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

**FORM            10-QSB**
| x                    | QUARTERLY REPORT UNDER SECTION 13 OR 15(D)                        OF THE SECURITIES EXCHANGE ACT OF 1934  |
|----------------------|-----------------------------------------------------------------------------------------------------------|
|                 |                                                                                                      |
|                 | **For the Quarterly Period ended****September****30,                        2007**                        |
|                 |                                                                                                      |
|                 | OR                                                                                                        |
|                 |                                                                                                      |
| [   ] | TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF                        THE SECURITIES EXCHANGE ACT OF 1934 |
|                 |                                                                                                      |
|                 | **For the Transition Period from ___________ to _____________**                                           |

Commission            File Number 333-127409

**BANKGREENVILLE            FINANCIAL CORPORATION**

(Exact            name of small business issuer as specified in its charter)
| South Carolina                                                        |     | 20-2645711                                                  |
|-----------------------------------------------------------------------|--------------------|-------------------------------------------------------------|
| (State or other jurisdiction                        of incorporation) |     | (I.R.S. Employer                        Identification No.) |

499            Woodruff Road

Greenville,            South Carolina 29607

(Address            of principal executive offices)

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

            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       

Indicate            by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of            the Exchange Act).

                          Yes         No  X  

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, outstandingasofNovember 8,2007.

                    Transitional Small Business Disclosure            Format (check one):               Yes          No              X  

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| **BANKGREENVILLE FINANCIAL CORPORATION                                                  INDEX**

** **

                        Part I-Financial                        Information

                         

                        Item                        1.     Financial                        Statements

                         

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

                         

                        Item                        3.     Controls and                        Procedures

                         

                        Part II-Other                        Information

                         

                        Item 1.     Legal                        Proceedings

                         

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

                         

                        Item 3.     Default Upon Senior                        Securities

                         

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

                         

                        Item 5.     Other                        Information

                         

                        Item 6.     Exhibits

                         

                        SIGNATURES

                         

EXHIBIT INDEX

                         

Exhibit 31.1      Rule 15d-14(a)                        Certification of thePrincipal                        Executive Officer

                             

Exhibit 31.2      Rule 15d-14(a)                        Certification of thePrincipal                        Financial Officer

                             

Exhibit 32                                 Section 1350 Certifications

                              |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**BANKGREENVILLE            FINANCIAL CORPORATION**

**Part I – financial information**

**Item            1. Financial Statements**

**Consolidated            Balance Sheets**
|                                                                                                                                                                                                                              | **     September****30,** | **        December 31,**                                                          |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------|-----------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                              | **   2007**                    | **                                      2006** |
|                                                                                                                                                                                                                              | **    (unaudited)**            | **                                   (audited)**              |
|                                                                                                                                                                                                                              |                                          |                                                                                                            |
|                                                    **Assets**                              |                                          |                                                                                                            |   |   |   |   |   |   |
|   Cash and due from banks                                                                                                                                                                                               |                                          |                                                                                                            | $ |  417,410 |   | $ |  552,972 |   |
|   Federal funds sold                                                                                                                                                                                                    |                                          |                                                                                                            |   | 1,284,000 |   |   | 4,991,000 |   |
|      Total cash and cash equivalents                                                                                                                                                                          |                                          |                                                                                                            |   | 1,701,410 |   |   | 5,543,972 |   |
|  Investment securities available for sale                                                                                                                                                                                    |                                          |                                                                                                            |   | 12,892,114 |   |   | 9,806,419 |   |
|  Loans, net                                                                                                                                                                                                                  |                                          |                                                                                                            |   | 30,960,003 |   |   | 13,814,879 |   |
|  Property and equipment, net                                                                                                                                                                                                 |                                          |                                                                                                            |   | 2,888,099 |   |   | 808,045 |       |
| Building construction in progress                                                                                                                                                                                                 |                                          |                                                                                                            |   | - |   |   | 1,327,968 |   |
| Accrued interest receivable                                                                                                                                                                                                       |                                          |                                                                                                            |   | 325,753 |   |   | 187,439 |   |
|  Other assets                                                                                                                                                                                                                |                                          |                                                                                                            |   | 109,541 |   |   | 167,987 |   |
|     Total assets                                                                                                                                                                                              |                                          |                                                                                                            |  **$** | **48,876,920 ** |   |  **$** | ** 31,656,709** |   |
|                                                                                                                                                                                                                              |                                          |                                                                                                            |   |   |   |   |   |   |
|                           **Liabilities and Shareholders’                        Equity** |                                          |                                                                                                            |   |   |   |   |   |   |
| **Liabilities**                                                                                                                                                                                                                   |                                          |                                                                                                            |   |   |   |   |   |   |
| Deposits                                                                                                                                                                                                                          |                                          |                                                                                                            |   |   |   |   |   |   |
|   Non-interest bearing                                                                                                                                                                                                  |                                          |                                                                                                            |  $ |  2,084,970 |   |  $ |  1,478,051 |   |
|   Interest bearing                                                                                                                                                                                                      |                                          |                                                                                                            |   | 36,603,951 |   |   | 19,453,950 |   |
|      Total deposits                                                                                                                                                                                      |                                          |                                                                                                            |   | 38,688,921 |   |   | 20,932,001 |   |
|   Accrued interest on deposits                                                                                                                                                                                               |                                          |                                                                                                            |   | 331,073 |   |   | 148,499 |   |
|   Accounts payable and accrued liabilities                                                                                                                                                                              |                                          |                                                                                                            |   | 324,003 |   |   | 509,377 |   |
|      Total liabilities                                                                                                                                                                                        |                                          |                                                                                                            |   | 39,343,997 |   |   | 21,589,877 |   |
|                                                                                                                                                                                                                              |                                          |                                                                                                            |   |   |   |   |   |   |
| **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                                                                                                                                   |                                          |                                                                                                            |   |   |   |   |   |   |
|    September30, 2007 and December 31,                        2006                                                                                                                                                  |                                          |                                                                                                            |   | 11,128,266 |   |   | 11,084,562 |   |
| Accumulated other comprehensive(loss)                        income                                                                                                                                                               |                                          |                                                                                                            |   | (113,383 | ) |   | 9,562 |   |
| Retained deficit                                                                                                                                                                                                                  |                                          |                                                                                                            |   | (1,481,960 | ) |   | (1,027,292 | ) |
|    Total shareholders' equity                                                                                                                                                                                      |                                          |                                                                                                            |   | 9,532,923 |   |   | 10,066,832 |   |
|       Total liabilities and shareholders'                        equity                                                                                                                             |                                          |                                                                                                            |  **$** | ** 48,876,920** |   |  **$** | ** 31,656,709** |   |

