##### Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-K



x  Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the fiscal year ended December 31, 2004

OR

 ̈Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                  to



Commission File Number: 000-33021



GREER BANCSHARES INCORPORATED

(Exact name of registrant as specified in its charter)



|                                                              |  |                                     
|------------------------------------------------------------- |  | ------------------------------------
|South Carolina                                                |  | 57-1126200                          
|(State or other jurisdiction ofincorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                               |  |           
|---------------------------------------------- |  | ----------
|1111 W. Poinsett Street, Greer, South Carolina |  | 29650     
|(Address of Principal Executive Offices)       |  | (Zip Code)



Registrants
telephone number, including area code: (864) 877-2000



Securities registered pursuant to Section 12(b) of the Act:



|                    |  |  |  |                                          
|------------------- |  |  |  | -----------------------------------------
|Title of each class |  |  |  | Name of each exchange on which registered
|None                |  |  |  | None                                     



Securities registered
pursuant to Section 12 (g) of the Act:



| |  |                                         |  | 
| |  | --------------------------------------- |  | 
| |  | Common Stock, Par Value $5.00 per share |  | 
| |  | (Title of class)                        |  | 



Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.



Yes   x            No ̈



Indicate by check if the
disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

Yes ̈No  x



The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant (1,996,085 shares) as of March 22, 2005 was approximately
$34,931,488. For the purpose of this response, officers, directors and holders of 5% or more of the registrants common stock are considered affiliates of the Registrant at that date.



The number of shares outstanding of the registrants Common Stock as of March 23, 2005
was 2,434,127 shares of $5.00 par value common stock.



DOCUMENTS INCORPORATED BY REFERENCE



The Companys Annual
Report to Shareholders and its attachment for the year ended December 31, 2004 is incorporated by reference in this Form 10-K in Part II, Items 5 through 8. The Companys Proxy Statement for the Annual Meeting of Shareholders to be held on
April 28, 2005 is incorporated by reference in this Form 10-K in Part III, Items 10 through 14.



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TABLE OF CONTENTS



|         |  |                                                                                                              |  |   
|-------- |  | ------------------------------------------------------------------------------------------------------------ |  | --
|Part I   |  | Page                                                                                                        
|1.       |  | Description of Business                                                                                      |  | 3 
|2.       |  | Description of Property                                                                                      |  | 14
|3.       |  | Legal Proceedings                                                                                            |  | 15
|4.       |  | Submission of Matters to a Vote of Security Holders                                                          |  | 15
|         |  |                                                                                                             
|Part II  |  |                                                                                                              |  |   
|5.       |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 15
|6.       |  | Selected Financial Data                                                                                      |  | 15
|7.       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 16
|7A.      |  | Quantitative and Qualitative Disclosures about Market Risk                                                   |  | 16
|8.       |  | Financial Statements and Supplementary Data                                                                  |  | 16
|9.       |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosures                        |  | 16
|9A.      |  | Controls and Procedures                                                                                      |  | 16
|9B.      |  | Other Information                                                                                            |  | 16
|         |  |                                                                                                             
|Part III |  |                                                                                                              |  |   
|10.      |  | Directors and Executive Officers of the Registrant                                                           |  | 17
|11.      |  | Executive Compensation                                                                                       |  | 17
|12.      |  | Security Ownership of Certain Beneficial Owners and Management                                               |  | 17
|13.      |  | Certain Relationships and Related Transactions                                                               |  | 17
|14.      |  | Principal Accounting Fees and Services                                                                       |  | 17
|         |  |                                                                                                             
|Part IV  |  |                                                                                                              |  |   
|15.      |  | Exhibits and Financial Statement Schedules                                                                   |  | 18



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PART I



|Item 1. | Description of Business
|------- | -----------------------



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 our primary service area, becoming less favorable than expected resulting in, among other things, a deterioration in credit quality; changes occurring in business conditions and
inflation; changes in technology; changes in monetary and tax policies; 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.



General



Greer Bancshares Incorporated was formed in July 2001 as a one-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 only current activity of the holding company is to hold its investment in its banking subsidiary. It does not anticipate being traded on any
exchange. The common stock of Greer Bancshares Incorporated is traded in the over-the-counter market and quoted on the OTC Bulletin Board (symbol: GRBS). The Bank operates under a state charter and provides full banking services to its clients. The
Bank is subject to regulation by the Federal Deposit Insurance Corporation and the South Carolina Board of Financial Institutions.



The Bank has been engaged in the commercial banking business since its inception in January 1989 and has three banking offices located in Greer, South Carolina. The
Company is headquartered at 1111 W. Poinsett Street, Greer, South Carolina 29650. The Banks first branch office was opened in 1992 in an existing bank building that was purchased and renovated to be used as a branch office and operations
center, and is located at 601 North Main Street, Greer, South Carolina 29650. The third branch office was built and opened in November 1998 and is located at 871 South Buncombe Road, Greer, South Carolina 29650. As of December 31, 2004, the Bank had
entered into a contract for the construction of a branch office at 3317 Wade Hampton Boulevard in Taylors, SC 29687.



In 1997, the Bank began an alternative investments function with the formation of Greer Financial Services Corporation (GFSC), which allows customers who want
to earn a higher rate of return on their money to invest in mutual funds, stock, annuities, and similar securities. GFSC is a wholly-owned subsidiary of the Bank. GFSC offers securities exclusively through Raymond James Financial Services, Inc., a
registered broker-dealer.



Trust, international, or correspondent banking
services are not currently offered by the Company, nor contemplated at this time.



Location and Service Area



The Companys banking
subsidiary was organized for the primary purpose of serving local banking needs in Greer and in the small surrounding communities and has been primarily engaged in the business of



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attracting deposits from the general public and using the deposits to make commercial, consumer, and mortgage loans. In addition, deposits are also used to
invest in acceptable investment securities as defined by Bank policy.



Greer is
located approximately 13 miles east of Greenville, South Carolina and approximately 15 miles west of Spartanburg, South Carolina and has borders in both Greenville and Spartanburg counties of South Carolina. The population of Greer was 16,843
according to 2000 census data, which was an increase of 63.2% since the 1990 census.



