<PAGE>
                                    (PHOTO)

                     The future belongs to those who believe
                         in the beauty of their dreams,


                                                          _Eleanor Roosevelt

                                     (LOGO)

                                  ANNUAL REPORT
                                      2002


<PAGE>
To Our Shareholders


                                                           (LOGO)


Dear Shareholders and Friends,


As we began to compose this letter, it became clear that everything we are about
to share comes from the vision and wisdom of the person reading this at this
very moment -- you, our shareholder. Why, you might ask. Because, now, as we
reflect back on the history of Greer Bancshares Incorporated (and Greer State
Bank), our thoughts and deep gratitude ultimately turn to the original twelve
founders who dreamed of a new, hometown bank for the Greer community and to the
634 charter shareholders who enabled the dream to become a reality. It has now
been sixteen years since the organizers of Greer State Bank first met to discuss
and explore their dream, and thanks to those twelve visionaries and you, the
dream has now grown into a mature and successful bank.

Since its inception, Greer State Bank has attempted to be different from other
financial institutions. Greer State Bank has tried to embody and reflect the
core human qualities that make the Greer community special. Those qualities are
"a strong sense of family and community" and "a true spirit of caring" for our
families, neighbors, and community. Greer State Bank has, therefore, attempted
to be a Bank that cares about its customers, its employees, its community,
and its shareholders.

Our mission as a Bank from the start has been simple and straightforward: "To
make a meaningful difference in the quality of life for our customers,
employees, and community, and to provide a good return on investment for our
shareholders." The successes of the past fourteen years have validated our
mission and values. Nevertheless, while we are proud of our past
accomplishments, we are neither satisfied nor complacent. We now dream of taking
the Bank to a higher level of success through a deeper sense of caring and a
greater commitment to service excellence.

"The Future Belongs to Those Who Believe in the Beauty of Their Dreams"

                                                      -Eleanor Roosevelt

Dreams can be very powerful motivation for achievement, but we recognize that
dreams alone are not enough. We also recognize that the Greer community today is
very different from the Greer community of 1989 when the Bank opened for
business. So what, then, does the future hold for your Greer State Bank? We
believe the future of Greer is filled with promise, opportunity, and challenge.

Greer is now widely recognized as the fastest growing city in the state of South
Carolina. The recent announcement by the Greenville Hospital System for a new
and major expansion of its Greer health care facilities on 120 acres along
Buncombe Road and Highway 14 is tangible testimony to that growth. BMW recently
expanded its operations further and now employs close to 5,000 associates. The
new J. Verne Smith Parkway has opened up a new quadrant of land for commercial
and industrial growth and improved transportation access to highways 29, 290,
101, and 14. New retail stores have opened along Wade Hampton Boulevard in
Greer, including Home Depot, Eckerd's, and a Kia


2
<PAGE>
                                                             To Our Shareholders


automobile dealership. Soon a new Toyota dealership will operate in Greer, and
Walgreen's Pharmacy has begun site work at the intersection of Wade Hampton
Boulevard and Highway 14. The new Blue Ridge Plantation residential development
north of Greer will be one of the largest, if not the largest, subdivisions in
the history of Greenville County. And growth continues to move South of Greer
along Highways 14 and 101 to Interstate 85 and beyond. In short, Greer continues
to be blessed with a variety of commercial, industrial, and residential growth
opportunities.

These growth opportunities, however, have made Greer a very attractive market
for other financial institutions, and two new competitors from North Carolina
have moved into the Greer community. Blue Ridge Savings Bank is now operating in
Greer near the Greenville-Spartanburg International Airport, and MountainBank
has broken ground on Wade Hampton Boulevard with plans to open by mid-year 2003.
These new entities will present new challenges and intensify competition for
market share in Greer.

As stated earlier, Greer State Bank is now a mature bank in many respects and
perhaps the "easy growth" is behind us. Consequently, we have begun to seriously
evaluate sites for new branch offices. We would like to enlarge the Bank's
service "footprint" and provide greater access and convenience to the growing
Greer population. We anticipate a new branch office will be planned and opened
in 2004 and then another branch in 2007. We will also continue to improve our
present facilities, services, and delivery channels to add greater convenience
and value for our customers.

Since much of the Bank's success over the past fourteen years has been due to
the leadership and vision of our Directors and management team, we recognize the
importance of "succession plans" for both the board of directors and the
management team. Consequently, over the past few years, we have added new
directors who have already made significant contributions to the Bank, and we
have added new management talent to strengthen the management team and to
provide long-term management depth. We will continue to add management talent as
needed to sustain service quality, to support the Bank's growth opportunities,
and to assure long-term, high-quality management leadership and vision.

The enclosed financial statements report record earnings in 2002, a year that
was both challenging and difficult. In the context of a weak national and local
economy, the Bank experienced a decrease in the size of its loan portfolio and
lower earnings on loans due to 40-year low interest rates. Unfortunately, the
Bank also experienced the highest level of loan delinquencies, bankruptcies,
foreclosures, and loan losses in the Bank's 14-year history. Fortunately,
however, the Bank was successful in selling 12.7 acres of land it had purchased
in July of 1996 as part of a larger parcel for the Buncombe Road Office, and the
Bank realized a significant gain on this sale, offsetting the extraordinary loan
losses and contributing importantly to the Bank's record earnings.


                                                                              3
<PAGE>
To Our Shareholders


While we are optimistic that the most significant loan problems are behind us,
the economic outlook for 2003 is still a cause for concern. The financial
markets are deeply troubled by the prospect of war in the Middle East, higher
energy costs, and the potential geo-political instability that could result if
war becomes necessary in Iraq. Until these issues are resolved, we expect the
economy will continue to languish, extending the problems of unemployment, low
consumer confidence, and weak capital expenditures by business. 2003 will
indeed be another challenging and interesting year for our nation, our economy,
and the banking industry.

Despite the uncertainties mentioned above, we are optimistic about the future of
our nation, our economy, and the Greer community. Greer State Bank will continue
to focus on its mission of making a meaningful difference in the quality of life
for its stakeholders. We will continue to care deeply about our customers'
dreams and aspirations for a better financial future. And we will continue our
commitment to the human qualities and values that make Greer a special place to
live, work, and nurture a family.

Finally, thank you for your continuing interest and support. Your confidence and
trust over the past 14 years have been a source of inspiration to us, and we
pledge our best efforts to enhance further the value of your investment and to
serve the Greer community with care and distinction.


With our best regards,



/s/ Gary M. Griffin
Chairman of the Board

/s/ R. Dennis Hennett
President and CEO

(PHOTO)


4
<PAGE>

Board of  Directors


(PHOTO)


Seated left to right:
C. Don Wall, Theron C. Smith, III, Gary M. Griffin, Paul D. Lister and Anthony
Cannon

Standing left to right:
Mark S. Ashmore, Walter M. Burch, David M. Rogers, R. Dennis Hennett and Harold
K. James

GARY M. GRIFFIN, CHAIRMAN
Mutual Home Stores
Vice President

MARK S. ASHMORE
Ashmore Bros., Inc./Century Concrete
President

WALTER M. BURCH
The Greer Citizen
Co-Publisher/General Manager

ANTHONY CANNON
Greer Commission of Public Works
Energy Manager

R. DENNIS HENNETT
Greer Bancshares Incorporated
President/Chief Executive Officer

HAROLD K. JAMES
James Agency, Inc.
Real Estate and Insurance
Vice President/Broker In Charge

PAUL D. LISTER
Paul D. Lister, CPA, LLC

DAVID M. ROGERS
Joshua's Way, Inc.
President

THERON C. SMITH, III
Eye Associates of Carolina, PA
President

C. DON WALL
Professional Pharmacy of Greer, Inc.
President

(LOGO)

EXECUTIVE OFFICERS

R. DENNIS HENNETT
President and Chief Executive Officer

J. RICHARD MEDLOCK, JR.
Secretary/Treasurer


                                                                              5
<PAGE>
Officers and Staff

BANK OFFICERS


R. DENNIS HENNETT
President & Chief Executive Officer

E. PIERCE WILLIAMS, JR.
Executive Vice President/
Credit Administration & Commercial Lending

SANDRA I. BURDETTE
Senior Vice President & Chief Operations Officer

WILLIAM S. HARRILL, JR.
Senior Vice President/Mortgage Lending

J. WILLIAM HUGHES
Senior Vice President/Consumer Lending

J. RICHARD MEDLOCK, JR.
Senior Vice President & Chief Financial Officer

SANDRA K. BOOZER
Vice President/Manager, Information Systems

JOE COPELAND
Vice President/Commercial Lending & Business Development

DENISE W. PLUMBLEE
Vice President/Marketing & Internet Banking Officer

THOMAS L. WILLIAMS
Vice President/Branch Manager of North Main Office

SANDRA D. MASON
Vice President/Operations Officer

JUDY A. EDWARDS
Assistant Vice President/Manager, Loan Administration

ROBERT M. LEE
Assistant Vice President/EDP & Operations Officer

CHRIS M. TALLEY
Assistant Vice President/Finance & Accounting, Security Officer

DENNIS TROUT
Banking Officer/Branch Manager of Buncombe Road Office

TERRI N. GRADY
Banking Officer/Operations

ELIZABETH C. SAYCE
Banking Officer/Loan Administration

SUE H. GAMES
Mortgage Lending Officer

ANN S. MILLER
Operations Officer/Manager, EDP & Item Processing

RICK DANNER
Human Resources & Marketing Officer



BANK STAFF

Jolynne G. Beck, Marsha K. Bennett, Christy H. Blackwell, Miranda F. Breazeale,
Pam Bright, Tammy S. Budove, Becky E. Burrell, Melissa Carroll, Angie W.
Coleman, Debra P. Day, Rachel Dillard, Tammy Durham, Tracy B. Forrester, Cindy
L. Fowler, Janice R. Fowler

Lynda M. Green, Leigh Gregory, Sherri Groce, Louise S. Gullette, Doris
Hendricks, Joy T. Jordan, Josie Lamphere, Janet Lister, Brandi R. Lowe, Cindy
K. Morrell, Marion J. Muhlenbeck, Joy Myers, Cindi Patterson, Lisa Perrin,
Ann B. Rainey

Annette Reynolds, Melanie Robbins, Patsy L. Robinson, Tonda B. Rogers, Denise S.
Ross, Mindi C. Smith, Teresa E. Smith, Kristi G. Twiddy, Rebecca Underwood, Pat
Vaughn, Patricia M. Voss, Belinda S. Waters, Pat Wellmon, Marie J. Wilson

GREER FINANCIAL SERVICES CORPORATION

ROGER SIMS

President and Investments Representative

MELISSA S. WILLIAMS
Administrative Assistant

DONNA HARVEY
Clerical Assistant

6
<PAGE>
                                                    Independent Auditors' Report


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, 2002 and 2001,
and the related consolidated statements of income, changes in stockholders'
equity and cash flows for each of the three years in the period ended December
31, 2002. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Greer Bancshares
Incorporated and Subsidiary as of December 31, 2002 and 2001, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2002, in conformity with U.S. generally accepted accounting
principles.


/s/ CRISP HUGHES EVANS LLP

Asheville, North Carolina
January 31, 2003


                                                                              7
<PAGE>


Management's Discussion and Analysis
Greer Bancshares Incorporated and Subsidiary

                             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
Operations.

<TABLE>
<CAPTION>
DECEMBER 31,                                              2002          2001           2000           1999            1998
                                                       ==========    ==========     ==========     ==========      ==========
(Dollars in thousands, except per share data)
<S>                                                    <C>           <C>            <C>            <C>             <C>
SUMMARY OF OPERATIONS
=============================================================================================================================
  Interest and fee income                              $   11,091    $   12,497     $   12,219     $    9,972      $    9,067
  Interest expenses                                         4,132         6,049          6,451          4,637           4,118
                                                       ----------    ----------     ----------     ----------      ----------

  Net interest income                                       6,959         6,448          5,768          5,335           4,949
  Provision for loan losses                                   788           355            200            120             126
                                                       ----------    ----------     ----------     ----------      ----------

  Net interest income after provision
    for loan losses                                         6,171         6,093          5,568          5,215           4,823
  Noninterest income                                        2,805         1,704          1,184            988             752
  Noninterest expense                                       6,453         5,671          4,999          4,581           4,154
                                                       ----------    ----------     ----------     ----------      ----------

  Net income                                           $    2,523    $    2,126     $    1,753     $    1,622      $    1,421
                                                       ----------    ----------     ----------     ----------      ----------



PER SHARE DATA
=============================================================================================================================
   Earnings:
    Basic                                              $     1.57    $     1.37     $     1.15     $     1.09      $     0.94
    Diluted                                                  1.56          1.35           1.13           1.08            0.93
  Cash Dividends Declared                                    0.50            --           0.35           0.30            0.35
  Book Value                                                11.29          9.71           8.35           7.77            7.77
 Average shares outstanding:
    Basic                                               1,602,884     1,551,358      1,524,417      1,484,873       1,497,922
    Diluted                                             1,619,911     1,570,341      1,544,546      1,503,029       1,509,332



SELECTED ACTUAL YEAR END BALANCES
=============================================================================================================================
 Total assets                                          $  192,531    $  180,052     $  166,197     $  152,167      $  126,225
  Loans                                                   107,661       114,360        116,466         96,859          77,066
 Allowance for loan losses                                  1,081         1,244            948            784             692
 Available For Sale Securities                             52,163        49,754         36,242         43,498          37,865
  Held To Maturity Securities                              14,607            --             --             --              --
  Deposits                                                137,563       131,171        127,014        113,916          97,849
  Borrowings                                               34,837        31,615         24,190         25,801          14,887
  Shareholders' Equity                                     18,613        15,926         13,540         11,502          11,227

SELECTED AVERAGE BALANCES
=============================================================================================================================
  Assets                                               $  183,999    $  174,513     $  159,713     $  138,991      $  119,847
  Deposits                                                133,359       127,650        122,542        108,939          98,131
  Shareholders' Equity                                     16,243        14,589         11,878         11,119          10,392


FINANCIAL RATIOS
=============================================================================================================================
  Return on average assets                                   1.37%         1.22%          1.10%          1.17%           1.18%
  Return on average equity                                  15.63%        14.83%         14.06%         14.59%          13.67%
  Average equity to average assets                           8.83%         8.36%          7.44%          8.00%           8.67%
  Dividend payout ratio                                     31.85%         0.00%         30.43%         27.52%          37.23%
</TABLE>


8
<PAGE>
                                            MANAGEMENT'S DISCUSSION AND ANALYSIS
                                    Greer Bancshares Incorporated and Subsidiary


                      DESCRIPTION OF THE COMPANY'S BUSINESS

Greer State Bank was organized under a state banking charter in August 1988, and
commenced operations on January 3, 1989. Greer Bancshares Incorporated (a
one-bank holding company) 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
businesses, professional concerns, and individuals, primarily in Greer and
surrounding areas in the upstate of South Carolina. The Company currently
engages in no other business other than owning and managing the Bank.

