LOGO







2009

ANNUAL REPORT



---

Exhibit 13

Letter to Shareholders

Greer Bancshares
Incorporated

April 8, 2010

Dear Shareholders and Friends:

To say that 2009 was a challenging year for the banking industry,
as well our global economy, would be an enormous understatement. The banking industry experienced 140 bank failures in 2009, much deterioration of asset quality and depressed earnings. We have experienced, and continue to work through what many say
is the most difficult economic environment our country has seen since the Great Depression of the 1930s. Not surprisingly, our bank has felt its share of pain arising from the effects of this recession. However, while we may not be completely
past the challenges, we begin 2010 as a well-capitalized institution, with increased loan loss reserve levels, reduced overhead expenses and a track record of proven success in executing core deposit growth strategies. In spite of all of the
challenges faced in 2009, Greer State Bank moved into the number one deposit market share position in our market.

As this message is being
written, a revised strategic plan is being finalized by our senior management group and board of directors. We have very positive plans beyond this recession. We are confident that some of the challenges we face today will subside, so we look
forward to and plan for a prosperous future. We have an experienced and knowledgeable management group and board of directors who are committed to managing our bank through the difficult times and restoring the banks earnings to historical
levels.

Based upon our philosophy of recognizing asset quality issues as they appear, we made necessary provisions for loan losses in 2009,
adding $5.2 million to the allowance during the year. In addition to these additional provisions for loan losses, earnings in 2009 were also affected by the following, and the result was an operating loss for the year:



| |  |  | FDIC insurance premiums increased by $614,351;
| | - |  | ----------------------------------------------



| |  |  | Write-downs on an impaired investment security and on restricted stock totaled $464,719;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | Expenses and losses relating to other real estate owned (foreclosed properties) totaled $823,974; and
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | Gains on the sale of investment securities totaled $1,093,840.
| | - |  | --------------------------------------------------------------

As we previously reported, Greer Bancshares Incorporated had a net loss of $511,389 before TARP dividends and related expenses. The net loss applicable to common shareholders was $1,091,952, after TARP
dividends and related expenses. We ask that you please review our financial reports, including the notes to consolidated financial statements and managements discussion of the financial results for additional information. We are not pleased
with the earnings performance of the Company in 2009, and despite the negative effects of the economy on the bank and our customers, we realize that we must do all we can to weather the storm and position ourselves appropriately for the new recovery
phase of this economic cycle.

Our emphasis on core deposit acquisition in 2009 resulted in an increase of $32.3 million in core deposits and
allowed us to reduce brokered deposit balances by $19.3 million. We continue to focus on increasing core deposits and anticipate continued reductions in brokered deposit balances and borrowings in 2010. Net interest income improved slightly in 2009,
compared to 2008, as liabilities repriced lower during the year. Net interest income in the quarter ended 12/31/09 increased by $400,823 compared to the fourth quarter of 2008. We anticipate and manage for continued improvement in the net interest
margin through 2010. Noninterest expenses increased slightly in 2009 compared to 2008 due to the increase in FDIC deposit insurance assessments noted above, as well as increased expenses relating to foreclosed properties. Outside of these specific
expense categories, however, noninterest expenses declined by approximately $1,207,000 as a result of managements focus on overhead expenses control, beginning in early 2009.



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We are prepared to continue to aggressively manage our problem loans and to continue to record reserves for
loan losses appropriately as we work through the lingering effects of the recession. As economic conditions improve, we anticipate similar improvement in the overall credit quality within our loan portfolio, and funds that would otherwise be
directed toward the loan loss provision will contribute to more favorable future earnings performance.

We thank you, our shareholders, for
your patience and support of our Company during this time. We are extremely eager to deliver more positive performance results to you in the future; yet, we recognize that the forces and effects of global, national and local economic movements are
not fully within our control. We know that 2010 will continue to involve challenge, but we are optimistic that the hard work, commitment and resilience of our team will translate into results that you will be pleased with over time. This is a
special company, and Greer is a special market. Outstanding people work here, each of whom enjoys serving others, and making lives better. We feel for those customers who are suffering, and we celebrate the successes of the many who are continuing
to perform at high levels. For these reasons, what we do on an everyday basis will continue to impact our community in positive ways.

As
always, we welcome your comments for improving your Company and our communications with you.



|                      |  |                                    
|--------------------- |  | -----------------------------------
|Walter M. Burch       |  | Kenneth M. Harper                  
|Chairman of the Board |  | President & Chief Executive Officer



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|                                                 |  |                                                                               
|------------------------------------------------ |  | ------------------------------------------------------------------------------
|Board of Directors                               |  |                                                                               
|                                                 | 
|Walter M. Burch                                  |  | Chairman/The Greer Citizen/Retired                                            
|Mark S. Ashmore                                  |  | Ashmore Bros. Inc./Century Concrete, President                                
|Steven M. Bateman                                |  | Steven M. Bateman, CPA/Owner                                                  
|Raj K. S. Dhillon                                |  | Motel Owner and Land Developer                                                
|Gary M. Griffin                                  |  | Mutual Home Stores, Vice President                                            
|Kenneth M. Harper                                |  | Greer Bancshares Incorporated and Greer State Bank, President & CEO           
|R. Dennis Hennett                                |  | Greer Bancshares Incorporated and Greer State Bank/Retired Executive          
|Harold K. James                                  |  | James Agency, Inc., Real Estate and Insurance, Vice President/Broker in Charge
|Paul D. Lister                                   |  | Lister, Jeter and Lloyd, CPAs, LLC                                            
|David M. Rogers                                  |  | Chairman/Joshuas Way, Inc., President                                        
|Theron C. Smith, III                             |  | Eye Associates of Carolina, PA, President                                     
|C. Don Wall                                      |  | Professional Pharmacy of Greer, Inc., President                               
|                                                
|Greer Bancshares Incorporated Executive Officers
|                                                 | 
|Kenneth M. Harper                                |  | President & Chief Executive Officer                                           
|J. Richard Medlock, Jr.                          |  | Chief Financial Officer                                                       
|                                                
|Greer State Bank Officers                       
|                                                 | 
|Kenneth M. Harper                                |  | President & Chief Executive Officer                                           
|Victor K. Grout                                  |  | Executive Vice President & Commercial Lending Banking Manager                 
|J. Richard Medlock, Jr.                          |  | Executive Vice President & Chief Financial Officer                            
|John Gifford                                     |  | Senior Vice President/Greer Financial Services                                
|William S. Harrill, Jr.                          |  | Senior Vice President/Mortgage Lending                                        
|Lola C. Hart                                     |  | Senior Vice President/Controller                                              
|J. William Hughes                                |  | Senior Vice President/Consumer Lending                                        
|Greg Sisk                                        |  | Senior Vice President/Community Executive - Taylors/Retail Banking Manager    
|Chris M. Talley                                  |  | Senior Vice President & Chief Operations Officer                              
|E. Pierce Williams, Jr.                          |  | Senior Vice President/Commercial Banking                                      
|Christy H. Blackwell                             |  | Vice President/Branch Manager of Taylors Office                               
|Jim Boyd                                         |  | Vice President/Commercial Lending                                             
|Brad Cantrell                                    |  | Vice President/Chief Credit Administrator                                     
|Rick Danner                                      |  | Vice President/Human Resources & Security                                     
|Judy A. Edwards                                  |  | Vice President/Risk Management Administrator & Compliance                     
|David Faucette                                   |  | Vice President/Internal Auditor                                               
|Sue H. Gaines                                    |  | Vice President/Mortgage Lending Officer                                       
|Robert M. Lee                                    |  | Vice President/Information Technology                                         
|Tim Lincolnhol                                   |  | Vice President/Community Banking                                              
|Kelly C. Long                                    |  | Vice President/Branch Manager of Buncombe Road Office                         
|Sandra D. Mason                                  |  | Vice President/Operations Officer                                             
|Ann S. Miller                                    |  | Vice President/Manager EDP & Item Processing                                  
|Scott Presley                                    |  | Vice President/Construction Lending                                           
|Marvin E. Robinson, Jr.                          |  | Vice President/Commercial Lending                                             
|Elizabeth C. Sayce                               |  | Vice President/Manager, Loan Administration                                   
|Eric Steele                                      |  | Vice President/Greer Financial Services                                       
|Carole Stroud                                    |  | Vice President/Branch Manager of Poinsett Office                              



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|                                      |  |                                                   
|------------------------------------- |  | --------------------------------------------------
|Greer State Bank Officers (continued)
|                                      | 
|Robert M. Hartzel, Jr.                |  | Vice President/Credit Administration              
|Thomas L. Williams                    |  | Vice President/Branch Manager of North Main Office
|Terri N. Grady                        |  | Assistant Vice President/Operations               
|Donna Miller                          |  | Assistant Vice President/Internet Banking         
|Patti Clifton                         |  | Banking Officer/Greer Financial Services          
|Joy Peebles                           |  | Banking Officer/Loan Production                   



|                       |  |                  |  |                 |  |               
|---------------------- |  | ---------------- |  | --------------- |  | --------------
|Greer State Bank Staff |  |                  |  |                 |  |               
|                       |  |                  | 
|Meredith Alexander     |  | Grace Edwards    |  | Jennifer Kemp   |  | Linda Rorie   
|Leatha Alley           |  | Jessica Estola   |  | Nikita Mack     |  | Denise Ross   
|Jolynne Beck           |  | Sherri Forrester |  | David McCammon  |  | Mindi Smith   
|Marsha Bennett         |  | Candice Good     |  | Cindy Morrell   |  | Tammy Smith   
|Charlotte Betts        |  | Marie Good       |  | Joy Myers       |  | Teresa Smith  
|Shea Boyce             |  | Willie Greer     |  | Linda Oliver    |  | Tammy Thompson
|Nancy Brown            |  | Patsy Hairston   |  | Cindi Patterson |  | Kristi Twiddy 
|Theresa Bruce          |  | Vince Harris     |  | Brooke Phillips |  | Ann Vaughn    
|Mindi Calvert          |  | Cindy Hart       |  | Leanna Perdue   |  | Pat Vaughn    
|Melissa Carroll        |  | Doris Hendricks  |  | Brandi Prevatte |  | Pat Wellmon   
|Maury Cook             |  | Carey Henry      |  | Ann Rainey      |  | Marie Wilson  
|Angie Coleman          |  | Heather Henson   |  | Nalani Ramza    |  | Lisa Wiles    
|Karen Corn             |  | Angela Hornick   |  | Patsy Robinson  |  | Lena Wolfe    
|Sarah Crutchfield      |  | Tonya Kellett    |  |                 |  |               

Our Vision:

A better life for all

Our Mission:

Exceptional banking for everyday people

Our Values:

Character: Whatever we do, we will do with integrity.

Commitment: Whatever we do, we will do with dedication.

Competence: Whatever we do, we will do with excellence.

Courtesy: Whatever we do, we will do with respect and kindness.



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LOGO

Report of Independent Registered Public Accounting Firm

To the Board of Directors

Greer Bancshares
Incorporated and Subsidiary

Greer, South Carolina

We have audited the accompanying consolidated balance sheets of Greer Bancshares Incorporated and Subsidiary (the Company) as of December 31, 2009 and 2008, and the related consolidated
statements of income (loss), changes in stockholders equity and cash flows for each of the years in the three-year period ended December 31, 2009. The Companys management is responsible for these consolidated financial statements.
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in
accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of the Companys internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects, the financial position of Greer Bancshares Incorporated and Subsidiary as of December 31, 2009 and 2008, and the results of their operations and their cash flows
for each of the years in the three-year period ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

LOGO

Charlotte, North Carolina

March 31, 2010



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GREER BANCSHARES INCORPORATED AND SUBSIDIARY

Consolidated Balance Sheets



|                                                                                                                                                                          |  |              |             |      |   |            
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ----------- | ---- | - | -----------
|                                                                                                                                                                          |  | December 31,
|                                                                                                                                                                          |  | 2009         |             | 2008
|Assets                                                                                                                                                                    |  |              |             |      |   |            
|Cash and due from banks                                                                                                                                                   |  | $            | 12,222,440  |      | $ | 5,808,332  
|Interest-bearing deposits in banks                                                                                                                                        |  |              | 441,538     |      |   | 370,644    
|Federal funds sold                                                                                                                                                        |  |              |            |      |   | 121,000    
|                                                                                                                                                                          |  |              |             |      |   |            
|Cash and cash equivalents                                                                                                                                                 |  |              | 12,663,978  |      |   | 6,299,976  
|Investment securities:                                                                                                                                                    |  |              |             |      |   |            
|Held to maturity (fair value of approximately $and $16,164,898, respectively)                                                                                            |  |              |            |      |   | 15,977,251 
|Available for sale                                                                                                                                                        |  |              | 124,984,008 |      |   | 79,874,179 
|Loans, net of allowance for loan losses of $6,315,278 and $5,127,304, respectively                                                                                        |  |              | 301,078,198 |      |   | 306,286,728
|Premises and equipment, net                                                                                                                                               |  |              | 5,951,672   |      |   | 6,294,763  
|Accrued interest receivable                                                                                                                                               |  |              | 2,054,466   |      |   | 2,094,424  
|Restricted stock                                                                                                                                                          |  |              | 5,936,900   |      |   | 5,689,914  
|Other real estate owned                                                                                                                                                   |  |              | 8,493,968   |      |   | 1,842,372  
|Deferred tax asset                                                                                                                                                        |  |              | 3,441,052   |      |   | 4,743,474  
|Other assets                                                                                                                                                              |  |              | 12,186,323  |      |   | 7,934,406  
|                                                                                                                                                                          |  |              |             |      |   |            
|                                                                                                                                                                          |  |             
|Total Assets                                                                                                                                                              |  | $            | 476,790,565 |      | $ | 437,037,487
|                                                                                                                                                                          |  |              |             |      |   |            
|                                                                                                                                                                          |  |             
|Liabilities and Stockholders Equity                                                                                                                                      |  |              |             |      |   |            
|                                                                                                                                                                          |  |             
|Liabilities:                                                                                                                                                              |  |              |             |      |   |            
|                                                                                                                                                                          |  |             
|Deposits:                                                                                                                                                                 |  |              |             |      |   |            
|Noninterest bearing                                                                                                                                                       |  | $            | 33,655,746  |      | $ | 28,428,528 
|Interest bearing                                                                                                                                                          |  |              | 264,989,786 |      |   | 253,696,157
|                                                                                                                                                                          |  |              |             |      |   |            
|Total deposits                                                                                                                                                            |  |              | 298,645,532 |      |   | 282,124,685
|Short term borrowings                                                                                                                                                     |  |              | 13,992,931  |      |   | 4,000,000  
|Long term borrowings                                                                                                                                                      |  |              | 132,841,000 |      |   | 129,341,000
|Other liabilities                                                                                                                                                         |  |              | 3,358,431   |      |   | 3,745,747  
|                                                                                                                                                                          |  |              |             |      |   |            
|                                                                                                                                                                          |  |             
|Total Liabilities                                                                                                                                                         |  |              | 448,837,894 |      |   | 419,211,432
|                                                                                                                                                                          |  |              |             |      |   |            
|                                                                                                                                                                          |  |             
|Commitments and contingenciesNote 10                                                                                                                                     |  |              |             |      |   |            
|                                                                                                                                                                          |  |             
|Stockholders Equity:                                                                                                                                                     |  |              |             |      |   |            
|Preferred stockno par value 200,000 shares authorized; Preferred stock, Series 2009-SP, no par value, 9,993 shares issued
and outstanding at December 31, 2009 (Note 11) |  |              | 9,451,058   |      |   |           
|Preferred stock, Series 2009-WP, no par value, 500 shares issued and outstanding at December 31, 2009 (Note
11)                                                           |  |              | 578,139     |      |   |           
|Common stockpar value $5 per share, 10,000,000 shares authorized; 2,486,692 shares issued and outstanding at
December 31, 2009 and 2008                                  |  |              | 12,433,460  |      |   | 12,433,460 
|Additional paid in capital                                                                                                                                                |  |              | 3,542,201   |      |   | 3,415,182  
|Retained earnings                                                                                                                                                         |  |              | 734,978     |      |   | 1,826,930  
|Accumulated other comprehensive income                                                                                                                                    |  |              | 1,212,835   |      |   | 150,483    
|                                                                                                                                                                          |  |              |             |      |   |            
|                                                                                                                                                                          |  |             
|Total Stockholders Equity                                                                                                                                                |  |              | 27,952,671  |      |   | 17,826,055 
|                                                                                                                                                                          |  |              |             |      |   |            
|                                                                                                                                                                          |  |             
|Total Liabilities and Stockholders Equity                                                                                                                                |  | $            | 476,790,565 |      | $ | 437,037,487
|                                                                                                                                                                          |  |              |             |      |   |            

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



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GREER BANCSHARES INCORPORATED AND SUBSIDIARY

Consolidated Statements of Income (Loss)



|                                                                                                          |  |                                  |            |   |      |   |            |      |  |   |           
|--------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ---------- | - | ---- | - | ---------- | ---- |  | - | ----------
|                                                                                                          |  | For the Years Ended December 31,
|                                                                                                          |  | 2009                             |            |   | 2008 |   |            | 2007
|Interest income:                                                                                          |  |                                  |            |   |      |   |            |      |  |   |           
|Loans, including fees                                                                                     |  | $                                | 16,667,757 |   |      | $ | 18,490,118 |      |  | $ | 20,652,576
|Investment securities:                                                                                    |  |                                  |            |   |      |   |            |      |  |   |           
|Taxable                                                                                                   |  |                                  | 4,229,272  |   |      |   | 4,460,793  |      |  |   | 3,071,097 
|Tax-exempt                                                                                                |  |                                  | 967,266    |   |      |   | 921,115    |      |  |   | 979,027   
|Federal funds sold                                                                                        |  |                                  | 4,172      |   |      |   | 38,258     |      |  |   | 92,112    
|Other                                                                                                     |  |                                  | 11,747     |   |      |   | 13,655     |      |  |   | 41,144    
|                                                                                                          |  |                                  |            |   |      |   |            |      |  |   |           
|Total interest income                                                                                     |  |                                  | 21,880,214 |   |      |   | 23,923,939 |      |  |   | 24,835,956
|                                                                                                          |  |                                  |           
|Interest expense:                                                                                         |  |                                  |            |   |      |   |            |      |  |   |           
|Interest on deposit accounts                                                                              |  |                                  | 5,871,323  |   |      |   | 7,721,112  |      |  |   | 8,178,964 
|Interest on short term borrowings                                                                         |  |                                  | 38,201     |   |      |   | 82,825     |      |  |   | 505,852   
|Interest on long term borrowings                                                                          |  |                                  | 4,636,105  |   |      |   | 4,985,916  |      |  |   | 4,056,328 
|                                                                                                          |  |                                  |            |   |      |   |            |      |  |   |           
|Total interest expense                                                                                    |  |                                  | 10,545,629 |   |      |   | 12,789,853 |      |  |   | 12,741,144
|                                                                                                          |  |                                  |            |   |      |   |            |      |  |   |           
|                                                                                                          |  |                                  |           
|Net interest income                                                                                       |  |                                  | 11,334,585 |   |      |   | 11,134,086 |      |  |   | 12,094,812
|                                                                                                          |  |                                  |           
|Provision for loan losses                                                                                 |  |                                  | 5,185,195  |   |      |   | 4,230,227  |      |  |   | 1,810,883 
|                                                                                                          |  |                                  |            |   |      |   |            |      |  |   |           
|Net interest income after provision for loan losses                                                       |  |                                  | 6,149,390  |   |      |   | 6,903,859  |      |  |   | 10,283,929
|                                                                                                          |  |                                  |           
|Noninterest income:                                                                                       |  |                                  |            |   |      |   |            |      |  |   |           
|Customer service fees                                                                                     |  |                                  | 874,327    |   |      |   | 862,463    |      |  |   | 905,131   
|Gain on sale of investment securities                                                                     |  |                                  | 1,093,840  |   |      |   | 200,451    |      |  |   |          
|Impairment loss on investment securities and restricted stock                                             |  |                                  |            |   |      |   |            |      |  |   |           
|Impairment loss on investment securities and restricted stock                                             |  |                                  | (464,719   | ) |      |   | (8,366,630 | )    |  |   |          
|Noncredit-related losses on securities not expected to be sold (recognized in other comprehensive income) |  |                                  |           |   |      |   |           |      |  |   |          
|                                                                                                          |  |                                  |            |   |      |   |            |      |  |   |           
|Net impairment loss on investment securities and restricted stock                                         |  |                                  | (464,179   | ) |      |   | (8,366,630 | )    |  |   |          
|Other                                                                                                     |  |                                  | 1,723,335  |   |      |   | 1,981,888  |      |  |   | 1,593,961 
|                                                                                                          |  |                                  |            |   |      |   |            |      |  |   |           
|Total noninterest income (loss)                                                                           |  |                                  | 3,226,783  |   |      |   | (5,321,828 | )    |  |   | 2,499,092 
|                                                                                                          |  |                                  |           
|Noninterest expenses:                                                                                     |  |                                  |            |   |      |   |            |      |  |   |           
|Salaries and employee benefits                                                                            |  |                                  | 5,676,889  |   |      |   | 6,092,666  |      |  |   | 5,733,309 
|Occupancy and equipment                                                                                   |  |                                  | 829,023    |   |      |   | 922,265    |      |  |   | 934,951   
|Postage and supplies                                                                                      |  |                                  | 255,764    |   |      |   | 308,948    |      |  |   | 314,625   
|Marketing expenses                                                                                        |  |                                  | 110,517    |   |      |   | 386,096    |      |  |   | 362,982   
|Directors fees                                                                                            |  |                                  | 191,778    |   |      |   | 250,419    |      |  |   | 209,457   
|Professional fees                                                                                         |  |                                  | 391,057    |   |      |   | 442,841    |      |  |   | 397,891   
|FDIC insurance assessment                                                                                 |  |                                  | 849,950    |   |      |   | 235,599    |      |  |   | 28,450    
|Other real estate owned and foreclosure expense                                                           |  |                                  | 823,974    |   |      |   | 150,587    |      |  |   | 6,981     
|Other                                                                                                     |  |                                  | 1,394,769  |   |      |   | 1,653,522  |      |  |   | 1,240,182 
|                                                                                                          |  |                                  |            |   |      |   |            |      |  |   |           
|Total noninterest expenses                                                                                |  |                                  | 10,523,721 |   |      |   | 10,442,943 |      |  |   | 9,228,828 
|                                                                                                          |  |                                  |            |   |      |   |            |      |  |   |           
|                                                                                                          |  |                                  |           
|Income (loss) before income taxes                                                                         |  |                                  | (1,147,548 | ) |      |   | (8,860,912 | )    |  |   | 3,554,193 
|                                                                                                          |  |                                  |           
|Provision (benefit) for income taxes:                                                                     |  |                                  | (636,159   | ) |      |   | (3,420,808 | )    |  |   | 948,568   
|                                                                                                          |  |                                  |           
|Net income (loss)                                                                                         |  |                                  | (511,389   | ) |      |   | (5,440,104 | )    |  |   | 2,605,625 
|                                                                                                          |  |                                  |           
|Preferred stock dividends and net discount accretion                                                      |  |                                  | (580,563   | ) |      |   |           |      |  |   |          
|                                                                                                          |  |                                  |           
|Net income (loss) available or attributed to common shareholders                                          |  | $                                | (1,091,952 | ) |      | $ | (5,440,104 | )    |  | $ | 2,605,625 
|                                                                                                          |  |                                  |            |   |      |   |            |      |  |   |           
|                                                                                                          |  |                                  |           
|Basic net income (loss) per share of common stock                                                         |  | $                                | (.44       | ) |      | $ | (2.19      | )    |  | $ | 1.05      
|                                                                                                          |  |                                  |            |   |      |   |            |      |  |   |           
|                                                                                                          |  |                                  |           
|Diluted net income (loss) per share of common stock                                                       |  | $                                | (.44       | ) |      | $ | (2.19      | )    |  | $ | 1.04      
|                                                                                                          |  |                                  |            |   |      |   |            |      |  |   |           
|                                                                                                          |  |                                  |           
|Weighted average common shares outstanding:                                                               |  |                                  |            |   |      |   |            |      |  |   |           
|Basic                                                                                                     |  |                                  | 2,486,692  |   |      |   | 2,485,096  |      |  |   | 2,479,051 
|                                                                                                          |  |                                  |            |   |      |   |            |      |  |   |           
|                                                                                                          |  |                                  |           
|Diluted                                                                                                   |  |                                  | 2,486,692  |   |      |   | 2,485,096  |      |  |   | 2,509,270 

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



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GREER BANCSHARES INCORPORATED AND SUBSIDIARY

Consolidated Statements of Changes in Stockholders Equity

For the Years Ended December 31, 2009, 2008 and 2007



|                                                                                                                        |  |                              |   |                              |   |              |  |                          |  |                  |            |  |                                            |           |  |                          |            |   |  |   |            |   |  |   |            |  
|----------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | - | ---------------------------- | - | ------------ |  | ------------------------ |  | ---------------- | ---------- |  | ------------------------------------------ | --------- |  | ------------------------ | ---------- | - |  | - | ---------- | - |  | - | ---------- | -
|                                                                                                                        |  | PreferredStock Series2009-SP |   | PreferredStock Series2009-WP |   | Common Stock |  | AdditionalPaid
InCapital |  | RetainedEarnings |            |  | AccumulatedOtherComprehensiveIncome (Loss) |           |  | TotalStockholdersEquity |           
|                                                                                                                        |  |                              |   | Shares                       |   | Amount       |  |                          |  |                 
|Balance at December 31, 2006                                                                                            |  | $                            |  |                              | $ |             |  | 2,472,671                |  | $                | 12,363,355 |  | $                                          | 3,039,690 |  | $                        | 7,273,436  |   |  | $ | (134,253   | ) |  | $ | 22,542,228 |  
|                                                                                                                        |  |                              |   |                              |   |              |  |                         
|Net income                                                                                                              |  |                              |  |                              |   |             |  |                         |  |                  |           |  |                                            |          |  |                          | 2,605,625  |   |  |   |           |   |  |   | 2,605,625  |  
|Other comprehensive income, net of tax:                                                                                 |  |                              |   |                              |   |              |  |                          |  |                  |            |  |                                            |           |  |                          |            |   |  |   |            |   |  |   |            |  
|Unrealized holding gain on investment securities net of income taxes of approximately $182,000                          |  |                              |  |                              |   |             |  |                         |  |                  |           |  |                                            |          |  |                          |           |   |  |   | 291,030    |   |  |   | 291,030    |  
|Comprehensive income                                                                                                    |  |                              |   |                              |   |              |  |                          |  |                  |            |  |                                            |           |  |                          |            |   |  |   |            |   |  |   | 2,896,655  |  
|Stock option exercises pursuant to stock option plan                                                                    |  |                              |  |                              |   |             |  | 9,165                    |  |                  | 45,825     |  |                                            | 46,732    |  |                          |           |   |  |   |           |   |  |   | 92,557     |  
|Tax benefit of stock options exercised                                                                                  |  |                              |  |                              |   |             |  |                         |  |                  |           |  |                                            | 8,082     |  |                          |           |   |  |   |           |   |  |   | 8,082      |  
|Stock based compensation                                                                                                |  |                              |  |                              |   |             |  |                         |  |                  |           |  |                                            | 165,391   |  |                          |           |   |  |   |           |   |  |   | 165,391    |  
|Dividends declared ($.51 per share)                                                                                     |  |                              |  |                              |   |             |  |                         |  |                  |           |  |                                            |          |  |                          | (1,269,391 | ) |  |   |           |   |  |   | (1,269,391 | )
|                                                                                                                        |  |                              |   |                              |   |              |  |                          |  |                  |            |  |                                            |           |  |                          |            |   |  |   |            |   |  |   |            |  
|                                                                                                                        |  |                              |   |                              |   |              |  |                         
|Balance at December 31, 2007                                                                                            |  |                              |  |                              |   |             |  | 2,481,836                |  |                  | 12,409,180 |  |                                            | 3,259,895 |  |                          | 8,609,670  |   |  |   | 156,777    |   |  |   | 24,435,522 |  
|                                                                                                                        |  |                              |   |                              |   |              |  |                         
|Cumulative effect of a change in accounting principal                                                                   |  |                              |  |                              |   |             |  |                         |  |                  |           |  |                                            |          |  |                          | (75,031    | ) |  |   |           |   |  |   | (75,031    | )
|Net loss                                                                                                                |  |                              |  |                              |   |             |  |                         |  |                  |           |  |                                            |          |  |                          | (5,440,104 | ) |  |   |           |   |  |   | (5,440,104 | )
|Other comprehensive loss, net of tax:                                                                                   |  |                              |   |                              |   |              |  |                          |  |                  |            |  |                                            |           |  |                          |            |   |  |   |            |   |  |   |            |  
|Unrealized holding loss on investment securities net of income taxes of approximately $3,143,000                        |  |                              |  |                              |   |             |  |                         |  |                  |           |  |                                            |          |  |                          |           |   |  |   | (5,044,826 | ) |  |   | (5,044,826 | )
|Less reclassification adjustments for losses included in net loss net of income tax benefit of approximately
$3,128,000 |  |                              |  |                              |   |             |  |                        |  |                  |           |  |                                            |          |  |                          |           |   |  |   | 5,038,532  |   |  |   | 5,038,532  |  
|Comprehensive loss                                                                                                      |  |                              |   |                              |   |              |  |                          |  |                  |            |  |                                            |           |  |                          |            |   |  |   |            |   |  |   | (5,446,398 | )
|Stock option exercises pursuant to stock option plan                                                                    |  |                              |  |                              |   |             |  | 4,856                    |  |                  | 24,280     |  |                                            | 22,680    |  |                          |           |   |  |   |           |   |  |   | 46,960     |  
|Stock based compensation                                                                                                |  |                              |  |                              |   |             |  |                         |  |                  |           |  |                                            | 132,607   |  |                          |           |   |  |   |           |   |  |   | 132,607    |  
|Dividends declared ($.51 per share)                                                                                     |  |                              |  |                              |   |             |  |                         |  |                  |           |  |                                            |          |  |                          | (1,267,605 | ) |  |   |           |   |  |   | (1,267,605 | )
|                                                                                                                        |  |                              |   |                              |   |              |  |                          |  |                  |            |  |                                            |           |  |                          |            |   |  |   |            |   |  |   |            |  
|                                                                                                                        |  |                              |   |                              |   |              |  |                         
|Balance at December 31, 2008                                                                                            |  |                              |  |                              |   |             |  | 2,486,692                |  |                  | 12,433,460 |  |                                            | 3,415,182 |  |                          | 1,826,930  |   |  |   | 150,483    |   |  |   | 17,826,055 |  