Deposits



The Company offers a full range of banking services
through its subsidiary, including checking, savings, brokered deposits and other time deposits of various types, loans for business, real estate, personal use, home improvements, automobiles, and a variety of other types of loans and services. In
addition, drive-up, safe deposit, and night depository facilities are offered. The Bank solicits deposit accounts from individuals, businesses, associations and organizations and governmental authorities.



Lending Activities



GeneralThe Bank makes and services both secured and unsecured loans to individuals and businesses in its market area. The Bank
strives for a balanced mix of consumer lending, commercial lending to small and medium-sized businesses, and mortgage lending, both consumer and commercial. The Banks portfolio consists of commercial, commercial real estate, real estate
construction, residential mortgage, consumer installment loans, other consumer loans, as well as a small amount in lease financing and obligations of state and political subdivisions. The lease financing is loans made to finance the leasing of
equipment, and the obligations of state and political subdivisions consists of loans made to a municipality.



The Bank strives to diversify its loan portfolio and limit loan concentrations to any borrower or industry. Management has placed emphasis on the collateralization of loans with value-retaining assets. As of December
31, 2004, 95% of the Banks loan portfolio is secured and 70% of the total loan portfolio is secured by real estate.



Commercial LoansThe commercial portion of the portfolio is diversified and includes loans secured by non-real estate collateral to various types of small to
mid-sized businesses. The emphasis is on businesses with financial stability and local, well-known management located in Greer and the surrounding communities. Collateral for commercial loans includes, but is not limited to, inventory, equipment,
vehicles, and accounts receivable. Commercial loans generally have more risk than other types of loans made by the Bank since there are more factors that can cause a default. The Bank must evaluate the quality of a companys management,
capitalization, and competition, as well as its profitability. The Bank manages the risk by dealing with locally-owned and managed businesses and by often requiring personal guarantees and collateral from owners and/or officers.



Commercial Real Estate LoansThe commercial real estate loan portfolio consists
largely of mortgage loans secured by commercial properties located in the communities served by the Bank. A significant portion of these loans were made to fund the acquisition of real estate and/or buildings for commercial, industrial, office and
retail use. Generally, the maximum loan-to-value ratio applicable to improved commercial properties is 85%. The real estate construction portion of the loan portfolio consists primarily of loans made to finance the on-site construction of 1-4 family
residences, commercial properties, and medical or business offices. The maximum loan-to-value ratio applicable to commercial and 1-4 family residential construction loans is 85%. There is not as much risk associated with commercial real estate as
with other commercial loans, but more risk than 1-to-4 family residential mortgages. The Bank deals primarily with owner-occupied businesses, rather than speculative lease space. Limiting the loan-to-value ratio is another way the risk is managed.



Residential Real Estate LoansThe 1-to-4 family residential real
estate portfolio is predominantly comprised of loans extended for owner-occupied residential properties. These loans are typically secured



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by first mortgages on the properties financed, and generally do not exceed fifteen years. These loans generally have a maximum loan-to-value ratio of 85% and
the majority has a fixed rate of interest. The Bank is currently not booking fixed rate residential mortgages in-house, but is originating them (collecting an origination fee) and placing them with an investor. The 1-to-4 family residential real
estate category includes home equity lines of credit which have an interest rate indexed to the prime lending rate. Home equity lines generally have a maximum loan-to-value ratio of 89.9%. The loan-to-value ratios on mortgages minimize the risk on
these loans.



Consumer LoansThe consumer loan portfolio consists
of both secured and unsecured loans to individuals for household, family, and other personal expenditures such as automobile financing, home improvements, and recreational and educational purposes. Consumer loans are typically structured with fixed
rates of interest and full amortization on principal and interest within three to five years. The maximum loan-to-value ratio applicable to consumer loans is generally 85%. This category of loans also includes revolving credit products such as
checking overdraft protection. Consumer loans are either unsecured or are secured with various forms of collateral, other than real estate. The Bank minimizes risk by dealing with local customers who have an existing banking relationship. Bank
policy prohibits unsecured debt consolidation loans.



Loan Risk
ManagementThe Bank has procedures and controls in place designed to analyze potential risks and to support the growth of a profitable and high quality loan portfolio. A loan rating system is used by the Bank to monitor the loan portfolio
and to determine the adequacy of the allowance for loan losses. The Bank invests in loans in Greer and the surrounding communities, and this allows for easier monitoring of credit risks. The majority of the loan portfolio consists of loans to
consumers and loans to small and mid-sized businesses. As of December 31, 2004, approximately 95% of the portfolio is secured. A bank consulting firm is employed to perform a periodic review of selected credits to identify heightened risks and
monitor collateral position. Some of the factors that could contribute to increased risk in the loan portfolio are changes in economic conditions in the Banks market area, changes in interest rates, and reduced collateral values. There are no
loans to foreign countries in the loan portfolio. As of December 31, 2004, the legal lending limit amount for the Bank to lend to any one borrower was approximately $3,971,000.



Other Banking Services



Other banking services provided include travelers checks, safe deposit boxes, direct deposit of payroll and social security checks, as well as automatic drafts for
various accounts. Automated Teller Machine (ATM) services are provided by STAR ATM Network, which allows access through ATMs nationwide. The Bank has two drive-up ATMs, located at its offices at 1111 W. Poinsett Street and 871 S. Buncombe Road. The
Bank offers Mastercard and Visa credit cards to qualifying customers through a correspondent bank and has an automated telephone banking system (TELEBANKER). The TELEBANKER system allows the Banks customers to access information concerning
their accounts, transfer funds, and make payments by telephone.



The Bank also
offers an internet online banking service. Its website is www.greerstatebank.com and the Bank believes that the website is attractive, functional and user friendly. Bank customers who have authorized access to the Banks website have the
capability to make account inquiries, view account histories, transfer funds from one account to the other, make payments on outstanding loans and retrieve check images. Cash management services through online banking will be offered in the near
future. The Bank also offers bill payment services through its website which allows the Banks customers to pay their bills online.



