  Company's  internal  control  over  financial
reporting during the most recent fiscal quarter that has materially affected, or
is reasonably likely to materially  affect,  the Company's internal control over
financial reporting.

Item 8B.  Other Information.

         No  information  was  required to be disclosed in a Form 8-K during the
fourth quarter of 2004 that was not so disclosed.


                                       10
<PAGE>

                                    PART III

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

         The  information  set  forth  under  the  captions  "Management  of the
Company" -- Directors" and "-- Executive Officers" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in registrant's definitive proxy statement filed
with the  Commission  for the 2005 Annual  Meeting of  Shareholders  (the "Proxy
Statement") is incorporated herein by reference.  Directors serve for a one year
term, or until their successors are elected and qualify to serve.

         Audit Committee Financial Expert

         The Company's  board of directors has determined  that the Company does
not have an "audit committee  financial expert," as that term is defined by Item
401(e) of Regulation S-B promulgated by the Securities and Exchange  Commission,
serving on its Board (the Company's  entire Board of Directors  functions as the
Audit  Committee).  After  reviewing the  experience  and training of all of the
Company's  independent  directors,  the board of directors has concluded that no
independent director meets the SEC's very demanding  definition.  Therefore,  it
would be necessary to find a qualified individual willing to serve as a director
and have that  person  elected  by the  shareholders  in order to have an "audit
committee  financial expert" serving on the Company's Board. The Company's Board
is,  however,  authorized to use  consultants  to provide  financial  accounting
expertise in any instance  where  members of the Board  believe such  assistance
would be useful. Accordingly, the Company does not believe that it needs to have
an "audit committee financial expert" on its Board.

         Code of Ethics

         The  Company  has  adopted a code of ethics  (as  defined  by 17 C.F.R.
228.406) that applies to its principal executive officer and principal financial
officer.  The Company will provide a copy of the code of ethics, free of charge,
to any person  upon  written  request  to J. B.  Garrett,  Corporate  Secretary,
GrandSouth  Bancorporation,  Inc., 381 Halton Road,  Greenville,  South Carolina
29606.

Item 10. Executive Compensation.

         The information set forth under the caption "Management  Compensation"
in the Proxy Statement is incorporated herein by reference.

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

         The  information  set forth under the caption  "Security  Ownership  of
Certain Beneficial Owners and Management" in the Proxy Statement is incorporated
herein by reference.


                      Equity Compensation Plan Information

         The following  table sets forth  aggregated  information as of December
31, 2004 about all of the Company's  compensation  plans  (including  individual
compensation  arrangements)  under which  equity  securities  of the Company are
authorized for issuance:


                                       11
<PAGE>

<TABLE>
<CAPTION>
Plan category                   Number of securities         Weighted-average             Number of securities
                                to be issued upon            exercise price of            remaining available
                                exercise of                  outstanding options,         for future issuance
                                outstanding options,         warrants and rights          under equity
                                warrants and rights                                       compensation plans
                                                                                          (excluding securities
                                                                                          reflected in column(a))
                                (a)                          (b)                          (c)
------------------------------- ---------------------------- ---------------------------- ----------------------------
<S>                             <C>                          <C>                          <C>
Equity compensation
plans approved by
security holders                303,709                      4.26                         26,621

Equity compensation
plans not approved
by security holders                   -                         -                              -
                                -------                      ----                         ------
                                303,709                      4.26                         26,621
Total
</TABLE>

The number of shares subject to outstanding options,  exercise prices and number
of shares remaining  available for future issuance of options have been restated
to reflect the 5% stock  dividends  declared  in January  2003 and the 10% stock
dividends declared in January 2004 and February 2005.

Item 12. Certain Relationships and Related Transactions.

         The information set forth under the caption "Certain  Relationships and
Related   Transactions"  in  the  Proxy  Statement  is  incorporated  herein  by
reference.


Item 13. Exhibits

(a)      Description of Exhibits.

