# UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

# FORM 10-QSB

(Mark One)

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

| | For the Quarterly Period Ended June 30, 2007
| | --------------------------------------------

| | TRANSITION REPORT PURSUANT TO 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(Exact name of small business issuer as specified in its charter)

|South Carolina               |  | 20-2645711         
|---------------------------- |  | -------------------
|(State or other jurisdiction |  | (I.R.S. Employer   
|of incorporation)            |  | Identification No.)

499 Woodruff RoadGreenville, South Carolina 29607
(Address of principal executive offices)

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

______________________________

Check whether  the issuer (1) has filed all reports required  to be filed by Section 13 of 15(d) of the
Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant  was required to file such reports),  and
(2) has been subject to such filing requirements for the past 90 days.  Yes          No

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

State
the number of shares outstanding of each of the issuers classes of common equity, as
of the latest practicable date: 1,180,000 shares of common stock, no par value, outstanding as of August 8, 2007.

Transitional Small Business Disclosure Format (check one)
  Yes          No

---

# BANKGREENVILLE
FINANCIAL CORPORATION

# INDEX

|                               | 
|------------------------------ | 
|Part I - Financial Information | 
|Item 1.                        | 
|Item 2.                        | 
|Item 3.                        | 
|Part II - Other Information    | 
|Item 1.                        | 
|Item 2.                        | 
|Item 3.                        | 
|Item 4.                        | 
|Item 5.                        | 
|Item 6.                        | 
|SIGNATURES                     | 
|EXHIBIT INDEX                  | 
|Exhibit 31.1                   | 
|Exhibit 31.2                   | 
|Exhibit 32                     | 

---

# BANKGREENVILLE FINANCIAL
CORPORATION

# PART I  FINANCIAL
INFORMATION

# Item 1. Financial
Statements

# Consolidated Balance
Sheets

|                                                       | June 30, | December 31,
|------------------------------------------------------ | -------- | ------------
|
|
|Assets                                                 |          |             
|Cash and due from banks                                |          |             
|Federal funds sold                                     |          |             
|                                                       |          |             
|Total cash and cash equivalents                        |          |             
|Investment securities available for sale               |          |             
|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                           |          |             
|Accounts payable and accrued liabilities               |          |             
|                                                       |          |             
|Total liabilities                                      |          |             
|                                                       |          |             
|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 |          |             
|June 30, 2007 and December 31, 2006                    |          |             
|Accumulated other comprehensive (loss) income          |          |             
|Retained deficit                                       |          |             
|                                                       |          |             
|Total shareholders' equity                             |          |             
|                                                       |          |             
|Total liabilities and shareholders' equity             |          |             
|                                                       |          |             

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

2

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# BANKGREENVILLE
FINANCIAL CORPORATION

# Consolidated Statements
of Operations (Unaudited)

|                                                             | Three Months Ended | Six Months Ended |  
|------------------------------------------------------------ | ------------------ | ---------------- | -
|
|
|Interest income                                              |                    |                  |  
|Loans and fees                                               |                    |                  | $
|Investment securities                                        |                    |                  |  
|Federal funds sold                                           |                    |                  |  
|                                                             |                    |                  |  
|Total interest income                                        |                    |                  |  
|Interest expense on deposits                                 |                    |                  |  
|                                                             |                    |                  |  
|Net interest income                                          |                    |                  |  
|Provision for loan loss                                      |                    |                  |  
|                                                             |                    |                  |  
|Net interest income after provision for loan losses          |                    |                  |  
|                                                             |                    |                  |  
|Noninterest income                                           |                    |                  |  
|                                                             |                    |                  |  
|Noninterest 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 noninterest expense                                    |                    |                  |  
|                                                             |                    |                  |  
|Loss before income tax benefit                               |                    |                  |  
|                                                             |                    |                  |  
|Income tax provision (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.