Competition



The Bank competes with several major banks which dominate the commercial banking industry in their service areas and in South Carolina. In addition, the Bank competes with other community banks, savings institutions
and credit unions. In Greer, there are twelve competitor banks (none of which are headquartered in Greer) with fifteen total offices, one savings institution branch (headquartered in Greer), and one credit union branch (headquartered in nearby
Greenville, South Carolina). As of June 30, 2004 the Bank held approximately 23.4% of the FDIC insured deposits in the Greer market.



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Employees



As of December 31, 2004, the Bank employed 75 employees, 60 of whom are full-time. The Company does not have any employees other than its officers.



SUPERVISION AND REGULATION



Both the Company and the Bank are subject to extensive state and federal banking laws and
regulations, which impose specific requirements or restrictions on and provide for general regulatory oversight of virtually all aspects of operations. These laws and regulations are generally intended to protect depositors, not shareholders. The
following summary is qualified by reference to the statutory and regulatory provisions discussed. Changes in applicable laws or regulations may have a material effect on our business and prospects. Beginning with the enactment of the Financial
Institution Report Recovery and Enforcement Act in 1989 and following with the FDIC Improvement Act in 1991 and the Gramm-Leach-Bliley Act in 1999, numerous additional regulatory requirements have been placed on the banking industry in the past
several years, and additional changes have been proposed. Our operations may be affected by legislative changes and the policies of various regulatory authorities. We cannot predict the effect that fiscal or monetary policies, economic control, or
new federal or state legislation may have on our business and earnings in the future.



The following discussion is not intended to be a complete list of all the activities regulated by the banking laws or of the impact of such laws and regulations on our operations. It is intended only to briefly summarize some material
provisions.



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 D.C. 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 of all kinds 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.



Check 21



On October 28, 2003, President Bush signed into law the Check Clearing for the 21st Century
Act, also known as Check 21. The new law, which was effective October 28, 2004, gives substitute checks, such as a digital image of a check and copies made from that image, the same legal standing as the original paper check. Some of the
major provisions include:



| |  |  | Allows check truncation without making it mandatory;
| | - |  | ----------------------------------------------------



| |  |  | Demands that every financial institution communicate to accountholders in writing a description of its substitute check processing program and their rights under the law;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Legalizes substitutions for and replacements of paper checks without agreement from consumers;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | Keeps in place the previously mandated electronic collection and return of checks between financial institutions only when individual agreements are in place;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cautions that when accountholders request verification, financial institutions must produce the original check (or a copy that accurately represents the original) and
demonstrate that the account debit was accurate and valid; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Requires recrediting of funds to an individuals account on the next business day after a consumer proves the financial institution has erred.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



This new legislation will likely have a dramatic impact on bank capital spending as many
financial institutions assess whether technological or operational changes are necessary to stay competitive and take advantage of the new opportunities presented by

Check 21.



Greer Bancshares Incorporated



Because it owns the outstanding capital stock of the Bank, the Company is a
bank holding company under the federal Bank Holding Company Act of 1956 and the South Carolina Banking and Branching Efficiency Act.



The Bank Holding Company Act. Under the Bank Holding Company Act, the Company is subject to periodic examination by the Federal Reserve and is required to file periodic
reports of its operations and any additional information that the Federal Reserve may require. Our activities at the bank holding company level are limited to:



| |  |  | banking and managing or controlling banks;
| | - |  | ------------------------------------------



| |  |  | furnishing services to or performing services for its subsidiaries; and
| | - |  | -----------------------------------------------------------------------



| |  |  | engaging in other activities that the Federal Reserve determines to be so closely related to banking and managing or controlling banks as to be a proper incident thereto.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Investments, Control, and Activities. With certain limited
exceptions, the Bank Holding Company Act requires every bank holding company to obtain the prior approval of the Federal Reserve before:



| |  |  | acquiring substantially all the assets of any bank;
| | - |  | ---------------------------------------------------



| |  |  | acquiring direct or indirect ownership or control of any voting shares of any bank if after the acquisition it would own or control more than 5% of the voting shares of such bank
(unless it already owns or controls the majority of such shares); or
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | merging or consolidating with another bank holding company.
| | - |  | -----------------------------------------------------------



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In addition, and subject to certain exceptions, the Bank Holding Company Act and the Change in Bank Control Act, together
with regulations thereunder, require Federal Reserve approval prior to any person or company acquiring control of a bank holding company. Control is conclusively presumed to exist if an individual or company acquires 25% or more of any
class of voting securities of a bank holding company. Control is rebuttably presumed to exist if a person acquires 10% or more, but less than 25%, of any class of voting securities and either the company has registered securities under Section 12 of
the Securities Exchange Act of 1934 or no other person owns a greater percentage of that class of voting securities immediately after the transaction. The companys common stock is registered under the Securities Exchange Act of 1934. The
regulations provide a procedure for challenge of the rebuttable control presumption.



Under the Bank Holding Company Act, a bank holding company is generally prohibited from engaging in, or acquiring direct or indirect control of more than 5% of the voting shares of any company engaged in nonbanking activities unless the
Federal Reserve Board, by order or regulation, has found those activities to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. Some of the activities that the Federal Reserve Board has determined
by regulation to be proper incidents to the business of a bank holding company include:



| |  |  | making or servicing loans and certain types of leases;
| | - |  | ------------------------------------------------------



| |  |  | engaging in certain insurance and discount brokerage activities;
| | - |  | ----------------------------------------------------------------



| |  |  | performing certain data processing services;
| | - |  | --------------------------------------------



| |  |  | acting in certain circumstances as a fiduciary or investment or financial adviser;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | owning savings associations; and
| | - |  | --------------------------------



| |  |  | making investments in certain corporations or projects designed primarily to promote community welfare.
| | - |  | -------------------------------------------------------------------------------------------------------



The Federal Reserve Board imposes certain capital requirements on the Company under the Bank Holding Company Act, including a minimum
leverage ratio and a minimum ratio of qualifying capital to risk-weighted assets. These requirements are described below under Capital Regulations. Subject to its capital requirements and certain other restrictions, the
Company is able to borrow money to make a capital contribution to the Bank, and these loans may be repaid from dividends paid from the Bank to the Company. Our ability to pay dividends is subject to regulatory restrictions as described below in
Greer State BankDividends. The Company is also able to raise capital for contribution to the Bank by issuing securities without having to receive regulatory approval, subject to compliance with federal and state securities laws.