There were no significant changes to the Company's business in 2002.

                              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 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 terrorist attacks that occurred in New York City and Washington, D.C. on
September 11, 2001, and subsequent events relating to the attacks have
contributed to a general economic slowdown that may adversely affect our banking
business. Economic slowdowns or recessions in our primary market area may be
accompanied by reduced loan demand, decreasing interest margins and declining
real estate values, which could lead to a decrease in net earnings and an
increased possibility of loan losses in the event of default. Any sustained
period of decreased economic activity, increased delinquencies, foreclosures or
losses could limit our growth and negatively affect our results of operations.
We, of course, cannot accurately predict the extent or duration of the economic
events or their effect upon our business and operations. We will, however,
closely monitor the effect of these events upon our business, and make
adjustments to our business strategy as we deem necessary.

   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                                   OPERATIONS

YEAR ENDED DECEMBER 31, 2002 COMPARED WITH YEAR ENDED DECEMBER 31, 2001

Net income for the year ended December 31, 2002 was $2,523,541, or $1.56 per
diluted share, compared to $2,125,861, or $1.35 per diluted share, for the year
ended December 31, 2001. Net interest income increased $510,760, or 7.9%, to
$6,959,242 for the year ended December 31, 2002. Non-interest income also
increased $1,101,495 to $2,805,405 for the year ended December 31, 2002,
primarily as a result of a gain on the sale of undeveloped real estate. If the
gain were not considered, the increase in non-interest income would have been
$44,367, or 2.6%. Other operating expenses increased $244,309, or 19.3%, and
included expenses associated with a significant upgrade of the Company's core
data processing system, which was completed in January 2002.

YEAR ENDED DECEMBER 31, 2001 COMPARED WITH YEAR ENDED DECEMBER 31, 2000

Net income for the year ended December 31, 2001 was $2,125,861, or $1.35 per
diluted share, compared to $1,752,803, or $1.13 per diluted share, for the year
ended December 31, 2000. Net interest income increased $680,292, or 11.8%, to
$6,448,482 for the year ended December 31, 2001. Non-interest income also
increased $519,452 to $1,703,910 for the year ended December 31, 2001, primarily
as a result of income generated from service charges and fees related to deposit
accounts and earnings related to bank-owned life insurance policies. Other
operating expense increased in 2001 as well. The other operating expenses
increase of $184,407 included expenses associated with upgraded technology, as
well as with the outsourcing of the Bank's internal audit function.

                               NET INTEREST INCOME

Net interest income, the difference between interest earned and interest paid,
is the largest component of our earnings and changes in it have the greatest
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 our 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.


                                                                              9
<PAGE>
Management's Discussion and Analysis
Greer Bancshares Incorporated and Subsidiary


Net interest income increased from $6,448,482 for the year ended December 31,
2001 to $6,959,242 for the year ended December 31, 2002. The increase in net
interest income of $510,760, or 7.9%, is partially due to an increase in average
interest earning assets of approximately $11.6 million offset by a decrease in
yield on earning assets of 116 basis points from 7.89% for the year ended
December 31, 2001 to 6.73% for the year ended December 31, 2002. The increase in
net interest income is also a result of the decrease in our cost of interest
bearing liabilities of 146 basis points from 4.30% for the year ended December
31, 2001 to 2.84% for the year ended December 31, 2002. This decrease in cost of
funds more than offset the increase in average interest bearing liabilities of
approximately $4.9 million. Net interest spread and net interest margin were
3.89% and 4.31%, respectively, for the year ended December 31, 2002 as compared
to 3.59% and 4.08%, respectively, for the year ended December 31, 2001. The
increase in net interest margin is related primarily to the 146 basis point
reduction in the average cost of funds resulting from the decreasing interest
rate environment throughout 2001 and 2002. The rate decreases were offset
somewhat by the 116 basis point decrease in the yield on assets during the year
as new loans were funded at market rates and variable rate loans repriced to
market rates.

Net interest income increased from $5,768,190 for the year ended December 31,
2000 to $6,448,482 for the year ended December 31, 2001. The increase in net
interest income of $680,292, or 11.8%, is due to an increase in average interest
earning assets of approximately $13.2 million offset by a decrease in yield on
earning assets of 50 basis points from 8.39% for the year ended December 31,
2000 to 7.89% for the year ended December 31, 2001. The increase in net interest
income is also a result of the decrease in our cost of interest bearing
liabilities of 68 basis points from 4.98% for the year ended December 31, 2000
to 4.30% for the year ended December 31, 2001. This decrease in cost of funds
more than offset the increase in average interest bearing liabilities of
approximately $ 11.1 million. Net interest spread and net interest margin were
3.59% and 4.08%, respectively, for the year ended December 31, 2001 as compared
to 3.41% and 4.05%, respectively, for the year ended December 31, 2000. The
increase in net interest margin is related primarily to the 68 basis point
reduction in average cost of funds resulting from the decreasing interest rate
environment throughout 2001. The rate decreases were offset somewhat by the 50
basis point decrease in the yield on earning assets during the same period.

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


<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(Dollars in Thousands)                            2002                          2001                          2000
                                      --------------------------------------------------------------------------------------------
                                       Average    Income/   Yield     Average   Income/   Yield/    Average   Income/     Yield/
                                       Balance    Expense   Rate (2)  Balance   Expense   Rate (2)  Balance   Expense     Rate (2)
                                      --------    --------  -------- --------   -------   --------  -------   -------     ------
<S>                                   <C>         <C>       <C>      <C>        <C>       <C>       <C>       <C>         <C>
ASSETS:
==================================================================================================================================
  Interest Earning Assets:
    Taxable Investments               $ 36,411    $  1,777  4.88%    $ 29,284   $ 1,729    5.90%   $  29,878   $ 1,999     6.69%
    Non-Taxable Investments             21,041         985  7.24%      12,461       600    7.44%      11,327       559     7.61%
    Int. Bearing Deposits in other       1,685          25  1.48%         514        22    4.28%         253        16     6.32%
      banks
    Federal Funds Sold                   4,036          62  1.54%       2,195        88    4.01%          79         5     6.33%
    Loans (1)                          107,265       8,243  7.54%     114,378    10,058    8.53%     104,064     9,640     9.08%
                                      --------    --------  ----     --------   -------    ----    ---------   -------     ----
  Total Interest Earning Assets        170,438      11,092  6.73%     158,832    12,497    7.89%     145,601    12,219     8.39%
                                      --------    --------  ----     --------   -------    ----    ---------   -------     ----
  Other noninterest-earning assets      13,561                         15,681                         14,112
                                      --------    --------  ----     --------   -------    ----    ---------   -------     ----
  Total Assets                        $183,999                       $174,513                      $ 159,713
                                      ========    ========  ====     ========   =======    ====    =========   =======     =====



LIABILITIES AND SHAREHOLDERS' EQUITY
==================================================================================================================================
  Interest Bearing Liabilities:
    NOW Accounts                      $ 26,964         230  0.85%    $ 25,447   $   460    1.81%   $  24,608       649     2.64%
    Money Market and Savings            27,741         476  1.72%      23,547       761    3.23%      17,893       615     3.44%
    Time Deposits                       57,734       1,788  3.10%      61,082     3,194    5.23%      62,664     3,681     5.87%
    Federal Funds Purchased                 80           1  1.25%          44         2    4.55%         611        44     7.20%
    FHLB Borrowings                     33,009       1,638  4.96%      30,511     1,632    5.35%      23,801     1,462     6.14%
                                      --------    --------  ----     --------   -------    ----    ---------   -------     ----
  Total Interest Bearing Liabilities   145,528       4,133  2.84%     140,631     6,049    4.30%     129,577     6,451     4.98%
                                      --------    --------  ----     --------   -------    ----    ---------   -------     ----
</TABLE>

                                                          continued on next page


10
<PAGE>
                                            Management's Discussion and analysis
                                    Greer Bancshares Incorporated and Subsidiary

<TABLE>
<S>                                             <C>            <C>            <C>

Noninterest-Bearing Liabilities:
  Demand Deposits                                 20,920         17,574         17,321
  Other Liabilities                                1,308          1,719            937
                                                --------       --------       --------
Total NonInterest-Bearing Liabilities             22,228         19,293         18,258
                                                --------       --------       --------

Total Liabilities                                167,756        159,924        147,835
                                                --------       --------       --------
Stockholders' Equity                              16,243         14,589         11,878
                                                --------       --------       --------
Total Liabilities and Shareholders' Equity      $183,999       $174,513       $159,713
                                                ========       ========       ========
Net Interest Spread                                 3.89%          3.59%          3.41%
Net Interest Income                             $  6,959       $  6,448       $  5,768
                                                --------       --------       --------
 Net Interest Margin                                4.31%          4.08%          4.05%
                                                ========       ========       ========
</TABLE>

(1)      The effect of bans in nonaccrual status and fees collected is not
         significant to the computations. All loans and deposits are domestic.
(2)      All Yields/Rates are computed on a Tax Equivalent Basis.

         The following table sets forth the effect which the varying levels of
         earning assets and interest-bearing liabilities and the applicable
         rates have had on changes in net interest income during the periods
         indicated.

Analysis of Changes in Net Interest Income




<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,                           2002 COMPARED WITH 2001                   2001 COMPARED WITH 2000
                                           -----------------------------------       -----------------------------------
                                                     Variance Due to                           Variance Due to
  (Dollars in Thousands)                    Volume        Rate          Total         Volume        Rate          Total
                                           -------       -------       -------       -------       -------       -------
<S>                                        <C>           <C>           <C>           <C>           <C>           <C>
Interest Income:
  Taxable Investments                      $   421       $  (373)      $    48       $   (40)      $  (230)      $  (270)
  Non-Taxable Investments                      413           (28)          385            56           (15)           41
  Int-Bearing Deposits in other banks           50           (47)            3            17           (11)            6
  Federal Funds Sold                            74          (100)          (26)          134           (51)           83
  Loans                                       (625)       (1,190)       (1,815)          955          (537)          418
                                           -------       -------       -------       -------       -------       -------
  Total                                        332        (1,737)       (1,405)        1,122          (844)          278



Interest Expense:
  NOW Accounts                                  27          (257)         (230)           22          (211)         (189)
  Money Market and Savings                     136          (421)         (285)          194           (48)          146
  Time Deposits                               (175)       (1,231)       (1,406)          (93)         (394)         (487)
  Federal Funds Purchased                        2            (3)           (1)          (41)           (1)          (42)
  FHLB Borrowings                              134          (128)            6           412          (242)          170
                                           -------       -------       -------       -------       -------       -------
  Total                                        123        (2,039)       (1,916)          495          (897)         (402)

  Net Interest Income                      $   209       $   302       $   511       $   627            53       $   680
                                           =======       =======       =======       =======            ==       =======
</TABLE>

(1)      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 its net interest income. The principal monitoring
 technique employed by the Company is the use of an interest rate risk
 management model that measures the effects 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 our interest sensitivity "gap," which is the positive or negative
 dollar difference between assets and liabilities that are subject to interest
 rate repricing within a given period of time. Interest rate sensitivity can be
 managed by repricing assets or liabilities, replacing an asset or liability at
 maturity, or adjusting the interest rate during the life of an asset or
 liability. Managing the amount of assets and liabilities repricing in this same
 time interval helps to hedge the risk and minimize the impact on net interest
 income of rising or falling interest rates.


                                                                              11
<PAGE>


Management's Discussion and Analysis
Greer Bancshares Incorporated and Subsidiary


The following table presents the Company's rate sensitivity at each of the time
intervals indicated as of December 31, 2002. The table may not be indicative of
the Company's rate sensitivity position at other points in time.

Interest Rate Sensitivity Analysis

<TABLE>
<CAPTION>

                                                               AFTER             AFTER
DECEMBER 31, 2002                              THREE        THREE MONTHS       ONE YEAR
                                               MONTHS         THROUGH           THROUGH        AFTER
                                              OR LESS       TWELVE MONTHS     FIVE YEARS     FIVE YEARS        TOTALS
                                              -------      --------------    -------------   ----------        ------
<S>                                           <C>          <C>               <C>             <C>               <C>
Interest earning assets:
  Federal Funds Sold                           $ 3,351        $     --         $     --        $     --        $  3,351
  Interest bearing due from banks                2,686              --               --              --           2,686
  Investment securities                          4,628           9,397           21,024          30,434          65,483
  Loans                                         41,123          19,702           38,054           8,390         107,269
                                               -------        ---------        --------        --------        --------
Total interest earning assets                   51,788          29,099           59,078          38,824         178,789
                                               -------        ---------        --------        --------        --------


Cumulative interest earning assets              51,788          80,887          139,965         178,789         178,789
                                               -------        ---------        --------        --------        --------


Interest bearing liabilities:
  Certificates of deposit                       17,699          19,838           13,545              --          51,082
  IRA's                                          1,776           3,220            4,619              --           9,615
  Money Market Accounts                             --           7,303            7,303              --          14,606
  Transaction Accounts                              --             751           24,266           6,254          31,271
  Savings Accounts                               5,063             154            4,993           1,287          11,497
  FHLB Advances                                  6,677           2,827            3,333          22,000          34,837
                                               -------        ---------        --------        --------        --------
Total interest bearing liabilities              31,215          34,093           58,059          29,541         152,908
                                               -------        ---------        --------        --------        --------

Cumulative interest bearing liabilities         31,215          65,308          123,367         152,908         152,908
                                               -------        ---------        --------        --------        --------


Gap Analysis:
  Interest sensitivity gap                     $20,573        $ (4,994)        $  1,019        $  9,283        $ 25,881
                                               -------        ---------        --------        --------        --------

  Cumulative interest sensitivity gap          $20,573        $ 15,579         $ 16,598        $ 25,881        $ 25,881
                                               -------        ---------        --------        --------        --------

Cumulative gap ratio of interest earning
 assets to interest bearing liabilities            166%            124%             113%            117%            117%
                                               -------        ---------        --------        --------        --------
</TABLE>

The above table reflects the balances of interest-earning assets and
interest-bearing liabilities at the earlier of their repricing or maturity
dates. Overnight federal funds are reflected at the earliest pricing interval
due to the immediate availability of the instruments. Debt securities are
reflected at each instrument's ultimate maturity date. Scheduled payment amounts
of fixed rate amortizing loans are reflected at each scheduled payment date.
Scheduled payment amounts of variable rate amortizing loans are reflected at
each scheduled payment date until the loan may be repriced contractually; the
unamortized balance is reflected at that point. Interest-bearing liabilities
with no contractual maturity, such as savings deposits and interest-bearing
transaction accounts, are reflected in the repricing period indicated
appropriate by historical data. Due to contractual arrangements, the Company has
the opportunity to vary the rates paid on those deposits within a thirty-day or
shorter period; however, historically rates on these types of deposits have not
been immediately adjusted. When adjustments have been made to rates on savings
and transaction accounts in the past, the adjustments have been only a fraction
of the movement in overnight rates. Fixed rate time deposits, principally
certificates of deposit, are reflected at their contractual maturity date.
Securities sold under agreements to repurchase mature on a daily basis and are
reflected in the earliest pricing period. Advances from Federal Home Loan Bank
are reflected at their contractual maturity date.