(continued)



(8)







---

GREER BANCSHARES INCORPORATED AND SUBSIDIARY

Consolidated Statements of Changes in Stockholders Equity

For the Years Ended December 31, 2009, 2008 and 2007, Continued



|                                                                                                                                                        |  |                              |           |        |                              |        |         |              |  |                          |  |                  |            |  |                                           |           |  |                          |          |   |  |   |           |   |  |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | --------- | ------ | ---------------------------- | ------ | ------- | ------------ |  | ------------------------ |  | ---------------- | ---------- |  | ----------------------------------------- | --------- |  | ------------------------ | -------- | - |  | - | --------- | - |  | - | ---------- | -
|                                                                                                                                                        |  | PreferredStock Series2009-SP |           |        | PreferredStock Series2009-WP |        |         | Common Stock |  | AdditionalPaid
InCapital |  | RetainedEarnings |            |  | AccumulatedOtherComprehensiveIncome(Loss) |           |  | TotalStockholdersEquity |         
|                                                                                                                                                        |  |                              |           | Shares |                              | Amount |         |              |  |                         
|Net loss                                                                                                                                                |  |                              |          |        |                              |        |        |              |  |                         |  |                  |           |  |                                           |          |  |                          | (511,389 | ) |  |   |          |   |  |   | (511,389   | )
|Other comprehensive income (loss), net of tax:                                                                                                          |  |                              |           |        |                              |        |         |              |  |                          |  |                  |            |  |                                           |           |  |                          |          |   |  |   |           |   |  |   |            |  
|Unrealized holding gain on held to maturity investment securities transferred to available for sale net of income tax expense of
approximately $102,000 |  |                              |          |        |                              |        |        |              |  |                         |  |                  |           |  |                                           |          |  |                          |         |   |  |   | 166,164   |   |  |   | 166,164    |  
|Unrealized holding gain on available for sale securities net of income tax liability of approximately $723,000                                          |  |                              |           |        |                              |        |         |              |  |                          |  |                  |            |  |                                           |           |  |                          |          |   |  |   | 1,180,244 |   |  |   | 1,180,244  |  
|Less reclassification adjustments for gains included in net loss net of income tax liability of approximately
$345,000                                  |  |                              |          |        |                              |        |        |              |  |                         |  |                  |           |  |                                           |          |  |                          |         |   |  |   | (284,056  | ) |  |   | (284,056   | )
|                                                                                                                                                        |  |                              |           |        |                              |        |         |              |  |                          |  |                  |            |  |                                           |           |  |                          |          |   |  |   |           |   |  |   |            |  
|Comprehensive income                                                                                                                                    |  |                              |           |        |                              |        |         |              |  |                          |  |                  |            |  |                                           |           |  |                          |          |   |  |   |           |   |  |   | 550,963    |  
|Issuance of Preferred Stock                                                                                                                             |  |                              | 9,993,000 |        |                              |        | 500,000 |              |  |                          |  |                  |           |  |                                           |          |  |                          |         |   |  |   |          |   |  |   | 10,493,000 |  
|Discount associated with preferred stock Series 2009-SP                                                                                                 |  |                              | (645,185  | )      |                              |        |        |              |  |                          |  |                  |           |  |                                           |          |  |                          |         |   |  |   |          |   |  |   | (645,185   | )
|Premium associated with preferred stock Series 2009-WP                                                                                                  |  |                              |           |        |                              |        | 101,595 |              |  |                          |  |                  |           |  |                                           |          |  |                          |         |   |  |   |          |   |  |   | 101,595    |  
|Amortization of premium and discount on preferred stock                                                                                                 |  |                              | 103,243   |        |                              |        | (23,456 | )            |  |                          |  |                  |           |  |                                           |          |  |                          | (79,787  | ) |  |   |          |   |  |   |           |  
|Stock based compensation                                                                                                                                |  |                              |          |        |                              |        |        |              |  |                         |  |                  |           |  |                                           | 127,019   |  |                          |         |   |  |   |          |   |  |   | 127,019    |  
|Preferred stock dividend declared                                                                                                                       |  |                              |          |        |                              |        |        |              |  |                         |  |                  |           |  |                                           |          |  |                          | (500,776 | ) |  |   |          |   |  |   | (500,776   | )
|                                                                                                                                                        |  |                              |           |        |                              |        |         |              |  |                          |  |                  |            |  |                                           |           |  |                          |          |   |  |   |           |   |  |   |            |  
|                                                                                                                                                        |  |                              |           |        |                              |        |         |             
|Balance at December 31, 2009                                                                                                                            |  | $                            | 9,451,058 |        |                              | $      | 578,139 |              |  | 2,486,692                |  | $                | 12,433,460 |  | $                                         | 3,542,201 |  | $                        | 734,978  |   |  | $ | 1,212,835 |   |  | $ | 27,952,671 |  
|                                                                                                                                                        |  |                              |           |        |                              |        |         |              |  |                          |  |                  |            |  |                                           |           |  |                          |          |   |  |   |           |   |  |   |            |  

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



(9)







---

GREER BANCSHARES INCORPORATED AND SUBSIDIARY

Consolidated Statements of Cash Flows



|                                                                                         |  |                                  |             |   |      |   |             |      |  |   |             |  
|---------------------------------------------------------------------------------------- |  | -------------------------------- | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                                                                         |  | For the Years Ended December 31, |            
|                                                                                         |  | 2009                             |             |   | 2008 |   |             | 2007 | 
|Operating activities:                                                                    |  |                                  |             |   |      |   |             |      |  |   |             |  
|Net income (loss)                                                                        |  | $                                | (511,389    | ) |      | $ | (5,440,104  | )    |  | $ | 2,605,625   |  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                                  |             |   |      |   |             |      |  |   |             |  
|Depreciation                                                                             |  |                                  | 435,521     |   |      |   | 487,428     |      |  |   | 472,199     |  
|Loss on sale of other real estate owned                                                  |  |                                  | 86,397      |   |      |   |            |      |  |   |            |  
|Gain on sale of investment securities                                                    |  |                                  | (1,093,840  | ) |      |   | (200,451    | )    |  |   |            |  
|Impairment loss on investment securities                                                 |  |                                  | 153,305     |   |      |   | 8,366,630   |      |  |   |            |  
|Impairment loss on restricted stock                                                      |  |                                  | 311,414     |   |      |   |            |      |  |   |            |  
|Provision for loan losses                                                                |  |                                  | 5,185,195   |   |      |   | 4,230,227   |      |  |   | 1,810,883   |  
|Deferred income taxes (benefit)                                                          |  |                                  | 2,321,167   |   |      |   | (3,723,259  | )    |  |   | (171,537    | )
|Stock-based compensation                                                                 |  |                                  | 127,019     |   |      |   | 132,607     |      |  |   | 165,391     |  
|Increase in cash surrender value of life insurance                                       |  |                                  | (289,976    | ) |      |   | (251,641    | )    |  |   | (233,943    | )
|Increase in prepaid FDIC insurance assessment                                            |  |                                  | (2,032,903  | ) |      |   |            |      |  |   |            |  
|Net change in:                                                                           |  |                                  |             |   |      |   |             |      |  |   |             |  
|Accrued interest receivable                                                              |  |                                  | 39,958      |   |      |   | 353,487     |      |  |   | (149,056    | )
|Other assets                                                                             |  |                                  | (2,897,785  | ) |      |   | (502,165    | )    |  |   | 197,296     |  
|Accrued interest payable                                                                 |  |                                  | (498,071    | ) |      |   | (518,418    | )    |  |   | 340,427     |  
|Other liabilities                                                                        |  |                                  | 42,674      |   |      |   | (42,544     | )    |  |   | (501,216    | )
|                                                                                         |  |                                  |             |   |      |   |             |      |  |   |             |  
|Net cash provided by operating activities                                                |  |                                  | 1,378,686   |   |      |   | 2,891,797   |      |  |   | 4,536,069   |  
|                                                                                         |  |                                  |             |   |      |   |             |      |  |   |             |  
|                                                                                         |  |                                  |            
|Investing activities:                                                                    |  |                                  |             |   |      |   |             |      |  |   |             |  
|Activity in available-for-sale securities:                                               |  |                                  |             |   |      |   |             |      |  |   |             |  
|Sales                                                                                    |  |                                  | 33,690,784  |   |      |   | 14,764,547  |      |  |   |            |  
|Maturities, prepayments and calls                                                        |  |                                  | 22,474,074  |   |      |   | 10,921,369  |      |  |   | 5,379,696   |  
|Purchases                                                                                |  |                                  | (92,476,437 | ) |      |   | (34,073,418 | )    |  |   | (24,286,198 | )
|Activity in held to maturity securities:                                                 |  |                                  |             |   |      |   |             |      |  |   |             |  
|Maturities, prepayments and calls                                                        |  |                                  | 3,118,030   |   |      |   | 3,609,209   |      |  |   | 3,995,008   |  
|Sales (Note 2)                                                                           |  |                                  | 6,063,849   |   |      |   |            |      |  |   |            |  
|Proceeds from sales of other real estate owned                                           |  |                                  | 1,461,562   |   |      |   |            |      |  |   |            |  
|Purchase of restricted stock                                                             |  |                                  | (558,390    | ) |      |   | (746,900    | )    |  |   | (994,100    | )
|Net increase in loans                                                                    |  |                                  | (8,176,220  | ) |      |   | (51,539,503 | )    |  |   | (18,574,072 | )
|Purchase of premises and equipment                                                       |  |                                  | (92,430     | ) |      |   | (209,381    | )    |  |   | (413,288    | )
|Purchase of life insurance                                                               |  |                                  | (50,000     | ) |      |   |            |      |  |   | (1,000,000  | )
|                                                                                         |  |                                  |             |   |      |   |             |      |  |   |             |  
|Net cash used for investing activities                                                   |  |                                  | (34,545,178 | ) |      |   | (57,274,077 | )    |  |   | (35,892,954 | )
|                                                                                         |  |                                  |             |   |      |   |             |      |  |   |             |  

(continued)



(10)







---

GREER BANCSHARES INCORPORATED AND SUBSIDIARY

Consolidated Statements of Cash Flows, Continued



|                                                                                                                                              |  |                                  |             |   |      |   |             |      |  |   |             |  
|--------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                                                                                                                              |  | For the Years Ended December 31, |            
|                                                                                                                                              |  | 2009                             |             |   | 2008 |   |             | 2007 | 
|Financing activities:                                                                                                                         |  |                                  |             |   |      |   |             |      |  |   |             |  
|Net increase in deposits                                                                                                                      |  | $                                | 16,520,847  |   |      | $ | 37,531,525  |      |  | $ | 4,305,269   |  
|Net increase (decrease) in short term borrowings                                                                                              |  |                                  | 9,992,931   |   |      |   | 996,000     |      |  |   | (11,167,875 | )
|Proceeds from other long term borrowings                                                                                                      |  |                                  |            |   |      |   |            |      |  |   | 15,000,000  |  
|Repayment of notes payable to FHLB                                                                                                            |  |                                  | (52,900,000 | ) |      |   | (45,400,000 | )    |  |   | (14,713,514 | )
|Proceeds from notes payable to FHLB                                                                                                           |  |                                  | 56,400,000  |   |      |   | 61,300,000  |      |  |   | 35,300,000  |  
|Proceeds from issuance of preferred stock                                                                                                     |  |                                  | 9,949,410   |   |      |   |            |      |  |   |            |  
|Proceeds from exercise of stock options                                                                                                       |  |                                  |            |   |      |   | 46,960      |      |  |   | 92,557      |  
|Tax benefit from stock option exercise                                                                                                        |  |                                  |            |   |      |   |            |      |  |   | 8,082       |  
|Cash dividends paid on common stock                                                                                                           |  |                                  |            |   |      |   | (1,267,605  | )    |  |   | (1,682,801  | )
|Cash dividends paid on preferred stock                                                                                                        |  |                                  | (432,694    | ) |      |   |            |      |  |   |            |  
|                                                                                                                                              |  |                                  |             |   |      |   |             |      |  |   |             |  
|Net cash provided by financing activities                                                                                                     |  |                                  | 39,530,494  |   |      |   | 53,206,880  |      |  |   | 27,141,718  |  
|                                                                                                                                              |  |                                  |             |   |      |   |             |      |  |   |             |  
|                                                                                                                                              |  |                                  |            
|Net increase (decrease) in cash and cash equivalents                                                                                          |  |                                  | 6,364,002   |   |      |   | (1,175,400  | )    |  |   | (4,215,167  | )
|                                                                                                                                              |  |                                  |            
|Cash and cash equivalents, beginning of period                                                                                                |  |                                  | 6,299,976   |   |      |   | 7,475,376   |      |  |   | 11,690,543  |  
|                                                                                                                                              |  |                                  |             |   |      |   |             |      |  |   |             |  
|                                                                                                                                              |  |                                  |            
|Cash and cash equivalents, end of period                                                                                                      |  | $                                | 12,663,978  |   |      | $ | 6,299,976   |      |  | $ | 7,475,376   |  
|                                                                                                                                              |  |                                  |             |   |      |   |             |      |  |   |             |  
|                                                                                                                                              |  |                                  |            
|Cash paid for:                                                                                                                                |  |                                  |             |   |      |   |             |      |  |   |             |  
|Cash paid during the year for:                                                                                                                |  |                                  |             |   |      |   |             |      |  |   |             |  
|Interest                                                                                                                                      |  | $                                | 1,545,629   |   |      | $ | 13,308,271  |      |  | $ | 12,400,717  |  
|                                                                                                                                              |  |                                  |             |   |      |   |             |      |  |   |             |  
|                                                                                                                                              |  |                                  |            
|Income taxes                                                                                                                                  |  | $                                |            |   |      | $ | 450,881     |      |  | $ | 829,258     |  
|                                                                                                                                              |  |                                  |             |   |      |   |             |      |  |   |             |  
|                                                                                                                                              |  |                                  |            
|Non-cash investing and financing activities:                                                                                                  |  |                                  |             |   |      |   |             |      |  |   |             |  
|Real estate acquired in satisfaction of loans                                                                                                 |  | $                                | 8,031,112   |   |      | $ | 1,800,372   |      |  | $ | 42,000      |  
|                                                                                                                                              |  |                                  |             |   |      |   |             |      |  |   |             |  
|                                                                                                                                              |  |                                  |            
|Loans to facilitate sale of other real estate owned                                                                                           |  | $                                | 168,443     |   |      | $ |            |      |  | $ |            |  
|                                                                                                                                              |  |                                  |             |   |      |   |             |      |  |   |             |  
|                                                                                                                                              |  |                                  |            
|Transfer of investment securities from held to maturity to available for sale, due to change of intent to sell investment
Securities (Note 2) |  | $                                | 6,795,372   |   |      | $ |            |      |  | $ |            |  
|                                                                                                                                              |  |                                  |             |   |      |   |             |      |  |   |             |  
|                                                                                                                                              |  |                                  |            
|Unrealized gain on transfer of held to maturity investment securities to available for sale investment securities, net of tax                 |  | $                                | 166,164     |   |      | $ |            |      |  | $ |            |  
|                                                                                                                                              |  |                                  |             |   |      |   |             |      |  |   |             |  
|                                                                                                                                              |  |                                  |            
|Dividends payable                                                                                                                             |  | $                                | 68,082      |   |      | $ |            |      |  | $ |            |  
|                                                                                                                                              |  |                                  |             |   |      |   |             |      |  |   |             |  
|                                                                                                                                              |  |                                  |            
|Adoption of new accounting principle charged to retained earnings                                                                             |  | $                                |            |   |      | $ | (75,031     | )    |  | $ |            |  
|                                                                                                                                              |  |                                  |             |   |      |   |             |      |  |   |             |  
|                                                                                                                                              |  |                                  |            
|Unrealized gains (losses) on available for sale investment securities net of tax                                                              |  | $                                | 1,062,352   |   |      | $ | (6,294      | )    |  | $ | 291,030     |  
|                                                                                                                                              |  |                                  |             |   |      |   |             |      |  |   |             |  

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



(11)







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GREER BANCSHARES INCORPORATED AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007



|1. | Summary of Significant Accounting Policies
|-- | ------------------------------------------

Organization - Greer State Bank (the Bank) was organized under a state banking charter in August 1988, and commenced operations on January 3, 1989. Greer Bancshares Incorporated is
a South Carolina corporation formed in July 2001, primarily to hold all of the capital stock of Greer State Bank. The Bank engages in commercial and retail banking, emphasizing the needs of small to medium sized businesses, professional concerns and
individuals, primarily in Greer and surrounding areas in the upstate of South Carolina. The accompanying consolidated financial statements include the accounts of the holding company and its wholly owned subsidiary (herein referred to as the
Company).

Nature of Operations - The primary activity of the holding company is to hold its investment in
the Bank. The Bank operates under a state bank charter and provides full banking services. The Bank is subject to regulation by the Federal Deposit Insurance Corporation (FDIC) and the South Carolina Board of Financial Institutions.

Greer Financial Services, a division of the Bank, provides financial management services and non-deposit product sales.

Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its
subsidiary. All significant intercompany items are eliminated in consolidation.

Business Segments - The Company reports
all activities as one business segment. In determining the appropriateness of segment definition, the materiality of the potential segment and components of the business about which financial information is available and regularly evaluated relative
to resource allocation and performance assessment is considered.

Estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash Equivalents - For the purpose of presentation in the statements of cash flows, the Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash equivalents.

Securities Held to Maturity
- Bonds, notes and debentures for which there is the positive intent and ability to hold to maturity are reported at cost, adjusted for premiums and discounts that are recognized in interest income using the interest method over the period to
maturity or to call dates.



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|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



Securities Available for Sale - Available-for-sale securities are reported at
fair value and consist of bonds, notes, debentures and certain equity securities not classified as trading securities or as held-to-maturity securities. Unrealized holding gains and losses, net of tax, on available-for-sale securities are reported
as a net amount in a separate component of stockholders equity.

Realized gains and losses on the sale of investment
securities are determined using the specific-identification method. Premiums and discounts are recognized in interest income using the interest method over the period to maturity or to call dates.

Other Than Temporary Impairment - Declines in the fair value of individual held-to-maturity and available-for-sale securities below
cost that are other than temporary are reflected as write-downs of the individual securities to fair value. For securities that we do not expect to sell or it is not more likely than not to be required to sell, the other-than-temporary impairment
(OTTI) is separated into credit and noncredit components. The credit-related OTTI, represented by the expected loss in principal, is recognized in noninterest income, while the noncredit-related OTTI is recognized in the other
comprehensive income (loss) (OCI). Noncredit-related OTTI results from other factors, including increased liquidity spreads. For securities for which there is an expectation to sell, all OTTI is recognized in earnings.

Concentrations of Credit Risk - The Bank grants mortgage, commercial and consumer loans to customers. A substantial portion of the
loan portfolio is represented by loans to borrowers located throughout the Greater Greer area of the upstate of South Carolina, and many of those loans are secured by real estate located in that market area. The ability of our debtors to honor their
contracts is dependent upon the general economic conditions in this area.

Comprehensive Income - Comprehensive income
reflects the change in equity during the year arising from transactions and events other than investments by and distributions to shareholders. It consists of net income plus certain other changes in assets and liabilities that are reported as
separate components of stockholders equity rather than as income or expense. The statement of changes in stockholders equity includes the components of comprehensive income. Accumulated other comprehensive income at December 31,
2009 and 2008 consisted solely of unrealized gains and losses on investment securities.

Loans and Interest Income -
Loans are reported at their outstanding unpaid principal balances adjusted for the allowance for loan losses, net deferred loan fees and any unearned discounts. Interest income is accrued and taken into income based upon the interest method.

The accrual of interest on loans is discontinued when, in the judgment of management, the interest will not be collectible in
the normal course of business. Accrual of interest on such loans is typically discontinued when the loan is 90 days past due or impaired. All interest accrued, but not collected for loans that are placed on non-accrual or charged off, is reversed
against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying



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|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for Loan Losses - The allowance for loan losses is based on managements ongoing evaluation of the loan
portfolio and reflects an amount that, in managements opinion, is adequate to absorb probable losses in the existing portfolio. Additions to the allowance for loan losses are provided by charges to earnings. Loan losses are charged against the
allowance when the ultimate uncollectibility of a loan balance is determined. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a monthly basis by management. The evaluation includes the periodic review of the collectibility of the loans in light of historical experience, the nature
and volume of the loan portfolio, adverse situations that may affect the borrowers ability to repay, estimated value of any underlying collateral, impairment and prevailing economic conditions. This evaluation is inherently subjective as it
requires estimates that are susceptible to significant revision. Management believes that the allowance for loan losses is adequate. While management uses available information to recognize losses on loans, future additions to the allowance may be
necessary based on changes in economic conditions. In addition, regulatory agencies, as an integral part of the examination process, periodically review the allowance for loan losses. Such agencies may require additions to the allowance based on
their judgments about information available to them at the time of their examination.

A loan is considered impaired when,
based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. Factors considered by management in
determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not
classified as impaired. Impairment is measured on a loan by loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loans effective interest rate, the loans obtainable
market price or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller balance
homogeneous loans are collectively evaluated for the necessary allowance. Accordingly, individual consumer and residential loans are not separately evaluated for impairment.

Premises and Equipment - Land is carried at cost. Premises and equipment are stated at cost, net of accumulated depreciation.
Depreciation is charged using the straight-line method over the useful lives (three to thirty-nine years) of the assets. Additions to premises and equipment and major replacements or improvements are capitalized at cost. Maintenance, repairs and
minor replacements are expensed when incurred. Gains and losses on routine dispositions are reflected in current earnings.



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|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



Other Real Estate Owned - Other real estate owned (OREO) is stated at
net realizable value at the time of foreclosure. Market values of OREO are reviewed regularly and valuation allowances are established when the carrying value exceeds the estimated net realizable value. Gains and losses on OREO are recorded at the
time of sale. Costs to maintain the real estate are expensed after acquisition.

Restricted Stock - Restricted stock
consists of non-marketable equity securities including investments in the stock of the Federal Home Loan Bank (FHLB), Community Bankers Bank and Community Financial Services, Inc. These stocks have no ready market and no quoted market
value. Because of the redemption provisions of the restricted stock, the Bank estimates that fair value equals cost for these investments resulting in no impairment at December 31, 2009. Investment in the Federal Home Loan Bank is a condition
of borrowing from the Federal Home Loan Bank. The stock is pledged to collateralize such borrowings. At December 31, 2009 and 2008, the investment in the Federal Home Loan Bank stock was $5,891,500 and $5,333,100, respectively. At
December 31, 2009 and 2008, the investment in Community Bankers Bank was $45,400. The investment in Community Financial Services, Inc. was $0 and $311,414 at December 31, 2009 and December 31, 2008, respectively (See Note 2).
Dividends received on these stocks are included in interest income.

Stock-Based Compensation - Compensation cost for
stock-based payments is measured based on the fair value of the award, which most commonly includes restricted stock (i.e., unvested common stock), stock options, and stock appreciation rights at the grant date and is recognized in the consolidated
financial statements on a straight-line basis over the requisite service period for service-based awards. The fair value of restricted stock is determined based on the price of the Companys common stock on the date of grant. The fair value of
stock options is estimated at the date of grant using a Black-Scholes option pricing model and related assumptions.

Income
Taxes - Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences
between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. In considering whether a valuation allowance is
needed, management considers all available evidence, including the existence of available reversing temporary differences, the ability to generate future taxable income and available tax planning strategies. It is possible that the Companys
management may conclude in future periods that a valuation allowance is necessary for some or all of its deferred tax assets in order to reduce them to a level that is more likely than not to be realized.

Earnings Per Share of Common Stock - Basic and diluted earnings (loss) per share of common stock are presented after giving
retroactive effect to stock splits and dividends. The assumed conversion of stock options using the treasury stock method creates the difference between basic and diluted net income per share. Income (loss) per share is calculated by dividing net
income (loss) available to common shareholders by the weighted average number of common shares outstanding



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|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



for each period presented. Anti-dilutive options totaling 350,347, 370,122 and 149,300
have been excluded from the income (loss) per share calculation for the years ended December 31, 2009, 2008 and 2007, respectively.

Off-Balance Sheet Credit Related Financial Instruments - In the ordinary course of business, the Company has entered into commitments to extend credit, including commitments under commercial
letters of credit and standby letters of credit. Such financial instruments are recorded when they are funded.

Reclassification - Certain amounts in the 2008 and 2007 consolidated financial statements have been reclassified to conform to the 2009 presentation. The reclassifications had no effect on net income (loss) or stockholders
equity as previously reported.