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

             

2

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**BANKGREENVILLE            FINANCIAL CORPORATION**

**Consolidated            Statements of Operations**

**(Unaudited)             **
|                                                                                                                  |          |          |          |           |
|------------------------------------------------------------------------------------------------------------------|----------|----------|----------|-----------|
||
||
|                                                                                                                  | **2007** | **2006** | **2007** | **2006**  |
| **Interest                    income**                                                                           |     |     |     |           |   |   |  |   |   |  |   |   |  |   |
|    Loans                    and fees                                                              |     |     | $        | 540,493   |   | $ | 179,072 |   | $ | 1,216,115 |   | $ | 299,312 |   |
|    Investment                    securities                                                       |     |     |     | 186,356   |   |   | 91,567 |   |   | 512,449 |   |   | 153,449 |   |
|    Federal funds                    sold                                                          |     |     |     | 49,380    |   |   | 69,665 |   |   | 182,584 |   |   | 281,913 |   |
|        Total                    interest income                               |     |     |     | 776,229   |   |   | 340,304 |   |   | 1,911,148 |   |   | 734,674 |   |
|                                                                                                                  |     |     |     |           |   |   |  |   |   |  |   |   |  |   |
| **Interest expense                    on deposits**                                                              |     |     |     | 403,941   |   |   | 109,579 |   |   | 946,082 |   |   | 206,189 |   |
|        Net                    interest income                                 |     |     |     | 372,288   |   |   | 230,725 |   |   | 965,066 |   |   | 528,485 |   |
|                                                                                                                  |     |     |     |           |   |   |  |   |   |  |   |   |  |   |
| **Provision for                    loan loss**                                                                   |     |     |     | 82,000    |   |   | 48,962 |   |   | 163,621 |   |   | 147,137 |   |
|                                                                                                                  |     |     |     |           |   |   |  |   |   |  |   |   |  |   |
|        Net                    interest income after provision for loan losses |     |     |     | 290,288   |   |   | 181,763 |   |   | 801,445 |   |   | 381,348 |   |
|                                                                                                                  |     |     |     |           |   |   |  |   |   |  |   |   |  |   |
| **Noninterest                    income**                                                                        |     |     |     |           |   |   |  |   |   |  |   |   |  |   |
| Gain on investment                    securities sales                                                           |     |     |     | 3,313     |   |   | -- |   |   | 3,313 |   |   | -- |   |
| Other                                                                                                            |     |     |     | 7,286     |   |   | 13,947 |   |   | 44,528 |   |   | 19,015 |   |
|                           **Total other income**                                   |     |     |     | 10,599    |   |   | 13,947 |   |   | 47,841 |   |   | 19,015 |   |
|                                                                                                                  |     |     |     |           |   |   |  |   |   |  |   |   |  |   |
| **Noninterest                    expense**                                                                       |     |     |     |           |   |   |  |   |   |  |   |   |  |   |
|   Compensation                    and employee benefits                                                |     |     |     | 265,441   |   |   | 185,277 |   |   | 714,389 |   |   | 560,780 |   |
|   Occupancy                    and equipment                                                           |     |     |     | 44,695    |   |   | 56,550 |   |   | 161,999 |   |   | 203,725 |   |
|   Data                    processing and related costs                                                 |     |     |     | 47,565    |   |   | 25,416 |   |   | 135,041 |   |   | 64,580 |   |
|   Marketing,                    advertising and shareholder communications                             |     |     |     | 12,055    |   |   | 11,178 |   |   | 59,467 |   |   | 41,943 |   |
|   Legal, audit                    and compliance                                                       |     |     |     | 13,927    |   |   | 20,445 |   |   | 42,398 |   |   | 47,030 |   |
|   Other                    professional fees                                                           |     |     |     | 7,521     |   |   | 910 |   |   | 49,193 |   |   | 2,657 |   |
|   Supplies,                    postage and telephone                                                   |     |     |     | 9,811     |   |   | 12,194 |   |   | 33,749 |   |   | 43,286 |   |
|   Insurance                                                                                            |     |     |     | 4,338     |   |   | 5,028 |   |   | 13,018 |   |   | 12,508 |   |
|   Credit                    related expenses                                                           |     |     |     | 8,460     |   |   | 6,281 |   |   | 21,764 |   |   | 19,658 |   |
|   Courier and                    armored carrier service                                               |     |     |     | 4,719     |   |   | 4,591 |   |   | 13,955 |   |   | 12,316 |   |
|   Regulatory                    fees and FDIC insurance                                                |     |     |     | 14,587    |   |   | 3,981 |   |   | 26,954 |   |   | 3,981 |   |
|   Other                                                                                                |     |     |     | 11,867    |   |   | 15,817 |   |   | 32,027 |   |   | 27,870 |   |
|                                                                                                                  |     |     |     |           |   |   |  |   |   |  |   |   |  |   |
|    Total                    noninterest expense                                                   |     |     |     | 444,986   |   |   | 347,668 |   |   | 1,303,954 |   |   | 1,040,334 |   |
|                                                                                                                  |     |     |     |           |   |   |  |   |   |  |   |   |  |   |
| Loss before income tax                    benefit                                                                |     |     |     | (144,099  | ) |   | (151,958 | ) |   | (454,668 | ) |   | (639,971 | ) |
| Income tax provision                    (benefit)                                                                |     |     |     | --        |   |   | -- |   |   | -- |   |   | -- |   |
|                                                                                                                  |     |     |     |           |   |   |  |   |   |  |   |   |  |   |
|                                                                                                                  |     |     |     |           |   |   |  |   |   |  |   |   |  |   |
| **Net                    loss**                                                                                  |     |     | $        | (144,099  | ) | $ | (151,958 | ) | $ | (454,668 | ) | $ | (639,971 | ) |
|                                                                                                                  |     |     |     |           |   |   |  |   |   |  |   |   |  |   |
| **Net loss per                    common share, basic and diluted**                                              |     |     | $        | (0.12     | ) | $ | (0.13 | ) | $ | (0.39 | ) | $ | (0.54 | ) |
|                                                                                                                  |     |     |     |           |   |   |  |   |   |  |   |   |  |   |
| **Weighted average                    common shares outstanding-basic and diluted**                              |     |     |     | 1,180,000 |   |   | 1,180,000 |   |   | 1,180,000 |   |   | 1,180,000 |   |