3

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# BANKGREENVILLE
FINANCIAL CORPORATION

# Consolidated Statements
of Changes In Shareholders Equity and Comprehensive Loss (Unaudited)

|                                |  |  | Accumulated |           | 
|------------------------------- |  |  | ----------- | --------- | 
|
|
|
|Balance, December 31, 2005      |  |  |             | 1,180,000 | 
|                                |  |  |             |           | 
|Adjustment of 2005 accrued      |  | 
|offering expenses to actual     |  |  |             | -         | 
|Stock compensation expense      |  |  |             |           | 
|Comprehensive loss:             |  | 
|Net loss                        |  |  |             | -         | 
|Unrealized losses on investment |  | 
|securities available for sale,  |  | 
|no tax effect                   |  |  |             | -         | 
|                                |  |  |             |           | 
|Total comprehensive loss        |  |  |             | -         | 
|                                |  |  |             |           | 
|Balance, June 30, 2006          |  |  |             | 1,180,000 | 
|                                |  |  |             |           | 
|                                |  |  |             |           | 
|Balance, December 31, 2006      |  |  |             | 1,180,000 | 
|Stock compensation expense      |  |  |             |           | 
|Comprehensive loss:             |  | 
|                                |  |  |             |           | 
|Net loss                        |  |  |             | -         | 
|Unrealized losses on investment |  | 
|securities available for sale,  |  | 
|no tax effect                   |  |  |             | -         | 
|                                |  |  |             |           | 
|Total comprehensive loss        |  |  |             | -         | 
|                                |  |  |             |           | 
|Balance, June 30, 2007          |  |  |             | 1,180,000 | 
|                                |  |  |             |           | 

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

4

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# BANKGREENVILLE
FINANCIAL CORPORATION

# Consolidated Statements
of Cash Flows For the Six Months Ended (Unaudited)

|                                                        | June 30, 2007 | June 30, 2006
|------------------------------------------------------- | ------------- | -------------
|Operating activities                                    |               |              
|Net loss                                                |               |              
|Provision for loan losses                               |               |              
|Stock compensation expense                              |               |              
|Depreciation                                            |               |              
|Accretion of discounts on investment securities, net    |               |              
|Increase in interest receivable                         |               |              
|Decrease (increase) in other assets                     |               |              
|Increase in accrued interest payable on deposits        |               |              
|Decrease in accounts payable and accrued liabilities    |               |              
|                                                        |               |              
|Net cash used by operating activities                   |               |              
|Investing activities                                    |               |              
|Increase in loans, net                                  |               |              
|Purchase of investment securities available-for-sale    |               |              
|Sale of investment securities available-for-sale        |               |              
|Proceeds from principal paydowns on mortgage-backed     |               |              
|securities                                              |               |              
|Purchase of property and equipment                      |               |              
|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 certificates of deposit, net                |               |              
|                                                        |               |              
|Net cash provided by financing activities               |               |              
|                                                        |               |              
|Net increase (decrease) in cash and cash equivalents    |               |              
|Cash and cash equivalents, beginning of period          |               |              
|                                                        |               |              
|Cash and cash equivalents, end of period                |               |              
|                                                        |               |              
|Supplemental informationCash paid for:                  |               |              
|Interest                                                |               |              
|                                                        |               |              
|Schedule of non-cash transactions:                      |               |              
|Change in unrealized losses on investment securities,   |               |              
|no income tax                                           |               |              
|                                                        |               |              

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

5

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# BANKGREENVILLE
FINANCIAL CORPORATION

# Notes to Consolidated
Financial Statements

# NOTE 1  NATURE OF
BUSINESS AND BASIS OF PRESENTATION

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 Banking and Branching Efficiency Act of 1996, 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 to
the date the Bank opened for business on January 30, 2006, we engaged in organizational
and pre-opening activities necessary to obtain regulatory approvals and to prepare 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. Net proceeds from the offering totaled approximately $11.04 million, $11 million
of which was used to capitalize the Bank. The Bank primarily engages 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 unaudited consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America for interim
financial information and with the instructions to Form 10-QSB. Accordingly, they do not
include all information and footnotes required by accounting principles generally accepted
in the United States of America for complete financial statements. However, in the opinion
of management, all adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for the six months
ended June 30, 2007 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2007. For further information, refer to the audited
consolidated financial statements and footnotes thereto included in the Companys
10-KSB for the year ended December 31, 2006 as filed with the Securities and Exchange
Commission.