Recent Accounting Pronouncements - The following is a summary of recent authoritative
pronouncements that affect accounting, reporting and disclosure of financial information by the Company:

FASB ASC 820In
April 2009, the FASB issued new guidance impacting FASB ASC 820, Fair Value Measurements and Disclosures. This provides additional guidance on determining fair value when the volume and level of activity for the asset or liability has
significantly decreased and guidance for identifying transactions that are not orderly. This standard affirms that the objective of fair value when the market for an asset is not active is the price that would be received to sell the asset in an
orderly transaction, and clarifies and includes additional factors for determining whether there has been a significant decrease in market activity for an asset when the market for that asset is not active. This standard further requires an entity
to base its conclusion about whether a transaction was not orderly on the weight of the evidence. It also amended previous standards to expand certain disclosure requirements. The standard was effective for interim and annual periods ending after
June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. This standard became effective for the Company on June 15, 2009 and did not have a significant impact on the Companys financial statements.

FASB ASC 320-10In April 2009, the FASB issued new guidance impacting FASB ASC 320-10, InvestmentsDebt and
Equity Securities. The guidance (i) changed existing guidance for determining whether an impairment is other than temporary to debt securities and (ii) replaced the existing requirement that the entitys management assert it has both
the intent and ability to hold an impaired security until recovery with a requirement that management assert: (a) it does not have the intent to sell the security; and (b) it is more likely than not it will not have to sell the security
before recovery of its cost basis. Under these standards, declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses to
the extent the impairment is related to credit losses. The amount of the impairment related to other factors is recognized in other comprehensive income. These standards were effective for interim and annual periods ending after June 15, 2009
and became



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|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



effective for the Company on June 15, 2009 and did not have a significant impact on the Companys financial statements.

FASB ASC 825In April 2009, the FASB issued new guidance impacting FASB ASC 825-10-50, Financial Instruments. This guidance
requires an entity to provide disclosures about fair value of financial instruments in interim financial information at interim reporting periods. Under these standards, a publicly traded company shall include disclosures about the fair value of its
financial instruments whenever it issues summarized financial information for interim reporting periods. In addition, entities must disclose, in the body or in the accompanying notes of its summarized financial information for interim reporting
periods and in its financial statements for annual reporting periods, the fair value of all financial instruments for which it is practicable to estimate that value, whether recognized or not recognized in the statement of financial position. The
new interim disclosures were included in the Companys interim financial statements beginning the second quarter, June 30, 2009.

FASB ASC 105-10In June 2009, the FASB issued FASB ASC 105-10, Generally Accepted Accounting Principles. This guidance establishes the FASB Accounting Standards Codification as the source of
authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles. This standard was effective for
financial statements issued for interim and annual periods ending after September 15, 2009, for most entities. On the effective date, all non-SEC accounting and reporting standards were superseded. The Company adopted this standard for the
quarterly period ended September 30, 2009, as required, and adoption did not have a material impact on the financial statements taken as a whole.

FASB ASC 810In December 2009, the FASB issued FASB ASC 810, Consolidations. This accounting guidance was originally issued in June 2009 and is now included in ASC 810. The guidance amends
the consolidation guidance applicable for variable interest entities. The guidance is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2009, and early adoption is prohibited. We do not
anticipate the adoption of this standard will have a significant impact on the Companys financial statements.



|2. | Investment Securities
|-- | ---------------------

In September 2009, the investment portfolio was analyzed for specific securities to sell that would benefit the Company by realizing gains while maintaining yields and slightly extending average lives through new investment purchases. As a
result of the analysis, on September 17, 2009, securities with book values totaling $11,714,738 were sold of which $5,922,089 were classified as held to maturity. Management determined the remaining pool of investment securities classified as
held to maturity were tainted by this transaction and reclassified the remaining balance to available for sale as required by FASB ASC 320, Investments-Debt and Equity Securities. For the year ended December 31, 2009, unrealized gains of
$166,164 (net of tax) were included in other comprehensive income that related to these transferred securities.



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|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



The amortized cost, gross unrealized gains and losses, and estimated
fair value of investment securities are as follows:



|                                                      |  |                   |             |                      |   |                       |  |                     |         |  |   |            
|----------------------------------------------------- |  | ----------------- | ----------- | -------------------- | - | --------------------- |  | ------------------- | ------- |  | - | -----------
|                                                      |  | December 31, 2009
|                                                      |  | AmortizedCost     |             | GrossUnrealizedGains |   | GrossUnrealizedLosses |  | Estimated FairValue
|Held to maturity:                                     |  |                   |             |                      |   |                       |  |                     |         |  |   |            
|Mortgage backed securities                            |  | $                 |            |                      | $ |                      |  | $                   |        |  | $ |           
|                                                      |  |                   |             |                      |   |                       |  |                     |         |  |   |            
|                                                      |  |                   |             |                     
|Available for sale:                                   |  |                   |             |                      |   |                       |  |                     |         |  |   |            
|United States Government and other agency obligations |  | $                 | 2,013,573   |                      | $ |                      |  | $                   | 25,811  |  | $ | 1,987,762  
|Mortgage-backed securities                            |  | $                 | 98,114,906  |                      | $ | 1,951,486             |  | $                   | 192,527 |  | $ | 99,873,865 
|Municipal securities                                  |  |                   | 22,547,597  |                      |   | 377,788               |  |                     | 138,848 |  |   | 22,786,537 
|Collateralized debt obligation                        |  |                   | 335,844     |                      |   |                      |  |                     |        |  |   | 335,844    
|                                                      |  |                   |             |                      |   |                       |  |                     |         |  |   |            
|                                                      |  |                   |             |                     
|                                                      |  | $                 | 123,011,920 |                      | $ | 2,329,274             |  | $                   | 357,186 |  | $ | 124,984,008
|                                                      |  |                   |             |                      |   |                       |  |                     |         |  |   |            
|                                                      | 
|                                                      |  | December 31, 2008
|                                                      |  | AmortizedCost     |             | GrossUnrealizedGains |   | GrossUnrealizedLosses |  | EstimatedFairValue 
|Held to maturity:                                     |  |                   |             |                      |   |                       |  |                     |         |  |   |            
|Mortgage backed securities                            |  | $                 | 15,977,251  |                      | $ | 190,223               |  | $                   | 2,576   |  | $ | 16,164,898 
|                                                      |  |                   |             |                      |   |                       |  |                     |         |  |   |            
|                                                      |  |                   |             |                     
|Available for sale:                                   |  |                   |             |                      |   |                       |  |                     |         |  |   |            
|Mortgage-backed securities                            |  | $                 | 58,120,920  |                      | $ | 876,366               |  | $                   | 423,120 |  | $ | 58,574,166 
|Municipal securities                                  |  |                   | 20,736,533  |                      |   | 224,462               |  |                     | 371,582 |  |   | 20,589,413 
|Equity securities                                     |  |                   | 265,600     |                      |   |                      |  |                     |        |  |   | 265,600    
|Corporate bonds                                       |  |                   | 506,440     |                      |   |                      |  |                     | 61,440  |  |   | 445,000    
|                                                      |  |                   |             |                      |   |                       |  |                     |         |  |   |            
|                                                      |  |                   |             |                     
|                                                      |  | $                 | 79,629,493  |                      | $ | 1,100,828             |  | $                   | 856,142 |  | $ | 79,874,179 
|                                                      |  |                   |             |                      |   |                       |  |                     |         |  |   |            



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|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



The amortized cost and estimated fair value of investment securities at
December 31, 2009 by contractual maturity for debt securities are shown below. Mortgage backed securities have not been scheduled since expected maturities will differ from contractual maturities because borrowers may have the right to prepay
the obligations.



|                               |  |                    |             |            |   |            
|------------------------------ |  | ------------------ | ----------- | ---------- | - | -----------
|                               |  | Available for Sale
|                               |  | Amortized Cost     |             | Fair Value
|Due in 1 year                  |  | $                  | 114,969     |            | $ | 115,254    
|Over 1 year through 5 years    |  |                    | 1,287,598   |            |   | 1,313,554  
|After 5 years through 10 years |  |                    | 7,950,437   |            |   | 8,044,494  
|Over 10 years                  |  |                    | 15,544,010  |            |   | 15,636,842 
|                               |  |                    |             |            |   |            
|                               |  |                    | 24,897,014  |            |   | 25,110,144 
|Mortgage backed securities     |  |                    | 98,114,906  |            |   | 99,873,864 
|                               |  |                    |             |            |   |            
|                               |  |                   
|Total                          |  | $                  | 123,011,920 |            | $ | 124,984,008

Investment
securities with an aggregate book value of approximately $108,724,000 and $91,817,000 at December 31, 2009 and 2008, respectively, were pledged to secure public deposits and Federal Home Loan Bank borrowings.

The fair value of securities with temporary impairment at December 31, 2009 and 2008 is shown below:



|                                                      |  |                         |            |                    |   |            |  |                  |         |  |   |       
|----------------------------------------------------- |  | ----------------------- | ---------- | ------------------ | - | ---------- |  | ---------------- | ------- |  | - | ------
|                                                      |  | Less Than Twelve Months |            | Over Twelve Months
|2009                                                  |  | Fair Value              |            | UnrealizedLosses   |   | Fair Value |  | UnrealizedLosses
|Description of securities:                            |  |                         |            |                    |   |            |  |                  |         |  |   |       
|United States Government and other agency obligations |  | $                       | 1,987,762  |                    | $ | 25,811     |  | $                |        |  | $ |      
|Mortgage backed securities                            |  |                         | 15,702,486 |                    |   | 192,527    |  |                  |        |  |   |      
|Municipal securities                                  |  |                         | 4,399,202  |                    |   | 93,862     |  |                  | 435,014 |  |   | 44,986
|                                                      |  |                         |            |                    |   |            |  |                  |         |  |   |       
|                                                      |  |                         |            |                   
|Total                                                 |  | $                       | 22,089,450 |                    | $ | 312,200    |  | $                | 435,014 |  | $ | 44,986
|                                                      |  |                         |            |                    |   |            |  |                  |         |  |   |       



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|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



|                           |  |                         |            |                    |   |            |  |                  |           |  |   |        
|-------------------------- |  | ----------------------- | ---------- | ------------------ | - | ---------- |  | ---------------- | --------- |  | - | -------
|                           |  | Less Than Twelve Months |            | Over Twelve Months
|2008                       |  | Fair Value              |            | UnrealizedLosses   |   | Fair Value |  | UnrealizedLosses
|Description of securities: |  |                         |            |                    |   |            |  |                  |           |  |   |        
|Mortgage backed securities |  | $                       | 5,581,710  |                    | $ | 418,096    |  | $                | 1,059,007 |  | $ | 7,600  
|Corporate bonds            |  |                         |           |                    |   |           |  |                  | 445,000   |  |   | 61,440 
|Municipal securities       |  |                         | 4,510,585  |                    |   | 206,768    |  |                  | 3,747,688 |  |   | 164,814
|                           |  |                         |            |                    |   |            |  |                  |           |  |   |        
|                           |  |                         |            |                   
|Total                      |  | $                       | 10,092,295 |                    | $ | 624,864    |  | $                | 5,251,695 |  | $ | 233,854
|                           |  |                         |            |                    |   |            |  |                  |           |  |   |        

Management believes all of the unrealized losses as of
December 31, 2009 and 2008 are temporary and as a result of temporary changes in the market. The number of securities with unrealized losses was sixteen and twenty-four at December 31, 2009 and 2008, respectively. Seven are mortgage-backed
securities and nine are municipal securities at December 31, 2009. Four are mortgage-backed securities, eighteen are municipal securities, one is a collateralized debt obligation and one is a corporate bond at December 31, 2008. The
temporary impairment is due primarily to changes in the short and long term interest rate environment since the purchase of the securities and is not related to credit issues of the issuer. The Bank has sufficient cash and investments showing
unrealized gains and borrowing sources to provide sufficient liquidity to hold the securities until maturity or a recovery of fair value if necessary.

The Company reviews its investment portfolio on a quarterly basis, judging each investment for OTTI. For securities for which there is no expectation to sell or it is not more likely than not to be
required to sell, the OTTI is separated into credit and noncredit components. The credit-related OTTI, represented by the expected loss in principal, is recognized in noninterest income, while the noncredit-related OTTI is recognized in the other
comprehensive income (loss) (OCI). Noncredit-related OTTI results from other factors, including increased liquidity spreads and extension of the security. For securities for which there is an expectation to sell, all OTTI is recognized
in earnings.

The Company owns a collateralized debt obligation for which it would sell prior to fully recovering any
unrealized loss. The security is collateralized by subordinated debt issued by approximately forty-two commercial banks located throughout the United States. This security was analyzed with multiple stress scenarios using conservative assumptions
for underlying collateral defaults, loss severity, and prepayments. The present value of the future cash flows was calculated using 10% as a discount rate. The difference in the present value and the carrying value of the security was the OTTI.
During the years ended December 31, 2009 and 2008 the Company has recognized OTTI of $153,305 and $583,319, respectively, through noninterest income. The security is currently carried at an estimated fair value of $335,844 at December 31,
2009.



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|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



The following table presents more detail on the collateralized debt obligation as of
December 31, 2009 with an original par value of approximately $1,087,000. These details are listed separately due to the inherent level of risk for continued OTTI on this security.



|                               |  |           |  |                     |  |           |         |            |   |                |  |                                 |   |  |   |        
|------------------------------ |  | --------- |  | ------------------- |  | --------- | ------- | ---------- | - | -------------- |  | ------------------------------- | - |  | - | -------
|Description                    |  | Cusip#    |  | CurrentCreditRating |  | BookValue |         | Fair Value |   | UnrealizedLoss |  | PresentValueDiscountedCash Flow
|                               |  |           |  |                     |  |          
|Collateralized debt obligation |  |           |  |                     |  |           |         |            |   |                |  |                                 |   |  |   |        
|Trapeza 2003-5A                |  | 89412RAL9 |  | Ca                  |  | $         | 335,844 |            | $ | 335,844        |  | $                               |  |  | $ | 335,844

The following table
presents a roll-forward of the amount of credit losses on the Companys investment securities recognized in earnings for the year ended December 31, 2009:



|                                                                  |  |   |        
|----------------------------------------------------------------- |  | - | -------
|Beginning balance of credit losses at January 1, 2009             |  | $ |       
|Other-than-temporary impairment credit losses                     |  |   | 153,305
|Ending balance of cumulative credit losses recognized in earnings |  | $ | 153,305
|                                                                  |  |   |        

The Company held $311,414 of restricted stock in
Community Financial Services, Inc., holding company for Silverton Bank, at March 31, 2009. On May 1, 2009 the Office of the Comptroller of the Currency (OCC) closed Silverton Bank after which the Federal Deposit Insurance
Company (FDIC) created a bridge bank, Silverton Bridge Bank, N.A. to take over operations. The restricted stock was determined to have no value. The Company recognized a write-down of $311,414 through noninterest income representing
permanent impairment.



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|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



Gross realized gains, gross realized losses and sale proceeds for held to maturity and
available for sale securities for the years ended December 31 are summarized as follows. These net gains or losses are shown in noninterest income as gain on sale of available for sale securities.



|                                          |  |                             |            |      |   |            |  |   |  
|----------------------------------------- |  | --------------------------- | ---------- | ---- | - | ---------- |  | - | -
|                                          |  | Held to maturity securities
|                                          |  | 2009                        |            | 2008 |   | 2007      
|Gross realized gains                      |  | $                           | 141,760    |      | $ |           |  | $ | 
|Gross realized losses                     |  |                             |           |      |   |           |  |   | 
|                                          |  |                             |            |      |   |            |  |   |  
|                                          |  |                             |           
|Net gain on held to maturity securities   |  | $                           | 141,760    |      | $ |           |  | $ | 
|                                          |  |                             |            |      |   |            |  |   |  
|                                          |  |                             |           
|Sale proceeds                             |  | $                           | 6,063,849  |      | $ |           |  | $ | 
|                                          |  |                             |            |      |   |            |  |   |  
|                                          | 
|                                          |  | Available for sale         
|                                          |  | 2009                        |            | 2008 |   | 2007      
|Gross realized gains                      |  | $                           | 969,489    |      | $ | 202,981    |  | $ | 
|Gross realized losses                     |  |                             | 17,409     |      |   | 2,530      |  |   | 
|                                          |  |                             |            |      |   |            |  |   |  
|                                          |  |                             |           
|Net gain on available for sale securities |  | $                           | 952,080    |      | $ | 200,451    |  | $ | 
|                                          |  |                             |            |      |   |            |  |   |  
|                                          |  |                             |           
|Sale proceeds                             |  | $                           | 33,690,784 |      | $ | 14,764,547 |  | $ | 
|                                          |  |                             |            |      |   |            |  |   |  

In March 2010, management entered into a transaction
whereby approximately $33,500,000 in mortgage backed securities were sold, resulting in net gains of approximately $950,000, and approximately $33,100,000 in mortgage backed securities and municipal bonds were purchased. All securities sold were in
unrealized gain positions as of December 31, 2009.



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---

|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



|3. | Net Loans
|-- | ---------

A
summary of loans outstanding by major classification follows:



|                                                                                       |  |              |             |   |      |   |             |  
|-------------------------------------------------------------------------------------- |  | ------------ | ----------- | - | ---- | - | ----------- | -
|                                                                                       |  | December 31, |            
|                                                                                       |  | 2009         |             |   | 2008 |  
|Real estate                                                                            |  |              |             |   |      |   |             |  
|Construction and land development                                                      |  | $            | 75,536,819  |   |      | $ | 84,967,619  |  
|Owner-occupied commercial                                                              |  |              | 43,904,857  |   |      |   | 46,796,139  |  
|Non owner-occupied commercial                                                          |  |              | 32,694,597  |   |      |   | 24,092,660  |  
|Residential                                                                            |  |              | 85,541,371  |   |      |   | 83,414,831  |  
|Commercial and industrial (non-real estate)                                            |  |              | 58,868,006  |   |      |   | 57,870,827  |  
|Installment loans to individuals for household, family and other personal expenditures |  |              | 8,528,439   |   |      |   | 10,681,056  |  
|All other loans                                                                        |  |              | 2,319,387   |   |      |   | 3,590,900   |  
|                                                                                       |  |              |             |   |      |   |             |  
|                                                                                       |  |              | 307,393,476 |   |      |   | 311,414,032 |  
|Allowance for loan losses                                                              |  |              | (6,315,278  | ) |      |   | (5,127,304  | )
|                                                                                       |  |              |             |   |      |   |             |  
|                                                                                       |  |             
|                                                                                       |  | $            | 301,078,198 |   |      | $ | 306,286,728 |  
|                                                                                       |  |              |             |   |      |   |             |  

The change in the allowance for loan losses is summarized as follows:



|                            |  |      |            |   |      |   |            |      |  |   |            |  
|--------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                            |  | 2009 |            |   | 2008 |   |            | 2007 | 
|Balance, beginning of year  |  | $    | 5,127,304  |   |      | $ | 2,232,703  |      |  | $ | 1,801,287  |  
|Provision charged to income |  |      | 5,185,195  |   |      |   | 4,230,227  |      |  |   | 1,810,883  |  
|Recoveries on loans         |  |      | 59,573     |   |      |   | 49,071     |      |  |   | 142,671    |  
|Loans charged off           |  |      | (4,056,794 | ) |      |   | (1,384,697 | )    |  |   | (1,522,138 | )
|                            |  |      |            |   |      |   |            |      |  |   |            |  
|Balance, end of year        |  | $    | 6,315,278  |   |      | $ | 5,127,304  |      |  | $ | 2,232,703  |  
|                            |  |      |            |   |      |   |            |      |  |   |            |  

Loans totaling approximately $90,000,000 were pledged as collateral for borrowings from the FHLB and Federal
Reserve.

At December 31, 2009 and 2008, non-accrual loans totaled approximately $6,724,738 and $5,067,851, respectively.
The gross interest income that would have been recorded under the original terms of the non-accrual loans amounted to approximately $253,000 in 2009, $505,000 in 2008 and $124,000 in 2007. No interest income was recognized on non-accrual loans in
2009, 2008 or 2007.

Nonperforming loans and impaired loans are defined differently. Nonperforming loans are loans that are
90 days past due and still accruing interest and nonaccrual loans. Impaired loans are loans that, based upon current information and events, it is considered probable that the Company will be unable to collect all amounts of contractual
interest and principal as scheduled in the loan agreement.



(23)







---

|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



Large groups of smaller balance homogenous loans that may meet these criteria are not
evaluated individually for impairment, so they are not included in the impaired loan totals. As a result, some loans may be included in both categories, whereas other loans may only be included in one category.

The Company may elect to formally restructure a loan due to the weakening credit status of a borrower so that the restructuring may
facilitate a repayment plan that minimizes the potential losses that the Company may have to otherwise incur. At December 31, 2009, the Company had approximately $209,000 of restructured loans, all of which except $19,000 was classified as
non-accrual and the remaining were performing. The Company had taken charge-offs of approximately $39,000 on the restructured non-accrual loans as of December 31, 2009. There were no restructured loans at December 31, 2008.

The Bank had impaired loans at December 31, 2009 and 2008 with outstanding balances of $4,965,800 and $6,428,029, respectively. The
average amount of impaired loans outstanding during 2009 and 2008 was $6,682,674 and $4,343,835, respectively. There was no interest income recognized on the impaired loans during 2009, 2008 and 2007. The Bank had taken charge-offs of approximately
$1,070,000 on impaired loans as of December 31, 2009. Valuation allowances of $1,039,231 and $833,075 were allocated to impaired loans of $4,026,923 and $5,494,950 at December 31, 2009 and 2008, respectively. The remaining balance of
impaired loans at each date had no corresponding valuation allowance.



|4. | Premises and Equipment
|-- | ----------------------

Premises and equipment are summarized as follows:



|                                     |  |              |            |   |      |   |            |  
|------------------------------------ |  | ------------ | ---------- | - | ---- | - | ---------- | -
|                                     |  | December 31, |           
|                                     |  | 2009         |            |   | 2008 |  
|Land                                 |  | $            | 1,460,177  |   |      | $ | 1,460,177  |  
|Buildings and improvements           |  |              | 5,061,860  |   |      |   | 5,061,860  |  
|Equipment                            |  |              | 1,651,262  |   |      |   | 1,619,181  |  
|Furniture and fixtures               |  |              | 844,944    |   |      |   | 846,404    |  
|Electronic data processing equipment |  |              | 3,545,832  |   |      |   | 3,486,963  |  
|                                     |  |              |            |   |      |   |            |  
|                                     |  |              | 12,564,075 |   |      |   | 12,474,585 |  
|Less accumulated depreciation        |  |              | (6,612,403 | ) |      |   | (6,179,822 | )
|                                     |  |              |            |   |      |   |            |  
|                                     |  |             
|                                     |  | $            | 5,951,672  |   |      | $ | 6,294,763  |  
|                                     |  |              |            |   |      |   |            |  

On March 16, 2010, the Company sold a parcel of land with a recorded cost of $560,000, which had
previously been held for future expansion, for $590,000 before selling costs. The sale had an insignificant impact on the Companys financial statements and will meet short term Holding Company liquidity needs.



(24)







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|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



|5. | Other Assets
|-- | ------------

Other assets at December 31 consist of the following:



|                                  |  |      |            |      |   |          
|--------------------------------- |  | ---- | ---------- | ---- | - | ---------
|                                  |  | 2009 |            | 2008
|Prepaid expenses                  |  | $    | 428,550    |      | $ | 352,604  
|Prepaid FDIC insurance assessment |  |      | 2,032,903  |      |   |         
|Bank owned life insurance         |  |      | 6,970,221  |      |   | 6,630,245
|Income tax receivable             |  |      | 2,193,994  |      |   | 730,725  
|Other                             |  |      | 560,655    |      |   | 220,832  
|                                  |  |      |            |      |   |          
|                                  |  |     
|                                  |  | $    | 12,186,323 |      | $ | 7,934,406
|                                  |  |      |            |      |   |          



|6. | Time Deposits
|-- | -------------

At
December 31, 2009 and 2008, time deposits of $100,000 or more totaled approximately $94,108,000 and $109,647,000, respectively. The Bank had brokered deposits of approximately $30,000,000 at December 31, 2009 and $49,000,000 at
December 31, 2008.

Contractual maturities at December 31, 2009 of time deposits are summarized as follows:



|                  |  |   |            
|----------------- |  | - | -----------
|12 months or less |  | $ | 126,716,919
|1-3 years         |  |   | 48,957,790 
|                  |  |   |            
|                  | 
|                  |  | $ | 175,674,709
|                  |  |   |            



|7. | Short Term Borrowings
|-- | ---------------------

At December 31, 2009, short term borrowings consisted of federal funds and federal reserve borrowings. The outstanding balances and related information for these borrowings are summarized as follows:



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---

|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



|                                        |  |                         |           |   |                            |   |           |      |  |   |           |   |  |      |            |   |      |   |      |   |  |   |      |  
|--------------------------------------- |  | ----------------------- | --------- | - | -------------------------- | - | --------- | ---- |  | - | --------- | - |  | ---- | ---------- | - | ---- | - | ---- | - |  | - | ---- | -
|                                        |  | Federal Funds Purchased |           |   | Federal Reserve Borrowings |  
|                                        |  | 2009                    |           |   | 2008                       |   |           | 2007 |  |   | 2009      |   |  | 2008 |            |   | 2007 |  
|Outstanding balance at December 31      |  | $                       | 3,992,931 |   |                            | $ | 4,000,000 |      |  | $ | 3,004,000 |   |  | $    | 10,000,000 |   |      | $ |     |   |  | $ |     |  
|Weighted average rate                   |  |                         | .36       | % |                            |   | 1.09      | %    |  |   | 4.60      | % |  |      | .25        | % |      |   | 0.00 | % |  |   | 0.00 | %
|Maximum month-end outstanding           |  | $                       | 3,992,931 |   |                            | $ | 6,994,000 |      |  | $ | 4,781,000 |   |  | $    | 18,000,000 |   |      | $ |     |   |  | $ |     |  
|Approximate average amounts outstanding |  | $                       | 1,277,000 |   |                            | $ | 2,995,000 |      |  | $ | 1,175,000 |   |  | $    | 10,593,000 |   |      | $ |     |   |  | $ |     |  
|Weighted average rate for the year      |  |                         | .85       | % |                            |   | 2.76      | %    |  |   | 4.18      | % |  |      | .26        | % |      |   | 0.00 | % |  |   | 0.00 | %

Federal funds purchased
generally mature within one to thirty days from the transaction date.



|8. | Long Term Borrowings
|-- | --------------------

At December 31, 2009, long term borrowings consisted of fixed and variable rate FHLB advances and repurchase agreements. The outstanding balances and related information for these borrowings are summarized as follows:



|                              |  |               |             |                       |   |             |  |      |            |  |   |           
|----------------------------- |  | ------------- | ----------- | --------------------- | - | ----------- |  | ---- | ---------- |  | - | ----------
|                              |  | FHLB Advances |             | Repurchase Agreements
|                              |  | 2009          |             | 2008                  |   | 2009        |  | 2008
|Outstanding balance           |  | $             | 106,500,000 |                       | $ | 103,000,000 |  | $    | 15,000,000 |  | $ | 15,000,000
|Stated interest rate or range |  |               | .25%-5.92%  |                       |   | .48%-5.92%  |  |      | 3.60%      |  |   | 3.60%     

The Bank has pledged
as collateral FHLB stock, certain investment securities and has entered into a blanket collateral agreement whereby qualifying mortgages with a book value of at least 135 percent of total advances, free of other encumbrances, will be maintained.