            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)             **
|                                                                  |            |            |                                          |             |            |
|------------------------------------------------------------------|------------|------------|------------------------------------------|-------------|------------|
||
||
||
|                                                                  | **Shares** | **Amount** | **income                        (loss)** | **deficit** | **equity** |
| **Balance, December                    31, 2005**                |       |       |                                     | 1,180,000   |       | $ | 11,035,013 |   | $ | -- |   | $ | (241,907 | ) | $ | 10,793,106 |   |
|                                                                  |       |       |                                     |             |       |   |  |   |   |  |   |   |  |   |   |  |   |
| Adjustment                    of 2005 accrued                    |       |       |                                     |             |       |   |  |   |   |  |   |   |  |   |   |  |   |
|    offering                    expenses to actual |       |       |                                     | --          |       |   | 274 |   |   | -- |   |   | -- |   |   | 274 |   |
|                                                                  |       |       |                                     |             |       |   |  |   |   |  |   |   |  |   |   |  |   |
| Stock                    compensation expense                    |       |       |                                     | --          |       |   | 35,129 |   |   | -- |   |   | -- |   |   | 35,129 |   |
|                                                                  |       |       |                                     |             |       |   |  |   |   |  |   |   |  |   |   |  |   |
| **Comprehensive                    loss:**                       |       |       |                                     |             |       |   |  |   |   |  |   |   |  |   |   |  |   |
|                                                                  |       |       |                                     |             |       |   |  |   |   |  |   |   |  |   |   |  |   |
| Net                    loss                                      |       |       |                                     | --          |       |   | -- |   |   | -- |   |   | (639,971 | ) |   | (639,971 | ) |
|                                                                  |       |       |                                          |             |            |  |  |  |  |  |  |  |  |  |  |  |  |
| Unrealized                    losses on investment               |       |       |                                     |             |       |   |  |   |   |  |   |   |  |   |   |  |   |
|   securities                    available for sale,    |       |       |                                     |             |       |   |  |   |   |  |   |   |  |   |   |  |   |
|   no tax                    effect                     |       |       |                                     | --          |       |   | -- |   |   | (1,021 | ) |   | -- |   |   | (1,021 | ) |
| Total                    comprehensive loss                      |       |       |                                     | --          |       |   | -- |   |   | -- |   |   | -- |   |   | (640,992 | ) |
|                                                                  |       |       |                                     |             |       |   |  |   |   |  |   |   |  |   |   |  |   |
| **Balance, September                    30, 2006**               |       |       |                                     | 1,180,000   |       | $ | 11,070,416 |   | $ | (1,021 | ) | $ | (881,878 | ) | $ | 10,187,517 |   |
|                                                                  |       |       |                                     |             |       |   |  |   |   |  |   |   |  |   |   |  |   |
| **Balance, December                    31, 2006**                |       |       |                                     | 1,180,000   |       | $ | 11,084,562 |   | $ | 9,562 |   | $ | (1,027,292 | ) | $ | 10,066,832 |   |
|                                                                  |       |       |                                     |             |       |   |  |   |   |  |   |   |  |   |   |  |   |
| Stock                    compensation expense                    |       |       |                                     |             |            |   | 43,704 |  |  |  |  |  |  |  |  | 43,704 |  |
|                                                                  |       |       |                                     |             |       |   |  |   |   |  |   |   |  |   |   |  |   |
| **Comprehensive                    loss:**                       |       |       |                                     |             |       |   |  |   |   |  |   |   |  |   |   |  |   |
|                                                                  |            |            |                                          |             |            |  |  |  |  |  |  |  |  |  |  |  |  |
| Net                    loss                                      |       |       |                                     | --          |       |   | -- |   |   | -- |   |   | (454,668 | ) |   | (454,668 | ) |
|                                                                  |       |       |                                     |             |       |   |  |   |   |  |   |   |  |   |   |  |   |
| Unrealized                    losses on investment               |       |       |                                     |             |       |   |  |   |   |  |   |   |  |   |   |  |   |
|   securities                    available for sale,    |       |       |                                     |             |       |   |  |   |   |  |   |   |  |   |   |  |   |
|   no tax                    effect                     |       |       |                                     | --          |       |   | -- |   |   | (122,945 | ) |   | -- |   |   | (122,945 | ) |
| Total                    comprehensive loss                      |       |       |                                     | --          |       |   | -- |   |   | -- |   |   | -- |   |   | (577,613 | ) |
|                                                                  |       |       |                                     |             |       |   |  |   |   |  |   |   |  |   |   |  |   |
| **Balance, September                    30, 2007**               |       |       |                                     | 1,180,000   |       | $ | 11,128,266 |   | $ | (113,383 | ) | $ | (1,481,960 | ) | $ | 9,532,923 |   |

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****Nine****Months            Ended**