12


<PAGE>
                                            Management's Discussion and Analysis
                                    Greer Bancshares Incorporated and Subsidiary


The Company generally would benefit from increasing market rates of interest
when it has an asset-sensitive gap position and generally would benefit from
decreasing market rates of interest when it is liability-sensitive. We are
asset-sensitive over the one to twelve month time frame. However, our gap
analysis is not a precise indicator of its interest sensitivity position. The
analysis presents only a static view of the timing of maturities and repricing
opportunities, without taking into consideration that changes in interest rates
do not affect all assets and liabilities equally. The analysis also does not
consider any options relating to assets and liabilities (such as floors and
ceilings, etc.). Since gap analysis is not a precise indicator of interest
sensitivity, management uses the Risk Analytics Interest Rate Risk Management
Model. The model calculates the effects of interest rate movements on net
interest income, and considers all characteristics of the Company's assets and
liabilities, based on assumptions made by management.

                           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, the results of the internal monitoring and
reporting system, and a review of historical statistical data for both the Bank
and other financial institutions.

Additions to the allowance for loan losses, which are expensed as the provision
for loan losses on our income statement, are made periodically to maintain the
allowance at an appropriate level based on management's analysis of the
potential risk 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 a given period, and current and anticipated economic conditions.
During 2002, we provided $787,500 for loan losses, leaving the balance at
$1,080,635 on December 31, 2002 after deducting current year net charge-offs.
The reserve for loan losses was approximately 1.00% and 1.09% of total loans on
December 31, 2002 and 2001, respectively.

The Bank's allowance for loan losses is based upon judgments and assumptions of
risk elements in the portfolio, future economic conditions, and other factors
affecting borrowers. The process includes identification and analysis of loss
potential 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 delinquency, charge-offs, and general conditions in the service area.
The adequacy of the allowance for loan losses and the effectiveness of our
monitoring and analysis system are also reviewed periodically by the banking
regulators and our independent auditors.

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 which it
believes to be reasonable but which may or may not be valid. Our losses will
undoubtedly vary from our estimates, and 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.

                                  OTHER INCOME

Non-interest income for the year ended December 31, 2002 was $2,805,405
compared to $1,703,910 for the year ended December 31, 2001, primarily due to a
gain of $1,057,128 realized on the sale of undeveloped real estate owned by the
Bank. The excess of a tract of land that was purchased in 1996 in order to
obtain a corner lot on which to build a branch office was sold in 2002 for a
gain of $1,057,128. Another significant portion of non-interest income was from
service charges and fees relating to deposit accounts that totaled $1,088,839
in 2002 compared to $912,115 in 2001. The increase of $176,724 is a result of
the continued success of an overdraft privilege product, which was introduced
in August 2000. The most significant portion of other operating income is
income from credit cards, which totaled $243,491 in 2002 and $241,425 in 2001.
Also included in that line item is fees from brokerage services offered through
Raymond James Financial Services, which totaled $190,350 in 2002 and $177,456
in 2001, an increase of $12,894, or 7.3%, despite volatile market conditions
during 2002.

Non-interest income for the year ended December 31, 2001 was $1,703,910 compared
to $1,184,458 for the year ended December 31, 2000. The most significant portion
of non-interest income was earnings on life insurance policies which totaled
$241,695 compared to $111,462 in 2000. The primary reason for the increase of
$130,233 was the receipt of a death benefit of $81,780, which related to the
death of a director. Service charges and fees relating to deposit accounts
totaled $912,115 in 2001 and $591,801 in 2000, which was an increase of
$320,314, or 54.1%. The significant increase was primarily due to the overdraft
privilege product, which was in place for the entire year in 2001, and only five
months in 2000.


                                                                              13
<PAGE>


Management's Discussion and Analysis
Greer Bancshares Incorporated and Subsidiary


                                 Other Expenses

Non-interest expenses were $5,566,006 for the year ended December 31, 2002
compared to $4,830,181 for the year ended December 31, 2001. This was comprised
primarily of salaries and employee benefits totaling $2,856,452 for the year
ended December 31, 2002 compared to $2,560,920 for the year ended December 31,
2001. The increase in salaries was due to annual salary adjustments and the
addition of staff needed as the Company grows. Included in non-interest expenses
is depreciation expense on equipment which totaled $482,899 in 2002 and $364,839
in 2001, which was an increase of $118,060, or 32.4%. Internet banking expense
increased to $68,978 in 2002 from $22,286 in 2001, as the result of growth and
the additional features implemented in 2002. All other operating expenses
increased also as a result of the continued growth of the Company.

Non-interest expenses were $4,830,181 for the year ended December 31, 2001
compared to $4,321,230 for the year ended December 31, 2000. This was comprised
primarily of salaries and employee benefits totaling $2,560,920 for the year
ended December 31, 2001 compared to $2,324,105 for the year ended December 31,
2000. The increase in salaries was due to annual salary increases, as well as,
the addition of staff necessary to accommodate growth. All other operating
expenses increased also as a result of the continued growth of the Company.

                                  Income Taxes

For the years ended December 31, 2002 and 2001, the Company recorded income tax
expense in the amounts of $887,600 and $841,350, respectively. This resulted in
an effective tax rate of 26.0% and 28.4% for the years ended December 31, 2002
and 2001, respectively. The decrease in the effective income tax rate is due to
non-taxable interest income on investment securities relating to the addition of
$12,134,217 in tax-free securities in 2002. At December 31, 2002 the Bank owned
$27,260,281 in tax-free municipal securities. For the year ended December 31,
2000, the Company recorded income tax expense in the amount of $678,615. This
resulted in an effective tax rate of 27.9%.

                                Capital Resources

Total capital of the Company was increased by 2002 net income of $2,523,541 and
unrealized gains of $757,390, net of tax, on securities available for sale. In
addition, the Company issued a 2.5% stock dividend and paid a cash dividend of
$.50 per share on May 30, 2002. Total cash paid out for the cash dividend was
$783,440, and cash paid in lieu of fractional shares was $8,992. Total capital
of the Company was increased by 2001 net income of $2,125,861 and unrealized
gains of $179,891, net of tax, on securities available for sale. The Company
issued a 5% stock dividend and paid cash in lieu of fractional shares totaling
$8,909 on July 31, 2001.

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 form 0% to 100%. Under the risk-based standard, capital is
classified into two tiers. Tier 1 capital of the Company consists of common
shareholders' equity minus unrealized gains on securities available for sale.
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.


14
<PAGE>

                                            Management's Discussion and Analysis
                                    Greer Bancshares Incorporated and Subsidiary


Risk-Based Capital Ratios

<TABLE>
<CAPTION>
(Dollars in thousands)                                                      THE BANK       THE COMPANY
                                                                            --------       -----------
<S>                                                                         <C>            <C>
DECEMBER 31, 2002
Tier 1 capital
   Common shareholders' equity                                              $ 18,405         $ 18,613
   Less: unrealized gains on securities available for sale, net of taxes        (793)            (793)
                                                                            --------         --------
      Total Tier 1 capital                                                    17,612           17,820
Tier 2 capital
   Allowable allowance for loan losses                                         1,081            1,081
                                                                            --------         --------
      Total qualifying capital                                              $ 18,693         $ 18,901
                                                                            ========         ========
Risk-adjusted total assets
   (including off-balance sheet exposures)                                  $125,036         $125,036
                                                                            ========         ========
      Total average assets                                                  $192,851         $192,851
                                                                            ========         ========

Risk-based capital ratios:
   Tier 1 risk-based capital ratio                                              14.1%            14.3%
   Total risk-based capital ratio                                               15.0%            15.1%
   Tier 1 leverage ratio                                                         9.1%             9.2%
</TABLE>

                                    LIQUIDITY

The Company manages its liquidity from both the asset and liability side of the
balance sheet through the coordination of 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
also has the ability to borrow additional funds from the Federal Home Loan Bank
of up to 30% of the Bank's assets. Management has established policies and
procedures governing the length of time to maturity on loans and investments. In
the opinion of management, our deposit base and lines of credit can adequately
support our short-term liquidity needs.

                     IMPACT OF OFF-BALANCE SHEET 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 is the same as for loans in our 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 that we have the necessary resources to fund these
commitments.

                     IMPACT OF INFLATION AND CHANGING PRICES

The financial statements and related financial data presented herein have been
prepared in accordance with accounting principles generally accepted in the
United States of America which require the measurement of financial position and
operating results in terms of historical dollars, without considering changes in
relative purchasing power over time due to inflation. Unlike most industrial
companies, virtually all of the assets and liabilities of a financial
institution are monetary in nature. As a result, interest rates generally have a
more significant impact on a financial institution's performance than does the
effect of inflation.

While the effect of inflation on a bank is normally not as significant as its
influence on those businesses that have large investments in plant and
inventories, it does have an effect. Interest rates generally increase as the
rate of inflation increases, but the magnitude of the change in rates may not be
the same. While interest rates have traditionally moved with inflation, the
effect on income is diminished because both interest earned on assets and
interest paid on liabilities vary directly with each other. Also, increases in
the price of goods and services will generally result in increased operating
expenses.


                                                                              15
<PAGE>


Management's Discussion and Analysis
Greer Bancshares Incorporated and Subsidiary

                              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, 2002 and 2001.

Investment Securities Portfolio Composition

<TABLE>
<CAPTION>
AVAILABLE FOR SALE                  DUE        ONE YEAR       FIVE YEARS                                  ESTIMATED        AVERAGE
(Dollars in Thousands)           ONE YEAR       THROUGH        THROUGH        AFTER                        MARKET          MATURITY
DECEMBER 31, 2002                 OR LESS      FIVE YEARS     TEN YEARS      TEN YEARS       TOTAL          VALUE          IN YEARS
                                 --------      ----------     ---------      ---------      -------       ---------        --------
<S>                              <C>           <C>            <C>            <C>            <C>           <C>              <C>
U.S. Treasury Securities          $    0        $     0        $     0        $    0        $     0        $     0           0.00
U.S. Govt Agencies and             7,868         10,887              0             0         18,755         19,183           1.16
   Mortgage Backed
   Securities
States of the U.S. and               105          2,106         19,657         4,571         26,439         27,261           8.44
   Political Subdivisions
Corporate Securities               1,336          2,545              0             0          3,881          3,922           1.33
Other Securities                       0              0          1,797             0          1,797          1,797           7.00
                                  ------        -------        -------        -------       -------        -------           ----
  Total                           $9,309        $15,538        $21,454       $ 4,571        $50,872        $52,163
                                  ======        =======        =======        =======       =======        =======           ====
WEIGHTED AVERAGE YIELDS:

U.S. Treasury Securities            0.00%          0.00%          0.00%         0.00%
U.S. Govt Agencies and              3.73%          5.09%          0.00%         0.00%
   Mortgage Backed
   Securities
States of the U.S. and              6.37%          6.52%          6.55%         6.20%
   Political Subdivisions
Corporate Securities                5.30%          5.02%          0.00%         0.00%
 Other Securities                   0.00%          0.00%          5.29%         0.00%
</TABLE>


<TABLE>
<CAPTION>
HELD-TO-MATURITY                   DUE          ONE YEAR      FIVE YEARS                                  ESTIMATED        AVERAGE
(Dollars in Thousands)           ONE YEAR       THROUGH        THROUGH        AFTER                        MARKET          MATURITY
DECEMBER 31, 2002                 OR LESS      FIVE YEARS     TEN YEARS      TEN YEARS       TOTAL          VALUE          IN YEARS
                                 --------      ----------     ---------      ---------      -------       ---------        --------
<S>                              <C>           <C>            <C>            <C>            <C>           <C>              <C>
Mortgage Backed Securities        $    0        $12,044        $ 2,563        $    0        $14,607        $14,686           3.47
                                  ------        -------        -------        ------        -------        -------           ----
  Total                           $    0        $12,044        $ 2,563        $    0        $14,607        $14,686
                                  ======        =======        =======        =======       =======        =======           ====

WEIGHTED AVERAGE YIELDS:


Mortgage Backed Securities          0.00%          4.10%          4.56%         0.00%
</TABLE>

<TABLE>
<CAPTION>
AVAILABLE FOR SALE                  DUE        ONE YEAR       FIVE YEARS                                  ESTIMATED        AVERAGE
(Dollars in Thousands)           ONE YEAR       THROUGH        THROUGH        AFTER                        MARKET          MATURITY
DECEMBER 31, 2001                 OR LESS      FIVE YEARS     TEN YEARS      TEN YEARS       TOTAL          VALUE          IN YEARS
                                 --------      ----------     ---------      ---------      -------       ---------        --------
<S>                              <C>           <C>            <C>            <C>            <C>           <C>              <C>
U.S. Treasury Securities          $    0        $     0        $     0        $    0        $     0        $     0           0.00
U.S. Govt Agencies and                 0          5,000         11,471        12,095         28,566         28,484           3.02
   Mortgage Backed
   Securities
States of the U.S. and               100            469          1,663        13,154         15,386         15,196          11.97
   Political Subdivisions
Corporate Securities               1,427            835              0             0          2,262          2,310           0.81
Other Securities                   1,895              0          1,587             0          3,482          3,401           3.19
                                  ------        -------        -------        ------        -------        -------           ----
      Total                       $3,422        $ 6,304        $14,721       $25,249        $49,696        $49,755
                                  ======        =======        =======        =======       =======        =======           ====

WEIGHTED AVERAGE YIELDS:
U.S. Treasury Securities            0.00%          0.00%          0.00%         0.00%
U.S. Govt Agencies and              0.00%          5.12%          6.23%         4.97%
   Mortgage Backed
   Securities
States of the U.S. and              6.23%          6.59%          6.05%         6.76%
   Political Subdivisions
Corporate Securities                6.26%          5.49%          0.00%         0.00%
 Other Securities                   5.75%          0.00%          6.62%         0.00%
</TABLE>


16

<PAGE>

                                            Management's Discussion and Analysis
                                    Greer Bancshares Incorporated and Subsidiary

                                 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 our primary marketplace and within our 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 our marketplace. Additionally, since real estate is considered
by the Company as the most desirable nonmonetary collateral, a significant
portion of our 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. We also seek to limit total exposure to individual and affiliated
borrowers. We manage the risk specific to individual borrowers 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.