The contractual maturities at December 31, 2009, are as follows:



|           |  |   |            
|---------- |  | - | -----------
|2010       |  | $ | 22,000,000 
|2011       |  |   | 37,000,000 
|2012       |  |   | 16,500,000 
|2013       |  |   | 9,000,000  
|2014       |  |   | 5,000,000  
|Thereafter |  |   | 32,000,000 
|           |  |   |            
|           | 
|           |  | $ | 121,500,000
|           |  |   |            



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---

|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



In October 2004, the Company formed Greer Capital Trust I (Trust I). Trust I
issued $6,000,000 of variable rate trust preferred securities as part of a pooled offering of such securities. The Company issued $6,186,000 junior subordinated debentures to the Trust I in exchange for the proceeds of the offering, which debentures
represent the sole asset of Trust I. The debentures pay interest quarterly at the three-month LIBOR plus 2.20% adjusted quarterly, and mature in October 2034 with an option to call the debt in December 2011 at par.

In December 2006, the Company formed Greer Capital Trust II (Trust II). Trust II issued $5,000,000 of variable rate trust
preferred securities as part of a pooled offering of such securities. The Company issued $5,155,000 junior subordinated debentures to the Trust II in exchange for the proceeds of the offering, which debentures represent the sole asset of Trust II.
The debentures pay interest quarterly at the three-month LIBOR plus 1.73% adjusted quarterly, and mature in December 2036 with an option to call the debt in December 2011 at par.

In accordance with ASC 810, Trust I and Trust II (the Trusts) are not consolidated with the Company. Accordingly, the Company
does not report the securities issued by the Trusts as liabilities, and instead reports as liabilities the junior subordinated debentures issued by the Company and held by each Trust. However, the Company has fully and unconditionally guaranteed the
repayment of the variable rate trust preferred securities. These trust preferred securities currently qualify as Tier 1 capital for regulatory capital requirements of the Company.



|9. | Unused Lines of Credit
|-- | ----------------------

As of December 31, 2009, the Bank had an unused short-term line of credit to purchase federal funds from correspondent banks totaling approximately $11,500,000 and other unused short term lines of credit from other financial
institutions totaling approximately $26,700,000.

The Bank has the ability to borrow approximately an additional $24,000,000
from the Federal Home Loan Bank. The borrowings are available by pledging collateral and purchasing additional stock in the Federal Home Loan Bank.



|10. | Off-Balance Sheet Activities, Commitments and Contingencies
|--- | -----------------------------------------------------------

In the normal course of business, the Bank is a party to financial instruments with off-balance sheet risk. These financial instruments include commitments to extend credit and standby letters of credit.
Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the accompanying balance sheets. The contract amounts of those instruments reflect the extent of involvement in particular
classes of financial instruments. Management uses the same credit policies in making commitments as for making loans. Commitments to extend credit in the future represent financial instruments involving credit risk.



(27)







---

|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



A summary of commitments at December 31, 2009 and 2008 is as follows:



|                             |  |      |            |      |   |           
|---------------------------- |  | ---- | ---------- | ---- | - | ----------
|                             |  | 2009 |            | 2008
|Commitments to extend credit |  | $    | 50,525,000 |      | $ | 66,107,000
|Standby letters of credit    |  |      | 2,635,000  |      |   | 2,157,000 
|                             |  |      |            |      |   |           
|                             |  |     
|                             |  | $    | 53,160,000 |      | $ | 68,264,000
|                             |  |      |            |      |   |           

Commitments to extend credit are agreements to lend as
long as there is no violation of the conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Management evaluates each customers creditworthiness on a case-by-case basis. The amount of collateral, if any, obtained upon
extension of credit is based on our credit evaluation.

Standby letters of credit are conditional commitments issued by the
Bank to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers. Collateral held varies as specified above and is required in instances that management deems necessary. Newly issued or modified guarantees are to be recorded on the Companys balance sheet at
fair value at inception. As of December 31, 2009 and 2008, no liability has been recorded related to these guarantees.

Concentrations of Credit Risk - Substantially all loans and commitments to extend credit have been granted to customers in the Banks market area and such customers are generally depositors of the Bank. The concentrations of
credit by type of loan are set forth in Note 3. The distribution of commitments to extend credit approximates the distribution of loans outstanding. The primary focus is toward consumer and small business transactions, and accordingly, there are not
a significant number of credits to any single borrower or group of related borrowers in excess of $2,500,000.

From time to
time, the Bank has cash and cash equivalents on deposit with financial institutions that exceed federally insured limits.

Litigation - The Company is a party to litigation and claims arising in the normal course of business. After consultation with legal counsel, management believes that the liabilities, if any, arising from such litigation and claims
will not be material to the Companys financial position.



(28)







---

|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



|11. | Preferred Stock
|--- | ---------------

On January 30, 2009, Greer Bancshares Incorporated issued 9,993 shares of cumulative perpetual preferred stock (Series SP Preferred Stock), no par value having a liquidation amount equal to $1,000 per share, to the U.S.
Treasury with an attached warrant to purchase an additional 500 shares of cumulative perpetual preferred stock, initial price $.01 per share having a liquidation amount equal to $1,000 per share, for an aggregate price of $9,993,000. The warrants
were exercised immediately resulting in the issuance of 500 shares of cumulative perpetual preferred stock (Series WP Preferred Stock) to the U.S. Treasury.

Series SP Preferred Stock is non-voting and pays cumulative dividends quarterly at a rate of 5% per annum for the first five years and 9% per annum thereafter. The preferred shares are
redeemable at the option of the Company under certain circumstances during the first three years and only thereafter without restriction.

The terms of the Series WP Preferred Stock are substantially identical to those of the Series SP Preferred Stock. Differences include the payment under the Series WP Preferred Stock of cumulative
dividends at a rate of 9% per year. In addition such stock may not be redeemed while shares of the Series SP Preferred Stock are outstanding.

No dividends may be paid on common stock unless dividends have been paid on the senior preferred stock. Also, benefit plans and certain employment arrangements were modified to comply with the issuance of
the cumulative perpetual preferred stock as required by the U.S. Treasury.



|12. | Benefit Plans
|--- | -------------

Defined Contribution Plan - The Bank has a 401(k) Profit Sharing Plan for the benefit of employees. Subject to annual approval by the Board of Directors, employee contributions of up to 5% of compensation are matched in accordance
with plan guidelines. Matching contributions of $160,812, $161,295 and $152,356 were charged to expense during 2009, 2008 and 2007, respectively.

Stock Option Plan - The Company adopted ASC 718 using the modified prospective application as permitted. Under this application, the Company is required to record compensation expense for the fair
value of all awards granted after the date of adoption and for the unvested portion of previously granted awards that remain outstanding at the date of adoption.

Effective April 27, 2006, the Directors Incentive Stock Option Plan (the Directors Incentive Plan) was terminated. Outstanding options issued under the former Directors
Incentive Plan will be honored in accordance with the terms and conditions in effect at the time they were granted, except that they are not subject to reissuance. At December 31, 2009, there were 48,500 options outstanding that had been issued
under the terminated Directors Incentive Plan.



(29)







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|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



Effective April 28, 2005, the Greer State Bank Employee Incentive Stock Option Plan
(the Plan) was terminated. Outstanding options issued under the former Plan will be honored in accordance with the terms and conditions in effect at the time they were granted, except that they are not subject to reissuance. At
December 31, 2009, there were 11,352 options outstanding that had been issued under the terminated Plan.

Effective
April 28, 2005, the Company adopted the 2005 Equity Incentive Plan (the Incentive Plan). The Incentive Plan provides for the granting of statutory incentive stock options within the meaning of Section 422 of the Internal
Revenue Code as well as non-statutory stock options. The Incentive Plan authorized the initial issuance of options and stock awards to acquire up to 250,000 shares of common stock of the Company. The Incentive Plan provides that beginning with the
annual meeting of the shareholders in 2006 and continuing for the next eight annual meetings, the aggregate number of shares of common stock that can be issued under the Incentive Plan will automatically be increased by a number of shares equal to
the least of (1) 2% of the diluted shares outstanding, (2) 20,000 shares or (3) a lesser number of shares determined by the Compensation Committee of the Board. Diluted shares outstanding means the sum of (a) the
number of shares of common stock outstanding on the date of the applicable annual meeting of shareholders, (b) the number of shares of common stock issuable on such date assuming all outstanding shares of preferred stock and convertible notes
are then converted, and (c) the additional number of shares of common stock that would be outstanding as a result of any outstanding options or warrants during the fiscal year of such meeting using the treasury stock method. In 2009 the number
of available stock awards under this plan increased by 20,000.

Under the Incentive Plan, awards may be granted for a term of
up to ten years from the effective date of grant. The Compensation Committee has the discretion as to the exercise date of any awards granted. The per-share exercise price of incentive stock options may not be less than the fair value of a share of
common stock on the date the option is granted. The per-share exercise price of nonqualified stock options may not be less than 85% of the fair value of a share on the effective date of grant. Any options that expire unexercised or are canceled
become available for reissuance. No awards may be granted more than ten years after the date the Incentive Plan was approved by the Board of Directors, which was September 24, 2004. At December 31, 2009, the Company had 35,800 awards
available for grant under the Incentive Plan.

Vesting under the plan is discretionary based upon a determination by the
Compensation Committee.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option
pricing model. The risk-free interest rate is based on the U.S. Treasury rate for the expected life at the time of grant. Volatility is based on the average long-term implied volatilities of the Company using historical volatility as a guide. The
expected life is based on previous option exercise experience. The following table illustrates the assumptions for the Black-Scholes model used in determining the fair value of options granted to employees for the years ended December 31, 2009,
2008 and 2007, respectively. The weighted-average grant-date fair value of



(30)







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|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



options granted during the years ended December 31, 2009, 2008 and 2007 was $1.70, $1.69 and $2.62, respectively.



|                        |  |       |   |  |       |   |  |      |  
|----------------------- |  | ----- | - |  | ----- | - |  | ---- | -
|                        |  | 2009  |   |  | 2008  |   |  | 2007 |  
|                        |  |       |  
|Dividend yield          |  | 0.00  | % |  | 5.21  | % |  | 3.10 | %
|Risk-free interest rate |  | 3.13  | % |  | 3.47  | % |  | 4.60 | %
|Volatility              |  | 22.50 | % |  | 22.54 | % |  | 9.38 | %
|Expected life (years)   |  | 7.5   |   |  | 7.5   |   |  | 7.5  |  

A summary
of option activity under the stock option plans discussed above as of December 31, 2009, and changes during the year ended December 31, 2009, is presented below:



|                             |  |                  |   |  |                    |   |  |                     |             |                              |   |      
|---------------------------- |  | ---------------- | - |  | ------------------ | - |  | ------------------- | ----------- | ---------------------------- | - | -----
|                             |  | OptionsAvailable |   |  | OptionsOutstanding |   |  | ExercisePrice Range |             | WeightedAverageExercisePrice
|                             |  |                  |   | 
|Balance at December 31, 2008 |  | 2,800            |   |  | 370,122            |   |  | $                   | 9.58-27.50  |                              | $ | 17.87
|                             |  |                  |   | 
|Exercised                    |  |                 |   |  |                   |   |  |                     |            |                              |   |     
|Authorized                   |  | 20,000           |   |  |                   |   |  |                     |            |                              |   |     
|Forfeited                    |  | 22,000           |   |  | (28,775            | ) |  |                     | 11.75-27.50 |                              |   | 17.39
|Granted                      |  | (9,000           | ) |  | 9,000              |   |  |                     | 5.05        |                              |   | 5.05 
|                             |  |                  |   |  |                    |   |  |                     |             |                              |   |      
|                             |  |                  |   | 
|Balance at December 31, 2009 |  | 35,800           |   |  | 350,347            |   |  | $                   | 5.05-27.50  |                              | $ | 17.58
|                             |  |                  |   |  |                    |   |  |                     |             |                              |   |      

The following table sets forth the exercise prices,
the number of options outstanding and the number of options exercisable at December 31, 2009:



|                         |  |                             |  |                              |       |                                                |      |                             |         |                              |   |      
|------------------------ |  | --------------------------- |  | ---------------------------- | ----- | ---------------------------------------------- | ---- | --------------------------- | ------- | ---------------------------- | - | -----
|                         |  | Options Outstanding         |  | Options Exercisable         
|Range of Exercise Prices |  | Number ofOptionsOutstanding |  | WeightedAverageExercisePrice |       | WeightedAverageContractualLifeRemaining(Years) |      | Number ofOptionsExercisable |         | WeightedAverageExercisePrice
|                         |  |                             |  |                              |      
|$5.05-$12.58             |  | 57,000                      |  | $                            | 10.64 |                                                | 8.49 |                             | 9,600   |                              | $ | 11.69
|$14.50-$18.67            |  | 174,547                     |  |                              | 16.02 |                                                | 4.46 |                             | 139,206 |                              |   | 16.15
|$19.30-$27.50            |  | 118,800                     |  |                              | 23.20 |                                                | 6.39 |                             | 76,600  |                              |   | 23.89
|                         |  |                             |  |                              |       |                                                |      |                             |         |                              |   |      
|                         |  |                             |  |                              |      
|Total/Wtd                |  |                             |  |                              |       |                                                |      |                             |         |                              |   |      
|Avg                      |  | 350,347                     |  | $                            | 17.58 |                                                | 5.29 |                             | 225,406 |                              | $ | 18.59
|                         |  |                             |  |                              |       |                                                |      |                             |         |                              |   |      



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|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



The following table sets forth information pertaining to the Companys exercisable
options and options expected to vest:



|                                                 |  |                  |     
|------------------------------------------------ |  | ---------------- | ----
|                                                 |  | December 31,2009
|                                                 | 
|Aggregate intrinsic value of outstanding options |  | $                |    
|Aggregate intrinsic value of exercisable options |  | $                |    
|Weighted average remaining life of all options   |  |                  | 6.23

The total intrinsic
value of options exercised during the twelve month period ended December 31, 2008 and 2007 was approximately $18,000 and $107,000, respectively. No options were exercised in 2009.

As of December 31, 2009, there was approximately $243,000 of total unrecognized compensation cost related to non-vested share-based
compensation arrangements granted under the Companys stock option plans. That cost is expected to be recognized over a weighted-average period of 3.02 years. The current total fair value of shares vested during the years ended
December 31, 2009, 2008 and 2007 was approximately $127,000, $133,000 and $165,000, respectively.

Non-Qualified
Plans - The Company has established certain non-qualified benefit plans for certain key executive officers and directors. The benefits under the plans are computed and payable under certain terms as specified in each agreement. The estimated
present value of future benefits to be paid is being accrued over the period from the effective date of each agreement until the initial payments are made at the normal retirement dates. Compensation expense related to these plans of approximately
$105,000, $112,000 and $231,000 for the years ended December 31, 2009, 2008 and 2007, respectively. The total liability under these plans was approximately $1,169,000 at December 31, 2009 and is included in other liabilities in the
accompanying consolidated balance sheets.

The Bank has purchased and is the owner and beneficiary of certain life insurance
policies that will be used to finance the benefits under these agreements. Income earned on the life insurance policies, which is exempt from federal and state income tax, of approximately $290,000, $252,000 and $234,000 for the years ended
December 31, 2009, 2008 and 2007, respectively, is included in other income.



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|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



|13. | Income Taxes
|--- | ------------

The
components of the provision for income taxes are as follows:



|                                              |  |      |            |   |      |   |            |      |  |   |           |  
|--------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | --------- | -
|                                              |  | 2009 |            |   | 2008 |   |            | 2007 | 
|Current income tax expense (benefit):         |  |      |            |   |      |   |            |      |  |   |           |  
|State                                         |  | $    |           |   |      | $ |           |      |  | $ | 142,900   |  
|Federal                                       |  |      | (1,273,532 | ) |      |   | 302,451    |      |  |   | 977,205   |  
|                                              |  |      |            |   |      |   |            |      |  |   |           |  
|                                              |  |      | (1,273,532 | ) |      |   | 302,451    |      |  |   | 1,120,105 |  
|                                              |  |      |           
|Deferred federal income tax expense (benefit) |  |      | 637,373    |   |      |   | (3,723,259 | )    |  |   | (171,537  | )
|                                              |  |      |            |   |      |   |            |      |  |   |           |  
|                                              |  |      |           
|Provision (benefit) for income taxes          |  | $    | (636,159   | ) |      | $ | (3,420,808 | )    |  | $ | 948,568   |  
|                                              |  |      |            |   |      |   |            |      |  |   |           |  

The provision for income taxes differs from the amount of income tax computed at the federal statutory rate
due to the following:



|                                     |  |        |            |   |                            |       |    |        |   |            |                            |  |       |        |  |   |                            |   |  |      |  
|------------------------------------ |  | ------ | ---------- | - | -------------------------- | ----- | -- | ------ | - | ---------- | -------------------------- |  | ----- | ------ |  | - | -------------------------- | - |  | ---- | -
|                                     |  | 2009   |            |   | 2008                       |       |    | 2007   |  
|                                     |  | Amount |            |   | Percent ofIncomeBefore Tax |       |    | Amount |   |            | Percent ofIncomeBefore Tax |  |       | Amount |  |   | Percent ofIncomeBefore Tax |  
|Income (loss) before income taxes    |  | $      | (1,147,548 | ) |                            |       |    |        | $ | (8,860,912 | )                          |  |       |        |  | $ | 3,554,193                  |   |  |      |  
|                                     |  |        |            |   |                            |      
|Tax (benefit) at statutory rate      |  | $      | (390,166   | ) |                            | (34.0 | )% |        | $ | (3,012,710 | )                          |  | (34.0 | )%     |  | $ | 1,208,000                  |   |  | 34.0 | %
|Tax effect of:                       |  |        |            |   |                            |       |    |        |   |            |                            |  |       |        |  |   |                            |   |  |      |  
|Federally tax exempt interest income |  |        | (345,412   | ) |                            | (30.1 | )  |        |   | (330,480   | )                          |  | (3.7  | )      |  |   | (296,000                   | ) |  | (8.4 | )
|State taxes, net of federal benefit  |  |        |           |   |                            |      |    |        |   |           |                            |  |      |        |  |   | 94,000                     |   |  | 1.9  |  
|Restricted stock valuation allowance |  |        | 106,000    |   |                            | 9.2   |    |        |   |           |                            |  |      |        |  |   |                           |   |  | 1.9  |  
|Othernet                            |  |        | (6,581     | ) |                            | (0.6  | )  |        |   | (77,618    | )                          |  | (0.9  | )      |  |   | (57,432                    | ) |  | (.8  | )
|                                     |  |        |            |   |                            |       |    |        |   |            |                            |  |       |        |  |   |                            |   |  |      |  
|                                     |  |        |            |   |                            |      
|Income tax provision (benefit)       |  | $      | (636,159   | ) |                            | (55.4 | )% |        | $ | (3,420,808 | )                          |  | (38.6 | )%     |  | $ | 948,568                    |   |  | 26.7 | %
|                                     |  |        |            |   |                            |       |    |        |   |            |                            |  |       |        |  |   |                            |   |  |      |  



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|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



Deferred tax assets consist of the following:



|                                     |  |              |           |      |   |          
|------------------------------------ |  | ------------ | --------- | ---- | - | ---------
|                                     |  | December 31,
|                                     |  | 2009         |           | 2008
|Deferred tax assets:                 |  |              |           |      |   |          
|Allowance for loan losses            |  | $            | 1,581,000 |      | $ | 1,421,000
|Other than temporary impairment      |  |              | 356,000   |      |   | 2,845,000
|Deferred compensation                |  |              | 916,000   |      |   | 879,000  
|Net operating loss carryforward      |  |              | 1,522,000 |      |   |         
|Other                                |  |              | 276,306   |      |   | 22,679   
|                                     |  |              |           |      |   |          
|                                     |  |              | 4,651,306 |      |   | 5,167,679
|                                     |  |              |           |      |   |          
|Deferred tax liabilities:            |  |              |           |      |   |          
|Depreciation                         |  |              | 241,000   |      |   | 235,000  
|Prepaid expenses                     |  |              | 104,000   |      |   | 95,000   
|Restricted stock valuation allowance |  |              | 106,000   |      |   |         
|Investment securities                |  |              | 759,254   |      |   | 94,205   
|                                     |  |              |           |      |   |          
|                                     |  |              | 1,210,254 |      |   | 424,205  
|                                     |  |              |           |      |   |          
|                                     |  |             
|Net deferred tax asset               |  | $            | 3,441,052 |      | $ | 4,743,474
|                                     |  |              |           |      |   |          

Net operating loss carryforwards are for federal
income tax purposes and expire on December 31, 2029.

GAAP requires companies to assess whether a valuation allowance
should be established against their deferred tax assets based on the consideration of all available evidence using a more likely than not standard. As part of this assessment, significant weight is given to evidence that can be
objectively verified. The analysis performed as of December 31, 2009 determined that a valuation allowance was needed at this time of $106,000 relating to the restricted stock impairment loss. The deferred tax assets will be analyzed quarterly
for changes affecting realization. There can be no assurance that increased valuation allowances will not be necessary in future periods.



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|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



|14. | Other Noninterest Income
|--- | ------------------------

Other noninterest income for the years ended December 31, 2009, 2008 and 2007 consists of the following:



|                                    |  |      |           |      |   |           |  |   |          
|----------------------------------- |  | ---- | --------- | ---- | - | --------- |  | - | ---------
|                                    |  | 2009 |           | 2008 |   | 2007     
|Earnings on life insurance policies |  | $    | 289,976   |      | $ | 251,641   |  | $ | 233,943  
|Card service income                 |  |      | 403,571   |      |   | 363,205   |  |   | 318,653  
|Safe deposit box rental             |  |      | 22,602    |      |   | 21,369    |  |   | 25,953   
|Investment services                 |  |      | 597,263   |      |   | 835,649   |  |   | 698,173  
|Other fees                          |  |      | 409,923   |      |   | 510,024   |  |   | 317,239  
|                                    |  |      |           |      |   |           |  |   |          
|                                    |  |      |          
|                                    |  | $    | 1,723,335 |      | $ | 1,981,888 |  | $ | 1,593,961
|                                    |  |      |           |      |   |           |  |   |          



|15. | Other Noninterest Expenses
|--- | --------------------------

Other noninterest expense for the years ended December 31 consists of the following:



|                           |  |      |           |      |   |           |  |   |          
|-------------------------- |  | ---- | --------- | ---- | - | --------- |  | - | ---------
|                           |  | 2009 |           | 2008 |   | 2007     
|Loan department expenses   |  | $    | 154,997   |      | $ | 129,800   |  | $ | 141,339  
|General operating expenses |  |      | 569,462   |      |   | 521,042   |  |   | 391,516  
|Educational expenses       |  |      | 48,024    |      |   | 99,011    |  |   | 87,559   
|Credit card expense        |  |      | 179,156   |      |   | 145,520   |  |   | 133,347  
|Travel and entertainment   |  |      | 68,366    |      |   | 153,708   |  |   | 116,617  
|Telephone expense          |  |      | 129,656   |      |   | 132,831   |  |   | 125,280  
|Internet banking expense   |  |      | 155,875   |      |   | 143,469   |  |   | 130,425  
|Other                      |  |      | 89,233    |      |   | 328,141   |  |   | 114,099  
|                           |  |      |           |      |   |           |  |   |          
|                           |  |      |          
|                           |  | $    | 1,394,769 |      | $ | 1,653,522 |  | $ | 1,240,182
|                           |  |      |           |      |   |           |  |   |          



|16. | Transactions with Directors and Executive Officers
|--- | --------------------------------------------------

Our directors and executive officers are customers of and had transactions with the Bank in the ordinary course of business. Included in such transactions are outstanding loans and commitments, all of
which were made on comparable terms, including interest rate and collateral, as those prevailing at the time for our other customers and did not involve more than normal risk of collectibility or present other unfavorable features.

Aggregate loan transactions with these related parties are as follows:



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|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



|                   |  |      |            |   |      |   |           |  
|------------------ |  | ---- | ---------- | - | ---- | - | --------- | -
|                   |  | 2009 |            |   | 2008 |  
|Balance, beginning |  | $    | 4,220,835  |   |      | $ | 3,713,755 |  
|Advances           |  |      | 1,487,021  |   |      |   | 1,265,429 |  
|Repayments         |  |      | (1,826,019 | ) |      |   | (646,349  | )
|Other              |  |      | (5,791     | ) |      |   | (112,000  | )
|                   |  |      |            |   |      |   |           |  
|                   |  |     
|Balance, ending    |  | $    | 3,876,046  |   |      | $ | 4,220,835 |  
|                   |  |      |            |   |      |   |           |  

Other includes closed or reduced lines of credit.

Included in the balances outstanding are directors and executive officers available unused lines of credit totaling approximately
$1,090,000 and $1,712,000 at December 31, 2009 and 2008, respectively.

The Company has an unfunded Deferred Compensation
Plan which allows electing directors to annually defer directors fees, which are then eligible for various future payment plans as chosen by the director. The Deferred Compensation Plan, which was revised effective January 1, 2007,
provides for a two-tiered deferred compensation system as follows:



|        |  |           |  |                       |  |               |  |                   |   |  |                     |  
|------- |  | --------- |  | --------------------- |  | ------------- |  | ----------------- | - |  | ------------------- | -
|        |  | TierLevel |  | MaximumDeferralAmount |  | Interest Rate |  | InterestRateFloor |   |  | InterestRateCeiling |  
|(1) (2) |  | One       |  | $9,000                |  | 80% ROAE      |  | 5                 | % |  | 10                  | %
|(2)     |  | Two       |  | > $9,000              |  | Prime - 3%    |  | None              |   |  | None                |  



| | (1) | ROAE represents return on average equity of the Company for the previous year.
| | --- | ------------------------------------------------------------------------------

| | (2) | Upon attaining age 65, a director may no longer defer any fees. Fees previously deferred will continue to earn interest after age 65 as provided for by the respective
tiers.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

All fees deferred prior to January 1, 2007 are treated as Tier 1. Net deferrals, including interest,
under the Plan during 2009, 2008 and 2007, totaled approximately $11,000, $167,000 and $183,000, respectively. The balance of total deferred director fees included in other liabilities was $1,416,347 and $1,405,623 at December 31, 2009 and
2008, respectively.



|17. | Employment Agreement
|--- | --------------------

The Company has entered into employment agreements with certain key executive officers to ensure a stable and competent management base. The agreements provide for benefits as spelled out in the contracts and can be terminated by the Board
of Directors with 180 days written notice, or can be terminated immediately for cause. In the event of a change in control of Company, as outlined in the agreements, the acquirer will be bound to the terms of the contracts.



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|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



|18. | Regulatory Matters
|--- | ------------------

Dividends - The Banks ability to pay cash dividends to the Holding Company is restricted by state banking regulations to the amount of the Banks retained earnings and statutory capital and other regulatory requirements.
At December 31, 2009, the Banks retained earnings were approximately $4,596,000.

Capital Requirements - The
Holding Company and Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions
by regulators that, if undertaken, could have a direct material effect on the 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 assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Capital amounts and classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require maintaining minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. Management believes, as of December 31, 2009, that all capital adequacy
requirements are met to which the Holding Company and Bank are subject.