Source of Strength; Cross-Guarantee.    In
accordance with Federal Reserve Board policy, the Company is expected to act as a source of financial strength to the Bank and to commit resources to support the Bank in circumstances in which the Company might not otherwise do so. Under the Bank
Holding Company Act, the Federal Reserve Board may require a bank holding company to terminate any activity or relinquish control of a nonbank subsidiary, other than a nonbank subsidiary of a bank, upon the Federal Reserve Boards determination
that such activity or control constitutes a serious risk to the financial soundness or stability of any subsidiary depository institution of the banks holding company. Further, federal bank regulatory authorities have additional discretion to
require a bank holding company to divest itself of any bank or nonbank subsidiary if the agency determines that divestiture may aid the depository institutions financial condition.



The Gramm-Leach-Bliley Act.    The Gramm-Leach-Bliley Act, previously known as the Financial Services
Modernization Act of 1999, was signed into law on November 12, 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 permits bank
holding companies that become financial holding companies to engage in a statutorily provided list of financial activities, including insurance and securities underwriting and agency activities, merchant banking, and insurance company portfolio
investment activities. The Act also authorizes activities that are complementary to financial activities.



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The Act is intended, in part, 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 we face 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 us.



South Carolina State
Regulation.    As a bank holding company registered under the South Carolina Banking and Branching Efficiency Act, we are subject to limitations on sale or merger and to regulation by the South Carolina Board of Financial
Institutions. We must receive the Boards approval prior to engaging in the acquisition of banking or nonbanking institutions or assets, and we must file periodic reports with respect to our financial condition and operations, management, and
intercompany relationships between the Company and its subsidiaries.



Greer
State Bank



The Bank operates as a South Carolina state chartered bank and
is subject to examination by the South Carolina Board of Financial Institutions. Deposits in the bank are insured by the FDIC up to a maximum amount, which is generally $100,000 per depositor subject to aggregation rules.



The South Carolina Board of Financial Institutions and the FDIC regulate or monitor virtually
all areas of the banks operations, including:



| |  |  | security devices and procedures;
| | - |  | --------------------------------



| |  |  | adequacy of capitalization and loss reserves;
| | - |  | ---------------------------------------------



| |  |  | loans;
| | - |  | ------



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



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



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



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



| |  |  | issuances of securities;
| | - |  | ------------------------



| |  |  | payment of dividends;
| | - |  | ---------------------



| |  |  | interest rates payable on deposits;
| | - |  | -----------------------------------



| |  |  | interest rates or fees chargeable on loans;
| | - |  | -------------------------------------------



| |  |  | establishment of branches;
| | - |  | --------------------------



| |  |  | corporate reorganizations;
| | - |  | --------------------------



| |  |  | maintenance of books and records; and
| | - |  | -------------------------------------



| |  |  | adequacy of staff training to carry on safe lending and deposit gathering practices.
| | - |  | ------------------------------------------------------------------------------------



The South Carolina Board of Financial Institutions requires the Bank to maintain specified capital ratios and imposes limitations on the
Banks aggregate investment in real estate, bank premises, and furniture and fixtures. The FDIC requires the Bank to prepare quarterly reports on the Banks financial condition and to conduct an annual audit of its financial affairs in
compliance with its minimum standards and procedures.



Under the FDIC
Improvement Act, all insured institutions must undergo regular on-site examinations by their appropriate banking agency. The cost of examinations of insured depository institutions and any affiliates may be assessed by the appropriate agency against
each institution or affiliate as it deems necessary or appropriate. Insured institutions are required to submit annual reports to the FDIC, their federal regulatory agency, and their state supervisor when applicable. The FDIC Improvement Act directs
the FDIC to develop a method for insured depository institutions to provide supplemental disclosure of the estimated fair market value of assets and liabilities, to the extent feasible and practicable, in any balance sheet, financial statement,
report of condition or any other report of any insured depository institution. The FDIC Improvement Act also requires the federal banking regulatory agencies to prescribe, by regulation, standards for all insured depository institutions and
depository institution holding companies relating, among other things, to the following:



| |  |  | internal controls;
| | - |  | ------------------



| |  |  | information systems and audit systems;
| | - |  | --------------------------------------



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| |  |  | loan documentation;
| | - |  | -------------------



| |  |  | credit underwriting;
| | - |  | --------------------



| |  |  | interest rate risk exposure; and
| | - |  | --------------------------------



| |  |  | asset quality.
| | - |  | --------------



Holding companies which have been registered or have undergone a change in control within the past two years or which have been deemed by the Federal Reserve Board to be troubled institutions must give the Federal
Reserve Board 30 days prior notice of the appointment of any senior executive officer or director. Within the 30 day period, the Federal Reserve Board, as the case may be, may approve or disapprove any such appointment.



Deposit Insurance.    The FDIC has adopted a risk-based assessment
system for determining an insured depository institutions insurance assessment rate. The system takes into account the risks attributable to different categories and concentrations of assets and liabilities. An institution is placed into one
of three capital categories: (1) well capitalized; (2) adequately capitalized; or (3) undercapitalized. The FDIC also assigns an institution to one of three supervisory subgroups, based on the FDICs determination of the institutions
financial condition and the risk posed to the deposit insurance funds. Assessments range from 0 to 27 cents per $100 of deposits, depending on the institutions capital group and supervisory subgroup. In addition, the FDIC imposes assessments
to help pay off the $780 million in annual interest payments on the $8 billion Financing Corporation (FICO) bonds issued in the late 1980s as part of the government rescue of the thrift industry. New changes have been proposed recently regarding
these assessments, including an increase in the amount of the FDIC insurance, but at this time it is not possible to predict whether the changes will be implemented or what their effect would be. Generally, we expect that increases in deposit
insurance premiums or changes in risk classification will increase the banks cost of funds, and we may not be able to pass these costs on to our customers. Although we pay a quarterly FICO assessment, the FDIC assessment rate on our bank
deposits currently is zero, but may change in the future. The FDIC may increase or decrease the assessment rate schedule on a semiannual basis. An increase in the BIF assessment rate could have a material adverse effect on our earnings, depending on
the amount of the increase.