The Bank's loan officers and loan administration staff are charged with
monitoring our 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 our loan portfolio, several credit risk identification and monitoring
processes are utilized. We use an outside consultant, a former OCC bank
examiner, to perform loan reviews on a monthly basis.

                               LENDING ACTIVITIES

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

The Company's service area is mixed in nature. The corporate office is located
in Greer, South Carolina. 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 2003.

Total loans outstanding were $107,661,418 and $114,359,871 at December 31, 2002
and 2001, respectively. There are no significant concentrations of loans in our
loan portfolio to any particular individuals or industry or group of related
individuals or industries.

The Company's ratio of loans to deposits was 78.3% and 87.2% at December 31,
2002 and 2001, 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 following table summarizes the composition of the loan portfolio at December
31, 2002 and 2001.

LOAN PORTFOLIO COMPOSITION

<TABLE>
<CAPTION>
DECEMBER 31,                                           2002                                         2001
---------------------------------         ----------------------------                ----------------------------
                                           AMOUNT              PERCENT                 AMOUNT              PERCENT
                                          --------             -------                --------             -------
<S>                                       <C>                  <C>                    <C>                  <C>
(Dollars in Thousands)
Commercial                                $  23,293              21.64%               $  24,482              21.41%
Real Estate-Construction                     13,596              12.63%                  11,361               9.93%
Real Estate Mortgage:
    Residential 1-4                          43,527              40.43%                  49,196              43.02%
    Multi-Family                                639               0.59%                     413               0.36%
    NonFarm/NonResidential                   15,555              14.45%                  17,149              15.00%
Installment Loans to Individuals              9,535               8.86%                   9,956               8.71%
Lease Financing                                 462               0.43%                     469               0.41%
Obligations of State and
    Political Subdivisions                    1,054               0.98%                   1,334               1.17%
                                           --------              -----                 --------              -----
       Total Loans                         $107,661                100%                $114,360                100%
                                           ========              =====                 ========              =====
</TABLE>


                                                                              17
<PAGE>

Management's Discussion and Analysis
Greer Bancshares Incorporated and Subsidiary

The Company's loan portfolio contains a significant percentage of real estate
mortgage loans; however, real estate mortgage loans declined by $4,802,000, or
6.1%, to $73,317,000 during the twelve months ended December 31, 2002. At
December 31, 2002 real estate mortgage loans represented 68.1% of the total loan
portfolio compared to 68.3% at December 31, 2001. The decline is attributable to
the increase in refinancings in 2002 due to interest rates being at forty-year
lows. 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. The Company does, however, offer fixed rate mortgages through its
investor program.

The Company also has a significant amount of commercial and industrial loans.
Commercial and industrial loans decreased $1,189,000 or 4.8% to $23,293,000 at
December 31, 2002. Commercial and industrial loans comprised 21.6% and 21.4% of
the total loan portfolio at December 31, 2002 and 2001, respectively.

Maturities and Sensitivity of Loans to Changes in Interest Rates

The following table summarizes the loan maturity distribution for the selected
categories.

<TABLE>
<CAPTION>
DECEMBER 31,2002                              COMMERCIAL                REAL ESTATE-CONSTRUCTION                TOTAL
----------------------------------       --------------------           ------------------------        -------------------
(Dollars in Thousand)                     AMOUNT      PERCENT             AMOUNT        PERCENT         AMOUNT      PERCENT
----------------------------------       -------      -------           ---------       --------        -------     -------
<S>                                      <C>          <C>               <C>             <C>             <C>         <C>
Due One Year or Less:                    $ 11,596      49.78%             $ 7,722        56.80%         $19,318      52.37%

Due One Year through Five Years:
     Fixed Rate                             5,014      21.53%               2,352        17.30%           7,366      19.97%
     Variable Rate                          2,525      10.84%               1,988        14.62%           4,513      12.23%

Due After Five Years:
     Fixed Rate                             2,992      12.85%               1,534        11.28%           4,526      12.27%
     Variable Rate                          1,166       5.01%                  --         0.00%           1,166       3.16%
                                         -------       -----              -------        -----          -------      -----
       Total                             $23,293         100%             $13,596          100%         $36,889        100%
                                         =======       =====              =======        =====          =======      =====
</TABLE>

                                  Risk Elements

At December 31, 2002, there were no restructured loans, $291,000 in loans 90
days past due and still accruing interest, and $391,000 in non-accrual status.
At December 31, 2001, there were no restructured loans, $612 in loans 90 days
past due and still accruing interest, and $346,000 in non-accrual status.

Summary of Loan Loss Experience

<TABLE>
<CAPTION>
(Dollars in Thousands)                                            2002                  2001
                                                                --------              --------
<S>                                                             <C>                   <C>
Total loans outstanding at end of year                          $107,661              $114,360
                                                                ========              ========
Average loans outstanding                                       $107,265              $114,378
                                                                ========              ========
Balance, beginning of year                                      $  1,244                   948
Loans charged off                                                    973                    81
Recoveries on loans previously charged off                            22                    22
                                                                --------              --------
    Net charge-offs                                                  951                    59
                                                                --------              --------
Provision charged to operations                                      788                   355
                                                                --------              --------
    Balance, end of year                                        $  1,081               $ 1,244
                                                                ========              ========
Ratios:
    Allowance for loan losses to average loans                      1.01%                 1.09%
    Allowance for loan losses to period end loans                   1.00%                 1.09%
    Net charge-offs to average loans                                 .89%                  .05%
</TABLE>


18
<PAGE>

                                            Management's Discussion and Analysis
                                    Greer Bancshares Incorporated and Subsidiary

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
including commitments to extend credit. 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 future economic conditions and other
factors affecting borrowers. Management is not aware of any trends, material
risks, or uncertainties affecting the loan portfolio nor is management aware of
any information about any significant borrowers which causes serious doubts as
to the ability of the borrower to comply with the loan repayment terms. However,
it should be noted that 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. At December 31,
2002, management reviewed its loan portfolio and determined that no impairment
on loans existed that it believes would have a material effect on the Company's
consolidated financial statements.

                             Average Daily Deposits

Average deposits were $133,359,000 and $127,650,000 during 2002 and 2001,
respectively. Each type of deposit increased in 2002, with the exception of time
deposit accounts, which declined by a moderate amount. The most significant
increases were in savings deposits, which includes money market accounts.
Management believes the increase in savings deposits during a year when interest
rates are exceptionally low is due to depositors' desire to hold deposits in
accounts with quick availability and no risk to the principal balance, with the
intent of reinvesting when interest rates increase.

Contractual maturities of all time deposits at December 31, 2002 were as
follows: twelve months or less - $42,533,000 and over twelve months through
thirty-six months - $18,164,000.

The following table summarizes the Bank's deposits at December 31, 2002 and
2001.

<TABLE>
<CAPTION>
DECEMBER 31,                                            2002                                         2001
                                            ----------------------------                 --------------------------
                                            AVERAGE                                      AVERAGE
                                            BALANCE              PERCENT                 BALANCE            PERCENT
                                            --------             -------                 --------           -------
<S>                                         <C>                  <C>                     <C>                <C>
NonInterest-Bearing Deposits
    Demand Deposits                         $ 20,920              15.69%                  $17,574            13.77%

Interest-Bearing Liabilities
    NOW Accounts                              26,964              20.22%                   25,447            19.93%
    Money Market and Savings                  27,741              20.80%                   23,547            18.45%
    Time Deposits                             57,734              43.29%                   61,082            47.85%
                                            --------              -----                  --------            -----
Total Deposits                              $133,359                100%                 $127,650              100%
                                            ========              =====                  ========            =====
</TABLE>

Core deposits, which exclude time deposits of $100,000 or more, provide a
relatively stable funding source for our loan portfolio and other earning
assets. Our core deposits were $111,332,000 and $108,581,000 at December 31,
2002 and 2001, respectively.

Time deposits over $100,000 totaled $26,231,000 and $22,593,000 at December 31,
2002 and 2001, respectively. Scheduled maturities were as follows:


<TABLE>
<CAPTION>
DECEMBER 31,                                                          2002                    2001
----------------------------------------------                       --------               --------
<S>                                                                  <C>                    <C>
Maturing in 3 months or less                                         $  8,099               $ 10,138
Maturing after 3 months but less than 6 months                          3,764                  5,532
Maturing after 6 months but less than 12 months                         2,712                  5,316
Maturing after 12 months                                               11,656                  1,607
                                                                     --------               --------
Total                                                                $ 26,231               $ 22,593
                                                                     ========               ========
</TABLE>


                                                                              19

<PAGE>



Management's Discussion and Analysis
Greer Bancshares Incorporated and Subsidiary

                    ADVANCES FROM THE FEDERAL HOME LOAN BANK

Advances from the Federal Home Loan Bank totaled $34,836,913 at December 31,
2002. $4,000,000 of these notes had variable interest at rates ranging from
2.12% to 5.33%, and $3,000,000 of the notes had variable interest at 5.33%. The
remaining $30,836,913 and $28,614,607, at December 31, 2002 and 2001,
respectively, bear interest at fixed rates ranging from 2.15% to 6.67%. The
Company has pledged its 1 to 4 family residential and commercial real estate
mortgages as collateral.

                              SHORT-TERM BORROWINGS

At December 31, 2002 and 2001 the Company had no short-term borrowings.

                     STOCK INFORMATION AND DIVIDEND HISTORY

The common stock of Greer Bancshares Incorporated (which replaced Greer State
Bank common stock on a one-for-one basis in July, 2001) has been traded in the
local over-the-counter market since January 4, 1989, and is quoted in two local
papers, The Greenville News and The Spartanburg Herald, in the Area OTC listings
section. 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 by the Area Over the Counter Market.

2002                                      2001
QUARTER          HIGH        LOW          QUARTER          HIGH          LOW
-------         ------      ------        -------         ------        ------
First           $27.00      $27.00        First           $27.00        $27.00
Second          $27.00      $27.00        Second          $27.00        $27.00
Third           $27.00      $27.00        Third           $28.25        $27.00
Fourth          $27.00      $27.00        Fourth          $28.25        $27.00

The Bank paid 5% stock dividends annually from 1992 through 1998, its fourth
through tenth years of operations, and paid a cash dividend of 12.5 cents per
share in June of 1997, 17.5 cents per share in June of 1998, and 30 cents per
share in June 1999. A 2-for-l stock split was issued effective as of June 1,
1999. Cash dividends, as well as the prices listed above, have been adjusted to
reflect the stock split. In June of 2000, the Bank paid a 3% stock dividend and
a 35 cents per share cash dividend. In July of 2001, Greer Bancshares
Incorporated paid a 5% stock dividend, and in May 2002 paid a 50 cents per share
and 2.5% stock dividend.

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.

                    ACCOUNTING AND FINANCIAL REPORTING ISSUES

Effective January 1, 2002, the Company adopted SFAS 142 which addresses the
financial accounting and reporting for acquired goodwill and other intangible
assets. Pursuant to SFAS 142 the amortization of goodwill is discontinued and
testing for impairment of existing goodwill and other intangibles is required.
The adoption of this standard did not have a material impact on the Company's
consolidated results of operations and financial position.

In August 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 143 (SFAS 143), "Accounting for
Asset Retirement Obligations." SFAS 143 establishes accounting standard for the
recognition and measurement of an asset retirement obligation and its associated
retirement cost. SFAS 143 is effective for financial statements issued for
fiscal years beginning after June 15, 2002. Management does not anticipate the
adoption of SFAS 143 to have a material effect on its consolidated financial
condition or results of operations. The Company plans to adopt SFAS 143
effective January 1, 2003.

In October 2001, the FASB issued SFAS 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SMS 144 establishes a single accounting model
for the impairment or disposal of long-lived assets, including discontinued
operations. This Statement is effective for fiscal years beginning after
December 15, 2001. The Company adopted this statement effective January 1, 2002
and it did not have a material impact on our consolidated results of operations
and financial position.

In April 2002, the FASB issued SFAS 145, "Rescission of FASB Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS
145 rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishments of
Debt" and an amendment of SFAS No. 4, SFAS No. 64, "Extinguishments of Debt Made
to Satisfy Sinking-Fund Requirements." SFAS 145 requires that gains and losses
from extinguishment of debt should be classified as an extraordinary item only
if they meet the criteria of FASB Opinion No. 30, "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions."
Applying the provisions of FASB Opinion 30 will


20

<PAGE>


                                            Management's Discussion and Analysis
                                    Greer Bancshares Incorporated and Subsidiary

distinguish transactions that are part of an entity's recurring operations from
those that are unusual or infrequent or that meet the criteria for
classification as an extraordinary item.