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---

|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



As of December 31, 2009, the most recent notification from the Federal Deposit
Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed that category. The actual
capital amounts (in thousands) and ratios and minimum regulatory amounts (in thousands) and ratios are presents as follows:



|                                                  |  |         |        |       |                              |   |        |                                                               |        |  |     |        |  |       |        |  |      |  
|------------------------------------------------- |  | ------- | ------ | ----- | ---------------------------- | - | ------ | ------------------------------------------------------------- | ------ |  | --- | ------ |  | ----- | ------ |  | ---- | -
|Bank:                                             |  | Actual  |        |       | For CapitalAdequacy Purposes |   |        | To Be WellCapitalized UnderPrompt CorrectiveAction Provisions |       
|                                                  |  | Minimum |        |       | Minimum                      |  
|                                                  |  | Amount  |        | Ratio |                              |   | Amount |                                                               | Ratio  |  |     | Amount |  | Ratio |       
|As of December 31, 2009                           |  |         |        |       |                              |   |        |                                                               |        |  |     |        |  |       |        |  |      |  
|Total risk-based capital(to risk-weighted assets) |  | $       | 39,985 |       | 11.5                         | % |        | $                                                             | 27,824 |  | 8.0 | %      |  | $     | 34,780 |  | 10.0 | %
|Tier 1 capital(to risk-weighted assets)           |  | $       | 35,614 |       | 10.2                         | % |        | $                                                             | 13,912 |  | 4.0 | %      |  | $     | 20,867 |  | 6.0  | %
|Tier 1 capital(to average assets)                 |  | $       | 35,614 |       | 7.6                          | % |        | $                                                             | 18,809 |  | 4.0 | %      |  | $     | 23,511 |  | 5.0  | %
|                                                  |  |         |        |       |                              |  
|As of December 31, 2008                           |  |         |        |       |                              |   |        |                                                               |        |  |     |        |  |       |        |  |      |  
|Total risk-based capital(to risk-weighted assets) |  | $       | 30,318 |       | 8.7                          | % |        | $                                                             | 27,800 |  | 8.0 | %      |  | $     | 34,750 |  | 10.0 | %
|Tier 1 capital(to risk-weighted assets)           |  | $       | 25,955 |       | 7.5                          | % |        | $                                                             | 13,900 |  | 4.0 | %      |  | $     | 20,850 |  | 6.0  | %
|Tier 1 capital(to average assets)                 |  | $       | 25,955 |       | 6.1                          | % |        | $                                                             | 17,157 |  | 4.0 | %      |  | $     | 21,447 |  | 5.0  | %

The Holding
Company is also subject to certain capital requirements. At December 31, 2009 the Tier 1 risk-based capital ratio, Tier 1 capital ratio and the total risk based capital ratio were 10.3%, 7.7% and 12.1%, respectively. At December 31, 2008
the Tier 1 risk-based capital ratio, Tier 1 capital ratio and the total risk based capital ratio were 7.1%, 5.8% and 9.8%, respectively.

The Bank is required by the Federal Reserve Bank to maintain average cash reserve balances at the Federal Reserve Bank and in working funds based upon a percentage of deposits. The required amount of
these reserve balances at December 31, 2009 was approximately $100,000.



| | 19. | Fair Value
| | --- | ----------

Fair
value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants
on the measurement date. Accounting principles generally accepted in the United States of America (GAAP), also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:



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|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



Level 1

Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and
derivative contracts that are traded in an active exchange market, as well as certain U.S. Treasury, other U.S. Government and agency mortgage-backed debt securities that are highly liquid and are actively traded in over-the-counter markets.

Level 2

Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and
derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes certain U.S. Government
and agency mortgage-backed debt securities, corporate debt securities, derivative contracts and residential mortgage loans held-for-sale.

Level 3

Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques,
as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes certain private equity investments, retained residual interests in securitizations, residential
mortgage servicing rights, and highly structured or long-term derivative contracts

Following is a description of valuation
methodologies used for assets and liabilities recorded at fair value.

Investment Securities Available-for-Sale

Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based
upon quoted prices of like or similar securities, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows,
adjusted for the securitys credit rating, prepayment assumptions and other factors such as credit loss assumptions.

Impaired Loans



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|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



The Company does not record loans at fair value on a recurring basis. However, from time
to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are
considered impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with GAAP. The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of
similar debt, enterprise value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such
loans. At December 31, 2009, substantially all of the total impaired loans were evaluated based on either the fair value of the collateral or its liquidation value. In accordance with GAAP, impaired loans where an allowance is established based
on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the impaired loan as nonrecurring
Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the impaired loan as nonrecurring
Level 3.

Other Real Estate Owned

Other real estate owned, consisting of properties obtained through foreclosure or in satisfaction of loans, is reported at net realizable value, determined on the basis of current appraisals, comparable
sales, and other estimates of value obtained principally from independent sources, adjusted for estimated selling costs. At the time of foreclosure, any excess of the loan balance over the fair value of the real estate held as collateral is treated
as a charge against the allowance for loan losses. Gains or losses on sale and any subsequent adjustments to the value are recorded as a component of foreclosed real estate expense. Other real estate is included in Level 3 of the valuation
hierarchy.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

Below is a table that presents information about certain assets and liabilities measured at fair value:



|                              |  |            |             |                                                |   |         |  |         |             |  |   |        
|----------------------------- |  | ---------- | ----------- | ---------------------------------------------- | - | ------- |  | ------- | ----------- |  | - | -------
|                              |  |            |             | Fair Value Measurements at ReportingDate Using
|Description                   |  | Fair Value |             | Level 1                                        |   | Level 2 |  | Level 3
|December 31, 2009             |  |            |             |                                                |   |         |  |         |             |  |   |        
|Available for sale securities |  | $          | 124,984,008 |                                                | $ |        |  | $       | 124,648,164 |  | $ | 335,844
|                              |  |            |             |                                               
|December 31, 2008             |  |            |             |                                                |   |         |  |         |             |  |   |        
|Available for sale securities |  | $          | 79,874,179  |                                                | $ |        |  | $       | 79,825,009  |  | $ | 49,170 

Changes in Level
3 Fair Value Measurements



(40)







---

|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



When a determination is made to classify a financial instrument within Level 3 of the
valuation hierarchy, the determination is based upon the significance of the unobservable factors to the overall fair value measurement. However, since Level 3 financial instruments typically include, in addition to the unobservable or Level 3
components, observable components (that is, components that are actively quoted and can be validated to external sources), the gains and losses below include changes in fair value due in part to observable factors that are part of the valuation
methodology.

A reconciliation of the beginning and ending balances of Level 3 assets and liabilities recorded at fair value on
a recurring basis for the year ended December 31, 2009 are as follows:



|                                                             |  |        |          |   |             |   |  
|------------------------------------------------------------ |  | ------ | -------- | - | ----------- | - | -
|                                                             |  | Assets |          |   | Liabilities
|Fair value December 31, 2008                                 |  | $      | 49,170   |   |             | $ | 
|Total unrealized gain included in other comprehensive income |  |        | 439,979  |   |             |   | 
|Impairment charges during the year                           |  |        | (153,305 | ) |             |   | 
|Transfers in and/or out of level 3                           |  |        |         |   |             |   | 
|                                                             |  |        |          |   |             |   |  
|Fair value December 31, 2009                                 |  | $      | 335,844  |   |             | $ | 
|                                                             |  |        |          |   |             |   |  

There were no Level 3 liabilities recorded at fair
value on a recurring basis for the year ending December 31, 2009.

Assets and Liabilities Recorded at Fair Value on a
Nonrecurring Basis

The Corporation may be required, from time to time, to measure certain assets at fair value on a
nonrecurring basis in accordance with U.S. generally accepted accounting principles. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. Assets measured at
fair value on a nonrecurring basis are included in the table below.



|               |  |            |           |                                                |   |         |  |         |   |  |   |          
|-------------- |  | ---------- | --------- | ---------------------------------------------- | - | ------- |  | ------- | - |  | - | ---------
|               |  |            |           | Fair Value Measurements atReporting Date Using
|Description    |  | 12/31/2009 |           | Level 1                                        |   | Level 2 |  | Level 3
|Impaired loans |  | $          | 2,987,692 |                                                | $ |        |  | $       |  |  | $ | 2,987,692
|OREO           |  |            | 8,493,968 |                                                |   |        |  |         |  |  |   | 8,493,968

Impaired loans,
which are measured for impairment using the fair value of the collateral for collateral dependent loans, had balances of $4,026,923 and $5,494,950 with a valuation allowance of $1,039,231 and $833,075 at December 31, 2009 and December 31,
2008, respectively. An additional provision for loan losses of approximately $206,000 and $768,000 was recorded on these loans for the year ended December 31, 2009 and 2008, respectively.



(41)







---

|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



There were no subsequent valuation allowances associated with other real estate owned at
December 31, 2009 or December 31, 2008.

Although the Company did not elect to adopt the fair value option for any
financial instruments, accounting standards require disclosure of fair value information, whether or not recognized in the balance sheet, when it is practicable to estimate the fair value. A financial instrument is defined as cash, evidence of an
ownership interest in an entity, or contractual obligations that require the exchange of cash or other financial instruments. Certain items are specifically excluded from the disclosure requirements, including common stock, premises and equipment,
real estate held for sale and other assets and liabilities. The following methods and assumptions were used in estimating fair values of financial instruments:



| |  |  | Fair value approximates carrying amount for cash and due from banks due to the short-term nature of the instruments.
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | Investment securities are valued using quoted fair market prices for actively traded securities. Discounted future cash flows are used to determine
estimated fair values of securities with no active market.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fair value for variable rate loans that re-price frequently and for loans that mature in less than 90 days is based on the carrying amount. Fair value
for mortgage loans, personal loans and all other loans (primarily commercial) is based on the discounted present value of the estimated future cash flows. Discount rates used in these computations approximate the rates currently offered for similar
loans of comparable terms, credit quality and a liquidity adjustment related to the current market environment.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Due to the redemptive provisions of the restricted stock, fair value equals cost. The carrying amount is adjusted for any other than temporary declines
in value.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The carrying amount for the cash surrender value of life insurance is a reasonable estimate of fair value.
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | The carrying value for accrued interest receivable and payable is a reasonable estimate of fair value.
| | - |  | ------------------------------------------------------------------------------------------------------



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



| |  |  | Fair value for federal funds sold and purchased and repurchase agreements is based on the carrying amount since these instruments typically mature
within three days from the transaction date.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fair value for variable rate long-term debt that re-prices frequently is based on the carrying amount. Fair value for fixed rate debt is based on the
discounted present value of the estimated future cash flows. Discount rates used in these computations approximate rates currently offered for similar borrowings of comparable terms and credit quality.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(42)







---

|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



| |  |  | Fair values for derivatives are based on the present value of future cash flows based on the interest rate spread between the fixed rate and the
floating rate.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

Management uses its best judgment in estimating fair value based on the above assumptions.
Thus, the fair values presented may not be the amounts that could be realized in an immediate sale or settlement of the instrument. In addition, any income taxes or other expenses that would be incurred in an actual sale or settlement are not taken
into consideration in the fair values presented. The estimated fair values of the Companys financial instruments are as follows:



|                               |  |                |             |                     |   |                |  |                     |             |  |   |            
|------------------------------ |  | -------------- | ----------- | ------------------- | - | -------------- |  | ------------------- | ----------- |  | - | -----------
|                               |  | December 31,  
|                               |  | 2009           |             | 2008               
|                               |  | CarryingAmount |             | Estimated FairValue |   | CarryingAmount |  | Estimated FairValue
|Financial assets               |  |                |             |                     |   |                |  |                     |             |  |   |            
|Cash and due from banks        |  | $              | 12,663,978  |                     | $ | 12,663,978     |  | $                   | 6,299,976   |  | $ | 6,299,976  
|Investment securities          |  |                | 124,984,008 |                     |   | 124,984,008    |  |                     | 95,851,430  |  |   | 96,039,077 
|Loansnet                      |  |                | 301,078,198 |                     |   | 293,445,878    |  |                     | 306,286,728 |  |   | 301,316,494
|Restricted stock               |  |                | 5,936,900   |                     |   | 5,936,900      |  |                     | 5,689,914   |  |   | 5,689,914  
|Accrued interest receivable    |  |                | 2,054,466   |                     |   | 2,054,466      |  |                     | 2,094,424   |  |   | 2,094,424  
|Bank owned life insurance      |  |                | 6,970,221   |                     |   | 6,970,221      |  |                     | 6,680,245   |  |   | 6,680,245  
|                               |  |                |             |                    
|Financial liabilities          |  |                |             |                     |   |                |  |                     |             |  |   |            
|Deposits                       |  | $              | 298,645,532 |                     | $ | 299,009,028    |  | $                   | 282,124,685 |  | $ | 283,030,178
|Federal funds purchased        |  |                | 3,992,931   |                     |   | 3,992,931      |  |                     | 4,000,000   |  |   | 4,000,000  
|Federal reserve borrowings     |  |                | 10,000,000  |                     |   | 10,000,000     |  |                     |            |  |   |           
|Repurchase agreements          |  |                | 15,000,000  |                     |   | 15,000,000     |  |                     | 15,000,000  |  |   | 15,000,000 
|Notes payable to FHLB          |  |                | 106,500,000 |                     |   | 109,110,866    |  |                     | 103,000,000 |  |   | 107,152,725
|Junior subordinated debentures |  |                | 11,341,000  |                     |   | 11,341,000     |  |                     | 11,341,000  |  |   | 11,341,000 
|Accrued interest payable       |  |                | 1,569,479   |                     |   | 1,569,479      |  |                     | 2,067,550   |  |   | 2,067,550  



|20. | Subsequent Events
|--- | -----------------

In preparing these financial statements, subsequent events were evaluated through the time the financial statements were issued. Financial statements are considered issued when they are widely distributed to all shareholders and other
financial statement users or filed with the Securities and Exchange Commission. In conjunction with applicable accounting standards, all material subsequent events have been either recognized in the financial statements or disclosed in the notes to
the financial statements.



(43)







---

|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



|21. | Condensed Parent Company Financial Information
|--- | ----------------------------------------------

The following condensed financial information for Greer Bancshares Incorporated (Parent Company only) should be read in conjunction with the consolidated financial statements and the notes thereto.



|                                            |  |             |            |      |   |           
|------------------------------------------- |  | ----------- | ---------- | ---- | - | ----------
|                                            |  | December 31
|                                            |  | 2009        |            | 2008
|Parent Company Only                         |  |             |            |      |   |           
|Condensed Balance Sheets                    |  |             |            |      |   |           
|                                            |  |            
|Assets:                                     |  |             |            |      |   |           
|Cash and cash equivalents                   |  | $           | 425,125    |      | $ | 33,546    
|Investment in Trusts                        |  |             | 341,000    |      |   | 341,000   
|Equity in net assets of Bank subsidiary     |  |             | 37,441,003 |      |   | 27,654,729
|Taxes receivable                            |  |             | 8,481      |      |   | 74,422    
|Premises and equipment, net of depreciation |  |             | 1,196,007  |      |   | 1,197,107 
|                                            |  |             |            |      |   |           
|                                            |  |            
|Total assets                                |  | $           | 39,411,616 |      | $ | 29,300,804
|                                            |  |             |            |      |   |           
|                                            |  |            
|Liabilities and stockholders equity:       |  |             |            |      |   |           
|Liabilities:                                |  |             |            |      |   |           
|Junior subordinated debentures              |  | $           | 11,341,000 |      | $ | 11,341,000
|Interest payable                            |  |             | 49,460     |      |   | 133,406   
|Other liabilities                           |  |             | 68,485     |      |   | 343       
|                                            |  |             |            |      |   |           
|Total liabilities                           |  |             | 11,458,945 |      |   | 11,474,749
|                                            |  |            
|Stockholders equity                        |  |             | 27,952,671 |      |   | 17,826,055
|                                            |  |             |            |      |   |           
|                                            |  |            
|Total liabilities and stockholders equity  |  | $           | 39,411,616 |      | $ | 29,300,804
|                                            |  |             |            |      |   |           



(44)







---

|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



|                                                                 |  |                         |            |   |      |   |            |      |  |   |           |  
|---------------------------------------------------------------- |  | ----------------------- | ---------- | - | ---- | - | ---------- | ---- |  | - | --------- | -
|                                                                 |  | Year Ended December 31, |           
|                                                                 |  | 2009                    |            |   | 2008 |   |            | 2007 | 
|Parent Company Only                                              |  |                         |            |   |      |   |            |      |  |   |           |  
|Condensed Statements of Income (Loss)                            |  |                         |            |   |      |   |            |      |  |   |           |  
|                                                                 |  |                         |           
|Income:                                                          |  |                         |            |   |      |   |            |      |  |   |           |  
|Lease income from Bank subsidiary                                |  | $                       | 60,000     |   |      | $ | 60,000     |      |  | $ | 60,000    |  
|Interest income of deposits                                      |  |                         | 7,407      |   |      |   |           |      |  |   |          |  
|Dividends from Bank subsidiary                                   |  |                         | 150,000    |   |      |   | 1,527,605  |      |  |   | 1,572,949 |  
|                                                                 |  |                         |            |   |      |   |            |      |  |   |           |  
|Total income                                                     |  |                         | 217,407    |   |      |   | 1,587,605  |      |  |   | 1,632,949 |  
|                                                                 |  |                         |            |   |      |   |            |      |  |   |           |  
|                                                                 |  |                         |           
|Expenses:                                                        |  |                         |            |   |      |   |            |      |  |   |           |  
|Interest on long-term borrowings                                 |  |                         | 326,767    |   |      |   | 600,447    |      |  |   | 821,271   |  
|Noninterest expense                                              |  |                         | 131,990    |   |      |   | 387,315    |      |  |   | 124,702   |  
|                                                                 |  |                         |            |   |      |   |            |      |  |   |           |  
|Total expenses                                                   |  |                         | 458,757    |   |      |   | 987,762    |      |  |   | 945,973   |  
|                                                                 |  |                         |            |   |      |   |            |      |  |   |           |  
|                                                                 |  |                         |           
|Income (loss) before taxes                                       |  |                         | (241,350   | ) |      |   | 599,843    |      |  |   | 686,976   |  
|Income tax benefit                                               |  |                         | (133,059   | ) |      |   | (315,439   | )    |  |   | (301,231  | )
|                                                                 |  |                         |            |   |      |   |            |      |  |   |           |  
|Income (loss) before equity earnings                             |  |                         | (108,291   | ) |      |   | 915,282    |      |  |   | 988,207   |  
|                                                                 |  |                         |           
|Equity in undistributed earnings (loss) of Bank subsidiary       |  |                         | (403,098   | ) |      |   | (6,355,386 | )    |  |   | 1,617,418 |  
|                                                                 |  |                         |            |   |      |   |            |      |  |   |           |  
|                                                                 |  |                         |           
|Net income (loss)                                                |  |                         | (511,389   | ) |      |   | (5,440,104 | )    |  |   | 2,605,625 |  
|                                                                 |  |                         |           
|Preferred stock dividends and net discount accretion             |  |                         | (580,563   | ) |      |   |           |      |  |   |          |  
|                                                                 |  |                         |            |   |      |   |            |      |  |   |           |  
|                                                                 |  |                         |           
|Net income (loss) available or attributed to common shareholders |  | $                       | (1,091,952 | ) |      | $ | (5,440,104 | )    |  | $ | 2,605,625 |  
|                                                                 |  |                         |            |   |      |   |            |      |  |   |           |  



(45)







---

|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



|                                                                                         |  |                         |            |   |      |   |            |      |  |   |            |  
|---------------------------------------------------------------------------------------- |  | ----------------------- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                         |  | Year Ended December 31, |           
|                                                                                         |  | 2009                    |            |   | 2008 |   |            | 2007 | 
|Parent Company Only                                                                      |  |                         |            |   |      |   |            |      |  |   |            |  
|Condensed Statements of Cash Flows                                                       |  |                         |            |   |      |   |            |      |  |   |            |  
|                                                                                         |  |                         |           
|Operating activities:                                                                    |  |                         |            |   |      |   |            |      |  |   |            |  
|Net income (loss)                                                                        |  | $                       | (511,389   | ) |      | $ | (5,440,104 | )    |  | $ | 2,605,625  |  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                         |            |   |      |   |            |      |  |   |            |  
|Write-off of construction in progress                                                    |  |                         |           |   |      |   | 248,569    |      |  |   |           |  
|Undistributed equity (earnings) loss of Bank subsidiary                                  |  |                         | 403,098    |   |      |   | 6,355,386  |      |  |   | (1,617,418 | )
|Change in operating assets and liabilities                                               |  |                         | 51,236     |   |      |   | 51,844     |      |  |   | 552,455    |  
|                                                                                         |  |                         |            |   |      |   |            |      |  |   |            |  
|Net cash provided by (used for) operating activities                                     |  |                         | (57,055    | ) |      |   | 1,215,695  |      |  |   | 1,540,662  |  
|                                                                                         |  |                         |            |   |      |   |            |      |  |   |            |  
|                                                                                         |  |                         |           
|Investing activities:                                                                    |  |                         |            |   |      |   |            |      |  |   |            |  
|Purchase of premises                                                                     |  |                         |           |   |      |   |           |      |  |   | (2,750     | )
|Construction in process                                                                  |  |                         |           |   |      |   |           |      |  |   | (3,427     | )
|Investment in Bank subsidiary                                                            |  |                         | (9,000,000 | ) |      |   |           |      |  |   |           |  
|                                                                                         |  |                         |            |   |      |   |            |      |  |   |            |  
|Net cash used for investing activities                                                   |  |                         | (9,000,000 | ) |      |   |           |      |  |   | (6,177     | )
|                                                                                         |  |                         |            |   |      |   |            |      |  |   |            |  
|                                                                                         |  |                         |           
|Financing activities:                                                                    |  |                         |            |   |      |   |            |      |  |   |            |  
|Proceeds from the issuance of preferred stock                                            |  |                         | 9,949,410  |   |      |   |           |      |  |   |           |  
|Cash dividends paid on preferred stock                                                   |  |                         | (432,694   | ) |      |   | (1,267,605 | )    |  |   | (1,682,801 | )
|Proceeds from exercise of stock options                                                  |  |                         |           |   |      |   | 46,960     |      |  |   | 92,557     |  
|Tax benefit from stock options exercised                                                 |  |                         |           |   |      |   |           |      |  |   | 8,082      |  
|                                                                                         |  |                         |            |   |      |   |            |      |  |   |            |  
|Net cash provided (used) by financing activities                                         |  |                         | (9,516,716 | ) |      |   | (1,220,645 | )    |  |   | (1,582,162 | )
|                                                                                         |  |                         |            |   |      |   |            |      |  |   |            |  
|                                                                                         |  |                         |           
|Net increase (decrease) in cash and cash equivalents                                     |  |                         | 391,579    |   |      |   | (4,950     | )    |  |   | (47,677    | )
|                                                                                         |  |                         |           
|Cash and cash equivalents beginning of year                                              |  |                         | 33,546     |   |      |   | 38,496     |      |  |   | 86,173     |  
|                                                                                         |  |                         |            |   |      |   |            |      |  |   |            |  
|                                                                                         |  |                         |           
|Cash and cash equivalents at end of year                                                 |  | $                       | 425,125    |   |      | $ | 33,546     |      |  | $ | 38,496     |  
|                                                                                         |  |                         |            |   |      |   |            |      |  |   |            |  



(46)







---

|                                             |  |                                                      
|-------------------------------------------- |  | -----------------------------------------------------
|GREER BANCSHARES INCORPORATED AND SUBSIDIARY |  | Notes to Consolidated Financial Statements, Continued



(continued)



|                                             |  |                         |           |      |   |        |      |  |   |        
|-------------------------------------------- |  | ----------------------- | --------- | ---- | - | ------ | ---- |  | - | -------
|                                             |  | Year Ended December 31,
|                                             |  | 2009                    |           | 2008 |   |        | 2007
|                                             |  |                         |          
|Non-cash investing and financing activities: |  |                         |           |      |   |        |      |  |   |        
|Dividends payable                            |  | $                       | 68,082    |      | $ |       |      |  | $ |       
|                                             |  |                         |           |      |   |        |      |  |   |        
|                                             |  |                         |          
|Change in other comprehensive Income (loss)  |  | $                       | 1,062,353 |      | $ | (6,294 | )    |  | $ | 291,030
|                                             |  |                         |           |      |   |        |      |  |   |        



(47)







---

LOGO

THE ATTACHED INFORMATION CONSTITUTES A PORTION OF GREER

BANCSHARES INCORPORATEDS ANNUAL REPORT TO SHAREHOLDERS FOR

THE YEAR ENDED DECEMBER 31, 2009.