The FDIC may terminate its insurance of deposits
if it finds that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC.



Transactions With Affiliates and Insiders.    The Bank is subject
to the provisions of Section 23A of the Federal Reserve Act, which places limits on the amount of loans or extensions of credit to, or investments in, or certain other transactions with, affiliates and on the amount of advances to third parties
collateralized by the securities or obligations of affiliates. The aggregate of all covered transactions is limited in amount, as to any one affiliate, to 10% of the Banks capital and surplus and, as to all affiliates combined, to 20% of the
Banks capital and surplus. Furthermore, within the foregoing limitations as to amount, each covered transaction must meet specified collateral requirements. Compliance is also required with certain provisions designed to avoid the taking of
low quality assets.



The Bank is also subject to the provisions of Section 23B
of the Federal Reserve Act which, among other things, prohibits an institution from engaging in certain transactions with certain affiliates unless the transactions are on terms substantially the same, or at least as favorable to such institution or
its subsidiaries, as those prevailing at the time for comparable transactions with nonaffiliated companies. The Bank is subject to certain restrictions on extensions of credit to executive officers, directors, certain principal shareholders, and
their related interests. Such extensions of credit (i) must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties and (ii) must not involve
more than the normal risk of repayment or present other unfavorable features.



The Federal Reserve Board issued Regulation W, which codifies prior regulations under Sections 23A and 23B of the Federal Reserve Act and interpretative guidance with respect to affiliate transactions. Regulation W incorporates the
exemption from the affiliate transaction rules but expands the exemption to cover the purchase of any type of loan or extension of credit from an affiliate. In addition, under Regulation W:



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| |  |  | a bank and its subsidiaries may not purchase a low-quality asset from an affiliate;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | covered transactions and other specified transactions between a bank or its subsidiaries and an affiliate must be on terms and conditions that are consistent with safe and sound
banking practices; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | with some exceptions, each loan or extension of credit by a bank to an affiliate must be secured by collateral with a market value ranging from 100% to 130%, depending on the type
of collateral, of the amount of the loan or extension of credit.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Regulation W generally excludes all non-bank and non-savings association subsidiaries of banks from treatment as affiliates, except to the extent that the Federal Reserve Board decides to treat these subsidiaries as affiliates. Concurrently
with the adoption of Regulation W, the Federal Reserve Board has proposed a regulation which would further limit the amount of loans that could be purchased by a bank from an affiliate to not more than 100% of the banks capital and surplus.
This regulation has not yet been adopted.



Dividends.    The Bank is subject to regulatory restrictions on the payment of dividends, including a prohibition of payment of dividends from its capital. All dividends must be paid out of the undivided profits
then on hand, after deducting expenses, including losses and bad debts. The Bank is authorized to pay cash dividends up to 100% of net income in any calendar year without obtaining the prior approval of the South Carolina Board of Financial
Institutions provided that the Bank received a composite rating of one or two at the last federal or state regulatory examination. The Bank must obtain approval from the South Carolina Board of Financial Institutions prior to the payment of any
other cash dividends. In addition, under the FDIC Improvement Act, the Bank may not pay a dividend if, after paying the dividend, the Bank would be undercapitalized. See Capital Regulations below.



Branching.    Under current South Carolina law, we may open bank
branch offices throughout South Carolina with the prior approval of the South Carolina Board of Financial Institutions. In addition, with prior regulatory approval, the Bank may acquire existing banking operations in South Carolina. Furthermore,
federal legislation permits interstate branching. This law permits out-of-state acquisitions by bank holding companies, interstate branching by banks if allowed by state law, interstate merging by banks, and de novo branching by banks if allowed by
state law.



Community Reinvestment Act.    The
Community Reinvestment Act requires that, in connection with examinations of financial institutions within their respective jurisdictions, a financial institutions primary federal regulator (this is the FDIC for our bank) shall evaluate the
record of each financial institution in meeting the credit needs of its local community, including low and moderate income neighborhoods. These factors are also considered in evaluating mergers, acquisitions, and applications to open a branch or
facility. Failure to adequately meet these criteria could impose additional requirements and limitations on the bank. Under the Gramm-Leach-Bliley Act, banks with aggregate assets of not more than $250 million will be subject to a Community
Reinvestment Act examination only once every 60 months if the bank receives an outstanding rating, once every 48 months if it receives a satisfactory rating, and as needed if the rating is less than satisfactory. Additionally, under the
Gramm-Leach-Bliley Act, banks are required to publicly disclose the terms of various Community Reinvestment Act-related agreements.



The Gramm-Leach-Bliley Act.    Under the Gramm-Leach-Bliley Act, subject to certain conditions imposed by their respective banking regulators,
national and state-chartered banks are permitted to form financial subsidiaries that may conduct financial or incidental activities, thereby permitting bank subsidiaries to engage in certain activities that previously were impermissible.
The Gramm-Leach-Bliley Act imposes several safeguards and restrictions on financial subsidiaries, including that the parent banks equity investment in the financial subsidiary be deducted from the banks assets and tangible equity for
purposes of calculating the banks capital adequacy. In addition, the Gramm-Leach-Bliley Act imposes new restrictions on transactions between a bank and its financial subsidiaries similar to restrictions applicable to transactions between banks
and nonbank affiliates.