The provisions of SFAS 145 are effective for financial statements issued for
fiscal years beginning after May 15, 2002 and interim periods within those
fiscal years, and early adoption is encouraged. Any gain or loss on
extinguishment of debt that was classified as an extraordinary item in prior
periods presented that does not meet the criteria in FASB opinion 30 for
classification as an extraordinary item will be reclassified. Management does
not anticipate the adoption of SFAS 145 to have a material effect on its
financial condition or results of operations.

In June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated with
Exit or Disposal Activities," which addresses financial accounting and reporting
for costs associated with exit or disposal activities. SFAS 146 requires that a
liability for a cost associated with an exit or disposal activity be recognized
when the liability is incurred. SFAS 146 requires that the initial measurement
of a liability be at fair value. SFAS 146 will be effective for exit or disposal
activities that are initiated after December 31, 2002 with early adoption
encouraged. Management does not anticipate the adoption of SFAS 146 to have a
material effect on its consolidated financial condition or results of
operations.

In October 2002, the FASB issued SFAS 147, "Acquisitions of Certain Financial
Institutions, an amendment of FASB Statements no. 72 and 144 and FASB
Interpretation No. 9." SFAS 147 removes acquisitions of financial institutions
from the scope of both SFAS No. 72 and FASB Interpretation No. 9 and requires
that those transactions be accounted for in accordance with SFAS 141, "Business
combinations," and SFAS 142, "Goodwill and Other Intangible Assets, except for
transactions between two or more mutual enterprises. The provisions of SFAS 147
are effective for financial statements issued on or after October 1, 2002 and
early adoption is permitted. The adoption of SFAS 147 will not currently affect
the Company.

The FASB issued SFAS 148 "Accounting for Stock-Based Compensation Transition and
Disclosure." SFAS 148 amends SFAS 123 to provide alternative methods of
transition for voluntary change to the fair value based method of accounting for
stock based employee compensation. In addition the statement amends the
disclosure requirement of SFAS 123 for both annual and interim financial
statements about the method of accounting for stock-based employee compensation
and the effect of the method used on reported results. SFAS 148 is effective for
financial statements for fiscal years ending after December 15, 2002. The
Company has not elected to change its method of accounting for stock-based
compensation to the fair value based method as of December 31, 2002 and our
disclosures are in accordance with the new requirements.

                           FORWARD LOOKING INFORMATION

This Report contains statements which constitute forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and the
Securities Exchange Act of 1934. These statements are based on many assumptions
and estimates and are not guarantees of future performance. Our actual results
may differ materially from those projected in any forward-looking statements, as
they will depend on many factors about which we are unsure, including many
factors which are beyond our control. The words "may," "would," "could," "will,"
"expect," "anticipate," "believe," "intend," "plan," and "estimate," as well as
similar expressions, are meant to identify such forward-looking statements.
Potential risks and uncertainties include, but are not limited to: significant
increases in competitive pressure in the banking and financial services
industries; changes in the interest rate environment which could reduce
anticipated or actual margins; changes in political conditions or the
legislative or regulatory environment; general economic conditions, either
nationally or regionally and especially in 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; the level of allowance for
loan loss; the rate of delinquencies and amounts of charge-offs; the rates of
loan growth; adverse changes in asset quality and resulting credit risk-related
losses and expenses; changes in the securities markets; and other risks and
uncertainties detailed from time to time in our filings with the Securities and
Exchange Commission.

                                REGULATORY ISSUES

USA PATRIOT ACT OF 2001

In October 2001, the USA Patriot Act of 2001 was enacted in response to the
terrorist attacks in New York, Pennsylvania and Washington, DC, which occurred
on September 11, 2001. The Patriot Act is intended to strengthen U.S. Law
enforcement's and the intelligence communities' abilities to work cohesively to
combat terrorism on a variety of fronts. The potential impact of the Patriot Act
on financial institutions is significant and wide ranging. The Patriot Act
contains sweeping anti-money laundering and financial transparency laws and
imposes various regulations, including standards for verifying client
identification at account opening, and rules to promote cooperation among
financial institutions, regulators and law enforcement entities in identifying
parties that may be involved in terrorism or money laundering.

On November 4, 1999, the U.S. Senate and House of Representatives each passed
the Gramm-Leach-Bliley Act, previously known as the Financial Services
Modernization Act of 1999. The Act was signed into law by President Clinton in
November 1999. Among other things, the Act repeals the restrictions on banks
affiliating with securities firms contained in sections 20 and 32 of the
Glass-Steagall Act. The Act also creates a new "financial holding company" under
the Bank Holding Company Act, which will permit holding companies to engage in a
statutorily provided list of financial activities, including insurance and
securities underwriting and


                                                                              21

<PAGE>



Management's Discussion and Analysis
Greer Bancshares Incorporated and Subsidiary

agency activities, merchant banking, and insurance company portfolio investment
activities. The Act also authorizes activities that are "complementary" to
financial activities. The Act is intended to grant to community banks certain
powers as a matter of right that larger institutions have accumulated on an ad
hoc basis. Nevertheless, the Act may have the result of increasing the amount of
competition that the Bank faces from larger institutions and other types of
companies. In fact, it is not possible to predict the full effect that the Act
will have on the Bank.

From time to time, various bills are introduced in the United States Congress
with respect to the regulation of financial institutions. Certain of these
proposals, if adopted, could significantly change the regulation of banks and
the financial services industry. The Bank cannot predict whether any of these
proposals will be adopted or, if adopted, how these proposals would affect the
Bank.


22

<PAGE>

                                                     Consolidated Balance Sheets
                                    Greer Bancshares Incorporated and Subsidiary

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,                                         2002                2001
                                                                    ------------        ------------
<S>                                                                 <C>                 <C>
ASSETS
Cash and due from banks                                             $  7,368,140        $  7,420,621
Federal funds sold                                                     3,351,000             150,000
Investment securities:
 Held to maturity                                                     14,607,260                  --
 Available for sale                                                   52,163,254          49,754,568
Net loans                                                            106,580,783         113,115,214
Premises and equipment, net                                            4,246,481           4,617,936
Real estate held for sale                                                     --             685,698
Accrued interest receivable                                            1,112,833           1,089,859
Other assets                                                           3,101,022           3,217,882
                                                                    ------------        ------------
      Total Assets                                                  $192,530,773        $180,051,778
                                                                    ============        ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
  Non-interest bearing                                              $ 18,711,363          16,856,854
  Interest bearing                                                   118,851,889         114,314,373
                                                                    ------------        ------------
                                                                     137,563,252         131,171,227
Notes payable to Federal Home Loan Bank                               34,836,913          31,614,607
Other liabilities                                                      1,517,340           1,340,358
                                                                    ------------        ------------
      Total liabilities                                              173,917,505         164,126,192
                                                                    ------------        ------------

Commitments-Note 9

Stockholders' equity:
  Common stock-par value $5 per share, 10,000,000 shares
    authorized; 1,606,018 and 1,557,528 shares issued and
    outstanding at December 31, 2002 and 2001, respectively            8,030,090           7,787,640
  Additional paid in capital                                           6,349,957           5,344,572
  Retained earnings                                                    3,440,565           2,758,108
  Accumulated other comprehensive income                                 792,656              35,266
                                                                    ------------        ------------
      Total Stockholders' Equity                                      18,613,268          15,925,586
                                                                    ------------        ------------
      Total Liabilities and Stockholders' Equity                    $192,530,773        $180,051,778
                                                                    ============        ============

</TABLE>

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


                                                                              23
<PAGE>

Consolidated Statements of Jncome
Greer Bancshares Incorporated and Subsidiary
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,                                      2002                 2001               2000
                                                                  ------------         -----------        -----------
<S>                                                               <C>                  <C>                <C>
INTEREST INCOME:
  Loans, including fees                                           $  8,242,588         $10,057,870        $ 9,639,812
  Investment securities:
   Taxable                                                           1,777,204           1,729,392          1,999,513
   Tax-exempt                                                          984,746             600,263            559,025
  Federal funds sold                                                    62,177              87,534              4,639
  Other                                                                 24,762              22,517             16,241
                                                                  ------------         -----------        -----------
       Total interest income                                        11,091,477          12,497,576         12,219,230
                                                                  ------------         -----------        -----------

INTEREST EXPENSE:
  Interest on deposit accounts                                       2,493,740           4,414,622          4,945,374
  Interest on other borrowings                                       1,638,495           1,634,472          1,505,666
                                                                  ------------         -----------        -----------
       Total interest expense                                         4,132,235           6,049,094          6,451,040
                                                                  ------------         -----------        -----------

       Net interest income                                            6,959,242           6,448,482          5,768,190

PROVISION FOR LOAN LOSSES                                              787,500             355,000            200,000
                                                                  ------------         -----------        -----------
       Net interest income after provision for loan losses           6,171,742           6,093,482          5,568,190

NON-INTEREST INCOME:
  Service fees on deposit accounts                                     420,311             305,596            179,330
  Other service charges and fees                                       668,528             606,519            412,471
  Gain (loss) on sale of investment securities                         (11,120)             17,874             26,527
  Gain on sale of real estate held for sale                          1,057,128               7,735                 --
  Other operating income                                               670,558             766,186            566,130
                                                                  ------------         -----------        -----------
       Total non-interest income                                     2,805,405           1,703,910          1,184,458
                                                                  ------------         -----------        -----------

NON-INTEREST EXPENSES:
  Salaries and employee benefits                                  $  2,856,452         $ 2,560,920        $ 2,324,105
  Occupancy and equipment                                              933,865             759,383            693,746
  Postage and supplies                                                 244,113             221,379            199,310
  FDIC insurance                                                        22,503              23,735             23,712
  Other operating expenses                                           1,509,073           1,264,764          1,080,357
                                                                  ------------         -----------        -----------
       Total non-interest expenses                                   5,566,006           4,830,181          4,321,230
                                                                  ------------         -----------        -----------

       Income before income taxes                                    3,411,141           2,967,211          2,431,418


PROVISION FOR INCOME TAXES                                             887,600             841,350            678,615
                                                                  ------------         -----------        -----------

       Net income                                                 $  2,523,541         $ 2,125,861        $ 1,752,803
                                                                  ============         ===========        ===========

EARNINGS PER SHARE:
  Basic                                                           $       1.57         $      1.37        $      1.15
                                                                  ------------         -----------        -----------
  Diluted                                                         $       1.56         $      1.35        $      1.13
                                                                  ------------         -----------        -----------
</TABLE>

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


24

<PAGE>


                      Consolidated Statements of Changes in Stockholders' Equity
                                    Greer Bancshares Incorporated and Subsidiary

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

<TABLE>
<CAPTION>
                                                                                                     ACCUMULATED
                                               COMMON STOCK             ADDITIONAL                      OTHER          TOTAL
                                         --------------------------       PAID IN      RETAINED     COMPREHENSIVE   STOCKHOLDERS'
                                          SHARES          AMOUNT          CAPITAL      EARNINGS         INCOME         EQUITY
                                         ---------     ------------     -----------   -----------   -------------   -------------
<S>                                      <C>           <C>              <C>           <C>           <C>             <C>
BALANCE AT DECEMBER 31, 1999             1,423,111     $  7,115,555     $ 2,608,923   $ 2,498,828      $(721,757)   $ 11,501,549
                                         ---------     ------------     -----------   -----------      ---------    ------------
Net income                                      --               --              --     1,752,803             --       1,752,803
Other comprehensive income,
net of tax:
  Unrealized holding gains on
     investment securities                      --               --              --            --        593,427         593,427
  Less reclassification adjustments
     for gains included in net income           --               --              --            --        (16,295)        (16,295)
                                                                                                                     -----------
Comprehensive income                                                                                                   2,329,935
Stock dividend (3%)                         42,596          212,980         894,516    (1,107,496)            --              --
Cash in lieu of fractional shares
  on stock dividend                             --               --              --        (8,821)            --          (8,821)
Stock exercised pursuant to stock
  option plan                               12,374           61,870         127,376            --             --         189,246
Tax benefit of stock options exercised          --               --          29,000            --             --          29,000
Cash dividend ($.35 per share)                  --               --              --      (500,911)            --        (500,911)
                                         ---------     ------------     -----------   -----------      ---------    ------------
BALANCE AT DECEMBER 31, 2000             1,478,081        7,390,405       3,659,815     2,634,403       (144,625)     13,539,998
                                         ---------     ------------     -----------   -----------      ---------    ------------
Net income                                      --               --              --     2,125,861             --       2,125,861
Other comprehensive income,
net of tax:
  Unrealized holding gains on
      investment securities                     --               --              --            --        190,884         190,884
  Less reclassification adjustments
      for gains included in net income          --               --              --            --        (10,993)        (10,993)
                                                                                                                    ------------
Comprehensive income                                                                                                   2,305,752
Stock dividend (5%)                         73,824          369,120       1,624,127    (1,993,247)            --              --
Cash in lieu of fractional shares
  on stock dividend                             --               --              --        (8,909)            --          (8,909)
Stock exercised pursuant to stock
  option plan                                5,623           28,115          60,630            --             --          88,745
                                         ---------     ------------     -----------   -----------      ---------    ------------
BALANCE AT DECEMBER 31, 2001             1,557,528        7,787,640       5,344,572     2,758,108         35,266      15,925,586
                                         ---------     ------------     -----------   -----------      ---------    ------------
Net income                                      --               --              --     2,523,541             --       2,523,541
Other comprehensive income,
net of tax:
  Unrealized holding gains on
      investment securities                     --               --              --            --        750,495         750,495
  Less reclassifiation adjustments
      for gains included in net income          --               --              --            --          6,895           6,895
                                                                                                                    ------------
Comprehensive income                                                                                                   3,280,931
Stock dividend (2.5%)                       38,839          194,195         854,457    (1,048,652)            --              --
Cash in lieu of fractional shares
  on stock dividend                             --               --              --        (8,992)            --          (8,992)
Stock exercised pursuant to stock
  option plan                                9,651           48,255         143,928            --             --         192,183
Tax benefit of stock options exercised          --               --           7,000            --             --           7,000
Cash dividend ($.50 per share)                  --               --              --      (783,440)            --        (783,440)
                                         ---------     ------------     -----------   -----------      ---------    ------------
BALANCE AT DECEMBER 31, 2002             1,606,018     $  8,030,090     $ 6,349,957   $ 3,440,565      $ 792,656    $ 18,613,268
                                         ---------     ------------     -----------   -----------      ---------    ------------
</TABLE>