P.O. Box 1029
Greer, SC 29652-1029

Phone: 864-877-2000 Fax: 864-848-5141



---

GREER BANCSHARES INCORPORATED



Selected Financial Data

The following table sets forth certain selected financial data concerning Greer Bancshares Incorporated. This information should be read in conjunction
with Managements Discussion and Analysis of Financial Condition and Results of Operation and the consolidated financial statements.



|                                                    |  |      |           |    |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|--------------------------------------------------- |  | ---- | --------- | -- | ---- | - | --------- | ---- |  | - | --------- | - |  | ---- | --------- | - |  | - | --------- | -
|December 31,                                        |  | 2009 |           |    | 2008 |   |           | 2007 |  |   | 2006      |   |  | 2005 |          
|(Dollars in thousands, except per share data)       |  |      |           |    |      |   |           |      |  |   |           |   |  |      |          
|SUMMARY OF OPERATIONS                               |  |      |           |    |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Interest and fee income                             |  | $    | 21,880    |    |      | $ | 23,924    |      |  | $ | 24,836    |   |  | $    | 22,216    |   |  | $ | 15,308    |  
|Interest expense                                    |  |      | 10,546    |    |      |   | 12,790    |      |  |   | 12,741    |   |  |      | 10,592    |   |  |   | 6,210     |  
|                                                    |  |      |           |    |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Net interest income                                 |  |      | 11,334    |    |      |   | 11,134    |      |  |   | 12,095    |   |  |      | 11,624    |   |  |   | 9,098     |  
|Provision for loan losses                           |  |      | 5,185     |    |      |   | 4,230     |      |  |   | 1,811     |   |  |      | 597       |   |  |   | 424       |  
|                                                    |  |      |           |    |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Net interest income after provision for loan losses |  |      | 6,149     |    |      |   | 6,904     |      |  |   | 10,284    |   |  |      | 11,027    |   |  |   | 8,674     |  
|Noninterest income (loss)                           |  |      | 3,227     |    |      |   | (5,322    | )    |  |   | 2,499     |   |  |      | 2,340     |   |  |   | 2,457     |  
|Noninterest expense                                 |  |      | 9,887     |    |      |   | 7,022     |      |  |   | 10,177    |   |  |      | 10,214    |   |  |   | 8,336     |  
|                                                    |  |      |           |    |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Net income (loss)                                   |  | $    | (511      | )  |      | $ | (5,440    | )    |  | $ | 2,606     |   |  | $    | 3,153     |   |  | $ | 2,795     |  
|                                                    |  |      |           |    |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Dividends and accretion on preferred stock          |  |      | 581       |    |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Net income (loss) available to common shareholders  |  | $    | (1,092    | )  |      | $ | (5,440    | )    |  | $ | 2,606     |   |  | $    | 3,153     |   |  | $ | 2,795     |  
|                                                    |  |      |           |    |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|                                                    |  |      |           |    |     
|PER COMMON SHARE DATA                               |  |      |           |    |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Earnings (Loss):                                    |  |      |           |    |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Basic                                               |  | $    | (.44      | )  |      | $ | (2.19     | )    |  | $ | 1.05      |   |  | $    | 1.28      |   |  | $ | 1.14      |  
|Diluted                                             |  |      | (.44      | )  |      |   | (2.19     | )    |  |   | 1.04      |   |  |      | 1.25      |   |  |   | 1.12      |  
|Cash dividends declared per common share            |  |      |          |    |      |   | 0.51      |      |  |   | 0.51      |   |  |      | 0.85      |   |  |   | 0.64      |  
|Book value                                          |  |      | 7.21      |    |      |   | 6.93      |      |  |   | 9.85      |   |  |      | 9.12      |   |  |   | 8.79      |  
|Weighted average common shares outstanding:         |  |      |           |    |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Basic                                               |  |      | 2,486,692 |    |      |   | 2,485,096 |      |  |   | 2,479,051 |   |  |      | 2,462,688 |   |  |   | 2,442,078 |  
|Diluted                                             |  |      | 2,486,692 |    |      |   | 2,485,096 |      |  |   | 2,509,270 |   |  |      | 2,517,549 |   |  |   | 2,504,856 |  
|                                                    |  |      |           |    |     
|SELECTED ACTUAL YEAR END BALANCES                   |  |      |           |    |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Total assets                                        |  | $    | 476,791   |    |      | $ | 437,037   |      |  | $ | 389,705   |   |  | $    | 359,662   |   |  | $ | 299,447   |  
|Loans                                               |  |      | 307,393   |    |      |   | 311,414   |      |  |   | 263,011   |   |  |      | 245,858   |   |  |   | 199,003   |  
|Allowance for loan losses                           |  |      | 6,315     |    |      |   | 5,127     |      |  |   | 2,233     |   |  |      | 1,801     |   |  |   | 1,416     |  
|Available for sale securities                       |  |      | 124,984   |    |      |   | 79,874    |      |  |   | 79,565    |   |  |      | 60,185    |   |  |   | 49,543    |  
|Held to maturity securities                         |  |      |          |    |      |   | 15,977    |      |  |   | 19,586    |   |  |      | 23,581    |   |  |   | 28,482    |  
|Deposits                                            |  |      | 298,646   |    |      |   | 282,125   |      |  |   | 244,593   |   |  |      | 240,288   |   |  |   | 199,187   |  
|Borrowings                                          |  |      | 135,493   |    |      |   | 122,000   |      |  |   | 105,104   |   |  |      | 80,685    |   |  |   | 69,367    |  
|Subordinated debt                                   |  |      | 11,341    |    |      |   | 11,341    |      |  |   | 11,341    |   |  |      | 11,341    |   |  |   | 6,186     |  
|Stockholders equity                                |  |      | 27,953    |    |      |   | 17,826    |      |  |   | 24,436    |   |  |      | 22,542    |   |  |   | 21,564    |  
|                                                    |  |      |           |    |     
|SELECTED AVERAGE BALANCES                           |  |      |           |    |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Assets                                              |  | $    | 465,532   |    |      | $ | 417,491   |      |  | $ | 359,683   |   |  | $    | 330,984   |   |  | $ | 271,695   |  
|Deposits                                            |  |      | 291,892   |    |      |   | 266,231   |      |  |   | 239,327   |   |  |      | 227,269   |   |  |   | 172,189   |  
|Stockholders equity                                |  |      | 26,992    |    |      |   | 21,526    |      |  |   | 23,419    |   |  |      | 21,153    |   |  |   | 20,389    |  
|                                                    |  |      |           |    |     
|FINANCIAL RATIOS                                    |  |      |           |    |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Return on average assets                            |  |      | (.23      | )% |      |   | (1.30     | )%   |  |   | .72       | % |  |      | .95       | % |  |   | 1.03      | %
|Return on average equity                            |  |      | (4.05     | )% |      |   | (25.27    | )%   |  |   | 11.13     | % |  |      | 14.90     | % |  |   | 13.71     | %
|Average equity to average assets                    |  |      | 5.80      | %  |      |   | 5.16      | %    |  |   | 6.51      | % |  |      | 6.40      | % |  |   | 7.50      | %
|Dividend payout ratio                               |  |      | N.M.      |    |      |   | N.M.      |      |  |   | 48.57     | % |  |      | 66.41     | % |  |   | 56.14     | %



N.M.  Not meaningful



2



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GREER BANCSHARES INCORPORATED



Managements Discussion and Analysis of Financial Condition and Results of
Operations

Description of the Companys Business

Greer State Bank (the Bank) was organized under a state banking charter in August 1988, and commenced operations on January 3, 1989. Greer Bancshares Incorporated is a South Carolina
corporation formed in July 2001, primarily to hold all of the capital stock of Greer State Bank. Greer Bancshares Incorporated and the Bank, its wholly-owned subsidiary, are herein referred to as the Company. In October 2004 and December
2006, Greer Capital Trust I and Greer Capital Trust II (the Trusts) were formed, respectively. The Trusts were formed as part of the process of the issuance of trust preferred securities. The Bank engages in commercial and retail
banking, emphasizing the needs of small to medium businesses, professional concerns and individuals, primarily in Greer and surrounding areas in the upstate of South Carolina. The Company currently engages in no business other than owning and
managing the Bank. Greer Financial Services, a division of the Bank, provides financial management services and non-deposit product sales.

Critical Accounting Policies

General

The financial condition and results of operations presented in the consolidated financial statements, the accompanying notes to the consolidated financial
statements and this section are, to a large degree, dependent upon the Companys accounting policies. The selection and application of these accounting policies involve judgments, estimates and uncertainties that are susceptible to change.
Those accounting policies that are believed to be the most important to the portrayal and understanding of the Companys financial condition and results of operations are discussed below. These critical accounting policies require
managements most difficult, subjective and complex judgments about matters that are inherently uncertain. In the event that different assumptions or conditions were to prevail, and depending upon the severity of such changes, the possibility
of a materially different financial condition or results of operations is a reasonable likelihood.

Income Taxes and Deferred Tax Asset

Income Taxes  The calculation of the provision for federal income taxes is complex and requires the use of estimates and
judgments. There are two accruals for income taxes: 1) The income tax receivable represents the estimated amount currently due from the federal government and is reported as a component of other assets in the consolidated balance sheet;
2) the deferred federal income tax asset or liability represents the estimated impact of temporary differences between how assets and liabilities are recognized under GAAP, and how such assets and liabilities are recognized under the federal tax
code.

The effective tax rate is based in part on interpretation of the relevant current tax laws. Appropriate tax treatment is reviewed of
all transactions taking into consideration statutory, judicial and regulatory guidance in the context of our tax positions. In addition, reliance is placed on various tax opinions, recent tax audits and historical experience.

Deferred Tax Asset At December 31, 2009, we had a net federal deferred tax asset of $3,441,052. In considering whether a valuation
allowance on deferred tax assets is needed, management considers all available evidence, including the existence of available reversing temporary differences, the ability to generate future taxable income and available tax planning strategies. It is
possible that the Companys management may conclude in future periods that a valuation allowance is necessary for some or all of its deferred tax assets in order to reduce them to a level that is more likely than not to be realized. Management
considered its trends of generating pre tax income in recent periods, excluding the impact of the impairment of FNMA securities, in evaluating its ability to continue to forecast income before taxes. It is possible that management may conclude that
it may not have the ability to generate sufficient income before income taxes at a sufficient level in future periods, which would require the Company to establish a valuation allowance for some or all of the deferred tax assets to reduce them to a
level that is more likely than not to be realized.



3



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GREER BANCSHARES INCORPORATED



Allowance for Loan Losses

The allowance for loan losses is based on managements ongoing evaluation of the loan portfolio and reflects an amount that, based on managements judgment, is adequate to absorb inherent
probable losses in the existing portfolio. Additions to the allowance for loan losses are provided by charges to earnings. Loan losses are charged against the allowance when the ultimate uncollectibility of the loan balance is determined. Subsequent
recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a monthly basis by management. The
evaluation includes the periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrowers ability to repay, estimated value of
any underlying collateral and related impairment and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision.

Management believes that the allowance for loan losses is adequate. While management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic conditions. In addition, regulatory agencies, as an integral part of the examination process, periodically review the allowance for loan losses. Such agencies may require
additions to the allowance based on their judgments about information available to them at the time of their examination.

A loan is
considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. Factors
considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment
shortfalls generally are not classified as impaired. Impairment is measured on a loan by loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loans effective interest
rate, the loans obtainable market price or the fair value of the collateral if the loan is collateral dependent.

Large groups of
smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, individual consumer and residential loans are not separately identified for impairment.

The Company values other real estate owned that is acquired in settlement of loans at the net realizable value at the time of foreclosure. Management obtains updated appraisals on such properties as
necessary, and reduces those values for selling costs. While management uses the best information available at the time of the preparation of the financial statements in valuing the other real estate owned, it is possible that in future periods the
Company will be required to recognize reductions in estimated fair values of these properties.

Results of Operations

This discussion and analysis is intended to assist the reader in understanding the financial condition and results of operations of Greer
Bancshares Incorporated and its wholly-owned subsidiary, Greer State Bank. The commentary should be read in conjunction with the consolidated financial statements and the related notes and the other statistical information in this report.

The following discussion describes our results of operations for 2009 as compared to 2008 and 2008 compared to 2007. The Companys
financial condition as of December 31, 2009 as compared to December 31, 2008 is also analyzed. Like most community banks, the Bank derives most of its income from interest received on loans and investments. The primary source of funds for
making these loans and investments is deposits, on which interest is paid on approximately 89 percent of the accounts. The Bank also utilizes Federal Home Loan Bank advances, the Federal Reserve discount window, federal funds purchased and
repurchase agreements for funding loans and investments. One of the key measures of success is net interest income, or the difference between the income on interest-earning assets, such as loans and investments, and the expense on interest-bearing
liabilities, such as deposits and other borrowings. Another key measure is the spread between the yield earned on interest-earning assets and the rate paid on interest-bearing liabilities.

A number of tables have been included to assist in the description of these measures. For example, the Average Balances table shows the average
balances during 2009, 2008 and 2007 of each category of assets and liabilities, as well as the yield earned or the rate paid with respect to each category. A review of this table shows that loans typically provide higher interest yields than do
other types of interest earning assets, resulting in managements intent to channel a substantial



4



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GREER BANCSHARES INCORPORATED



percentage of funding sources into the loan portfolio. Similarly, the Analysis of Changes in Net
Interest Income table demonstrates the impact of changing interest rates and the changing volume of assets and liabilities during the years shown. Finally, a number of tables have been included that provide detail about the Companys
investment securities, loans, deposits and other borrowings.

There are risks inherent in all loans. Therefore, an allowance for loan losses
is maintained to absorb inherent probable losses on existing loans that may become uncollectible. The allowance is established and maintained by charging a provision for loan losses against operating earnings. A detailed discussion of this process
is included, as well as tables, describing the allowance for loan losses.

In addition to earning interest on loans and investments, income is
earned through fees and other charges collected for services provided to customers. Various components of this noninterest income, as well as noninterest expense, are described in the following discussion.

The following discussion and analysis also identifies significant factors that have affected the financial position and operating results during the periods
included in the accompanying financial statements. Therefore, this discussion and analysis should be read in conjunction with the consolidated financial statements and the related notes and the other statistical information also included in this
report.

Year ended December 31, 2009 compared with year ended December 31, 2008

The Company recorded a net loss attributable to common shareholders of $1,091,952 for the year ended December 31, 2009, compared to a net loss
attributable to common shareholders of $5,440,104 for the year ended December 31, 2008. The loss per diluted common share for the year ended December 31, 2009 was $.44, compared to loss per diluted common share of $2.19 for the year ended
December 31, 2008. The net loss in 2009 is due primarily to the increases in the loan loss provision, real estate owned expenses and FDIC deposit insurance assessments partially offset by gain on sale of investment securities and non-interest
expense reductions. Net interest income increased slightly to $11,334,585 for the year ended December 31, 2009. Noninterest income increased $646,700, or 21.2%, in 2009 compared to 2008 before the impairment charges of $464,719 and $8,366,630
primarily as a result of the aforementioned gain on sale of investments of $1,093,840. See Note 2 in the accompanying consolidated financial statements for more details on the securities transactions. Noninterest expenses increased slightly in 2009
compared to 2008 primarily as the result of increased FDIC insurance premiums and an increase in OREO and foreclosure expenses partially offset by the results of budget reductions in all other noninterest expenses categories.

Year ended December 31, 2008 compared with year ended December 31, 2007

The Company recorded a net loss of $5,440,104 for the year ended December 31, 2008, compared to net income of $2,605,625 for the year ended
December 31, 2007. The loss per diluted common share for the year ended December 31, 2008 was $2.19, compared to earnings per diluted common share of $1.04 for the year ended December 31, 2007. The net loss in 2008 is due primarily to
the $8,366,630 pre-tax other than temporary impairment charge related to two equity securities and one pooled trust preferred security. Net interest income decreased $960,726 or 7.9%, to $11,134,086 for the year ended December 31, 2008 due
primarily to a 1.35% decline in yield on average earning assets partially offset by a .74% decline in yield on average interest bearing liabilities. Noninterest income increased $545,710, or 21.8%, in 2008 compared to 2007 before the impairment
charge of $8,366,630. The increase in noninterest income, excluding the impact of the impairment charges, was primarily due to a gain on sale of investment security of $200,451 and a gain on the sale of the interest rate floor of $152,878 included
in other noninterest income. Noninterest expenses increased $1,214,115, or 13.2%, primarily as the result of increased FDIC insurance premiums, an increase in salaries and benefits and the absorption of expenses related to the construction of the
operations center that has been postponed.



5



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GREER BANCSHARES INCORPORATED



Net Interest Income

Net interest income, the difference between interest earned and interest paid, is the largest component of the Companys earnings. Therefore, changes in that area have a significant impact on net
income. Variations in the volume and mix of assets and liabilities and their relative sensitivity to interest rate movements determine changes in net interest income. Interest rate spread and net interest margin are two significant elements in
analyzing net interest income. Interest rate spread is the difference between the yield on average earning assets and the rate on average interest bearing liabilities. Net interest margin is calculated as net interest income divided by average
earning assets.

Net interest income increased slightly to $11,334,585 for the year ended December 31, 2009. While the Banks
average earning assets increased by approximately $43.2 million, or 10.9%, during 2009, interest income on earning assets decreased by $2,043,725, or 8.5%. Average interest bearing liabilities increased 11.9%; however, interest expense declined by
$2,244,224, or 17.5% compared to 2008. The yield on average interest earning assets declined by 107 basis points in 2009, and the yield paid on interest bearing liabilities decreased by 93 basis points. The decline in interest income and interest
expense resulted in a lower net interest spread and net interest yield, and was primarily the result of lower market interest rates in 2009.

Net interest income decreased $960,726, or 7.9%, for the year ended December 31, 2008 to $11,134,086. The decrease in net interest income was primarily the result of the Federal Open Market Committee lowering the federal funds rate
seven times for a total of 400 basis points in 2008. The prime lending rate, which generally moves up and down with changes in the federal funds rate, also decreased 400 basis points during the year. At December 31, 2008, the Bank had
approximately $162 million in loans indexed to the Wall Street Journal prime rate. While the Banks average loan portfolio increased by approximately $36.2 million, or 14.5%, during 2008, interest income on loans decreased $2,162,458 due to the
decline in interest rates. Average interest bearing liabilities increased 21.1%; however, interest expense only increased by $48,709 due to the decline in market interest rates. Interest rate movements on interest bearing liabilities lag behind
movements on interest bearing assets due to repricing terms of time deposits.



6



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GREER BANCSHARES INCORPORATED



The following table sets forth for the periods indicated, the weighted-average yields earned, the
weighted-average yields paid, the net interest spread and the net interest margin on earning assets. The table also indicates the average monthly balance and the interest income or expense by specific categories.

Average Balances, Income, Expenses, and Rates



|                                           |  |                |         |                |      |                |  |      |                |  |                |         |                |   |        |                |      |                |  |                |         |  |   |        |  |      |  
|------------------------------------------ |  | -------------- | ------- | -------------- | ---- | -------------- |  | ---- | -------------- |  | -------------- | ------- | -------------- | - | ------ | -------------- | ---- | -------------- |  | -------------- | ------- |  | - | ------ |  | ---- | -
|Year Ended December 31,                    |  | 2009           |         |                | 2008 |                |  | 2007 |               
|(Dollars in Thousands)                     |  | AverageBalance |         | Income/Expense |      | Yield/Rate (1) |  |      | AverageBalance |  | Income/Expense |         | Yield/Rate (1) |   |        | AverageBalance |      | Income/Expense |  | Yield/Rate (1) |        
|Assets:                                    |  |                |         |                |      |                |  |      |                |  |                |         |                |   |        |                |      |                |  |                |         |  |   |        |  |      |  
|Interest Earning Assets:                   |  |                |         |                |      |                |  |      |                |  |                |         |                |   |        |                |      |                |  |                |         |  |   |        |  |      |  
|Taxable Investments                        |  | $              | 104,672 |                | $    | 4,229          |  | 4.04 | %              |  | $              | 86,048  |                | $ | 4,461  |                | 5.18 | %              |  | $              | 62,044  |  | $ | 3,071  |  | 4.95 | %
|Non-Taxable Investments                    |  |                | 22,438  |                |      | 967            |  | 6.65 | %              |  |                | 21,297  |                |   | 921    |                | 6.68 | %              |  |                | 22,491  |  |   | 979    |  | 6.59 | %
|Int. Bearing Deposits in other banks       |  |                | 859     |                |      | 12             |  | 1.40 | %              |  |                | 465     |                |   | 14     |                | 3.01 | %              |  |                | 858     |  |   | 41     |  | 4.78 | %
|Federal Funds Sold                         |  |                | 1,170   |                |      | 4              |  | .34  | %              |  |                | 1,459   |                |   | 38     |                | 2.60 | %              |  |                | 1,823   |  |   | 92     |  | 5.05 | %
|Loans (2)                                  |  |                | 309,162 |                |      | 16,668         |  | 5.39 | %              |  |                | 285,818 |                |   | 18,490 |                | 6.47 | %              |  |                | 249,583 |  |   | 20,653 |  | 8.28 | %
|                                           |  |                |         |                |      |                |  |      |                |  |                |         |                |   |        |                |      |                |  |                |         |  |   |        |  |      |  
|Total Interest Earning Assets              |  |                | 438,301 |                |      | 21,880         |  | 5.11 | %              |  |                | 395,087 |                |   | 23,924 |                | 6.18 | %              |  |                | 336,799 |  |   | 24,836 |  | 7.53 | %
|                                           |  |                |         |                |      |                |  |      |                |  |                |         |                |   |        |                |      |                |  |                |         |  |   |        |  |      |  
|                                           |  |                |         |                |      |                |  |      |               
|Other noninterest-earning assets           |  |                | 27,231  |                |      |                |  |      |                |  |                | 22,404  |                |   |        |                |      |                |  |                | 22,884  |  |   |        |  |      |  
|                                           |  |                |         |                |      |                |  |      |                |  |                |         |                |   |        |                |      |                |  |                |         |  |   |        |  |      |  
|Total Assets                               |  | $              | 465,532 |                |      |                |  |      |                |  | $              | 417,491 |                |   |        |                |      |                |  | $              | 359,683 |  |   |        |  |      |  
|                                           |  |                |         |                |      |                |  |      |                |  |                |         |                |   |        |                |      |                |  |                |         |  |   |        |  |      |  
|                                           |  |                |         |                |      |                |  |      |               
|Liabilities and Stockholders Equity       |  |                |         |                |      |                |  |      |                |  |                |         |                |   |        |                |      |                |  |                |         |  |   |        |  |      |  
|Interest Bearing Liabilities:              |  |                |         |                |      |                |  |      |                |  |                |         |                |   |        |                |      |                |  |                |         |  |   |        |  |      |  
|NOW Accounts                               |  | $              | 41,703  |                |      | 104            |  | 0.25 | %              |  | $              | 38,075  |                |   | 181    |                | 0.48 | %              |  | $              | 29,096  |  |   | 239    |  | 0.82 | %
|Money Market and Savings                   |  |                | 43,384  |                |      | 880            |  | 2.03 | %              |  |                | 43,756  |                |   | 1,185  |                | 2.71 | %              |  |                | 41,207  |  |   | 1,362  |  | 3.31 | %
|Time Deposits                              |  |                | 177,604 |                |      | 4,887          |  | 2.75 | %              |  |                | 155,220 |                |   | 6,356  |                | 4.09 | %              |  |                | 133,788 |  |   | 6,578  |  | 4.92 | %
|Federal Funds Purchased                    |  |                | 11,901  |                |      | 38             |  | .32  | %              |  |                | 2,987   |                |   | 83     |                | 2.78 | %              |  |                | 1,175   |  |   | 49     |  | 4.18 | %
|Repurchase Agreements                      |  |                | 15,000  |                |      | 548            |  | 3.65 | %              |  |                | 15,000  |                |   | 549    |                | 3.66 | %              |  |                | 9,723   |  |   | 499    |  | 5.13 | %
|FHLB Borrowings                            |  |                | 104,737 |                |      | 3,762          |  | 3.59 | %              |  |                | 96,066  |                |   | 3,836  |                | 3.99 | %              |  |                | 69,922  |  |   | 3,193  |  | 4.57 | %
|Other Long Term Debt                       |  |                | 11,341  |                |      | 327            |  | 2.88 | %              |  |                | 11,341  |                |   | 600    |                | 5.29 | %              |  |                | 11,341  |  |   | 821    |  | 7.24 | %
|                                           |  |                |         |                |      |                |  |      |                |  |                |         |                |   |        |                |      |                |  |                |         |  |   |        |  |      |  
|Total Interest Bearing Liabilities         |  |                | 405,670 |                |      | 10,546         |  | 2.60 | %              |  |                | 362,445 |                |   | 12,790 |                | 3.53 | %              |  |                | 296,252 |  |   | 12,741 |  | 4.30 | %
|                                           |  |                |         |                |      |                |  |      |                |  |                |         |                |   |        |                |      |                |  |                |         |  |   |        |  |      |  
|                                           |  |                |         |                |      |                |  |      |               
|Noninterest-Bearing Liabilities:           |  |                |         |                |      |                |  |      |                |  |                |         |                |   |        |                |      |                |  |                |         |  |   |        |  |      |  
|Demand Deposits                            |  |                | 29,193  |                |      |                |  |      |                |  |                | 29,180  |                |   |        |                |      |                |  |                | 35,394  |  |   |        |  |      |  
|Other Liabilities                          |  |                | 3,677   |                |      |                |  |      |                |  |                | 4,348   |                |   |        |                |      |                |  |                | 4,618   |  |   |        |  |      |  
|                                           |  |                |         |                |      |                |  |      |                |  |                |         |                |   |        |                |      |                |  |                |         |  |   |        |  |      |  
|Total Noninterest-Bearing Liabilities      |  |                | 32,870  |                |      |                |  |      |                |  |                | 33,528  |                |   |        |                |      |                |  |                | 40,012  |  |   |        |  |      |  
|                                           |  |                |         |                |      |                |  |      |                |  |                |         |                |   |        |                |      |                |  |                |         |  |   |        |  |      |  
|Total Liabilities                          |  |                | 438,540 |                |      |                |  |      |                |  |                | 395,973 |                |   |        |                |      |                |  |                | 336,264 |  |   |        |  |      |  
|                                           |  |                |         |                |      |                |  |      |                |  |                |         |                |   |        |                |      |                |  |                |         |  |   |        |  |      |  
|                                           |  |                |         |                |      |                |  |      |               
|Stockholders Equity                       |  |                | 26,992  |                |      |                |  |      |                |  |                | 21,526  |                |   |        |                |      |                |  |                | 23,419  |  |   |        |  |      |  
|                                           |  |                |         |                |      |                |  |      |                |  |                |         |                |   |        |                |      |                |  |                |         |  |   |        |  |      |  
|Total Liabilities and Stockholders Equity |  | $              | 465,532 |                |      |                |  |      |                |  | $              | 417,491 |                |   |        |                |      |                |  | $              | 359,683 |  |   |        |  |      |  
|                                           |  |                |         |                |      |                |  |      |                |  |                |         |                |   |        |                |      |                |  |                |         |  |   |        |  |      |  
|Net Interest Spread                        |  |                |         |                |      |                |  | 2.51 | %              |  |                |         |                |   |        |                | 2.65 | %              |  |                |         |  |   |        |  | 3.23 | %
|Net Interest Income                        |  |                |         |                | $    | 11,334         |  |      |                |  |                |         |                | $ | 11,134 |                |      |                |  |                |         |  | $ | 12,095 |  |      |  
|                                           |  |                |         |                |      |                |  |      |                |  |                |         |                |   |        |                |      |                |  |                |         |  |   |        |  |      |  
|Net Interest Yield                         |  |                |         |                |      |                |  | 2.71 | %              |  |                |         |                |   |        |                | 2.95 | %              |  |                |         |  |   |        |  | 3.75 | %



|(1) | All yields/rates are computed on a tax equivalent basis at a federal tax rate of 34%.
|--- | -------------------------------------------------------------------------------------

|(2) | Average loan balances include nonaccrual loans. All loans and deposits are domestic.
|--- | ------------------------------------------------------------------------------------



7



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GREER BANCSHARES INCORPORATED



The following table sets forth the effect that the varying levels of earning assets and interest-bearing
liabilities and the changes in applicable rates have had on changes in net interest income during the periods indicated. The net changes in net interest income in this table expand the differences in net interest income in the previous table,
Average Balances, Income, Expenses, and Rates.

Analysis of Changes in Net Interest Income



|                                         |  |                         |       |   |                         |   |        |       |  |   |        |   |  |      |       |   |       |   |        |   |  |   |        |  
|---------------------------------------- |  | ----------------------- | ----- | - | ----------------------- | - | ------ | ----- |  | - | ------ | - |  | ---- | ----- | - | ----- | - | ------ | - |  | - | ------ | -
|Year Ended December 31,                  |  | 2009 Compared with 2008 |       |   | 2008 Compared with 2007 |  
|                                         |  | Variance Due to         |       |   | Variance Due to         |  
|(Dollars in Thousands)                   |  | Volume                  |       |   | Rate                    |   |        | Total |  |   | Volume |   |  | Rate |       |   | Total |  
|Interest Income:                         |  |                         |       |   |                         |   |        |       |  |   |        |   |  |      |       |   |       |   |        |   |  |   |        |  
|Taxable Investments                      |  | $                       | 966   |   |                         | $ | (1,198 | )     |  | $ | (232   | ) |  | $    | 1,188 |   |       | $ | 202    |   |  | $ | 1,390  |  
|Non-Taxable Investments                  |  |                         | 49    |   |                         |   | (3     | )     |  |   | 46     |   |  |      | (52   | ) |       |   | (6     | ) |  |   | (58    | )
|Interest-Bearing Deposits in other banks |  |                         | 11    |   |                         |   | (13    | )     |  |   | (2     | ) |  |      | (19   | ) |       |   | (9     | ) |  |   | (28    | )
|Federal Funds Sold                       |  |                         | (8    | ) |                         |   | (26    | )     |  |   | (34    | ) |  |      | (18   | ) |       |   | (36    | ) |  |   | (54    | )
|Loans                                    |  |                         | 1,510 |   |                         |   | (3,332 | )     |  |   | (1,822 | ) |  |      | 2,998 |   |       |   | (5,161 | ) |  |   | (2,163 | )
|                                         |  |                         |       |   |                         |   |        |       |  |   |        |   |  |      |       |   |       |   |        |   |  |   |        |  
|Total                                    |  |                         | 2,528 |   |                         |   | (4,572 | )     |  |   | (2,044 | ) |  |      | 4,097 |   |       |   | (5,010 | ) |  |   | (913   | )
|                                         |  |                         |       |   |                         |  
|Interest Expense:                        |  |                         |       |   |                         |   |        |       |  |   |        |   |  |      |       |   |       |   |        |   |  |   |        |  
|NOW Accounts                             |  |                         | 17    |   |                         |   | (94    | )     |  |   | (77    | ) |  |      | 55    |   |       |   | (113   | ) |  |   | (58    | )
|Money Market and Savings                 |  |                         | (10   | ) |                         |   | (295   | )     |  |   | (305   | ) |  |      | 84    |   |       |   | (262   | ) |  |   | (178   | )
|Time Deposits                            |  |                         | 917   |   |                         |   | (2,386 | )     |  |   | (1,469 | ) |  |      | 1,054 |   |       |   | (1,276 | ) |  |   | (222   | )
|Federal Funds Purchased                  |  |                         | 248   |   |                         |   | (293   | )     |  |   | (45    | ) |  |      | 76    |   |       |   | (42    | ) |  |   | 34     |  
|Repurchase Agreements                    |  |                         |      |   |                         |   | (1     | )     |  |   | (1     | ) |  |      | 271   |   |       |   | (221   | ) |  |   | 50     |  
|FHLB Borrowings                          |  |                         | 346   |   |                         |   | (420   | )     |  |   | (74    | ) |  |      | 1,194 |   |       |   | (551   | ) |  |   | 643    |  
|Other Long Term Debt                     |  |                         |      |   |                         |   | (273   | )     |  |   | (273   | ) |  |      |      |   |       |   | (221   | ) |  |   | (221   | )
|                                         |  |                         |       |   |                         |   |        |       |  |   |        |   |  |      |       |   |       |   |        |   |  |   |        |  
|Total                                    |  |                         | 1,518 |   |                         |   | (3,762 | )     |  |   | (2,244 | ) |  |      | 2,734 |   |       |   | (2,686 | ) |  |   | 48     |  
|                                         |  |                         |       |   |                         |   |        |       |  |   |        |   |  |      |       |   |       |   |        |   |  |   |        |  
|Net Interest Income                      |  | $                       | 1,010 |   |                         | $ | (810   | )     |  | $ | 200    |   |  | $    | 1,363 |   |       | $ | (2,324 | ) |  | $ | (961   | )
|                                         |  |                         |       |   |                         |   |        |       |  |   |        |   |  |      |       |   |       |   |        |   |  |   |        |  

The rate/volume variances (change in volume times change in rate) have been allocated to the change attributable to rate.