Until
the Bank opened for business on January 30, 2006, we were 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 we devoted substantially all of our efforts to establishing a new
business. The comparison of the six months ended June 30, 2007 and June 30, 2006 in
Managements Discussion and Analysis or Plan of Operation should be read
in light of the fact that the six months ended June 30, 2006 included approximately five
months of bank operations and for the period January 1, 2006 to January 30, 2006, the
Company was devoted to pre-opening activities.

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.

# NOTE 2  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

A
summary of the Companys significant accounting policies is included in our annual
report on Form 10-KSB filed with the Securities and Exchange Commission for the year ended
December 31, 2006. For further information, refer to the financial statements and
footnotes thereto included in our Annual Report on Form 10-KSB for 2006 as filed with the
Securities and Exchange Commission. Accounting standards that have been issued or proposed
by the Financial Accounting Standards Board (FASB) that do not require
adoption until a future date are not expected to have a material impact on the
consolidated financial statements upon adoption.

6

---

# NOTE 2  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (continued)

# 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 six months and quarters ended
June 30, 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.

# 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. The average fair value per share of warrants as of June 30,
2007 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% 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 during
the period ended June 30, 2007 and 5,000 options were forfeited. 105,900 options were
outstanding at June 30, 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
June 30, 2007, the Company had 105,900 options outstanding at $10.00 per share, of which
18,880 were vested. The options have a weighted average remaining contractual term of
approximately 8.75 years. Total unrecognized compensation cost related to non-vested
options granted as of June 30, 2007 was $214,892, 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 $15,015 and $29,043 for the quarter and six
months ended June 30, 2007, 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
June 30, 2007.

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% and expected lives of seven
and a half years.

The
weighted average fair value per share of options granted during the second quarter of 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% and expected
lives of seven and a half years.

# 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.

7

---

# NOTE 2  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (continued)

# 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 June 30, 2007, 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.

# Item 2.
Managements Discussion and Analysis or Plan of Operation.

The following discussion reviews our results of operations and assesses our financial
condition. You should read the following discussion and analysis in conjunction with the
accompanying consolidated financial statements. The commentary should be read in
conjunction with the discussion of forward-looking statements, the financial statements,
and the related notes and the other statistical information included in this report and in
our 2006 Form 10-KSB.

# DISCUSSION OF
FORWARD-LOOKING STATEMENTS

This
report contains forward-looking statements relating to, without limitation,
future economic performance, plans and objectives of management for future operations, and
projections of revenues and other financial items that are based on the beliefs of
management, as well as assumptions made by and information currently available to
management. The words may, will, anticipate,
should, would, believe, contemplate,
expect, estimate, continue, and intend, as
well as other similar words and expressions of the future, are intended to identify
forward-looking statements. Our actual results may differ materially from the results
discussed in the forward-looking statements, and our operating performance each quarter is
subject to various risks and uncertainties that are discussed in detail in our 2006 Form
10-KSB under the Risk Factors heading as filed with the Securities and
Exchange Commission and that include, without limitation, the following:

| |  | our short operating history;
| | - | ----------------------------

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

| |  | our ability to control costs, expenses and loan delinquency rates;
| | - | ------------------------------------------------------------------

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

| |  | general economic conditions, either
nationally or regionally and especially in our primary service area, becoming less favorable than expected resulting in,
among other things, a deterioration in credit quality;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

| |  | changes in deposit flows;
| | - | -------------------------

| |  | the lack of seasoning of our loan portfolio
| | - | -------------------------------------------

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

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

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

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

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

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

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

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

8

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We
undertake no obligation to publicly update or otherwise revise any forward-looking
statements, whether as a result of new information, future events, or otherwise.

# General

Our
bank opened for business on January 30, 2006. Accordingly, the first half of 2006 included
only five months of banking operations. The comparison of the six months ended June 30,
2007 and 2006 should be read in that context. From January 1 to January 30, 2006, we
engaged in pre-opening activities, including, without limitation, the pursuit of
regulatory approvals from the Federal Deposit Insurance Company (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 the majority 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.

This
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, 2006, as filed on our annual report on Form 10-KSB.

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. 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.

9

---

# 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

Three months ended June
30, 2007 and 2006

General

Our
net loss for the quarter ended June 30, 2007 was $177,673, or $0.15 per share compared to
a net loss of $242,459, or $0.21 per share, for the quarter ended June 30, 2006, an
improvement of $64,786, or 27%.