**(Unaudited)**
|                                                                                                           | September                    30, | September                    30, |
|-----------------------------------------------------------------------------------------------------------|----------------------------------|----------------------------------|
||
| **Operating                    activities**                                                               |                             |                             |   |  |   |   |  |   |
|   Net loss                                                                                      |                             |                             |   | (454,668 | ) |   | (639,971 | ) |
|   Provision for loan                    losses                                                  |                             |                             |   | 163,621 |   |   | 147,137 |   |
|   Stock compensation                    expense                                                 |                             |                             |   | 43,704 |   |   | 35,129 |   |
|   Depreciation                                                                                  |                             |                             |   | 61,312 |   |   | 23,186 |   |
|   Accretion of discounts on                    investment securities, net                       |                             |                             |   | (4,394 | ) |   | (945 | ) |
|   Gain on sale of investment                    securities                                      |                             |                             |   | 3,313 |   |   | -- |   |
|   Increase in interest                    receivable                                            |                             |                             |   | (138,314 | ) |   | (142,630 | ) |
|   Decrease (increase) in other                    assets                                        |                             |                             |   | 58,446 |   |   | (93,036 | ) |
|   Increase in accrued interest                    payable on deposits                           |                             |                             |   | 182,574 |   |   | -- |   |
|   (Decrease) increase in                    accounts payable and accrued liabilities            |                             |                             |   | (185,374 | ) |   | 178,572 |   |
|         Net                    cash used by operating activities  |                             |                             |   | (269,780 | ) |   | (492,558 | ) |
|                                                                                                           |                             |                             |   |  |   |   |  |   |
| **Investing                    activities**                                                               |                             |                             |   |  |   |   |  |   |
|    Increase in loans,                    net                                               |                             |                             |   | (17,308,745 | ) |   | (9,809,162 | ) |
|    Purchase of investment                    securities available-for-sale                 |                             |                             |   | (5,752,972 | ) |   | (7,339,891 | ) |
|    Sale of investment                    securities available-for-sale                     |                             |                             |   | 2,176,305 |   |   | -- |   |
|    Proceeds from principal                    paydowns on mortgage-backed                  |                             |                             |   |  |   |   |  |   |
|       Securities                                                            |                             |                             |   | 369,108 |   |   | -- |   |
|                       Purchase of property and equipment                                        |                             |                             |   | (813,398 | ) |   | 26,497 |   |
|                       Building construction in progress                                         |                             |                             |   | -- |   |   | (1,327,968 | ) |
|         Net                    cash used for investing activities |                             |                             |   | (21,329,702 | ) |   | (18,450,524 | ) |
|                                                                                                           |                             |                             |   |  |   |   |  |   |
| **Financing                    activities**                                                               |                             |                             |   |  |   |   |  |   |
|    Net increase in common                    stock due to adjustment in stock              |                             |                             |   |  |   |   |  |   |
|       offering                    costs                                     |                             |                             |   | -- |   |   | 274 |   |
|    Increase in deposits,                    net                                            |                             |                             |   | 1,590,962 |   |   | 8,092,694 |   |
|    Increase in                    certificates of deposit, net                             |                             |                             |   | 16,165,958 |   |   | 4,119,266 |   |
|        Net                    cash provided by financing activities    |                             |                             |   | 17,756,920 |   |   | 12,212,234 |   |
|        Net                    decrease in cash and cash equivalents    |                             |                             |   | (3,842,562 | ) |   | (6,730,848 | ) |
| **Cash                    and cash equivalents, beginning of period**                                     |                             |                             |   | 5,543,972 |   |   | 10,729,271 |   |