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


                                                                              25

<PAGE>

Consolidated Statements of Cash F1ows
Greer Bancshares Incorporated and Subsidiary

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,                                      2002                2001                2000
                                                                   -----------         -----------        -----------
<S>                                                               <C>                  <C>                <C>
OPERATING ACTIVITIES:
  Net income                                                      $  2,523,541         $ 2,125,861        $ 1,752,803
 Adjustments to reconcile net income to net cash
   provided by operating activities:
   Depreciation                                                        580,048             459,405            378,224
    (Gain) loss on sale of investment securities                        11,120             (17,874)           (26,527)
    Gain on sale of real estate held for sale                       (1,036,121)             (7,735)                --
    Gain on surrender of life insurance policy                              --             (81,780)                --
   Provision for loan losses                                           787,500             355,000            200,000
   Deferred income tax benefit                                          82,000            (120,700)           (68,000)
   Net change in:
     Accrued interest receivable                                       (22,974)             52,277            (80,158)
     Other assets                                                      (74,726)           (137,953)          (161,273)
     Other liabilities                                                 (14,669)           (112,937)           533,484
                                                                   -----------         -----------        -----------
       Net cash provided by operating activities                     2,835,719           2,513,564          2,528,553
                                                                   -----------         -----------        -----------

INVESTING ACTIVITIES:
  Proceeds from sales of investment securities                      12,093,002           1,005,000         10,659,445
  Proceeds from the maturity of investment securities               17,471,547           8,810,697          2,412,834
  Purchase of investment securities                                (45,360,088)        (23,018,088)        (4,840,772)
  Purchase of bank-owned life insurance                                     --                  --         (1,415,000)
  Proceeds from sale of real estate held for sale                    1,862,069             300,369                 --
  Proceeds from life insurance policy surrender                             --             326,720                 --
  Net increase in federal funds sold                                (3,201,000)            (20,000)          (130,000)
  Net (increase) decrease in loans                                   5,440,781           1,697,991        (19,639,230)
  Purchase of premises and equipment                                  (208,593)           (630,125)          (549,125)
                                                                   -----------         -----------        -----------
       Net cash used for investing activities                      (11,902,282)        (11,527,436)       (13,501,848)
                                                                   -----------         -----------        -----------
FINANCING ACTIVITIES:
  Net increase in deposits                                        $  6,392,025         $ 4,157,602        $13,097,998
  Repayment of notes payable to Federal Home Loan
   Bank                                                             (2,277,694)        (10,675,856)       (10,510,647)
  Proceeds from notes payable to Federal Home Loan
   Bank                                                              5,500,000          19,000,000          8,000,000
  Proceeds from federal funds purchased                                     --                  --            900,000
  Repayment of federal funds purchased                                      --            (900,000)                --
  Proceeds from exercise of stock options                              192,183              88,745            189,246
  Cash in lieu of fractional shares on stock dividend                   (8,992)             (8,909)            (8,821)
  Cash dividends paid                                                 (783,440)                 --           (500,911)
                                                                   -----------         -----------        -----------
       Net cash provided by financing activities                     9,014,082          11,661,582         11,166,865
                                                                   -----------         -----------        -----------
</TABLE>


26

<PAGE>

                                   Consolidated Statements of Cashflows, cont'd,
                                    Greer Bancshares Incorporated and Subsidiary

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMER 31,                                  2002              2001              2000
                                                              ----------        ----------        ----------
<S>                                                           <C>               <C>               <C>
Net increase (decrease) in cash and due from banks               (52,481)         2,647,710          193,570
Cash and due from banks at end of year                         7,420,621        $ 4,772,911        4,579,341
                                                              ----------        -----------       ----------
Cash and due from banks at end of year                        $7,368,140        $ 7,420,621       $4,772,911
                                                              ==========        ===========       ==========
Supplemental disclosures of cash flow information:
  Cash paid during the year for:
    Interest                                                  $4,516,670        $ 6,278,452       $6,035,758
                                                              ==========        ===========       ==========
    Income taxes                                              $  551,600        $   947,151       $  718,006
                                                              ==========        ===========       ==========
Non-cash investing and financing activities:
  Real estate acquired in satisfaction of mortgage loans      $  134,000        $   345,358       $       --
                                                              ==========        ===========       ==========
</TABLE>

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


                                                                              27
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GREER BANCSHARES INCORPORATED AND SUBSIDIARY

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION In July 2001, we formed Greer Bancshares Incorporated (the "Holding
Company") as the bank holding company for Greer State Bank (the "Bank"). All of
the outstanding common shares of the Bank were exchanged for common stock of the
new holding company at that time. The accompanying financial statements include
the accounts of the holding company and its wholly owned subsidiary (herein
referred to as "the Company").

NATURE OF OPERATIONS The only current activity of the holding company is to hold
its investment in the Bank. We operate the Bank under a state bank charter and
provide full banking services to our clients. We are subject to regulation by
the Federal Deposit Insurance Corporation and the South Carolina Board of
Financial Institutions.

The Bank has Greer Financial Services Corporation as a wholly owned subsidiary
to provide financial management services and non-deposit product sales.

PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of the Company and its subsidiaries and, in consolidation, all
significant intercompany items are eliminated.

BUSINESS SEGMENTS We report our activities as one business segment. In
determining the appropriateness of segment definition, we consider 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.

ESTIMATES The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
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 AND CASH EQUIVALENTS For the purpose of presentation in the statements of
cash flows, cash and cash equivalents are defined as those amounts included in
the balance sheet caption "Cash and due from banks."

SECURITIES HELD TO MATURITY Bonds, notes, and debentures for which we have 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.

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 available-for-sale 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.

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. Related write-downs are included in
earnings as realized losses.

CONCENTRATIONS OF CREDIT RISK We make loans to individuals and small businesses
located primarily in upstate South Carolina for various personal and commercial
purposes. We have a diversified loan portfolio and the borrowers' ability to
repay their loans is not dependent upon any specific economic sector.

COMPREHENSIVE INCOME Annual comprehensive income reflects the change in our
equity during the year arising from transactions and events other than
investment 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.

LOANS AND INTEREST INCOME We grant mortgage, commercial and consumer loans to
customers. A substantial portion of the loan portfolio is represented by loans
throughout the Greater Greer area of the upstate of South Carolina. The ability
of our debtors to honor their contracts is dependent upon the general economic
conditions in this area.

Loans are reported at their outstanding unpaid principal balances adjusted for
the allowance for loan losses 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 our judgement, the
interest will not be collectible in the normal course of business. 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 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 established as losses
are estimated to have occurred through a provision for loan losses charged to
earnings. Loan losses are charged against the allowance when we


28
<PAGE>

                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONT'D,
                                    GREER BANCSHARES INCORPORATED AND SUBSIDIARY

believe the uncollectability of a loan balance is confirmed. Subsequent
recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by our management
and is based upon our periodic review of the collectability 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 prevailing economic conditions. This
evaluation is inherently subjective as it requires estimates that are
susceptible to significant revision as more information becomes available.

A loan is considered impaired when, based on current information and events, it
is probable that we will be unable to collect the scheduled payments of
principal or interest when due according to the contractual terms of the loan
agreement. Factors considered by us 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, we do not separately identify individual consumer and
residential loans for impairment disclosures.

PREMISES AND EQUIPMENT Premises and equipment are stated at cost, net of
accumulated depreciation. Depreciation is charged using straight-line and
accelerated methods over the useful lives 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 operations.

REAL ESTATE HELD FOR SALE Our real estate held for sale is stated at the lower
of cost or net realizable value. Market values of real estate held for sale are
reviewed regularly and allowances for losses are established when the carrying
value exceeds the estimated net realizable value. Gains and losses on the sale
of real estate held for sale are recorded at the time of sale.

In 2002, we sold a tract of undeveloped real estate for approximately
$1,690,000, which resulted in a gain of approximately $1,057,000. Originally
acquired as part of a larger parcel in 1996, we subdivided the undeveloped
portion of the property after completing construction of a branch office.

STOCK-BASED COMPENSATION We account for our stock-based compensation using the
accounting prescribed by Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees. We are not required to adopt the fair value based
recognition provisions prescribed under SFAS No. 123, Accounting for Stock-Based
Compensation, but we comply with the disclosure requirements set forth in the
Statement, which include disclosing pro forma net income as if the fair value
based method of accounting had been applied.

INCOME TAXES We follow the practice of filing a consolidated federal return and
separate state returns. Income taxes are allocated to each company based on the
separate returns filed.

Certain items of income and expense for financial reporting are recognized
differently for income tax purposes (principally the provision for loan losses
and depreciation). Provisions for deferred taxes are made in recognition of such
temporary differences as required under SFAS No. 109, Accounting for Income
Taxes. Current income taxes are recorded based on amounts due with the current
income tax returns.

EARNINGS PER SHARE OF COMMON STOCK We present basic and diluted earnings per
share of common stock, after giving retroactive effect to stock splits and
dividends. The assumed conversion of stock options creates the difference
between basic and diluted net income per share. Income per share is calculated
by dividing net income by the weighted average number of common shares
outstanding for each period presented. The weighted average number of common
shares outstanding for basic earnings per share was 1,602,884 in 2002, 1,551,358
in 2001, and 1,524,417 in 2000. The weighted average number of common shares
outstanding for diluted earnings per share was 1,619,911 in 2002, 1,570,341 in
2001, and 1,544,546 in 2000.


                                                                              29
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONT'D,
GREER BANCSHARES INCORPORATED AND SUBSIDIARY

2. INVESTMENT SECURITIES

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

DECEMBER 31, 2002

<TABLE>
<CAPTION>
                                                                              Gross               Gross
                                                       Amortized            Unrealized         Unrealized            Estimated
                                                          Cost                 Gains             Losses             Fair Value
                                                     ------------          ------------        ----------          ------------
<S>                                                  <C>                   <C>                 <C>                 <C>
Held to maturity:
  Mortgage backed securities                         $ 14,607,260          $     79,044          $     --          $ 14,686,304
                                                     ------------          ------------          --------          ------------

Available for sale:
  United States Government
    agency obligations                               $  5,500,000          $    165,742          $     --          $  5,665,742
  Mortgage-backed securities                           13,255,415               272,185            10,699            13,516,901
  Municipal securities                                 26,439,370               848,029            27,118            27,260,281
  Corporate bonds                                       3,881,698                40,732                --             3,922,430
  Federal Home Loan Bank stock--
    restricted                                          1,797,900                    --                --             1,797,900
                                                     ------------          ------------          --------          ------------
Totals                                               $ 50,874,383          $  1,326,688          $ 37,817          $ 52,163,254
                                                     ============          ============          ========          ============
</TABLE>

DECEMBER 31, 2001

<TABLE>
<CAPTION>
                                                                             Gross               Gross
                                                      Amortized           Unrealized          Unrealized           Estimated
                                                          Cost               Gains              Losses            Fair Value
                                                     ------------         ----------          ----------         ------------
<S>                                                  <C>                  <C>                 <C>                <C>
Available for sale:
  United States Government
    agency obligations                               $  8,500,000          $ 132,354          $  22,167          $  8,610,187
  Mortgage-backed securities                           20,065,832            299,826            128,972            20,236,686
  Municipal securities                                 15,386,112             50,641            240,689            15,196,064
  Corporate bonds                                       2,262,562             47,407                 --             2,309,969
  Federal Home Loan Bank stock--
    restricted                                          1,587,700                 --                 --             1,587,700
  Marketable equity securities--
    mutual funds                                        1,895,020              9,338             90,396             1,813,962
                                                     ------------          ---------          ---------          ------------
Totals                                               $ 49,697,226          $ 539,566          $ 482,224          $ 49,754,568
                                                     ============          =========          =========          ============
</TABLE>

The amortized cost and estimated fair value of investment securities at December
31, 2002, by contractual maturity for debt securities and expected maturities
for mortgage-backed securities, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to prepay the
obligations.

<TABLE>
<CAPTION>
                                                                                                                   Net
                                                                     Amortized             Estimated            Unrealized
                                                                        Cost              Fair Value         Gains (Losses)
                                                                   ------------          ------------        ---------------
<S>                                                                <C>                   <C>                 <C>
Due in one year or less                                            $  9,309,841          $  9,337,293          $    27,452
Due after one year through five years                                27,583,076            28,166,772              583,696
Due after five years through ten years                               22,219,341            22,922,990              703,649
Due after ten years                                                   6,369,385             6,422,503               53,118
                                                                   ------------          ------------          -----------
Totals                                                             $ 65,481,643          $ 66,849,558          $ 1,367,915
                                                                   ============          ============          ===========
</TABLE>

Investment securities with an aggregate book value of approximately $32,502,000
and $23,994,000 at December 31, 2002 and 2001, respectively, were pledged to
secure public deposits and for other purposes.

For the years ended December 31, 2002, 2001 and 2000, proceeds from sales of
securities available for sale amounted to $12,093,002, $1,005,000, and
$10,659,445, respectively. Gross realized gains amounted to $55,619, $17,874,
and $61,264, respectively. Gross realized losses amounted to $66,739, $-0-, and
$34,737, respectively. The tax provision applicable to these net realized losses
amounted to approximately $(3,500), $7,000, and $10,000, respectively.