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The Gramm-Leach-Bliley Act also contains provisions regarding consumer privacy. These provisions require financial
institutions to disclose their policy for collecting and protecting confidential information. Customers generally may prevent financial institutions from sharing personal financial information with nonaffiliated third parties except for third
parties that market an institutions own products and services. Additionally, financial institutions generally may not disclose consumer account numbers to any nonaffiliated third party for use in telemarketing, direct mail marketing, or other
marketing to the consumer.



Other
Regulations.    Interest and other charges collected or contracted for by the Bank are subject to state usury laws and federal laws concerning interest rates. The Banks loan operations are also subject to federal laws
applicable to credit transactions, such as:



| |  |  | the federal Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | the Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial
institution is fulfilling its obligation to help meet the housing needs of the community it serves;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | the Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | the rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



The deposit operations of the Bank also are subject to:



| |  |  | the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative
subpoenas of financial records; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve Board to implement that act, which governs automatic deposits to and withdrawals from deposit
accounts and customers rights and liabilities arising from the use of automated teller machines and other electronic banking services.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Capital Regulations.    The federal bank regulatory authorities have adopted risk-based capital guidelines for banks and bank holding companies
that are designed to make regulatory capital requirements more sensitive to differences in risk profiles among banks and bank holding companies and account for off-balance sheet items. The guidelines are minimums, and the federal regulators have
noted that banks and bank holding companies contemplating significant expansion programs should not allow expansion to diminish their capital ratios and should maintain ratios in excess of the minimums. We have not received any notice indicating
that either the company or the bank is subject to higher capital requirements. The current guidelines require all bank holding companies and federally-regulated banks to maintain a minimum risk-based total capital ratio equal to 8%, of which at
least 4% must be Tier 1 capital. Tier 1 capital includes common shareholders equity, qualifying perpetual preferred stock, and minority interests in equity accounts of consolidated subsidiaries, but excludes goodwill and most other intangibles
and excludes the allowance for loan and lease losses. Tier 2 capital includes the excess of any preferred stock not included in Tier 1 capital, mandatory convertible securities, hybrid capital instruments, subordinated debt and intermediate
term-preferred stock, and general reserves for loan and lease losses up to 1.25% of risk-weighted assets.



Under these guidelines, banks and bank holding companies assets are given risk-weights of 0%, 20%, 50%, or 100%. In addition, certain off-balance sheet items are given credit conversion factors to convert
them to asset equivalent amounts to which an appropriate risk-weight applies. These computations result in the total risk-weighted assets. Most loans are assigned to the 100% risk category, except for first mortgage loans fully secured by
residential property and, under certain circumstances, residential construction loans, both of which carry a 50% rating. Most investment securities are assigned to the 20% category, except for municipal or state revenue bonds, which have a 50%
rating, and direct obligations of or obligations guaranteed by the United States Treasury or United States Government agencies, which have a 0% rating.



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The federal bank regulatory authorities have also implemented a leverage ratio, which is equal to Tier 1 capital as a
percentage of average total assets less intangibles, to be used as a supplement to the risk-based guidelines. The principal objective of the leverage ratio is to place a constraint on the maximum degree to which a bank holding company may leverage
its equity capital base. The minimum required leverage ratio for top-rated institutions is 3%, but most institutions are required to maintain an additional cushion of at least 100 to 200 basis points.



The FDIC Improvement Act established a new capital-based regulatory scheme designed to
promote early intervention for troubled banks which requires the FDIC to choose the least expensive resolution of bank failures. The new capital-based regulatory framework contains five categories of compliance with regulatory capital requirements,
including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. To qualify as a well capitalized
institution, a bank must have a leverage ratio of no less than 5%, a Tier 1 risk-based ratio of no less than 6%, and a total risk-based capital ratio of no less than 10%, and the bank must not be under any order or directive from the appropriate
regulatory agency to meet and maintain a specific capital level. Greer State Bank qualifies as well capitalized.



Under the FDIC Improvement Act regulations, the applicable agency can treat an institution as if it were in the next lower category if the agency determines (after notice
and an opportunity for hearing) that the institution is in an unsafe or unsound condition or is engaging in an unsafe or unsound practice. The degree of regulatory scrutiny of a financial institution increases, and the permissible activities of the
institution decreases, as it moves downward through the capital categories. Institutions that fall into one of the three undercapitalized categories may be required to do some or all of the following:



| |  |  | submit a capital restoration plan;
| | - |  | ----------------------------------



| |  |  | raise additional capital;
| | - |  | -------------------------



| |  |  | restrict their growth, deposit interest rates, and other activities;
| | - |  | --------------------------------------------------------------------



| |  |  | improve their management;
| | - |  | -------------------------



| |  |  | eliminate management fees; or
| | - |  | -----------------------------



| |  |  | divest themselves of all or a part of their operations.
| | - |  | -------------------------------------------------------



A bank that is not well capitalized is also subject to certain limitations relating to so-called brokered deposits. Bank holding companies
controlling financial institutions can be called upon to boost the institutions capital and to partially guarantee the institutions performance under their capital restoration plans.



These capital guidelines can affect us in several ways. If we grow at a rapid pace, our
capital may be depleted too quickly, and a capital infusion from the holding company may be necessary which could impact our ability to pay dividends. Our capital levels currently are adequate; however, rapid growth, poor loan portfolio performance,
poor earnings performance, or a combination of these factors could change our capital position in a relatively short period of time.



Failure to meet these capital requirements would mean that a bank would be required to develop and file a plan with its primary federal banking regulator describing the
means and a schedule for achieving the minimum capital requirements. In addition, such a bank would generally not receive regulatory approval of any application that requires the consideration of capital adequacy, such as a branch or merger
application, unless the bank could demonstrate a reasonable plan to meet the capital requirement within a reasonable period of time.