| **Cash                    and cash equivalents, end of period**                                           |                             |                             | **$** | **1,701,410** |   | **$** | **3,998,423** |   |
|                                                                                                           |                             |                             |   |  |   |   |  |   |
| **Supplemental                    information**                                                           |                             |                             |   |  |   |   |  |   |
| **Cash                    paid for:**                                                                     |                             |                             |   |  |   |   |  |   |
|   Interest                                                                                      |                             |                             | $ | 763,508 |   |   | 138,557 |   |
| **Schedule of non-cash                    transactions:**                                                 |                             |                             |   |  |   |   |  |   |
|   Change in unrealized gains                    (losses) on investment securities,              |                             |                             |   |  |   |   |  |   |
|    no income                    tax                                                        |                             |                             | $ | (122,945 | ) | $ | (1,021 | ) |
|                                                                                                           |                                  |                                  |

 

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

             

5

----

             

**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 theSouth 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 theninemonths endedSeptember30, 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 theninemonths endedSeptember30, 2007 andSeptember30, 2006 in “Management’s            Discussion and Analysis or Plan of Operation” should be read in light of the fact            that theninemonths endedSeptember30, 2006 included approximatelyeightmonths 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 

****

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**NOTE 2 – SUMMARY            OF SIGNIFICANT ACCOUNTING POLICIES (continued)**

**Loss            per Share**

                 Basic loss per            share represents net loss 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            theninemonths and quarters endedSeptember30, 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            warrantsissuedamounted to approximately $1.83.             Thefair 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 nine months ended September 30, 2007 and 5,000 options were forfeited.            105,900 options were outstanding at September 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 September 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 8.50 years. Total            unrecognized compensation cost related to non-vested options granted as of September            30, 2007 was $200,231, 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$14,661 and$43,704 for the quarter and nine months ended September            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 atSeptember30,            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 theBlack-Scholesoption 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

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**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).  AtSeptember30, 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 andthatinclude,            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,thequarter ended September 30, 2006includedapproximately eightmonths of banking operations. The            comparison of theninemonths endedSeptember30, 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

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**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******September******30, 2007 and            2006***

*General*

             

*    *Our net loss for the quarter endedSeptember30,            2007was $144,099, or $0.12 per share            comparedto a net loss of $151,958, or            $0.13per share, for the quarter endedSeptember30,            2006.

*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 re-pricing these interest-earning assets and interest-bearing            liabilities.

             

                Duringthe third quarter of 2007, we earned            $372,288 in net interest income compared to $230,725 for the same period in 2006foran increase of $141,563, or 61%.Interest income and fees on loans was            $540,493 compared to $179,072 in 2006 for a 202% increase. Interest on investment            securities was $186,356 compared to $91,567 in 2006, for a 104% increase. Both            increases were attributed to volume increases in related loans and investments.            Interest on federal funds sold decreased $20,285 from 2006, due to reallocation of            funding sources to higher interest earning loans and            investments.

             

                Interest expense on deposits was $403,941            during the third quarter 2007 compared to $109,579 for the same period in 2006. This            269% increase was due to deposit growth as well as growth in higher-priced certificates            of deposit.

*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 provisionwas $82,000and $48,962 forthe quarters endedSeptember30, 2007 and 2006, respectively.The increase of 67% was due to loan            growth of $10.5 million for the quarter ended September 30, 2007 compared to $3.3            million for the same period in 2006.

*Noninterest            Expenses*

            The following table itemizes our noninterest expenses for thethirdquarterof2007 and 2006.