30
<PAGE>

                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONT'D,
                                    GREER BANCSHARES INCORPORATED AND SUBSIDIARY

3. NET LOANS

A summary of loans outstanding by major classification follows:

<TABLE>
<CAPTION>
DECEMBER 31,                                                                      2002                    2001
                                                                             -------------           -------------
<S>                                                                          <C>                     <C>
Real estate                                                                  $  77,968,079           $  79,131,792
Commercial and industrial (non-real estate)                                     20,027,612              22,999,392
Installment loans to individuals for household,
  family and other personal expenditures                                         8,874,588               9,920,484
All other loans                                                                    794,244               2,311,807
                                                                             -------------           -------------
                                                                               107,664,523             114,363,475
Unearned discounts                                                                  (3,105)                 (3,604)
                                                                             -------------           -------------
                                                                               107,661,418             114,359,871
Allowance for loan losses                                                       (1,080,635)             (1,244,657)
                                                                             -------------           -------------
                                                                             $ 106,580,783           $ 113,115,214
                                                                             =============           =============
</TABLE>

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

<TABLE>
<CAPTION>
                                                                      2002                  2001                  2000
                                                                   -----------           -----------           ---------
<S>                                                                <C>                   <C>                   <C>
Balance, beginning of year                                         $ 1,244,657           $   948,395           $ 784,373
Provision charged to income                                            787,500               355,000             200,000
Recoveries on loans                                                     21,724                22,130               9,791
Loans charged off                                                     (973,246)              (80,868)            (45,769)
                                                                   -----------           -----------           ---------
Balance, end of year                                               $ 1,080,635           $ 1,244,657           $ 948,395
                                                                   ===========           ===========           =========
</TABLE>

At December 31, 2002 and 2001, non-accrual loans totaled approximately $391,000
and $346,000, respectively. The total amount of interest earned on non-accrual
loans was approximately $56,000 in 2002, $38,000 in 2001, and $32,000 in 2000.
The gross interest income that would have been recorded under the original terms
of the non-accrual loans amounted to approximately $24,000 in 2002, $24,000 in
2001, and $22,000 in 2000. As of December 31, 2002 and 2001, we had no impaired
loans.

4. PREMISES AND EQUIPMENT

Premises and equipment are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,                                                                     2002                   2001
                                                                             ------------           ------------
<S>                                                                          <C>                    <C>
Land                                                                         $    264,720           $    264,720
Buildings and improvements                                                      3,592,744              3,558,199
Equipment                                                                         941,145                804,078
Furniture and fixtures                                                            616,284                606,428
Electronic data processing                                                      2,200,141              2,173,014
                                                                             ------------           ------------
                                                                                7,615,034              7,406,439
Less accumulated depreciation                                                  (3,368,553)            (2,788,503)
                                                                             ------------           ------------
                                                                             $  4,246,481           $  4,617,936
                                                                             ============           ============
</TABLE>

Depreciation expense charged to operations was $580,048, $459,405, and $378,224
for 2002, 2001 and 2000, respectively.

5. OTHER ASSETS

Other assets at December 31 consist of the following:

<TABLE>
<CAPTION>
                                                                                2002                 2001
                                                                             -----------          -----------
<S>                                                                          <C>                  <C>
Prepaid expenses                                                             $   163,417          $   223,443
Bank owned life insurance                                                      2,769,859            2,635,172
Deferred income tax asset                                                             --              357,500
Repossessed assets                                                               165,900                   --
Other                                                                              1,846                1,767
                                                                             -----------          -----------
                                                                             $ 3,101,022          $ 3,217,882
                                                                             ===========          ===========
</TABLE>


                                                                              31
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONT'D.
GREER BANCSHARES INCORPORATED AND SUBSIDIARY

6. TIME DEPOSITS GREATER THAN OR EQUAL TO $100,000

At December 31, 2002 and 2001, time deposits of $100,000 or more totaled
approximately $26,231,000 and $22,590,000, respectively. Interest expense on
these deposits was approximately $738,000, $1,288,000, and $1,496,000 in 2002,
2001 and 2000, respectively.

Contractual maturities of time deposits are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,                                                                        2002                 2001
                                                                                -------------        -------------
<S>                                                                             <C>                  <C>
12 months or less                                                               $  42,532,991        $  50,746,507
1-3 years                                                                          18,163,706            6,303,299
                                                                                -------------        -------------
                                                                                $  60,696,697        $  57,049,806
                                                                                =============        =============
</TABLE>

7. NOTES PAYABLE TO FEDERAL HOME LOAN BANK

At December 31, 2002 and 2001, we had notes payable totaling $34,836,913 and
$31,614,607, respectively, to the Federal Home Loan Bank (FHLB). At December 31,
2002, $4,000,000 of these notes had variable interest at rates ranging from 2.12
to 5.33 percent. At December 31, 2001, $3,000,000 of these notes had variable
interest at 5.33 percent. The remaining $30,836,913 and $28,614,607, at December
31, 2002 and 2001, respectively, bear interest at fixed rates ranging from 2.15
to 6.67 percent. We have pledged as collateral our FHLB stock and have entered
into a blanket collateral agreement whereby we will maintain, free of other
encumbrances, qualifying mortgages with a book value of at least 135 percent of
total advances.

Minimum required payments of principal at December 31, 2002, are as follows:

<TABLE>
<S>                                  <C>
2003                                 $   4,000,000
2004                                     1,000,000
2005                                       407,183
2006                                       700,000
2007                                       229,730
Thereafter                              28,500,000
                                     -------------
                                     $  34,836,913
                                     =============
</TABLE>

8. UNUSED LINES OF CREDIT

We have an unused short-term line of credit to purchase federal funds from
correspondent banks totaling $8.5 million.

We also have the ability to borrow an additional $13.4 million from the Federal
Home Loan Bank. The borrowings are available by pledging collateral and
purchasing additional stock in the Federal Home Loan Bank.

9. COMMITMENTS AND CONTINGENCIES

In the normal course of our business, we are 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 we have in particular
classes of financial instruments. We use the same credit policies in making
commitments as for making loans. Commitments to extend credit in the future
represent financial instruments involving credit risk. A summary of our
commitments at December 31, 2002 and 2001, is as follows:

<TABLE>
<CAPTION>
                                                                                  2002                  2001
                                                                             ------------          ------------
<S>                                                                          <C>                   <C>
Commitments to extend credit                                                 $ 21,633,000          $ 19,853,000
Standby letters of credit                                                         569,000               247,000
                                                                             ------------          ------------
                                                                             $ 22,202,000          $ 20,100,000
                                                                             ============          ============
</TABLE>

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. We evaluate 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.


32
<PAGE>

                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONT'D.
                                    GREER BANCSHARES INCORPORATED AND SUBSIDIARY

Standby letters of credit are conditional commitments issued by us 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 we deem necessary.

CONCENTRATIONS OF CREDIT RISK - Substantially all of our loans and commitments
to extend credit have been granted to customers in our 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. Our primary focus is
toward consumer and small business transactions, and accordingly, we do not have
a significant number of credits to any single borrower or group of related
borrowers in excess of $1,500,000.

From time to time, we have cash and cash equivalents on deposit with financial
institutions that exceed federally insured limits.

LITIGATION - We are a party to litigation and claims arising in the normal
course of business. After consultation with legal counsel, we believe that the
liabilities, if any, arising from such litigation and claims will not be
material to our financial position.

10. STOCKHOLDERS' EQUITY

We have 1,000,000 authorized but unissued shares of preferred stock (par value
$5). Should we ever issue preferred stock, the designation of terms, conditions
and amounts will be set by our directors.

In June 2002, we declared a 2.5% stock dividend; in July 2001, we declared a
five-percent stock dividend; and in June 2000, we declared a three-percent stock
dividend.

11. BENEFIT PLANS

DEFINED CONTRIBUTION PLAN - We have a 401(k) Profit Sharing Plan for the benefit
of our employees. Subject to annual approval by the Board of Directors, we match
employee contributions of up to 4% of compensation in accordance with plan
guidelines. Contributions of $64,674, $64,777, and $58,583 were charged to
operations during 2002, 2001 and 2000, respectively.

STOCK OPTION PLAN - Under the Greer Bancshares Incorporated and Subsidiary
employee Incentive Stock Option Plan, options for up to 120,000 shares of common
stock can be granted to employees designated by the Board of Directors. The
form, price, conditions and number of shares under option are determined by the
Board. Plan limitations are: (1) that no option can be exercised before one
year, or after ten years from the date that the option is granted, and (2) that
the option price will be greater than or equal to the fair market value of the
common stock at the date of the grant.

In 1997, our directors adopted a Directors Stock Option Plan. Beginning with the
adjournment of the 1997 annual meeting of shareholders and at the adjournment of
the annual meetings for each of the succeeding nine years in which the return on
average equity for the fiscal year preceding the annual meeting is greater than
or equal to twelve percent, each director shall be granted an option to purchase
1,000 shares of our common stock at fair market value on the grant date. Each
option becomes exercisable on the date six months and one day following the
grant date. No director may receive grants of options in excess of 10,000
shares. The maximum number of shares for which options may be granted is 90,000.

We apply Accounting Principles Board (APB) Opinion 25 and related
interpretations in accounting for the plans. Accordingly, no compensation cost
has been charged to operations. Had compensation cost for the Plan been
determined based on the fair value at the grant dates for awards under the plans
consistent with the accounting method available under SFAS No. 123, Accounting
for Stock-Based Compensation, our net income per share and our net income would
have been reduced to the proforma amounts indicated below:

<TABLE>
<CAPTION>
                                                                      2002                 2001                 2000
                                                                   -----------          -----------          -----------
<S>                                                                <C>                  <C>                  <C>
Net income:
  As reported                                                      $ 2,523,541          $ 2,125,861          $ 1,752,803
  Proforma                                                           2,490,873            2,077,075            1,718,282

Basic net income per share of common stock:
  As reported                                                      $      1.57          $      1.37          $      1.15
  Proforma                                                                1.55                 1.33                 1.13

Diluted net income per share of common stock:
  As reported                                                      $      1.56          $      1.35          $      1.13
  Proforma                                                                1.54                 1.32                 1.11
</TABLE>


                                                                              33
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONT'D.
GREER BANCSHARES INCORPORATED AND SUBSIDIARY

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions for grants in 2002: $.35 per share dividend yield, expected
volatility of 12.5 percent, risk-free interest rate of 4.50 percent and expected
lives of seven years. The following were the weighted average assumptions for
grants in 2001: $0.35 per share dividend yield, expected volatility of 12.5
percent, risk-free interest rate of 5.00 percent, and expected lives of seven
years. The following were the weighted average assumptions for grants in 2000:
$0.35 per share dividend yield, expected volatility of 12.5 percent, risk-free
interest rate of 5.35 percent, and expected lives of seven years.

A summary of the status of the plans as of December 31, 2002, 2001 and 2000, and
changes during the years ending on those dates is presented below (all per share
amounts have been adjusted for stock dividends):

<TABLE>
<CAPTION>
                                                       2002                       2001                        2000
                                              ---------------------      ----------------------      ----------------------
                                                          Weighted                     Weighted                    Weighted
                                                           Average                      Average                     Average
                                                          Exercise                     Exercise                    Exercise
                                              Shares        Price          Shares        Price         Shares        Price
                                             -------      --------       --------      --------      --------      --------
<S>                                          <C>          <C>            <C>           <C>           <C>           <C>
Outstanding at
   beginning of year                          49,782       $ 16.56         47,805       $ 14.67        50,679       $ 13.10
Granted                                       16,000         26.33          9,000         25.01         9,500         23.36
Exercised                                     (9,651)        19.91         (5,623)        15.78       (12,374)        15.30
Forfeited or expired                              --                       (1,400)        15.52            --
                                             -------       -------       --------       -------      --------       -------
Outstanding at end of year                    56,131         18.88         49,782         16.56        47,805         14.67
                                             =======       =======       ========       =======      ========       =======

Options exercisable at year-end               31,533       $ 19.53         30,134       $ 18.38        21,736       $ 16.56
Shares available for grant                    92,350                      108,350                     115,950
Weighted average fair value of
 options granted during the year             $  6.25                     $   6.00                    $   6.17
</TABLE>

The following table summarizes information at December 31, 2002:

<TABLE>
<CAPTION>
                  OPTIONS OUTSTANDING                                                     OPTIONS EXERCISABLE
----------------------------------------------------------------            ------------------------------------------------
                                                      Weighted
                                                       Average              Weighted                                Weighted
                                                      Remaining              Average                                 Average
Range of                           Number            Contractual            Exercise               Number           Exercise
Exercise Prices                 Outstanding              Life                 Price             Exercisable           Price
---------------                 -----------          -----------            --------            -----------         --------
<S>                             <C>                  <C>                    <C>                 <C>                 <C>
$5.21 - 5.98                         2,074            1.35 years            $   5.82                  576           $   5.81
$9.73 - 10.25                       10,200            4.33 years               10.10                5,700               9.98
$13.66 - 14.37                      12,632            5.40 years               14.20                5,432              13.98
$18.87                               4,825            6.27 years               18.87                3,425              18.87
$23.36 - 27.00                      26,400            8.63 years               25.54               16,400              25.31
                                    ======            ==========            ========               ======           ========
                                    56,131                                                         31,533
                                    ======                                                         ======
</TABLE>

NON-QUALIFIED PLANS - We have established a non-qualified salary continuation
plan for certain key executive officers. The benefits under the plan are
computed and payable under certain terms as specified in each agreement. The
estimated present value of future benefits to be paid in the future is being
accrued over the period from the effective date of each agreement until the
initial payments are made at the normal retirement dates. We have purchased and
are the owner and beneficiary of certain life insurance policies that will be
used to finance the benefits under these agreements. The charge to operations
was approximately $75,000, $68,000 and $62,000 during 2002, 2001 and 2000,
respectively. The cumulative accrued liabilities for the agreements are
presenting in the accompanying consolidated balance sheets in "Other
Liabilities."