Enforcement Powers.    The Financial Institution Report Recovery and Enforcement Act expanded and increased civil and criminal penalties
available for use by the federal regulatory agencies against depository institutions and certain institution-affiliated parties. Institution-affiliated parties primarily include management, employees, and agents of a financial
institution, as well as independent contractors and consultants such as attorneys and accountants and others who participate in the conduct of the financial



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##### Table of Contents

institutions affairs. These practices can include the failure of an institution to timely file required reports or the filing of false or misleading
information or the submission of inaccurate reports. Civil penalties may be as high as $1,000,000 a day for such violations. Criminal penalties for some financial institution crimes have been increased to 20 years. In addition, regulators are
provided with greater flexibility to commence enforcement actions against institutions and institution-affiliated parties. Possible enforcement actions include the termination of deposit insurance. Furthermore, banking agencies power to issue
cease-and-desist orders were expanded. Such orders may, among other things, require affirmative action to correct any harm resulting from a violation or practice, including restitution, reimbursement, indemnification or guarantees against loss. A
financial institution may also be ordered to restrict its growth, dispose of certain assets, rescind agreements or contracts, or take other actions as determined by the ordering agency to be appropriate.



Effect of Governmental Monetary Policies.    Our earnings are
affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. The Federal Reserve Banks monetary policies have had, and are likely to continue to have, an important impact on
the operating results of commercial banks through its power to implement national monetary policy in order, among other things, to curb inflation or combat a recession. The monetary policies of the Federal Reserve Board have major effects upon the
levels of bank loans, investments and deposits through its open market operations in United States government securities and through its regulation of the discount rate on borrowings of member banks and the reserve requirements against member bank
deposits. It is not possible to predict the nature or impact of future changes in monetary and fiscal policies.



Proposed Legislation and Regulatory Action.    New regulations and statutes are regularly proposed that contain wide-ranging proposals for
altering the structures, regulations and competitive relationships of the nations financial institutions. We cannot predict whether or in what form any proposed regulation or statute will be adopted or to the extent to which our business may
be affected by any new regulation or statute.



|Item 2. | Description of Property
|------- | -----------------------



As of December 31, 2004 the Bank had three banking facilities. The corporate headquarters and main office is located on a two-acre tract of land at the corner of West
Poinsett Street and Pennsylvania Avenue, in the city limits of Greer. The address is 1111 West Poinsett Street, Greer, South Carolina 29650. The building contains approximately 15,500 square feet. In the present facility, there are four teller
stations, two customer service offices, twelve additional private offices, and three drive-in teller windows located on the first floor. The vault contains 555 safe deposit boxes. The second floor consists of ten private offices, the Board of
Directors room, a storage vault, a training facility, and a large work area which houses eight modular work stations. A large basement was added to be used as a storage area for supplies and other items. The basement contains a locked storage
vault and locked storage room. There are 101 parking spaces on the premises. As of December 31, 2004, bank management was developing plans to renovate the basement area to be used as office space.



The operations functions (including data processing) are located at 601 North Main Street,
Greer, South Carolina 29650, where a branch banking office is also located. The property was obtained from another financial institution in 1992. The banking office consists of two private offices, two customer service stations, four teller
stations, and two drive-in teller windows. The cash vault contains 232 safe deposit boxes. The basement of the North Main Street building is used as the bookkeeping area of the Bank. It consists of 10 modular workstations, two private offices and a
large storage vault. As of the end of 2004, management was evaluating the need to provide for additional space for operations for the future.



On November 2, 1998, the Bank opened a full-service branch banking facility located on 2.27 acres at 871 South Buncombe Road, Greer, South Carolina 29650. The banking
facility consists of three private offices, one customer service desk, three teller stations, two drive-in teller windows, four drive-through lanes, and a drive-up ATM. The cash vault contains 138 safe deposit boxes.



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##### Table of Contents

The Bank plans to open a full-service branch office in the summer of 2005 at 3317 Wade Hampton Boulevard, Taylors, SC
29687. This facility will contain five private offices and will initially be staffed with five tellers, a customer service representative and a loan processor, in addition to the area executive and branch manager. The office will include
drive-through banking, a drive-up ATM and safe deposit boxes.



All buildings
and properties, except the Taylors location, are owned by the Bank without encumbrances. The land and building at the Taylors location will be leased from Greer Bancshares Incorporated.



|Item 3. | Legal Proceedings
|------- | -----------------



Neither the Company nor the Bank is a party to, nor is any of their property the subject of, any material pending legal proceedings incidental to the business of the Company or the Bank.



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



No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.



PART II



|Item 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|------- | ------------------------------------------------------------------------------------------------------------



In response to this Item, the information contained on pages 18 and 19 of the attachment to
the Companys Annual Report to Shareholders for the year ended December 31, 2004 under Stock Information and Dividend History is incorporated herein by reference.



Holders of Company Common Stock



As of December 31, 2004, there were approximately 817 holders of record of our common stock.



Equity Compensation Plan Information



The following table sets forth equity compensation plan information at December 31, 2004.



|                                                           |  |                                                                                              |  |                                                                               |       |                                                                                                                                            |       
|---------------------------------------------------------- |  | -------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------- | ----- | ------------------------------------------------------------------------------------------------------------------------------------------ | ------
|Plan Category                                              |  | Number of securities to be issued upon exercise ofoutstanding
options,warrants and rights(a) |  | Weighted-average exercise price ofoutstanding options,warrants and rights (b) |       | Number of securities remaining available for future issuance under equity compensation plans(excluding securities reflected in column (a))
|Equity Compensation Plans approved by security holders     |  | 102,819                                                                                      |  | $                                                                             | 14.91 |                                                                                                                                            | 98,325
|                                                           |  |                                                                                              | 
|Equity Compensation Plans not approved by security holders |  |                                                                                             |  |                                                                               |      |                                                                                                                                            |      
|                                                           |  |                                                                                              | 
|Total                                                      |  | 102,819                                                                                      |  | $                                                                             | 14.91 |                                                                                                                                            | 98,325



|Item 6. | Selected Financial Data
|------- | -----------------------



In response to this Item, the information contained on pages 2 through 3 of the attachment to the Companys Annual Report to Shareholders for the year ended December
31, 2004 under Selected Financial Statement Data and Description of BusinessRecent Events is incorporated herein by reference.