             

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|                                                                          | Three                    Months Ended |
|--------------------------------------------------------------------------|---------------------------------------|
||
||
| Compensation and                    employee benefits                    |                                  |   | $ | 265,441 |   | $ | 185,277 |   |
| Occupancy and                    equipment                               |                                  |   |   | 44,695 |   |   | 56,550 |   |
| Data processing and                    related costs                     |                                  |   |   | 47,565 |   |   | 25,416 |   |
| Marketing, advertising                    and shareholder communications |                                  |   |   | 12,055 |   |   | 11,178 |   |
| Legal, audit and                    compliance                           |                                  |   |   | 13,927 |   |   | 20,445 |   |
| Other professional                    fees                               |                                  |   |   | 7,521 |   |   | 910 |   |
| Supplies, postage and                    telephone                       |                                  |   |   | 9,811 |   |   | 12,194 |   |
| Insurance                                                                |                                  |   |   | 4,338 |   |   | 5,028 |   |
| Credit related                    expenses                               |                                  |   |   | 8,460 |   |   | 6,281 |   |
| Courier and armored                    carrier service                   |                                  |   |   | 4,719 |   |   | 4,591 |   |
| Regulatory fees and FDIC                    insurance                    |                                  |   |   | 14,587 |   |   | 3,981 |   |
| Other                                                                    |                                  |   |   | 11,867 |   |   | 15,817 |   |
|   Total                    noninterest expense                 |                                  |   | $ | 444,986 |   | $ | 347,668 |   |

                                 Compensation and benefits comprise the most significant component of our noninterest            expense. For thethirdquarter of 2007, weincurred $265,441 incompensation and benefitscompared to$185,277for the same period in 2006. The increase            primarily related to staff additions associated with the bank’s growth.Data processing andrelated expense increased from$25,416for thethirdquarter of 2006to $47,565 for thesame period in 2007, mainly due to an            increase in our core processor charges because of the increased volume of newaccounts.We incurred $14,587 in regulatory fees            and FDIC insurancecompared to            $3,981 in 2006. In 2007, we began to incur FDIC insurance costs due to our assetgrowth.

***Nine******months            ended******September******30, 2007 and            2006***

*General*

             

*         *For the firstninemonthsof 2007, we had a net lossof $454,668, or $0.39 per share, compared to $639,971, or            $0.54per share, for the same period in            2006,an improvement of $185,303, or29%.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 approximatelyeightmonths 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*

            Weearned $965,066            in net interest income for the nine months ended September 30, 2007, compared to            $528,485 for the same period in 2006, an increase of $436,581, or 83%.Interest income and fees on loans            was$1,216,115 compared to            $299,312in 2006 fora 306% increase. Interest on            investmentsecurities was $512,449            compared to $153,449 in 2006, for a 234% increase.Both increases were attributed to volume            increases in related loans and investments. Interest on federal funds decreased$99,329from 2006, due to reallocation of funding            sources to higher earning loans and investments.

            Interest expense on deposits was $946,082 during the nine moth period in 2007 compared            to $206,189 forthe            same period in 2006. This359%            increase wasdue to deposit growth            as well as growth in higher-priced certificates of deposit.

*Provision            for Loan Losses*

             

*          *Our loan loss provisionwas $163,621 fortheninemonths endedSeptember30, 2007 compared to $147,137for 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 $47,841 innoninterest income for            thenine months ended September            30,2007 compared to noninterest            income of $19,015for 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 in the first two quarters of the            year.

             

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Ifmortgageinterest rates rise, we would not anticipate this type of            continued growth. 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 expense for theninemonths endedSeptember30, 2007 and            2006.

             
|                                                                          | Nine Months                    Ended |
|--------------------------------------------------------------------------|--------------------------------------|
||
||
| Compensation and                    employee benefits                    |                                 |   | $ | 714,389 |   | $ | 560,780 |   |
| Occupancy and                    equipment                               |                                 |   |   | 161,999 |   |   | 203,725 |   |
| Data processing and                    related costs                     |                                 |   |   | 135,041 |   |   | 64,580 |   |
| Marketing, advertising                    and shareholder communications |                                 |   |   | 59,467 |   |   | 41,943 |   |
| Legal, audit and                    compliance                           |                                 |   |   | 42,398 |   |   | 47,030 |   |
| Other professional                    fees                               |                                 |   |   | 49,193 |   |   | 2,657 |   |
| Supplies, postage and                    telephone                       |                                 |   |   | 33,749 |   |   | 43,286 |   |
| Insurance                                                                |                                 |   |   | 13,018 |   |   | 12,508 |   |
| Credit related                    expenses                               |                                 |   |   | 21,764 |   |   | 19,658 |   |
| Courier and armored                    carrier service                   |                                 |   |   | 13,955 |   |   | 12,316 |   |
| Regulatory fees and FDIC                    insurance                    |                                 |   |   | 26,954 |   |   | 3,981 |   |
| Other                                                                    |                                 |   |   | 32,027 |   |   | 27,870 |   |
|   Total                    noninterest expense                 |                                 |   | $ | 1,303,954 |   | $ | 1,040,334 |   |