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
repricing these interest-earning assets and interest-bearing liabilities.

In
the second quarter of 2007, we earned $307,426 in net interest income as compared to
$180,199 for the same period in 2006, an increase of $127,227, or 71%. For the second
quarter of 2007, we generated $626,075 in interest income, mainly comprised of $369,234 in
loan interest income, $175,916 in interest earned on investment securities, and $80,925 in
interest earned on federal funds sold. We incurred $318,649 in interest expense on
deposits in the second quarter of 2007, an increase of $239,330 from the same period in
2006 primarily due to our deposit growth. Increases in net interest income were primarily
due to volume increases in interest earning assets.

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
loan loss provision was $45,621 and $56,555 for the quarters ended June 30, 2007 and 2006,
respectively.

Noninterest Income

We
earned $23,515 in noninterest income in the second quarter of 2007 as compared to $4,955
in the same period in 2006. The increase consisted primarily of mortgage loan origination
fees due to an increase in the volume of mortgage loan referrals. If interest rates
continue to rise, we would not anticipate this type of continued growth.

10

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Further, changes in state and federal laws regarding the oversight of mortgage brokers and lenders could
increase our costs of operations and affect our mortgage origination volume which could
negatively impact our noninterest income in the future.

Noninterest Expenses

The
following table itemizes our noninterest expenses for the second quarter of 2007 and 2006.

|                                                      | Three Months Ended | 
|----------------------------------------------------- | ------------------ | 
|
|
|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 noninterest expense                             |                    | 
|                                                      |                    | 

Compensation
and benefits comprise the most significant component of our noninterest expense. For the
second quarter of 2007, we incurred $246,275 in compensation and benefits as compared to
$212,655 for the same period in 2006. The increase primarily related to staff additions
associated with the banks growth. Data processing and related expense increased from
$29,852 for the second quarter of 2006 to $43,207 for the same period in 2007, mainly due
to an increase in our core processor charges because of the increased volume of new
accounts. Marketing and advertising expenses increased from $14,363 for the quarter ended
June 30, 2006 to $36,498 for the same period in 2007 due to the advertising and
promotional costs associated with the grand opening of our new headquarters building. We
incurred $7,997 in regulatory fees and FDIC insurance. In 2007, we began to incur FDIC
insurance costs due to our asset size and, in the second quarter incurred $4,622. The
remaining $3,375 represented state regulatory examination fees.

Six months ended June 30,
2007 and 2006

General

For
the first six months of 2007, we had a net loss of $310,568, or $0.26 per share, compared
to $488,013, or $0.41 per share, for the same period in 2006, an improvement of $177,445,
or 36%. 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 five
months of banking operations. In accordance with FASB Statement of Position (SOP) 98-5,
Reporting on the Costs of Start-Up Activities, we expensed these pre-opening
costs when incurred.

Net Interest Income

We
earned $592,778 in net interest income for the six months ended June 30, 2007, compared to
$297,760 for the same period in 2006, an increase of $295,018, or 99%. During this period
in 2007, we earned $1,134,919 in interest income, comprised of $675,622 in loan interest
income, $326,093 in interest earned on investment securities, and $133,204 in interest
earned on federal funds sold. We incurred $542,141 in interest expense on deposits in the
first half of 2007, an increase of $445,531 when compared to the interest expense of
$96,610 for the same period in 2006. Increases in interest income and expense are
primarily due to volume increases in related interest-earning assets and interest-bearing
deposits in the early stages of our bank.

11

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Provision for Loan Losses

Our
loan loss provision was $81,621 for the six months ended June 30, 2007 compared to $98,175
for the same period in 2006. Management continues to review and evaluate the adequacy of
the reserve for possible loan losses given the size, mix, and quality of the current loan
portfolio.

Noninterest Income

We
earned $37,242 in noninterest income for the first half of 2007 compared to noninterest
income of $5,068 for the same period in 2006. This increase consisted primarily of
mortgage loan origination fees due to an increase in the volume of mortgage loan
referrals.