12. INCOME TAXES

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

<TABLE>
<CAPTION>
                                                            2002                    2001                2000
                                                        ----------              -----------         ----------
<S>                                                     <C>                     <C>                 <C>
Current income tax expense:
   State                                                $  115,500              $    98,650         $   80,515
   Federal                                                 690,100                  863,400            666,100
                                                        ----------              -----------         ----------
                                                           805,600                  962,050            746,615
Deferred income tax expense (benefit)                       82,000                 (120,700)           (68,000)
                                                        ----------              -----------         ----------
Provision for income taxes                              $  887,600              $   841,350         $  678,615
                                                        ==========              ===========         ==========
</TABLE>


34
<PAGE>

                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONT'D.
                                    GREER BANCSHARES INCORPORATED AND SUBSIDIARY

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

<TABLE>
<CAPTION>
                                                  2002                           2001                          2000
                                       --------------------------     ---------------------------    -------------------------
                                                         Percent                        Percent                        Percent
                                                        of Income                      of Income                      of Income
                                          Amount       Before Tax        Amount       Before Tax        Amount       Before Tax
                                       -----------     ----------     -----------     ----------     -----------     ----------
<S>                                    <C>             <C>            <C>             <C>            <C>             <C>
Income before income taxes             $ 3,411,141                    $ 2,967,211                    $ 2,431,418
                                       ===========                    ===========                    ===========

Tax at statutory rate                  $ 1,160,000          34%       $ 1,009,000        34.0%       $   827,000        34.0%
Tax effect of:
  Federally tax exempt
       interest income                    (331,000)       (9.7)          (202,000)       (6.8)          (187,000)       (7.7)
  State taxes, net of federal
       benefit                              76,000         2.3             65,000         2.2             53,000         2.2
  Other--net                               (17,400)        (.6)           (30,650)       (1.0)           (14,385)        (.6)
                                       -----------       -----        -----------       -----        -----------       -----
Income tax provision                   $   887,600        26.0%       $   841,350        28.4%       $   678,615        27.9%
                                       ===========       =====        ===========       =====        ===========       =====
</TABLE>

Deferred tax assets are included in other assets and consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,                                                                     2002                  2001
                                                                             -----------           -----------
<S>                                                                          <C>                   <C>
Deferred tax assets:
    Bad debts                                                                $   305,000           $   423,000
    Other, net                                                                   235,850               184,000
                                                                             -----------           -----------
                                                                                 540,850               607,000
Deferred tax liabilities:
    Unrealized holding gains on investment securities                            496,000                22,000
    Depreciation                                                                 113,000                97,000
                                                                             -----------           -----------
                                                                                 609,000               488,000
Less valuation allowance                                                        (130,500)             (130,500)
                                                                             -----------           -----------

Net deferred tax asset (liability)                                           $  (198,650)          $   357,500
                                                                             ===========           ===========
</TABLE>

13. OTHER OPERATING INCOME

Other operating income for the years ended December 31 consist of the following:

<TABLE>
<CAPTION>
                                                                      2002                2001                2000
                                                                   ----------          ----------          ----------
<S>                                                                <C>                 <C>                 <C>
Income from financial management services                          $  190,350          $  177,456          $  161,837
Earnings on life insurance policies                                   151,404             240,695             111,462
Credit card income                                                    243,491             241,425             203,486
Safe deposit box rental                                                20,614              20,253              16,498
Other fees                                                             64,699              86,357              72,847
                                                                   ----------          ----------          ----------

                                                                   $  670,558          $  766,186          $  566,130
                                                                   ==========          ==========          ==========
</TABLE>

14. 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 collectability or
present other unfavorable features.


                                                                              35
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONT'D.
GREER BANCSHARES INCORPORATED AND SUBSIDIARY

Aggregate loan transactions with these related parties are as follows:

<TABLE>
<CAPTION>
                                                                                 2002                   2001
                                                                             ------------           -----------
<S>                                                                          <C>                    <C>
Balance, beginning                                                           $  3,029,000           $ 3,319,000
Change in relationship                                                            844,149                    --
Advances                                                                        1,583,671               206,000
Repayments                                                                     (1,040,820)             (496,000)
                                                                             ------------           -----------
Balance, ending                                                              $  4,416,000           $ 3,029,000
                                                                             ============           ===========
</TABLE>

In addition to the balance outstanding, directors and executive officers had
available unused lines of credit totaling approximately $1,099,000 and $875,000
at December 31, 2002 and 2001, respectively.

Effective January 1, 1996, our directors adopted an unfunded Deferred
Compensation Plan. Electing directors may annually defer directors' fees, which
are then eligible for various future payment plans as chosen by the director.
Deferred amounts earn interest currently at 12%. Deferrals, including interest,
under the Plan during 2002, 2001 and 2000, totaled approximately $95,200,
$68,100, and $63,200, respectively.

During 2002, the Bank sold land held for investment (see Note 1, Land Held for
Resale). One of our directors earned a commission of approximately $76,000 as
our real estate broker for this transaction.

15. REGULATORY MATTERS

DIVIDENDS - Our ability to pay cash dividends from the Bank to the Holding
Company is restricted by state banking regulations to the amount of our retained
earnings. At December 31, 2002, the Bank's retained earnings were approximately
$3,441,000.

CAPITAL REQUIREMENTS - We 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 our financial statements. Under capital adequacy guidelines
and the regulatory framework for prompt corrective action, we must meet specific
capital guidelines that involve quantitative measures of our assets,
liabilities, and certain off-balance sheet items as calculated under regulatory
accounting practices. Our capital amounts and classification are also subject to
qualitative judgements by the regulators about components, risk weightings, and
other factors.

Quantitative measures established by regulation to ensure capital adequacy
require us to maintain minimum amounts and ratios (set forth in the table below)
of total and Tier I capital to risk-weighted assets, and of Tier I capital to
average assets. Management believes, as of December 31, 2002, that we meet all
capital adequacy requirements to which we are subject.

As of December 31, 2002, the most recent notification from the Federal Deposit
Insurance Corporation categorized us 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 our category. Our actual
capital amounts (in thousands) and ratios and minimum regulatory amounts (in
thousands) and ratios are presented as follows:

<TABLE>
<CAPTION>
                                                                                                              To Be Well
                                                                                                          Capitalized Under
                                                                                   For Capital            Prompt Corrective
                                                                                Adequacy Puproses         Action Provisions
                                                                               -------------------      --------------------
Bank:                                                      Actual                    Minimum                   Minimum
-----                                                -------------------       -------------------      --------------------
                                                      Amount       Ratio        Amount       Ratio       Amount        Ratio
                                                     --------      -----       --------      -----      --------       -----
<S>                                                  <C>           <C>         <C>           <C>        <C>            <C>
AS OF DECEMBER 31, 2002
   Total risk-based capital
     (to risk-weighted assets)                       $ 18,693       15.0%      $ 10,003       8.0%      $ 12,504       10.0%
   Tier 1 capital
     (to risk-weighted assets)                       $ 17,612       14.1%      $  5,001       4.0%      $  7,502        6.0%
   Tier 1 capital
     (to average assets)                             $ 17,612        9.1%      $  7,714       4.0%      $  9,643        5.0%
</TABLE>


36
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONT'D.
GREER BANCSHARES INCORPORATED AND SUBSIDIARY

<TABLE>
<CAPTION>
                                                                                                              To Be Well
                                                                                                          Capitalized Under
                                                                                   For Capital            Prompt Corrective
                                                                                Adequacy Puproses         Action Provisions
                                                                               -------------------      --------------------
Bank:                                                      Actual                    Minimum                   Minimum
-----                                                -------------------       -------------------      --------------------
                                                      Amount       Ratio        Amount       Ratio       Amount        Ratio
                                                     --------      -----       --------      -----      --------       -----
<S>                                                  <C>           <C>         <C>           <C>        <C>            <C>
AS OF DECEMBER 31, 2001
  Total risk-based capital
     (to risk-weighted assets)                       $ 16,741       13.6%      $  9,837       8.0%      $ 12,297       10.0%
  Tier 1 capital
     (to risk-weighted assets)                       $ 15,496       12.6%      $  4,919       4.0%      $  7,378        6.0%
  Tier 1 capital
     (to average assets)                             $ 15,496        8.7%      $  7,164       4.0%      $  8,955        5.0%
</TABLE>

We are 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 amounts of these reserve balances for the
years ended December 31, 2002 and 2001, were approximately $1,393,000 and
$1,052,000, respectively.

16. FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, Disclosures About Fair Value of Financial Instruments, requires
disclosure of fair value information, whether or not recognized in the balance
sheet, when it is practicable to estimate the fair value. SFAS 107 defines a
financial instrument 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 our common stock, premises and equipment, real estate
held for sale, and other assets and liabilities. The following methods and
assumptions were used by us 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.

-        Fair value for variable rate loans that re-price frequently and for
         loans that mature in less than one year 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 and credit quality.

-        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 variable rate long-term debt that re-prices frequently
         is based on the carrying amount. Fair value for our off-balance sheet
         financial instruments 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 loans of comparable
         terms and credit quality.

We have used our best estimate of fair value based on the above assumptions.
Thus, the fair values presented may not be the amounts that could be realized in
an immediate sale or settlement of the instrument. In addition, any income taxes
or other expenses 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 our financial instruments are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,                                                   2002                                          2001
------------                                   ------------------------------------          ------------------------------------
                                                  Carrying                 Fair                Carrying                 Fair
                                                   Amount                 Value                 Amount                  Value
                                               -------------          -------------          -------------          -------------
<S>                                            <C>                    <C>                    <C>                    <C>
FINANCIAL ASSETS
    Cash and due from banks                    $   7,368,140          $   7,368,140          $   7,420,621          $   7,420,621
    Federal funds sold                             3,351,000              3,351,000                150,000                150,000
    Investment securities                         66,770,514             66,849,558             49,754,568             49,754,568
    Loans                                        106,580,783            106,567,000            113,115,214            113,578,000
</TABLE>


                                                                              37
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONT'D.
GREER BANCSHARES INCORPORATED AND SUBSIDIARY

<TABLE>
<CAPTION>
DECEMBER 31,                                                             2002                                  2001
                                                           ------------------------------        ------------------------------
                                                            Carrying             Fair             Carrying             Fair
                                                              Amount            Value              Amount              Value
                                                           -----------        -----------        -----------        -----------
<S>                                                        <C>                <C>                <C>                <C>
FINANCIAL LIABILITIES
     Deposits                                              137,563,252        132,874,000        131,171,227        131,682,000
     Notes payable to Federal Home
       Loan Bank                                            34,836,913         35,363,000         31,614,607         31,471,000
</TABLE>

17. 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. The Parent Company was formed in
2001 and therefore only information for as of December 31, 2002 and 2001 and for
the periods then ended are presented. The bank subsidiary paid the Parent
Company dividends of $783,439 and $50,000 in 2002 and 2001, respectively.

<TABLE>
<CAPTION>
PARENT COMPANY ONLY CONDENSED BALANCE SHEETS                                     2002                  2001
--------------------------------------------                                 ------------          ------------
<S>                                                                          <C>                   <C>
Assets:
    Cash and cash equivalents                                                $    196,902          $     28,029
    Equity in net assets of bank subsidiary                                    18,404,666            15,897,557
    Taxes receivable                                                               11,700                    --
                                                                             ------------          ------------
        Total assets                                                         $ 18,613,268          $ 15,925,586
                                                                             ============          ============
        Total stockholders' equity                                           $ 18,613,268          $ 15,925,586
                                                                             ============          ============
</TABLE>

<TABLE>
<CAPTION>
PARENT COMPANY ONLY CONDENSED STATEMENTS OF INCOME                              2002                   2001
--------------------------------------------------                           ------------          ------------
<S>                                                                          <C>                   <C>
  Dividends from bank subsidiary                                             $    783,439           $     50,000
  Non-interest expense                                                             14,317                 16,749
                                                                             ------------           ------------
        Income before taxes                                                       769,122                 33,251
  Income tax benefit                                                               (4,700)                    --
                                                                             ------------           ------------
        Income before equity earnings                                             773,822                 33,251
  Equity in undistributed earnings of bank subsidiary                           1,749,719              1,022,156
                                                                             ------------           ------------
        Net income                                                           $  2,523,541           $  1,055,407
                                                                             ============           ============
</TABLE>

<TABLE>
<CAPTION>
PARENT COMPANY ONLY CONDENSED STATEMENTS OF CASH FLOWS                           2002                 2001
------------------------------------------------------                       ------------          ------------
<S>                                                                          <C>                   <C>
  Operating activities:
    Net income                                                               $  2,523,541           $  1,055,407
    Adjustments to reconcile net income to net
      cash provided by operating activities:
      Undistributed equity earnings of bank subsidiary                         (1,749,719)            (1,022,156)
      Taxes receivable                                                             (4,700)
                                                                             ------------           ------------
        Net cash provided by operating activities                                 769,122                 33,251
                                                                             ------------           ------------

  Financing activities:
    Cash dividends paid                                                          (783,440)                    --
    Proceeds from exercise of stock options                                       192,183                  3,687
    Cash in lieu of fractional shares on stock dividend                            (8,992)                (8,909)
                                                                             ------------           ------------
        Net cash used by financing activities                                    (600,249)                (5,222)
                                                                             ------------           ------------

  Net increase in cash and cash equivalents                                       168,873                 28,029

  Cash and cash equivalents at beginning of year                                   28,029                     --
                                                                             ------------           ------------

  Cash and cash equivalents at end of year                                   $    196,902           $     28,029
                                                                             ============           ============

</TABLE>


38
<PAGE>

                                           CORPORATE AND SHAREHOLDER INFORMATION
                                    GREER BANCSHARES INCORPORATED AND SUBSIDIARY

Corporate Offices

Greer State Bank
1111 West Poinsett Street
PO Box 1029
Greer, South Carolina 29652
864-877-2000

Banking Locations

1111 West Poinsett Street
PO Box 1029
Greer, South Carolina 29652
864-877-2000

North Main Street Office
601 North Main Street
Greer, South Carolina 29650
864-848-5103

Buncombe Road Office
871 S. Buncombe Rd.
Greer, South Carolina 29650
864-848-2563

Company Website

www.greerstatebank.com

Independent Auditors

Crisp Hughes Evans, LLP
Asheville, North Carolina

Stock Transfer Agent and Registrar

Request for stock transfers, address changes, or corrections should be sent in
writing to:

Shareholder Relations
Greer State Bank
PO Box 1029
Greer, SC 29652-1029

Form 10-K and Other Information

The approximate number of record shareholders as of December 31, 2002 was 757.
Copies of Greer Bancshares Incorporated's Annual Report to the United States
Securities and Exchange Commission, Form 10-K, and other information may be
obtained by submitting a written request to:

   MR. J. RICHARD MEDLOCK, JR.
   SENIOR VICE PRESIDENT & CHIEF FINANCIAL OFFICER
   GREER BANCSHARES INCORPORATED
   PO BOX 1029
   GREER, SOUTH CAROLINA 29652-1029


   [FDIC  LOGO]


                                                                              39
<PAGE>



                            [GREER STATE BANK LOGO]



                                     [PHOTO]