We            incurred$714,389 in compensation and            benefits for the nine months ended September 30, 2007 compared to $560,780 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 $161,999 in the nine months ended            September 2007 decreased from $203,725 for the same period in 2006. Occupancy and            equipment costs were higher in 2006 due to site preparation costs associated with our            temporary modular facility site. Data processing and related expense            increased from $64,580 in the nine months ended September 30, 2006 to $135,041 in the            nine months endedSeptember 30,            2007, mainly due to an increase in our core processor charges because of the increased            volume of new accounts. Other professional fees increased from $2,657 for the nine            months ended September 30, 2006 to $49,193 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.Regulatory            fees and FDIC insurance increased from $3,981 in the nine months ended September 30,            2006 to $26,954 for the same period in 2007 as we began incurring FDIC insurance            expense in 2007.

*Income            Tax Benefit*

                  The Company had no currently taxable income for the            quarter andninemonths endedSeptember            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 September 30, 2007, total assets were            $48.9 million compared to $31.7 million at December 31, 2006, foran increase of $17.2million. The increase in assets resulted            from the increase in our funding source, deposits, as discussed below. Interest-earning            assets comprised approximately92%            and90% of total assets atSeptember30, 2007 and December 31, 2006. Gross            loanstotaled $31.3 million            anincrease of $17.3 or 123% from            $14.0 million at December 31, 2006. Investment securitieswere $12.9 million. Investment in overnight federal funds            decreased $3.7 million from $5.0 million as of December 31, 2006 to $1.3 million as of            September 30, 2007. During 2007, we have moved these funds into higher yielding            securities available for sale and loans.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,atSeptember30, 2007. Depositstotaled $38.7 millionatSeptember30, 2007, a $17.8 million or 85% increase            from$20.9 million at December 31,            2006. Shareholders’ equitywas $9.5 million and$10.1 million atSeptember30, 2007 and December 31, 2006,            respectively.

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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            $31.3 million in gross loans outstanding at September 30, 2007, an increase of $17.3            million from December 31, 2006.

            The following table summarizes the composition of our loan portfolio as ofSeptember30,            2007.
|                                                        |       | **Percentage of** |
|-------------------------------------------------------------|------------|-------------------|
|                                                        | **Amount** | **Total**         |
| Real Estate:                                                |       |              |   |   |   |   |   |   |
|   Construction and development and land           |       |              | $ | 11,897,243 |   |   | 38.0 | % |
|   Commercial                                      |       |              |   | 5,510,246 |   |   | 17.6 |   |
|   Residential mortgages                           |       |              |   | 3,489,242 |   |   | 11.1 |   |
|   Home equity lines                               |       |              |   | 3,103,546 |   |   | 9.9 |   |
|        Total real estate |       |              |   | 24,000,277 |   |   | 76.6 | % |
|                                                        |       |              |   |   |
|   Commercial                                      |       |              |   | 6,872,054 |   |   | 21.9 | % |
|   Consumer – other than real estate secured |       |              |   | 465,475 |   |   | 1.5 |   |
|   Deferred origination fees, net                  |       |              |   | (7,081 | ) |   | - |   |
|       Gross loans             |       |              |   | 31,330,725 |   |   | 100.0 | % |
| Less allowance for loan losses                              |       |              |   | (370,722 | ) |   |
|     Total loans, net                    |       |              | $ | 30,960,003 |   |   |

            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.As shown above, the            largest category of loans was real estate construction and development            loans.

*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$370,721            and$210,379 as ofSeptember30, 2007 and December 31, 2006,            respectively, andrepresented            1.18% of outstandingloans            atSeptember30, 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. 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.

             

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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.

             

            Charge-offs totaled $3,279 as ofSeptember 30, 2007.            Therewere no nonaccrual or            nonperforming loansatSeptember30, 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 atSeptember30, 2007.

             
|                                                               |        |
|---------------------------------------------------------------|--------|
| Balance,                    December 31, 2006                 |   |   | $ | 210,379 |   |
| Provision                    for loan losses                  |   |   |   | 163,621 |   |
| Recoveries                    on loans previously charged off |   |   |   | -- |   |
| Charged-off                    loans                          |   |   |   | (3,278 | ) |
| Balance,                    September 30, 2007                |   |   | $ | 370,722 |   |

*Deposits*

            Deposits increased $17.8 million, from $20.9 million at December 31, 2006 to $38.7            million at September30,            2007.