Noninterest Expenses

The
following table itemizes our noninterest expense for the six months ended June 30, 2007
and 2006.

|                                                      | Six Months Ended | 
|----------------------------------------------------- | ---------------- | 
|
|
|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 noninterest expense                             |                  | 
|                                                      |                  | 

We
incurred $448,948 in compensation and benefits for the first half of 2007 as compared to
$375,503 for the same period in 2006. The increase primarily related to staff additions
associated with the banks growth, performance raises, and increases in bank-paid
employee health care costs. Occupancy and equipment expense of $117,304 in the first half
of 2007 decreased from $147,175 for the same period in 2006. Occupancy and equipment costs
were higher in 2006 due to site preparation costs associated with preparing the site for
our temporary modular facility. Data processing and related expense increased from $39,164
in the first half of 2006 to $87,476 in the first half of 2007, mainly due to an increase
in our core processor charges because of the increased volume of new accounts. Other
professional fees increased from $3,897 for the six months ended June 30, 2006 to $41,672
in the same period 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. In 2007, we began
incurring FDIC insurance costs and incurred $4,622 in such costs for the first half of
2007. The remaining $7,745 represented state regulator examination fees.

Income Tax Benefit

The Company had no currently taxable income for the quarter and six months ended June 30,
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
June 30, 2007, total assets were $40.7 million compared to $31.7 million at December 31,
2006, an increase of $9.0 million. The increase in assets resulted from the increase in
our funding source, deposits, as discussed below. Interest-earning assets comprised
approximately 91% and 90% of total assets at June 30, 2007 and December 31, 2006. Gross
loans totaled $20.8 million, investment securities were $12.8 million, and federal funds
sold amounted to $3.3 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 June 30, 2007. Deposits totaled $30.6 million at June 30, 2007 and $20.9
million at December 31, 2006. Shareholders equity was $9.5 million and $10.1 million
at June 30, 2007 and December 31, 2006, respectively.

12

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Loans

Since
loans typically provide higher interest yields than other interest-earning assets, our
goal is to ensure that the highest percentage of our earning assets is invested in our
loan portfolio. We had $20.8 million in gross loans outstanding at June 30, 2007, an
increase of $6.8 million from December 31, 2006.

The
following table summarizes the composition of our loan portfolio as of June 30, 2007.

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

Due to
the short time our portfolio has existed, the above loan mix 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.

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
$292,000 and $210,379 as of June 30, 2007 and December 31, 2006, respectively, and
represented 1.40% of outstanding loans at June 30, 2007. 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.

13

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We will charge recognized losses to
the allowance and add subsequent recoveries back to the allowance for loan losses. 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 confirm the grading of
samples of loans.

The
bank has not charged off any loans since commencing operations. There were no nonaccrual
or nonperforming loans at June 30, 2007, 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.

The following is a rollforward of our allowance for loan losses at June 30, 2007.

|                                           | 
|------------------------------------------ | 
|
|Balance, December 31, 2006                 | 
|Provision for loan losses                  | 
|Recoveries on loans previously charged off | 
|Charged-off loans                          | 
|                                           | 
|Balance, June 30, 2007                     | 
|                                           | 

Deposits

Deposits
increased $9.7 million, from $20.9 million at December 31, 2006 to $30.6 million at June
30, 2007. Growth of $9.2 million in certificates of deposit resulted from promotional
offerings in the local market.

The following table shows the
composition of deposits at June 30, 2007.

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

# Capital Resources

Total
shareholders equity decreased $544,592 from $10.1 million at December 31, 2006 to
$9.5 million at June 30, 2007. Common stock increased $29,043 due to stock compensation
expense accrued during the six months ended June 30, 2007. We incurred an unrealized loss
of $263,067 on investment securities available for sale during the period. Our loss of
$310,568 for the six months ended June 30, 2007 contributed to the net decrease in
shareholders equity during the six month period.

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. Prior to March 2006, all bank holding companies
with less than $150 million in total assets, including the company, qualified for this
exemption. On March 30, 2006, the Federal Reserve adopted a new rule expanding the
definition of a small bank holding company.