The Company monitors and manages the pricing and maturity of its assets and liabilities in order to diminish the potential adverse impact
that changes in interest rates could have on net interest income. The principal monitoring technique employed by the Company is the use of an interest rate risk management model which measures the effects that movements in interest rates will have
on net interest income and the present value of equity. Included in the interest rate risk management reports generated by the model is a report that measures interest sensitivity gap, which is the positive or negative dollar difference
between assets and liabilities that are subject to interest rate repricing within a given period of time. Interest rate sensitivity can be managed by repricing assets or liabilities, replacing an asset or liability at maturity, or adjusting the
interest rate during the life of an asset or liability. Managing the amount of assets and liabilities repricing in the same time interval helps to hedge the risk and minimize the impact on net interest income of rising or falling interest rates.

The table included above shows the changes in interest income and expense during 2009 and 2008, and allocates the appropriate amount of
income or expense to changes in rate or changes in volume. In 2009 interest income decreased by approximately $2,044,000 and interest expense decreased by approximately $2,244,000, resulting in a slight increase of approximately $200,000 in net
interest income. The decline in interest income was primarily the result of the decline in the prime lending rate in 2008, which affected approximately $165 million loans indexed to prime. The increase in net interest income is largely attributable
to decreases in market interest rates as term interest bearing deposits reprice. The increase was partially offset by increased volume in interest bearing deposits. Average earning assets increased in 2009 by approximately $43,214,000, and average
interest-bearing liabilities increased by approximately $43,225,000.

In 2008 interest income decreased by approximately $913,000 and interest
expense increased by approximately $48,000, which resulted in a decrease of approximately $961,000 in net interest income. The decrease in net interest income is



8



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GREER BANCSHARES INCORPORATED



largely attributable to decreases in rate. The decrease was partially offset by increased volume in
loans. Earning assets increased in 2008 by approximately $44,675,000, and interest-bearing liabilities increased by approximately $56,395,000. Market interest rates decreased during 2008 as the Federal Open Market Committee decreased its target for
the federal funds rate by a total of 400 basis points.

Provision for Loan Losses

The Company has developed policies and procedures for evaluating the overall quality of its credit portfolio and the timely identification of potential
problem credits. On a quarterly basis, the Banks Board of Directors reviews and approves the appropriate level for the Banks allowance for loan losses based upon managements recommendations and the results of the internal
monitoring and reporting system. Management also monitors historical statistical data for both the Bank and other financial institutions. The adequacy of the allowance for loan losses and the effectiveness of the monitoring and analysis system are
also reviewed by the Banks regulators and the Companys internal auditor.

Additions to the allowance for loan losses, which are
expensed as the provision for loan losses on the income statement, are made as needed to maintain the allowance at an appropriate level based on managements analysis of the inherent probable losses in the loan portfolio. Loan losses and
recoveries are charged or credited directly to the allowance. The amount of the provision is a function of the level of loans outstanding, the level of nonperforming loans, historical loan loss experience, the amount of loan losses actually charged
against the reserve during the period and current economic conditions. During 2009, the Bank provided $5,185,195 for loan losses, raising the balance of the allowance for loan losses to $6,315,278 at December 31, 2009 after charging off current
year net bad debts of $3,997,221. The reserve for loan losses was approximately 2.05% and 1.65% of total loans for the years ended December 31, 2009 and 2008, respectively. Non-performing loans (i.e., loans ninety days or more past due and
loans on non-accrual status) as a percentage of average assets increased from 1.23% to 1.55% from December 31, 2008 to December 31, 2009. Management continues to carefully analyze the loan portfolio to ensure the timely identification of
problem loans and believes the current reserve level is adequate as indicated by the Banks loan loss reserve model at December 31, 2009.

Potential problem loans, which are not included in non-performing loans, amounted to approximately $19,500,000, or 6.3% of total loans outstanding at December 31, 2009. Potential problem loans represent those loans with a well-defined
weakness and where information about possible credit problems of borrowers or the performance of construction or development projects has caused management to have concerns about the borrowers ability to comply with present repayment terms.
Six residential construction and land development loans totaling approximately $9,894,000 were included in potential problem loans at December 31, 2009. While these loans are currently performing under the contract terms, the construction or
development projects are not performing as originally projected, due to a decline in the sale of lots. These loans have current appraisals indicating the collateral values exceed the loan balances.

The Banks allowance for loan losses is based upon judgments and assumptions of risk elements in the portfolio, current economic conditions and other
factors affecting borrowers. The process includes identification and analysis of probable losses in various portfolio segments utilizing a credit risk grading process and specific reviews and evaluations of significant problem credits. In addition,
management monitors the overall portfolio quality through observable trends in delinquencies, charge-offs and general conditions in the market area.

Based on present information and ongoing evaluation, management considers the allowance for loan losses to be adequate to meet presently known and inherent risks in the loan portfolio. Managements judgment as to the adequacy of the
allowance is based upon a number of assumptions about future events that it believes to be reasonable, but which may or may not prove to be accurate. Actual losses will undoubtedly vary from the estimates. Also, there is a possibility that
charge-offs in future periods will exceed the allowance for loan losses as estimated at any point in time. Thus, there can be no assurance that charge-offs in future periods will not exceed the allowance for loan losses or that additional increases
in the allowance for loan losses will not be required. The Company does not allocate the allowance for loan losses to specific categories of loans but evaluates the adequacy on an overall portfolio basis utilizing a risk grading system.

Noninterest Income

Noninterest income increased $646,700, or 21.2%, in 2009 compared to 2008 before the impairment charges in investment securities and restricted stock of $464,719 and $8,366,630, respectively. See Note 2 in the accompanying consolidated
financial statements for more details regarding the impairment charges. The increase was primarily due to a



9



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GREER BANCSHARES INCORPORATED



gain on sale of investment securities of $1,093,840 in 2009. In addition, other noninterest income
decreased $258,553, or 13%, for the year ended December 31, 2009 mainly as the result of a $152,878 gain on the sale of an interest rate floor in 2008 and decreased fees of $238,386 from the Banks financial services division. These
declines were partially offset by increased earnings on Bank owned life insurance of $38,335, increased service charges and customer service fees relating to Visa debit and credit cards of $37,289 and increases in mortgage banking fees of $67,454 in
2009.

The Company experienced a noninterest loss of $5,321,828 for the year ended December 31, 2008 compared to noninterest income of
$2,499,092 for the year ended December 31, 2007. The loss is attributable to the other than temporary impairment charge of $8,366,630 related to FNMA preferred stock and a pooled trust preferred investment. The impairment charge was slightly
offset by gain on sale of investment securities of $200,451. In addition, other noninterest income increased $387,927, or 24%, for the year ended December 31, 2008 mainly as the result of a $152,878 gain on the sale of an interest rate floor
and increased fees of $137,476 from the Banks financial management services division. Service charges and customer service fees relating to deposit accounts, declined slightly from $905,131 for the year ended December 31, 2007, to
$862,463 for the year ended December 31, 2008, primarily due to reduced non-sufficient funds fees.

Noninterest
Expenses

Noninterest expenses increased slightly in 2009 compared to 2008 due to an increase in FDIC deposit insurance assessments and an
increase in expenses relating to foreclosed properties. Without these increases, noninterest expenses declined by approximately $1,207,000 as a result of managements efforts to reduce overhead expenses. FDIC deposit insurance assessments
increased $614,351, or 260.8%, in 2009 compared to 2008 due to efforts by the Federal government to replenish the FDIC insurance fund after increased bank failures across the nation. The FDIC increased assessment rates in 2009 and imposed a special
assessment equating to $212,000 for the Bank in 2009 to further boost the FDICs deposit insurance reserve. Other real estate owned expenses and foreclosure expenses increased $673,387, or 447.2%, in 2009 compared to 2008 due to increases in
Bank owned real estate, net realizable valuation adjustments needed as updated appraisals were received during the holding period, payment of property taxes and repairs needed to maintain the real estate in sellable condition. As we work to manage
our levels of foreclosed assets, it is likely that we will continue to see elevated levels of related expenses for managing the properties. In addition, to the extent that updated appraisals reflect reductions of values of the property, we will be
required to record additional charges to our earnings. In January 2009, management identified certain expenses that could be reduced in an effort to operate more efficiently in the adverse economic environment being experienced. As a result of
managements actions, salaries and employees benefits expense declined 6.8% due to the elimination of seven staff positions, the loan production office was closed in September 2009 which is reflected in the 10.1% decline in occupancy and
equipment expense, postage and supplies expense decreased 17.2%, marketing expenses were cut drastically as seen in the 71.4% decline from 2008 to 2009 and directors fees were reduced 23.4%. Professional fees declined 11.7% in 2009 compared to 2008
as a result of postponement of Sarbanes-Oxley internal control testing.

Noninterest expenses were $10,442,943 for the year ended
December 31, 2008 compared to $9,228,828 for the year ended December 31, 2007. This increase was primarily the result of an increase in other noninterest expense of $413,340, or 33.3% for the year ended December 31, 2008 compared to
the same period in 2007. The increase in noninterest expense is largely the result of increases in FDIC insurance premiums totaling approximately $207,000 and the absorption of construction in progress expenses of approximately $284,000 as the
result of management postponing the construction of an operations facility.

Income Taxes

The Company recorded an income tax benefit in the amount of $636,159 for the year ended December 31, 2009, compared to income tax benefit for the year
ended December 31, 2008 of $3,420,808. The effective tax rate for the benefit recorded in 2009 was 55.4% compared to 38.6% for 2008. The increase in the effective tax rate for the benefit recorded is attributable to having lower loss before
income taxes in 2009, which resulted in nontaxable income having a greater impact on the income tax provision. Also impacting the effective tax rate in 2009 was the impact of impairment charges of approximately $311,000 on certain securities which
required a valuation allowance of $106,000.

The Company recorded an income tax benefit in the amount of $3,420,808 for the year ended
December 31, 2008, compared to income tax expense for the year ended December 31, 2007 of $948,568. The effective tax rate for the benefit recorded in



10



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GREER BANCSHARES INCORPORATED



2008 was 38.6%, compared to an effective tax rate in income before income taxes of 26.7% for 2007. The
effective tax rate in 2008 was impacted by the incurrence of a net loss as well as a higher level of nontaxable interest income.

At
December 31, 2009, the Company had net deferred tax assets of $3,441,052. The Company is required to evaluate whether it is more likely than not that it will realize these net deferred tax assets. In considering whether a valuation allowance on
deferred tax assets is needed, management considers all available evidence, including the existence of available reversing temporary differences, the ability to generate future taxable income and available tax planning strategies. It is possible
that the Companys management may conclude in future periods that a valuation allowance is necessary for some or all of its deferred tax assets in order to reduce them to a level that is more likely than not to be realized. If a valuation
allowance is required, the Company will record an additional charge to income tax expense.

Capital Resources

Total capital of the Company increased $10,126,616 from December 31, 2008 compared to December 31, 2009. In January 2009, the
Company issued $9,993,000 in preferred stock to the U.S. Department of the Treasury (see Note 11 in the accompanying consolidated financial statements for more details). In addition, accumulated other comprehensive income increased by $1,062,352
which partially offset a net loss attributable to common shareholders of $1,091,952. The Company declared cash dividends on preferred stock totaling $500,776 in 2009.

Total capital of the Company decreased in 2008 by a net loss of $5,440,104 and the change in accumulated other comprehensive income of $6,294. The Company paid cash dividends on
April 15, June 15 and September 15 totaling $1,267,605 or $.51 per share. The Company adopted Emerging Issues Task Force (EITF) 06-04 at the beginning of 2008. As a result of the adoption retained earnings was decreased by
$75,031 January 1, 2008.

The Federal Reserve Board and bank regulatory agencies require bank holding companies and financial
institutions to maintain capital at adequate levels based on a percentage of assets and off-balance-sheet exposures, adjusted for risk weights ranging from 0% to 100%. Under the risk-based standard, capital is classified into two tiers. Tier 1
capital of the Company consists of equity minus unrealized gains plus unrealized losses on securities available for sale and less a disallowed portion of our deferred tax assets. In addition to Tier 1 capital requirements, Tier 2 capital consists of
the allowance for loan losses subject to certain limitations. A bank holding companys qualifying capital base for purposes of its risk-based capital ratio consists of the sum of its Tier 1 and Tier 2 capital. The regulatory minimum
requirements are 4% for Tier 1 and 8% for total risk-based capital. The holding company and banking subsidiary are also required to maintain capital at a minimum level based on average assets, which is known as the leverage ratio. Only the strongest
bank holding companies and banks are allowed to maintain capital at the minimum requirement. All others are subject to maintaining ratios 100 to 200 basis points above the minimum.

In October 2004 and December 2006, the Company issued $6.186 million and $5.155 million of junior subordinated debentures to its wholly-owned capital Trusts, Greer Capital Trust I and Greer Capital Trust
II, respectively, to fully and unconditionally guarantee the trust preferred securities issued by the Trusts. These long term obligations qualify as total risk based capital for the Company. In addition, all proceeds received from the issuance were
invested in the Bank as additional capital.



11



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GREER BANCSHARES INCORPORATED



Greer State Bank and the holding company exceeded regulatory capital requirements at December 31,
2009, 2008 and 2007 as set forth in the following table. See Note 18 of the accompanying consolidated financial statements for minimum and well capitalized regulatory requirements.



|                                        |  |      |                        |   |      |   |         |      |  |   |         |  
|--------------------------------------- |  | ---- | ---------------------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|Risk-Based Capital Ratios               |  |      | (Dollars in thousands) |  
|                                        |  |      |                       
|Bank                                    |  | 2009 |                        |   | 2008 |   |         | 2007 | 
|Tier 1 Capital                          |  | $    | 35,614                 |   |      | $ | 25,955  |      |  | $ | 33,802  |  
|Tier 2 Capital                          |  |      | 4,371                  |   |      |   | 4,363   |      |  |   | 2,233   |  
|                                        |  |      |                        |   |      |   |         |      |  |   |         |  
|                                        |  |      |                       
|Total Qualifying Capital                |  | $    | 39,985                 |   |      | $ | 30,318  |      |  | $ | 36,035  |  
|                                        |  |      |                        |   |      |   |         |      |  |   |         |  
|                                        |  |      |                       
|Risk-adjusted total assets              |  | $    | 347,753                |   |      | $ | 347,502 |      |  | $ | 304,305 |  
|                                        |  |      |                        |   |      |   |         |      |  |   |         |  
|(including off-balance-sheet exposures) |  |      |                        |   |      |   |         |      |  |   |         |  
|                                        |  |      |                       
|Tier 1 risk-based capital ratio         |  |      | 10.02                  | % |      |   | 7.47    | %    |  |   | 11.11   | %
|Total risk-based capital ratio          |  |      | 11.28                  | % |      |   | 8.72    | %    |  |   | 11.84   | %
|Tier 1 leverage ratio                   |  |      | 7.43                   | % |      |   | 6.05    | %    |  |   | 9.20    | %
|                                        |  |      |                       
|Greer Bancshares                        |  |      |                        |   |      |   |         |      |  |   |         |  
|Tier 1 risk-based capital ratio         |  |      | 10.38                  | % |      |   | 7.1     | %    |  |   | 10.8    | %
|Total risk-based capital ratio          |  |      | 12.15                  | % |      |   | 9.8     | %    |  |   | 12.4    | %
|Tier 1 leverage ratio                   |  |      | 7.69                   | % |      |   | 5.8     | %    |  |   | 9.0     | %

Liquidity

The Company manages its liquidity for both the asset and liability side of the balance sheet through coordinating the relative maturities
of its assets and liabilities. Short-term liquidity needs are generally met from cash, due from banks, federal funds purchased and sold and deposit levels. The Company has federal funds lines in place totaling $15.5 million, the ability to borrow
additional funds from the Federal Reserve Discount Window of up to 75% of the Banks qualifying non-real estate consumer and commercial loans, the ability to borrow additional funds from the Federal Home Loan Bank of up to 30% of the
Banks assets and also has a repurchase agreement line with Deutsche Bank Securities, Inc., totaling $20 million. Use of the Federal Reserve, FHLB and repurchase lines is subject to the availability of acceptable collateral. As of
December 31, 2009, the Company had approximately $46,900,000 in available collateral for all lines. Management has established policies and procedures governing the length of time to maturity on loans and investments and has established
policies regarding the use of alternative funding sources. In the opinion of management, the deposit base and lines of credit can adequately support short-term liquidity needs.

Impact of Off-Balance Sheet Financial Instruments

The Company has
certain off-balance-sheet instruments in the form of contractual commitments to extend credit to customers. These legally binding commitments have set expiration dates and are at predetermined interest rates. The underwriting criteria for these
commitments are the same as for loans in the loan portfolio. Collateral is also obtained, if necessary, based on the credit evaluation of each borrower. Although many of the commitments will expire unused, management believes there are adequate
resources to fund these commitments. At December 31, 2009 and 2008, the Companys commitments to extend credit totaled approximately $53,160,000 and $68,264,000, respectively.

Investment Portfolio

The following tables summarize the carrying
value and estimated market value of investment securities and weighted-average yields of those securities at December 31, 2009. The yields are based upon amortized cost. The yield on securities of state and political subdivisions is presented
on a tax equivalent basis using a federal income tax rate of 34%.



12



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GREER BANCSHARES INCORPORATED



Expected maturities may differ from contractual maturities because issuers may have the right to call or
prepay obligations with or without call or prepayment penalties.

Investment Securities Portfolio Composition



|                                                      |  |                    |     |   |                           |   |       |                            |  |   |                |   |  |       |         |   |                      |   |                         |   |  |   |         |  |   |      
|----------------------------------------------------- |  | ------------------ | --- | - | ------------------------- | - | ----- | -------------------------- |  | - | -------------- | - |  | ----- | ------- | - | -------------------- | - | ----------------------- | - |  | - | ------- |  | - | -----
|(Dollars in Thousands)December 31, 2009               |  | DueOne Yearor Less |     |   | One YearThroughFive Years |   |       | Five YearsthroughTen Years |  |   | AfterTen Years |   |  | Total |         |   | EstimatedMarketValue |   | AverageMaturityin Years
|Available-For-Sale                                    |  |                    |     |   |                           |   |       |                            |  |   |                |   |  |       |         |   |                      |   |                         |   |  |   |         |  |   |      
|United States Government and other agency obligations |  | $                  |    |   |                           | $ |      |                            |  | $ | 1,988          |   |  | $     |        |   |                      | $ | 1,988                   |   |  | $ | 1,988   |  | $ | 7.97 
|Mortgage-backed securities                            |  |                    |    |   |                           |   | 442   |                            |  |   | 3,195          |   |  |       | 96,237  |   |                      |   | 99,874                  |   |  |   | 99,874  |  |   | 16.61
|Municipal securities                                  |  |                    | 115 |   |                           |   | 1,314 |                            |  |   | 6,056          |   |  |       | 15,301  |   |                      |   | 22,786                  |   |  |   | 22,786  |  |   | 10.19
|Collateral debt obligation                            |  |                    |    |   |                           |   |      |                            |  |   |               |   |  |       | 336     |   |                      |   | 336                     |   |  |   | 336     |  |   | 24.55
|                                                      |  |                    |     |   |                           |   |       |                            |  |   |                |   |  |       |         |   |                      |   |                         |   |  |   |         |  |   |      
|Total                                                 |  | $                  | 115 |   |                           | $ | 1,756 |                            |  | $ | 11,239         |   |  | $     | 111,874 |   |                      | $ | 124,984                 |   |  | $ | 124,984 |  |   |      
|                                                      |  |                    |     |   |                           |   |       |                            |  |   |                |   |  |       |         |   |                      |   |                         |   |  |   |         |  |   |      
|                                                      |  |                    |     |   |                           |   |      
|Available-For-Sale                                    |  |                    |     |   |                           |   |       |                            |  |   |                |   |  |       |         |   |                      |   |                         |   |  |   |         |  |   |      
|Weighted Average Yields:                              |  |                    |     |   |                           |   |       |                            |  |   |                |   |  |       |         |   |                      |   |                         |   |  |   |         |  |   |      
|United States Government and other agency obligations |  |                    | 0.0 | % |                           |   | 0.0   | %                          |  |   | 4.3            | % |  |       | 0.0     | % |                      |   | 4.3                     | % |  |   |         |  |   |      
|Mortgage-backed securities                            |  |                    | 0.0 | % |                           |   | 0.0   | %                          |  |   | 4.4            | % |  |       | 4.1     | % |                      |   | 4.2                     | % |  |   |         |  |   |      
|Municipal securities                                  |  |                    | 4.0 | % |                           |   | 4.7   | %                          |  |   | 4.5            | % |  |       | 4.2     | % |                      |   | 4.4                     | % |  |   |         |  |   |      
|Collateral debt obligation                            |  |                    | 0.0 | % |                           |   | 0.0   | %                          |  |   | 0.0            | % |  |       | 0.0     | % |                      |   | 0.0                     | % |  |   |         |  |   |      

Investment securities in an unrealized loss position as of December 31, 2009 continue to perform as
scheduled. Investment securities are evaluated monthly for indicators of other-than-temporary impairment. OTTI is considered to have occurred when the fair value of a debt security is less than the amortized cost basis at the balance sheet date.
Under these circumstances, OTTI is considered to have occurred 1) if there is intent to sell the security 2) if it is more likely than not we will be required to sell the security before recovery of its amortized cost basis; or 3) the present value
of the expected cash flows is not sufficient to recover the entire amortized cost basis. For securities that we do not expect to sell or it is not more likely than not to be required to sell, the OTTI is separated into credit and noncredit
components The credit-related OTTI, represented by the expected loss in principal, is recognized in noninterest income, while the noncredit-related OTTI is recognized in the other comprehensive income (loss) (OCI). Noncredit-related OTTI
results from other factors, including increased liquidity spreads and extension of the security. For securities which we do expect to sell, all OTTI is recognized in earnings. Presentation of OTTI is made in the income statement on a gross basis
with a reduction for the amount of OTTI recognized in OCI. Our securities may further decline in value in future periods, which may require additional charges for other than temporary impairment of securities.

Loan Portfolio

Credit Risk Management

Credit risk entails both general risk, which is inherent in the process of lending, and risk that is
specific to individual borrowers. The management of credit risk involves both the process of loan underwriting and loan administration. The Company manages credit risk through a strategy of making loans within its primary marketplace and within its
limits of expertise. Although management seeks to avoid concentrations of credit by loan type or industry through diversification, a substantial portion of the borrowers ability to honor the terms of their loans is dependent on the business
and economic conditions in Greenville and Spartanburg counties and the surrounding areas comprising the Companys marketplace. Additionally, since real estate is considered by the Company as the most desirable non-monetary collateral, a
significant portion of loans are collateralized by real estate; however, the cash flow of the borrower or the business enterprise is generally considered as the primary source of repayment. Generally, the value of real estate is not considered by
the Company as the primary source of repayment for performing loans. Management also seeks to limit total exposure to individual and affiliated borrowers. Risk specific to individual borrowers is managed through the loan underwriting process and
through an ongoing analysis of the borrowers ability to service the debt as well as the value of the pledged collateral.



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GREER BANCSHARES INCORPORATED



The Banks loan officers and loan administration staff are charged with monitoring the loan
portfolio and identifying changes in the economy or in a borrowers circumstances which may affect the ability to repay the debt or the value of the pledged collateral. In order to assess and monitor the degree of risk in the loan portfolio,
several credit risk identification and monitoring processes are utilized.

Lending Activities

The Company extends credit primarily to consumers and small to medium businesses in Greenville and Spartanburg counties and, to a limited extent, customers
in surrounding areas.

While the Companys corporate office is located in Greer, South Carolina, its service area is mixed in nature. The
Greenville-Spartanburg area is a regional business center whose economy contains elements of manufacturing, higher education, regional health care and distribution facilities. Outside the incorporated city limits of Greer, the economy includes
manufacturing, agriculture and industry. No particular category or segment of the economy previously described is expected to grow or contract disproportionately in 2010.

Total loans outstanding were $307,393,476 and $311,414,032 at December 31, 2009 and 2008, respectively. See Loan Portfolio Composition table below for concentration by credit type. Substantially all
loans and commitments to extend credit have been granted to customers in the Banks market area and such customers are generally depositors of the Bank.

The Companys ratio of loans to deposits was 102.9% and 110.4% at December 31, 2009 and 2008, respectively. The loan to deposit ratio is used to monitor a financial institutions potential
profitability and efficiency of asset distribution and utilization. Generally, a higher loan to deposit ratio is indicative of higher interest income since loans yield a higher return than alternative investment vehicles. Management has concentrated
on maintaining quality in the loan portfolio while continuing to increase the deposit base. The decrease in the loans to deposits ratio is due primarily to investing a portion of the deposits in investment securities.

The following table summarizes the composition of the loan portfolio by category at the dates indicated.