            The following table shows the composition of deposits atSeptember30,            2007.
|                                 |   | **Amount**       |  | **Percent                        of total** |   |
|--------------------------------------|--------|------------------|--|---------------------------------------------|--------|
| Non-interest bearing demand deposits | $      |  2,084,970  |  | 5.2                                         | %      |
| Interest bearing checking            |   | 1,589,020        |  | 4.1                                         |   |
| Money market and savings             |   | 9,199,657        |  | 23.8                                        |   |
| Time deposits less than $100,000     |   | 6,978,306        |  | 18.3                                        |   |
| Time deposits $100,000 and over      |   | 18,836,968       |  | 48.6                                        |        |
|      Total  | $      |  38,688,921 |  | 100.00                                      | %      |

**Capital            Resources**

             

**         **            Total shareholders’ equitydecreased $533,909from $10.1 million at December 31, 2006            to $9.5 million at September 30, 2007. Common stock increased $43,704 due to            stockcompensation expense accrued            during theninemonths endedSeptember30, 2007. We incurred an unrealized            lossof $122,945 oninvestment securities available for sale            during the period. Our loss of$454,668 for theninemonths endedSeptember30, 2007 contributed to the net decrease            in shareholders’ equity during theninemonth period.

             

                     At the bank level, we are subject to various regulatory capital requirements            administered by the federal banking agencies. The Federal Reserve also imposes            regulatory capital requirements on bank holing companies. However, the Federal Reserve            guidelines contain an exemption from the capital requirements for “small bank            holding companies,” which in 2006 were amended to cover most bank holding            companies with less than $500 million in total assetsthat do nothave a material amount of debt or            equitysecurities outstanding            registered with the SEC. Although our class of common stock is registered under Section            12 ofthe Securities Exchange            Act,we believe that because our            stock is notlisted on anyexchange, orotherwiseactively traded,the Federal Reserve Board will interpret            its new guidelines to mean that we qualifyas a small bank holding company.            Nevertheless, our bank remains subject to these capital requirements. Failure to            meetminimum capital            requirementscan initiate certain            mandatory and possibly additional discretionary actions by regulators that, if            undertaken, could have a material effect on the bank’s financial            statements.Under capital adequacy            guidelines,and the regulatory            framework for prompt corrective action, the bank must meet specific capital guidelines            that involve quantitative measures of the bank’s assets, liabilities, and certain            off-balance-sheet items as calculated under regulatory accounting practices. The            bank’s capital amounts and classifications are also subject to qualitative            judgments by the regulators about components, risk weightings, and other            factors.

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

The            bank is also required to maintain capital at a minimum level based on quarterly average            assets, which is known as the leverage ratio.

                      Only the strongest banks are allowed to maintain capital at the minimum requirement of            3%. All others are subject to maintaining ratios 1% to 2% above the minimum. The bank            exceeded its minimum regulatory capital ratios as of September 30, 2007, as well as the            ratios to be considered “well capitalized.” The following table sets for            the holding company and the bank capital ratios at September 30, 2007. The bank was            considered “well capitalized”.

             

             
|                                              |        |        | Well                    capitalized | Adequately                    capitalized |
|----------------------------------------------|--------|--------|-------------------------------------|-------------------------------------------|
||
||
||
| Total                    risk-based capital  |   |   | $                                   | 9,982                                     |   |   | 26.7 | % | $ | 3,740 |   |   | 10.0 | % | $ | 2,992 |   |   | 8.0 | % |
| Tier 1 risk-based                    capital |   |   |                                | 9,611                                     |   |   | 25.7 |   |   | 2,244 |   |   | 6.0 |   |   | 1,496 |   |   | 4.0 |   |
| Leverage                    capital          |   |   |                                | 9,611                                     |   |   | 21.2 |   |   | 2,263 |   |   | 5.0 |   |   | 1,811 |   |   | 4.0 |   |

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. 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. AtSeptember30, 2007, the bank had            issued commitments to extend creditof $5,295,522 throughvarious 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.

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                       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.

            AtSeptember30, 2007, our liquid assets, consisting            of cash and due from banks and federal funds sold, amounted to$1.7million, or approximately3.48%of total assets. Our investment            securities available for sale amountedto $12.9million or approximately26%of total assets. Unpledged investment            securities traditionally provide a secondary source of liquidity since they can be            converted into cash in a timely manner. AtSeptember30, 2007, $1.7 millionof 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 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.

             

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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            September30, 2007. There have            been no significant changes in our internal controls over financial reporting during            the fiscal quarter endedSeptember30, 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.

             

             

             

             

             

             

             

             

             

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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**

Not            applicable

             

**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.

 

 

 

 

 

 

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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) |
|--------|--------|--------|----------------------------------------------------------------------------|
|   | Dated:   November13                        , 2007 |   | By: /s/                        Russel T. Williams     

                                Russel T. Williams                                Chief Executive Officer                                (Principal Executive                        Officer) |
|--------|------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Dated:   November13                        , 2007 |   | By: /s/ Paula                        S.                        King                                          Paula S. King                                Chief Financial Officer                                (Principal Financial                        Officer) |
|--------|------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

             

 

 

 

 

 

 

 

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**BANKGREENVILLE            FINANCIAL CORPORATION**

**EXHIBIT            INDEX**

Exhibit

            Number             Description

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

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

32                                    Section 1350 Certifications.