14

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The new definition includes bank
holding companies with less than $500 million in total assets. However, bank holding
companies will not qualify under the new definition if they (i) are engaged in significant
nonbanking activities either directly or indirectly through a subsidiary, (ii)
conduct significant off-balance sheet activities, including securitizations or managing or
administering assets for third parties, or (iii) have a material amount of debt or equity
securities (including trust preferred securities) outstanding that are registered with the
SEC. The Federal Reserves use of the phrase material amount of . . . equity
securities . . . registered with the SEC created uncertainty, as the SEC
registration requirements apply to classes of securities, not to a portion of the shares
in a class. According to the Federal Reserve Board, the revision of the criterion to
exclude any bank holding company that has outstanding a material amount of SEC-registered
debt or equity securities reflects the fact that SEC registrants typically exhibit a
degree of complexity of operations and access to multiple funding sources that warrants
excluding them from the new policy statement and subjecting them to the capital
guidelines. In the adopting release for the new rule, the Federal Reserve Board stated
that what constitutes a material amount of SEC-registered debt or equity for a
particular bank holding company depends on the size, activities and condition of the
relevant bank holding company. In lieu of using fixed measurable parameters of materiality
across all institutions, the rule provides the Federal Reserve with supervisory
flexibility in determining, on a case-by-case basis, the significance or materiality of
activities or securities outstanding such that a bank holding company should be excluded
from the policy statement and subject to the capital guidelines. Based on informal
discussions with staff members of the Federal Reserve, we believe the new Federal Reserve
rule is intended to exclude companies whose stock is listed on a stock exchange and is
actively traded. Since our stock is not registered under the Securities Exchange Act,
listed on an exchange, or actively traded, we believe the company qualifies as a small
bank holding company and is exempt from the capital requirements. Nevertheless, until the
Federal Reserve provides further guidance on the new rules, it will be unclear whether our
holding company will be subject to the exemption from the capital requirements for small
bank holding companies. Regardless, our bank is subject to 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%.

The
following table sets forth the holding company and the bank capital ratios at June 30,
2007. The bank was considered well capitalized.

|                          |  |  | Well capitalized | Adequately capitalized
|------------------------- |  |  | ---------------- | ----------------------
|
|
|
|Total risk-based capital  |  |  | $                | 10,032                
|Tier 1 risk-based capital |  |  |                  | 9,740                 
|Leverage capital          |  |  |                  | 9,740                 

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.

# 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.

15

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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
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 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 normal underwriting and
risk management processes. At June 30, 2007, the bank had issued commitments to extend
credit of $3,959,333 through various types of lending arrangements.

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
June 30, 2007, our liquid assets, consisting of cash and due from banks and federal funds
sold, amounted to $4.1 million, or approximately 10% of total assets. Our investment
securities available for sale amounted to $12.8 million or approximately 31% 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 June 30, 2007, $1.8
million of our investment securities was pledged to secure public entity deposits.

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 also maintain a federal funds, purchased line of credit with a
correspondent bank totaling $3.9 million. 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.

# 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
March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial
AssetsAn Amendment of FASB Statement No. 140. This Statement amends FASB No.
140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities, with respect to the accounting for separately recognized servicing
assets and servicing liabilities. SFAS No. 156 requires an entity to recognize a servicing
asset or servicing liability each time it undertakes an obligation to service a financial
asset by entering into a servicing contract; requires all separately recognized servicing
assets and servicing liabilities to be initially measured at fair value, if practicable;
permits an entity to choose its subsequent measurement methods for each class of
separately recognized servicing assets and servicing liabilities; at its initial adoption,
permits a one-time reclassification of available for sale securities to trading securities
by entities with recognized servicing rights, without calling into question the

16

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treatment of other available for sale
securities under Statement 115, provided that the available for sale securities are
identified in some manner as offsetting the entitys exposure to changes in fair
value of servicing assets or servicing liabilities that a servicer elects to subsequently
measure at fair value; and requires separate presentation of servicing assets and
servicing liabilities subsequently measured at fair value in the statement of financial
position and additional disclosures for all separately recognized servicing assets and
servicing liabilities. An entity should adopt SFAS No. 156 as of the beginning of its
first fiscal year that begins after September 15, 2006. The adoption of SFAS No. 156 had
no impact on the Companys financial position, results of operations and cash flows.

In
July 2006, the FASB issued FASB Interpretation No. 48 (FIN 48),
Accounting for Uncertainty in Income Taxes. FIN 48 clarifies the accounting
for uncertainty in income taxes recognized in an enterprises financial statements in
accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48
prescribes a recognition threshold and measurement attributable for the financial
statement recognition and measurement of a tax position taken or expected to be taken in a
tax return. FIN 48 also provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosures and transitions. FIN 48 is effective
for fiscal years beginning after December 15, 2006. The adoption of FIN 48 had no impact
on the Companys financial position, results of operations and cash flows.