Loan Portfolio Composition



|                                                |  |         |  |        |  |         |  |        |  |         |  |        |  |         |  |        |  |         |  |       
|----------------------------------------------- |  | ------- |  | ------ |  | ------- |  | ------ |  | ------- |  | ------ |  | ------- |  | ------ |  | ------- |  | ------
|December 31,                                    |  | 2009    |  | 2008   |  | 2007    |  | 2006   |  | 2005   
|(Dollars in thousands)                          |  | $       |  | %      |  | $       |  | %      |  | $       |  | %      |  | $       |  | %      |  | $       |  | %     
|Commercial                                      |  | 58,868  |  | 19.15  |  | 57,119  |  | 18.34  |  | 50,512  |  | 19.21  |  | 49,954  |  | 20.32  |  | 43,509  |  | 21.86 
|Real Estate-Construction/Land                   |  | 75,537  |  | 24.57  |  | 86,312  |  | 27.71  |  | 73,095  |  | 27.79  |  | 59,625  |  | 24.26  |  | 42,980  |  | 21.60 
|Real Estate Mortgage:                           |  |         |  |        |  |         |  |        |  |         |  |        |  |         |  |        |  |         |  |       
|Residential 1-4                                 |  | 85,541  |  | 27.84  |  | 84,664  |  | 27.19  |  | 74,809  |  | 28.44  |  | 68,926  |  | 28.04  |  | 58,898  |  | 29.60 
|Multi-Family                                    |  | 40      |  | 0.01   |  | 50      |  | 0.02   |  | 223     |  | 0.08   |  | 608     |  | 0.25   |  | 921     |  | 0.46  
|Nonfarm/Nonresidential                          |  | 76,558  |  | 24.91  |  | 69,313  |  | 22.26  |  | 52,141  |  | 19.82  |  | 51,244  |  | 20.84  |  | 40,374  |  | 20.29 
|Installment Loans to Individuals                |  | 8,530   |  | 2.77   |  | 10,370  |  | 3.33   |  | 10,864  |  | 4.13   |  | 10,853  |  | 4.41   |  | 10,476  |  | 5.26  
|Lease Financing                                 |  | 1,055   |  | 0.34   |  | 593     |  | 0.19   |  | 696     |  | 0.27   |  | 796     |  | 0.32   |  | 899     |  | 0.45  
|Obligations of State and Political Subdivisions |  | 242     |  | 0.08   |  | 2,120   |  | 0.68   |  | 494     |  | 0.19   |  | 571     |  | 0.23   |  | 104     |  | 0.05  
|Other                                           |  | 1,022   |  | .33    |  | 873     |  | .28    |  | 177     |  | .07    |  | 3,281   |  | 1.33   |  | 842     |  | .43   
|                                                |  |         |  |        |  |         |  |        |  |         |  |        |  |         |  |        |  |         |  |       
|Total Loans                                     |  | 307,393 |  | 100.00 |  | 311,414 |  | 100.00 |  | 263,011 |  | 100.00 |  | 245,858 |  | 100.00 |  | 199,003 |  | 100.00
|                                                |  |         |  |        |  |         |  |        |  |         |  |        |  |         |  |        |  |         |  |       

The Companys loan portfolio contains a significant percentage of
real estate mortgage loans. Real estate loans decreased by approximately $2,663,000 to approximately $237,676,000 during the twelve months ended December 31, 2009. At December 31, 2009 real estate loans represented 77.33% of the total loan
portfolio compared to 77.18% at December 31, 2008. The slight increase in real estate mortgage loans as a percentage of total loans can be attributed to the slowing demand in the Companys market area for commercial and residential
construction, which is a result of a softening local economy and tightened underwriting standards. In an effort to effectively manage its interest rate risk, over the past several years the Company has not offered in-house long-term fixed rate
mortgage loans; however, the Company has offered five-year and seven-year balloon mortgage loan products at attractive rates. The Company



14



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GREER BANCSHARES INCORPORATED



continues to offer fixed rate long term mortgages through an investor loan program. Commercial and
industrial loans increased slightly to approximately $58,868,000 during 2009 as a result of continued demand for lines of credit also related to a softening local economy. Commercial and industrial loans comprised 19.15% and 18.34% of the total loan
portfolio at December 31, 2009 and 2008, respectively. See Lending Activities under the Companys December 31, 2009 Form-10-K for further discussion.

Maturities and Sensitivity of Loans to Changes in Interest Rates

The following table
summarizes the loan maturity distribution for the selected categories as of December 31, 2009. The Company has a total of approximately $162,341,000 in loans indexed to the Wall Street Journal Prime rate.



|                                 |  |            |        |         |                               |   |        |       |         |  |        |        |  |         |         |  |        |  
|-------------------------------- |  | ---------- | ------ | ------- | ----------------------------- | - | ------ | ----- | ------- |  | ------ | ------ |  | ------- | ------- |  | ------ | -
|December 31, 2009                |  | Commercial |        |         | Real Estate-Construction/Land |   |        | Total |        
|(Dollars in Thousands)           |  | Amount     |        | Percent |                               |   | Amount |       | Percent |  |        | Amount |  | Percent |        
|Due One Year or Less:            |  | $          | 24,367 |         | 41.39                         | % |        | $     | 51,329  |  | 67.95  | %      |  | $       | 75,696  |  | 56.32  | %
|                                 |  |            |        |         |                               |  
|Due One Year through Five Years: |  |            |        |         |                               |   |        |       |         |  |        |        |  |         |         |  |        |  
|Fixed Rate                       |  |            | 25,204 |         | 42.81                         | % |        |       | 17,638  |  | 23.35  | %      |  |         | 42,842  |  | 31.88  | %
|Variable Rate                    |  |            | 3,931  |         | 6.68                          | % |        |       | 2,994   |  | 3.96   | %      |  |         | 6,925   |  | 5.15   | %
|                                 |  |            |        |         |                               |  
|Due After Five Years:            |  |            |        |         |                               |   |        |       |         |  |        |        |  |         |         |  |        |  
|Fixed Rate                       |  |            | 2,865  |         | 4.87                          | % |        |       | 2,712   |  | 3.59   | %      |  |         | 5,577   |  | 4.15   | %
|Variable Rate                    |  |            | 2,501  |         | 4.25                          | % |        |       | 864     |  | 1.15   | %      |  |         | 3,365   |  | 2.50   | %
|                                 |  |            |        |         |                               |   |        |       |         |  |        |        |  |         |         |  |        |  
|Total                            |  | $          | 58,868 |         | 100.00                        | % |        | $     | 75,537  |  | 100.00 | %      |  | $       | 134,405 |  | 100.00 | %
|                                 |  |            |        |         |                               |   |        |       |         |  |        |        |  |         |         |  |        |  

Risk Elements

The accrual of interest on loans is discontinued when, in managements judgment, the interest will not be collectible in the normal course of business. Accrual of interest of such loans is typically
discontinued when the loan is 90 days past due or impaired. All interest accrued, but not collected for loans that are placed on nonaccrual or charged off, is reversed against interest income. The interest on these loans is accounted for on the
cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.



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GREER BANCSHARES INCORPORATED



The following table states the approximate aggregate amount of problem assets in each of the following
categories at December 31:



|                                                                            |  |      |        |   |      |   |       |      |  |   |       |   |  |      |        |   |  |   |        |  
|--------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ----- | ---- |  | - | ----- | - |  | ---- | ------ | - |  | - | ------ | -
|(dollars in thousands)                                                      |  | 2009 |        |   | 2008 |   |       | 2007 |  |   | 2006  |   |  | 2005 |       
|Nonperforming loans:                                                        |  |      |        |   |      |   |       |      |  |   |       |   |  |      |        |   |  |   |        |  
|Nonaccrual-real estate mortgage                                             |  | $    | 6,426  |   |      | $ | 4,727 |      |  | $ | 2,488 |   |  | $    | 718    |   |  | $ | 482    |  
|Nonaccrual-commercial and industrial                                        |  |      | 273    |   |      |   | 338   |      |  |   | 213   |   |  |      | 122    |   |  |   | 1      |  
|Nonaccrual-consumer                                                         |  |      | 26     |   |      |   | 3     |      |  |   | 1     |   |  |      | 3      |   |  |   | 1      |  
|90 days or more past due and still accruing interest                        |  |      | 561    |   |      |   | 86    |      |  |   | 100   |   |  |      | 1      |   |  |   | 32     |  
|                                                                            |  |      |        |   |      |   |       |      |  |   |       |   |  |      |        |   |  |   |        |  
|Total nonperforming loans                                                   |  |      | 7,286  |   |      |   | 5,154 |      |  |   | 2,802 |   |  |      | 844    |   |  |   | 516    |  
|                                                                            |  |      |        |   |      |   |       |      |  |   |       |   |  |      |        |   |  |   |        |  
|                                                                            |  |      |        |   |     
|Foreclosed properties:                                                      |  |      |        |   |      |   |       |      |  |   |       |   |  |      |        |   |  |   |        |  
|Foreclosed properties-residential real estate                               |  |      | 5,068  |   |      |   | 675   |      |  |   | 42    |   |  |      |       |   |  |   |       |  
|Foreclosed properties-commercial real estate                                |  |      | 3,426  |   |      |   | 1,167 |      |  |   |      |   |  |      |       |   |  |   |       |  
|                                                                            |  |      |        |   |      |   |       |      |  |   |       |   |  |      |        |   |  |   |        |  
|Total foreclosed properties                                                 |  |      | 8,494  |   |      |   | 1,842 |      |  |   | 42    |   |  |      |       |   |  |   |       |  
|                                                                            |  |      |        |   |      |   |       |      |  |   |       |   |  |      |        |   |  |   |        |  
|Total nonperforming assets                                                  |  | $    | 15,780 |   |      | $ | 6,996 |      |  | $ | 2,844 |   |  | $    | 844    |   |  | $ | 516    |  
|                                                                            |  |      |        |   |     
|Nonperforming assets to total loans and foreclosed properties at period end |  |      | 5.00   | % |      |   | 2.23  | %    |  |   | 1.08  | % |  |      | .34    | % |  |   | .26    | %
|Nonperforming assets to total assets at period end                          |  |      | 3.31   | % |      |   | 1.60  | %    |  |   | .70   | % |  |      | .23    | % |  |   | .17    | %
|Allowance for loan losses to nonperforming loans at period end              |  |      | 86.67  | % |      |   | 99.48 | %    |  |   | 79.69 | % |  |      | 213.39 | % |  |   | 274.42 | %

Nonperforming loans and impaired loans are
defined differently. Nonperforming loans are loans that are 90 days past due and still accruing interest and nonaccrual loans. Impaired loans are loans that based upon current information and events it is considered probable that the Company
will be unable to collect all amounts of contractual interest and principal as scheduled in the loan agreement. Some loans may be included in both categories, whereas other loans may only be included in one category.

The loan portfolio is regularly reviewed to determine whether any loans require classification in accordance with applicable regulations. When loans are
classified as either substandard or doubtful, collateral and future cash flow projections are reviewed to determine if a specific reserve is necessary. The allowance for loan losses represents amounts that have been established to recognize incurred
losses in the loan portfolio that are both probable and reasonably estimable. Loans are charged off when classified as loss. The determination as to risk classification of loans and the amount of the loss allowances are subject to review by the
Banks regulatory agencies.



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GREER BANCSHARES INCORPORATED



The following table sets forth certain information with respect to the allowance for loan losses and the
composition of charge-offs and recoveries for each of the last five years.

Summary of Loan Loss Experience



|                                              |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|--------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|(Dollars in Thousands)                        |  | 2009 |         |   | 2008 |   |         | 2007 |  |   | 2006    |   |  | 2005 |        
|Total loans outstanding at end of year        |  | $    | 307,393 |   |      | $ | 311,414 |      |  | $ | 263,011 |   |  | $    | 245,858 |   |  | $ | 199,003 |  
|                                              |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Average loans outstanding                     |  | $    | 309,162 |   |      | $ | 285,818 |      |  | $ | 249,583 |   |  | $    | 229,467 |   |  | $ | 161,909 |  
|                                              |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|                                              |  |      |         |   |     
|Balance, beginning of year                    |  | $    | 5,127   |   |      | $ | 2,233   |      |  | $ | 1,801   |   |  | $    | 1,416   |   |  | $ | 1,136   |  
|Loans charged-off                             |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Commercial and industrial                     |  |      | 702     |   |      |   | 494     |      |  |   | 1,338   |   |  |      | 177     |   |  |   | 24      |  
|Real estate - mortgage                        |  |      | 3,137   |   |      |   | 613     |      |  |   | 107     |   |  |      |        |   |  |   | 20      |  
|Consumer                                      |  |      | 218     |   |      |   | 278     |      |  |   | 77      |   |  |      | 77      |   |  |   | 114     |  
|                                              |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Total loans charged-off                       |  |      | 4,057   |   |      |   | 1,358   |      |  |   | 1,552   |   |  |      | 254     |   |  |   | 158     |  
|                                              |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|                                              |  |      |         |   |     
|Recoveries of previous loan losses            |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Commercial and industrial                     |  |      | 17      |   |      |   | 11      |      |  |   | 128     |   |  |      | 1       |   |  |   | 4       |  
|Real estate - mortgage                        |  |      | 7       |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Consumer                                      |  |      | 36      |   |      |   | 38      |      |  |   | 15      |   |  |      | 41      |   |  |   | 10      |  
|                                              |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Total loan recoveries                         |  |      | 60      |   |      |   | 49      |      |  |   | 143     |   |  |      | 42      |   |  |   | 14      |  
|                                              |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|                                              |  |      |         |   |     
|Net charge-offs                               |  |      | 3,997   |   |      |   | 1,336   |      |  |   | 1,379   |   |  |      | 212     |   |  |   | 144     |  
|                                              |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Provision charged to operations               |  |      | 5,185   |   |      |   | 4,230   |      |  |   | 1,811   |   |  |      | 597     |   |  |   | 424     |  
|                                              |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Balance, end of year                          |  | $    | 6,315   |   |      | $ | 5,127   |      |  | $ | 2,233   |   |  | $    | 1,801   |   |  | $ | 1,416   |  
|                                              |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|                                              |  |      |         |   |     
|Ratios:                                       |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Allowance for loan losses to average loans    |  |      | 2.04    | % |      |   | 1.79    | %    |  |   | 0.89    | % |  |      | 0.78    | % |  |   | 0.87    | %
|Allowance for loan losses to period end loans |  |      | 2.05    | % |      |   | 1.65    | %    |  |   | 0.85    | % |  |      | 0.73    | % |  |   | 0.71    | %
|Net charge offs to average loans              |  |      | 1.29    | % |      |   | 0.47    | %    |  |   | 0.55    | % |  |      | 0.09    | % |  |   | 0.09    | %

The allowance for loan losses is
maintained at a level determined by management to be adequate to provide for probable losses inherent in the loan portfolio. The allowance is maintained through the provision for loan losses which is a charge to operations. The potential for loss in
the portfolio reflects the risks and uncertainties inherent in the extension of credit.

The Banks provision and allowance for loan
losses is subjective in nature and relies on judgments and assumptions about economic conditions and other factors affecting borrowers. These assumptions are based on the evaluation of several factors, including levels of, and trends in, past due
and classified loans; levels of, and trends in, charge-offs and recoveries; trends in volume of loans, including any credit concentrations in the loan portfolio; experience, ability and depth of relevant lending staff; and national and local
economic trends and conditions. No assurances can be made that future charges to the allowance for loan losses or provisions for loan losses may not be significant to a particular accounting period.

Interest is discontinued on impaired loans when management determines that a borrower may be unable to meet payments as they become due. As of
December 31, 2009 the Bank had nineteen impaired commercial real estate loans and sixteen impaired commercial and industrial loans with outstanding balances of $3,818,426 and $1,147,374, respectively. The average amount of impaired loans
outstanding during 2009 was $6,682,674. There was no interest income recognized on the impaired loans. Large groups of smaller balance homogenous loans that may meet these criteria are not evaluated individually for impairment, so they are not
included in the impaired loan totals.



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GREER BANCSHARES INCORPORATED



Deposits

Average deposits were approximately $291,892,000 and $266,231,000 during 2009 and 2008, respectively. NOW accounts increased approximately $3,628,000, or 9.5%, from December 31, 2009 compared to
December 31, 2008. Time deposits increased approximately $22,384,000, or 14.4%, over the same period primarily as a result of aggressive rate specials offered on longer term deposits.

Contractual maturities of all time deposits at December 31, 2009 were as follows: twelve months or less  $126,716,919, over twelve months through
thirty-six months  $48,957,790, and over thirty-six months  $0.

The following table summarizes the Banks average deposits
by categories at the dates indicated.



|                             |  |                |         |         |        |   |                |      |         |  |        |                |  |         |         |  |        |  
|---------------------------- |  | -------------- | ------- | ------- | ------ | - | -------------- | ---- | ------- |  | ------ | -------------- |  | ------- | ------- |  | ------ | -
|Year Ended December 31,      |  | 2009           |         |         | 2008   |   |                | 2007 |        
|(Dollars in thousands)       |  | AverageBalance |         | Percent |        |   | AverageBalance |      | Percent |  |        | AverageBalance |  | Percent |        
|Noninterest-Bearing Deposits |  |                |         |         |        |   |                |      |         |  |        |                |  |         |         |  |        |  
|Demand Deposits              |  | $              | 29,193  |         | 10.00  | % |                | $    | 29,180  |  | 14.03  | %              |  | $       | 35,394  |  | 14.03  | %
|                             |  |                |         |         |        |  
|Interest Bearing Liabilities |  |                |         |         |        |   |                |      |         |  |        |                |  |         |         |  |        |  
|NOW Accounts                 |  |                | 41,711  |         | 14.29  | % |                |      | 38,075  |  | 12.90  | %              |  |         | 29,096  |  | 12.90  | %
|Money Market and Savings     |  |                | 43,384  |         | 14.86  | % |                |      | 43,756  |  | 17.21  | %              |  |         | 41,207  |  | 17.21  | %
|Time Deposits                |  |                | 177,604 |         | 60.85  | % |                |      | 155,220 |  | 55.86  | %              |  |         | 133,788 |  | 55.86  | %
|                             |  |                |         |         |        |   |                |      |         |  |        |                |  |         |         |  |        |  
|Total Deposits               |  | $              | 291,892 |         | 100.00 | % |                | $    | 266,231 |  | 100.00 | %              |  | $       | 239,485 |  | 100.00 | %
|                             |  |                |         |         |        |   |                |      |         |  |        |                |  |         |         |  |        |  

Core deposits, which exclude time deposits of $100,000 or more and brokered deposits, provide a relatively stable funding
source for the loan portfolio and other earning assets. Core deposits were approximately $202,717,000, $170,426,000, and $171,127,000 at December 31, 2009, 2008 and 2007, respectively.

Time deposits over $100,000, including brokered deposits of approximately $30,000,000, $49,000,000 and $22,000,000, totaled approximately $94,108,000,
$109,647,000 and $74,341,000 at December 31, 2009, 2008 and 2007, respectively. Scheduled maturities were as follows:



|                                                |  |      |        |      |   |         |  |   |       
|----------------------------------------------- |  | ---- | ------ | ---- | - | ------- |  | - | ------
|Year Ended December 31,(Dollars in thousands)   |  | 2009 |        | 2008 |   | 2007   
|Maturing in 3 months or less                    |  | $    | 29,997 |      | $ | 29,765  |  | $ | 18,385
|Maturing after 3 months but less than 6 months  |  |      | 12,857 |      |   | 38,425  |  |   | 22,206
|Maturing after 6 months but less than 12 months |  |      | 21,749 |      |   | 36,211  |  |   | 30,402
|Maturing after 12 months                        |  |      | 29,505 |      |   | 5,246   |  |   | 3,348 
|                                                |  |      |        |      |   |         |  |   |       
|Total                                           |  | $    | 94,108 |      | $ | 109,647 |  | $ | 74,341
|                                                |  |      |        |      |   |         |  |   |       

Short-Term Borrowings

At December 31, 2009, the Company had purchased federal funds totaling $3,992,931 and Federal Reserve borrowings of $10,000,000. At December 31,
2008 the Company had purchased federal funds totaling $4,000,000. At December 31, 2007, the Company had purchased federal funds totaling $3,004,000.



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GREER BANCSHARES INCORPORATED



The related information for these borrowings during 2009 is summarized as follows:



|                                            |  |                       |           |   |                          |   |            |  
|------------------------------------------- |  | --------------------- | --------- | - | ------------------------ | - | ---------- | -
|                                            |  | FederalFundsPurchased |           |   | FederalReserveBorrowings |  
|Average balance outstanding during the year |  | $                     | 1,277,000 |   |                          | $ | 10,593.000 |  
|Average rate paid during the year           |  |                       | .85       | % |                          |   | .26        | %
|Average rate on year end balance            |  |                       | .36       | % |                          |   | .25        | %

Long Term Borrowings

At December 31, 2009 and December 31, 2008, the Company had fixed rate notes payable totaling $90,500,000 and $82,000,000,
respectively, to Federal Home Loan Bank (FHLB). Interest rates on the advances ranged from .68% to 5.92% and 2.67% to 5.92% at December 31, 2009 and 2008, respectively. At December 31, 2009, the Company had fixed rate
repurchase agreements totaling $15,000,000 with a stated interest rate of 3.60%. At December 31, 2009, the Company had variable rate notes payable totaling $16,000,000 to FHLB. Notes for $10,000,000 were indexed to the 3 month LIBOR rate for a
weighted rate of .88% on December 31, 2009. A note for $6,000,000 was indexed to the Wall Street Journal prime rate and was .73% on December 31, 2009. The Company has pledged its 1 to 4 family residential mortgages, commercial real estate
mortgages, home equity lines of credit and certain mortgage-backed securities as collateral against the FHLB borrowings.

In October 2004 and
December 2006, the Company issued $6,186,000 and $5,155,000 of junior subordinated debentures to its wholly-owned capital Trusts, Greer Capital Trust I and Greer Capital Trust II, respectively, and fully and unconditionally guaranteed the trust
preferred securities issued by the Trusts. These long-term obligations currently qualify as total risk based capital for the Company.

The
junior subordinated debentures issued in October 2004 mature in October 2034. Interest payments are due quarterly to Greer Capital Trust I at three-month LIBOR plus 220 basis points.

The junior subordinated debentures issued in December 2006 mature in December 2036, but include an option to call the debt in December 2011. Interest
payments are due quarterly to Greer Capital Trust II at the three-month LIBOR plus 173 basis points.

Accounting and
Financial Reporting Issues

FASB ASC 820  In April 2009, the FASB issued new guidance impacting FASB ASC 820, Fair Value
Measurements and Disclosures. This provides additional guidance on determining fair value when the volume and level of activity for the asset or liability has significantly decreased and guidance for identifying transactions that are not orderly.
This standard affirms that the objective of fair value when the market for an asset is not active is the price that would be received to sell the asset in an orderly transaction, and clarifies and includes additional factors for determining whether
there has been a significant decrease in market activity for an asset when the market for that asset is not active. This standard further requires an entity to base its conclusion about whether a transaction was not orderly on the weight of the
evidence. It also amended previous standards to expand certain disclosure requirements. The standard was effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15,
2009. This standard became effective for the Company on June 15, 2009 and did not have a significant impact on the Companys financial statements.

FASB ASC 320-10  In April 2009, the FASB issued new guidance impacting FASB ASC 320-10, Investments  Debt and Equity Securities. The guidance (i) changed existing guidance for
determining whether an impairment is other than temporary to debt securities and (ii) replaced the existing requirement that the entitys management assert it has both the intent and ability to hold an impaired security until recovery with
a requirement that management assert: (a) it does not have the intent to sell the security; and (b) it is more likely than not it will not have to sell the security before recovery of its cost basis. Under these standards, declines in the
fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The amount of the
impairment related to other factors is recognized in other comprehensive income. These



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GREER BANCSHARES INCORPORATED



standards were effective for interim and annual periods ending after June 15, 2009, became
effective for the Company on June 15, 2009 and did not have a significant impact on the Companys financial statements.

FASB ASC
825  In April 2009, the FASB issued new guidance impacting FASB ASC 825-10-50, Financial Instruments. This guidance requires an entity to provide disclosures about fair value of financial instruments in interim financial information at
interim reporting periods. Under these standards, a publicly traded company shall include disclosures about the fair value of its financial instruments whenever it issues summarized financial information for interim reporting periods. In addition,
entities must disclose, in the body or in the accompanying notes of its summarized financial information for interim reporting periods and in its financial statements for annual reporting periods, the fair value of all financial instruments for
which it is practicable to estimate that value, whether recognized or not recognized in the statement of financial position. The new interim disclosures were included in the Companys interim financial statements beginning the second quarter,
June 30, 2009.

FASB ASC 105-10  In June 2009, the FASB issued FASB ASC 105-10, Generally Accepted Accounting Principles. This
guidance establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S.
Generally Accepted Accounting Principles. This standard was effective for financial statements issued for interim and annual periods ending after September 15, 2009, for most entities. On the effective date, all non-SEC accounting and reporting
standards were superseded. The Company adopted this standard for the quarterly period ended September 30, 2009, as required. Adoption did not have a material impact on the financial statements taken as a whole.

FASB ASC 810  In December 2009, the FASB issued FASB ASC 810, Consolidations. This accounting guidance was originally issued in June 2009
and is now included in ASC 810. The guidance amends the consolidation guidance applicable for variable interest entities. The guidance is effective for financial statements issued for fiscal years and interim periods beginning after
November 15, 2009, and early adoption is prohibited. We do not anticipate the adoption of this standard will have a significant impact on the Companys financial statements

Stock Information and Dividend History

The common stock of Greer
Bancshares Incorporated is traded in the over-the-counter market and quoted on the OTC Bulletin Board (symbol: GRBS). As of March 11, 2010 there were 1,154 record holders of our common stock, $5.00 par value per share.

The following table sets forth the high and low bid prices per share of the common stock for each quarterly period during the past two fiscal
years, as reported on NASDAQ.com. Such over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.



|        |  |      |       |      |   |      |  |     |       |  |   |      
|------- |  | ---- | ----- | ---- | - | ---- |  | --- | ----- |  | - | -----
|        |  | 2009 |       | 2008
|Quarter |  | High |       | Low  |   | High |  | Low
|First   |  | $    | 11.99 |      | $ | 5.50 |  | $   | 15.95 |  | $ | 13.00
|Second  |  | $    | 10.00 |      | $ | 6.75 |  | $   | 15.40 |  | $ | 11.00
|Third   |  | $    | 8.50  |      | $ | 6.05 |  | $   | 13.80 |  | $ | 10.25
|Fourth  |  | $    | 7.90  |      | $ | 4.00 |  | $   | 12.75 |  | $ | 3.51 

Holders of the Companys common
stock are entitled to receive dividends when, as and if declared by the Companys board of directors out of funds legally available for dividends. Due to the uncertain nature of the current economic environment, no cash dividends were declared
on common stock in 2009 in order to prudently preserve capital levels. The Companys ability to pay dividends to its shareholders in the future will depend on its earnings and financial condition, liquidity and capital requirements, the general
economic and regulatory climate, the Companys ability to service any equity or debt obligations senior to its common stock, including its outstanding trust preferred securities and accompanying junior subordinated debentures and preferred
stock and other factors deemed relevant by the Companys Board of Directors. In addition, in order to pay dividends to shareholders, the Company must receive cash dividends from the Bank. The payment of dividends in the future is subject to
earnings, capital requirements, financial condition

and such other factors as the Board of Directors of Greer Bancshares Incorporated, the
Commissioner of Banking for South Carolina and the FDIC may deem relevant. The preferred stock issued to the U.S. Treasury in January 2009 also contains restrictions on the Companys payment of dividends.



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GREER BANCSHARES INCORPORATED



Forward Looking Information

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such statements relate to, among other things, future economic performance, plans and objectives of management for future operations, and projections of revenues and other financial items that are based on the
beliefs of management, as well as assumptions made by, and information currently available to, management. The words may, will, anticipate, should, would, believe,
contemplate, expect, estimate, continue, may, and intend, as well as other similar words and expressions, are intended to identify forward-looking statements. Actual results may
differ materially from the results discussed in the forward-looking statements. The Companys operating performance is subject to various risks and uncertainties including, without limitation:



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



| |  |  | reduced earnings due to higher credit losses owing to economic factors, including declining home values, increasing interest rates, increasing
unemployment, or changes in payment behavior or other causes;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the concentration of our portfolio in real estate based loans and the weakness in the commercial real estate market;
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | increased funding costs due to market illiquidity, increased competition for funding or other regulatory requirements;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | market risk and inflation;
| | - |  | --------------------------



| |  |  | level, composition and re-pricing characteristics of our securities portfolios;
| | - |  | -------------------------------------------------------------------------------



| |  |  | availability of wholesale funding;
| | - |  | ----------------------------------



| |  |  | adequacy of capital and future capital needs;
| | - |  | ---------------------------------------------



| |  |  | our reliance on secondary sources of liquidity such as FHLB advances, federal funds lines of credit from correspondent banks and brokered time
deposits, to meet our liquidity needs;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | changes in political conditions or the legislative or regulatory environment, including recently enacted and proposed legislation;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



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



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



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



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



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GREER BANCSHARES INCORPORATED



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



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



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