Exhibit No.                Description
-----------                -----------

3.1                       Articles of Incorporation of Registrant (1)
3.2                       Bylaws of Registrant (1)
4.1                       Form of Common Stock Certificate (2)
10.1                      1998 Stock Option Plan (2)
10.2                      Form of Stock Option Agreement (2)
10.3                      Form of 10-Year Variable Rate Convertible Subordinated
                          Debenture (3)
10.4                      Executive Supplemental Retirement Plan Executive
                           Agreement with Ronald K. Earnest (4)
13                        Portions of the Annual Report to Shareholders  for the
                           Year Ended December 31, 2004
21                        Subsidiaries of Registrant (2)
31.1                      Rule 13a-14(a)/15d-14(a) Certifications
31.2                      Rule 13a-14(a)/15d-14(a) Certifications
32                        18 U.S.C. Section 1350 Certifications

-------------
(1)  Incorporated by reference to exhibits to Form 8-A filed November 13, 2000.
(2)  Incorporated  by  reference  to  exhibits to Form 10-KSB for the year ended
     December 31, 2000.
(3)  Incorporated  by reference to exhibits to Form 10-QSB for the quarter ended
     March 31, 2001.
(4)  Incorporated  by  reference  to  exhibits to Form 10-KSB for the year ended
     December 31, 2001.

Item 14.  Principal Accountant Fees and Services

         The  information  set  forth  under  the  caption  "Independent  Public
Accountants - Fees Paid to Independent  Auditors" and "-- Board  Pre-Approval of
Audit and Permissible  Non-Audit Services of Independent  Auditors" in the Proxy
Statement is incorporated herein by reference.



                                       12
<PAGE>

                                   SIGNATURES

      In accordance  with Section 13 or 15(d) of the Securities  Exchange Act of
1934,  the  registrant  caused  this  report to be  signed on its  behalf by the
undersigned, thereunto duly authorized.

                           GrandSouth Bancorporation


March 31, 2005             By: s/Mason Y. Garrett
                              --------------------------------------------------
                                 Mason Y. Garrett
                                 Chief Executive Officer


                           By: s/J. B. Garrett
                              --------------------------------------------------
                                 J. B. Garrett
                                 Vice President
                                 (Principal Financial and Principal Accounting
                                    Officer)


         In accordance  with the Exchange Act, this Report has been signed below
by the following  persons on behalf of the  registrant and in the capacities and
on the dates indicated:
<Table>
<Caption>

Signature                                Title                                              Date
---------                                -----                                              ----
<S>                                      <C>                                                <C>

---------------------------------------  Director                                           March __, 2005
Blanton S. Phillips

s/Ronald K. Earnest                      President, Chief Operating Officer, Director       March 31, 2005
--------------------------------
Ronald K. Earnest

s/Harold E. Garrett                      Director                                           March 31, 2005
--------------------------------
Harold E. Garrett

                                         Chairman, Director                                 March __, 2005
--------------------------------
Mason Y. Garrett

s/Michael L. Gault                       Director                                           March 31, 2005
--------------------------------
Michael L. Gault

s/Baety O. Gross                         Director                                           March 31, 2005
--------------------------------
Baety O. Gross

--------------------------------         Director                                           March __, 2005
S. Hunter Howard, Jr.
</Table>



                                       13
<PAGE>


                                  EXHIBIT INDEX


Exhibit No.               Description

3.1                       Articles of Incorporation of Registrant (1)
3.2                       Bylaws of Registrant (1)
4.1                       Form of Common Stock Certificate (2)
10.1                      1998 Stock Option Plan (2)
10.2                      Form of Stock Option Agreement (2)
10.3                      Form of 10-Year Variable Rate Convertible Subordinated
                          Debenture (3)
10.4                      Executive Supplemental Retirement Plan Executive
                           Agreement with Ronald K. Earnest (4)
13                        Portions of the Annual Report to Shareholders  for the
                           Year Ended December 31, 2004
21                        Subsidiaries of Registrant (2)
31.1                      Rule 13a-14(a)/15d-14(a) Certifications
31.2                      Rule 13a-14(a)/15d-14(a) Certifications
32                        18 U.S.C. Section 1350 Certifications
-------------
(1)  Incorporated by reference to exhibits to Form 8-A filed November 13, 2000.
(2)  Incorporated  by  reference  to  exhibits to Form 10-KSB for the year ended
     December 31, 2000.
(3)  Incorporated  by reference to exhibits to Form 10-QSB for the quarter ended
     March 31, 2001.
(4)  Incorporated  by  reference  to  exhibits to Form 10-KSB for the year ended
     December 31, 2001.



                                       14