In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS
157 defines fair value, establishes a framework for measuring fair value in generally
accepted accounting principles, and expands disclosures about fair value measurements.
SFAS 157 is effective for the Company on January 1, 2008 and is not expected to have a
significant impact on the Companys financial statements.

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. 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. Earlier adoption is permitted in 2007 if the Company also elects to apply
the provisions of SFAS 157, Fair Value Measurement. The Company is currently
analyzing the fair value option provided under SFAS 159.

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

# Item 3. Controls and
Procedures

As
of the end of the period covered by this report, we carried out an evaluation, under the
supervision and with the participation of our management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and
procedures as defined in Exchange Act Rule 15d-15(e). Based upon that evaluation, our
Chief Executive Officer and Chief Financial Officer have concluded that our current
disclosure controls and procedures are effective as of June 30, 2007. There have been no
significant changes in our internal controls over financial reporting during the fiscal
quarter ended June 30, 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.

17

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# PART II  OTHER
INFORMATION

# Item
1.   Legal Proceedings

There are no material pending legal
proceedings to which we are a party or of which any of our property is the subject.

# Item
2.  Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable

# Item 3.   Default
Upon Senior Securities

Not applicable

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

Our board of directors submitted one
matter to a vote of our security holders during the three months ended June 30, 2007 at
our annual meeting of shareholders held on April 26, 2007.

Proposal #1 
Election of Class II Directors

Our board of directors is divided
into three classes with each class to be as nearly equal in number as possible. The three
classes of directors have staggered terms, so that the terms of only approximately
one-third of the board members expire at each annual shareholders meeting. The current
Class I directors are Jeffrey L. Dezen, Roger H. Grower and Frank B. Halter, Jr. The
current Class II directors are R. Bruce Harman, Arthur L. Howson, Jr. and Paula S. King.
The current Class III directors are Jonathan T. McClure, David A. Merline, Jr., William H.
Pelham and Russel T. Williams. The Class II directors were up for re-election at the 2007
annual shareholders meeting. The shareholders reelected each of the then current Class II
directors for a three-year term expiring at the 2010 annual shareholders meeting. Mr.
Harman had 1,041,933 votes in favor of his re-election and 6,800 votes abstained. Mr.
Howson had 1,046,933 votes in favor of his re-election and 1,800 abstained. Ms. King had
1,041,933 votes in favor of her re-election and 6,800 abstained. The terms of the Class
III directors will expire at the 2008 annual shareholders meeting, and the terms of the
Class I directors will expire at the 2009 annual shareholders meeting.

# Item
5.   Other Information

Not applicable

# Item 6. Exhibits

31.1      Rule 15d-14(a) Certification of the Chief Executive Officer.

31.2      Rule 15d-14(a) Certification of the Chief Financial Officer.

32        Section 1350 Certifications.

18

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# BANKGREENVILLE
FINANCIAL CORPORATION

# SIGNATURES

In accordance with the requirements
of the Exchange Act, the registrant caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                      |  |                                                                       
|--------------------- |  | ----------------------------------------------------------------------
|                      |  | BANKGREENVILLE FINANCIAL CORPORATION
                    
(Registrant)
|Date:  August 8, 2007 |  | By:   /s/  Russel T. Williams                                         
|                      |  | Russel T. Williams                                                    
|                      |  | Chief Executive Officer
         (Principal Executive Officer)        

|                      |  |                                                               
|--------------------- |  | --------------------------------------------------------------
|                      |  |                                                               
|Date:  August 8, 2007 |  | By:   /s/  Paula S. King                                      
|                      |  | Paula S. King                                                 
|                      |  | Chief Financial Officer
         (Principal Financial Officer)

---

# BANKGREENVILLE
FINANCIAL CORPORATION

# EXHIBIT INDEX

ExhibitNumber
             Description

31.1            
Rule 15d-14(a) Certification of the Chief Executive Officer.

31.2            
Rule 15d-14(a) Certification of the Chief Financial Officer.

32              
Section 1350 Certifications.