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|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------



In response to this Item, the information contained on pages 3 through 19 of the attachment to the Companys Annual Report to
Shareholders for the year ended December 31, 2004 is incorporated herein by reference.



|Item 7A. | Quantitative and Qualitative Disclosures about Market Risk
|-------- | ----------------------------------------------------------



In response to this Item, the information contained on pages 8 and 9 of the attachment to the Companys Annual Report to Shareholders for the year ended December 31,
2004 under Interest Rate Sensitivity Analysis is incorporated herein by reference.



|Item 8. | Financial Statements and Supplementary Data
|------- | -------------------------------------------



In response to this Item, the information contained on pages 5 through 27 of the Companys Annual Report to Shareholders for the year ended December 31, 2004 is
incorporated herein by reference.



|Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
|------- | -------------------------------------------------------------------------------------



None



|Item 9A. | Controls and Procedures
|-------- | -----------------------



We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods required by the Securities and Exchange Commission, including, without limitation, those controls and procedures designed to ensure
that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosures.



As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that our current disclosure controls and procedures are effective as of December 31, 2004.



The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions, regardless of how remote.



We also
maintain a system of internal accounting controls that is designed to provide assurance that assets are safeguarded and that transactions are executed in accordance with managements authorization and properly recorded. This system is
continually reviewed and is augmented by written policies and procedures, the careful selection and training of qualified personnel and an internal audit program to monitor its effectiveness. There were no changes in our internal control over
financial reporting identified in connection with the evaluation of it that occurred during our last fiscal quarter that materially affected, or is reasonably likely to materially affect, internal control over financial reporting.



|Item 9B. | Other Information
|-------- | -----------------



In October 2004, the Company issued $6.186 million of junior subordinated debentures to its newly formed, wholly-owned capital trust, Greer Capital Trust I (the Trust), to fully and unconditionally
guarantee the trust preferred securities issued by the Trust. These long term obligations currently qualify as



16



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##### Table of Contents

Tier 1 capital for the Company. The junior subordinated debentures mature in October 2034. Interest payments are due quarterly to the Trust at the
three-month LIBOR plus 220 basis points. In further response to this item, the information contained on page 3 of the Companys Annual Report to Shareholders for the Year ended December 31, 2004 is incorporated herein by reference. In addition,
Note 8 on page 18 of the Companys Consolidated Financial Statements is hereby incorporated by reference.



PART III



|Item 10. | Directors and Executive Officers of the Registrant
|-------- | --------------------------------------------------



In response to this Item, the information contained on pages 4 through 6, pages 10 through 11, page 21, and pages 26 through 28, of the Companys Proxy Statement for
the Annual Meeting of Shareholders to be held on April 28, 2005 is incorporated herein by reference.



We have adopted a Code of Ethics that applies to the Companys Directors and Senior Officers in accordance with the Sarbanes-Oxley Corporate Responsibility Act of 2002 that includes our principal executive
officer and principal financial officer. The Code of Ethics is available without charge to anyone upon written request. Shareholders should contact the Companys Chief Financial Officer at the Company offices to obtain a copy. Our Code of
Ethics is also filed as Exhibit 14 to this report.



|Item 11. | Executive Compensation
|-------- | ----------------------



In response to this Item, the information contained on pages 8 through 10, and pages 12 through 16 of the Companys Proxy Statement for the Annual Meeting of
Shareholders to be held on April 28, 2005 is incorporated herein by reference (except for the information set forth under Board Compensation Committee Report on Executive Compensation).



|Item 12. | Security Ownership of Certain Beneficial Owners and Management
|-------- | --------------------------------------------------------------



In response to this Item, the information contained on pages 19 through 20 of the Companys Proxy Statement for the Annual Meeting of Shareholders to be held on
April 28, 2005 is incorporated herein by reference.



|Item 13. | Certain Relationships and Related Transactions
|-------- | ----------------------------------------------



In response to this Item, the information contained on page 21 of the Companys Proxy Statement for the Annual Meeting of Shareholders to be held on April 28, 2005
is incorporated herein by reference.



|Item 14. | Principal Accounting Fees and Services
|-------- | --------------------------------------



In response to this Item, the information contained on pages 26 through 28 of the Companys Proxy Statement for the Annual Meeting of Shareholders to be held on
April 28, 2005 is incorporated herein by reference (except for the information set forth under Audit Committee Report).



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PART IV



|Item 15. | Exhibits and Financial Statement Schedules
|-------- | ------------------------------------------



(a)(1) Financial Statements filed as part of this report:



The following report of independent auditors and consolidated financial statements of the Company and its subsidiaries are included in Item 8 hereof:



Report of Independent Registered Public
Accounting Firm  Dixon Hughes PLLC

Consolidated Balance Sheets  December 31, 2004 and 2003

Consolidated Statements of Income  Years ended December 31, 2004, 2003 and 2002

Consolidated Statements of Changes in Stockholders Equity  Years ended December 31, 2004, 2003 and 2002

Consolidated Statements of Cash Flows  Years ended 2004, 2003 and 2002

Notes to Consolidated Financial Statements



(2) Financial Statement Schedules



All schedules to the consolidated financial statements required by Article 9 of Regulation S-X and all other schedules to the financial statements of the
Company required by Article 5 of Regulation S-X are not required under the related instructions or are inapplicable and, therefore, have been omitted, or the required information is contained in the Consolidated Financial Statements or the notes
thereto, which are included in Item 8 hereof.



(3) List
of Exhibits



The exhibits filed as part of this report are
listed in the Exhibit Index, which is incorporated into this item by reference.



(b)The Exhibits filed as part of this report are listed in Item 15(a)(3) above.



(c) See Item 15(a)(2).



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##### Table of Contents

SIGNATURES



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



GREER BANCSHARES INCORPORATED



|   |  |                                            |  |  |  |  |  |                     
|-- |  | ------------------------------------------ |  |  |  |  |  | --------------------
|   |  |                                            |  | 
|By |  | /s/    R. Dennis Hennett                   |  |  |  |  |  | Date: March 28, 2005
|   |  | R. Dennis Hennett, Chief
Executive Officer |  |  |  |  |  |                     



KNOW ALL MEN BY THESE PRESENTS, that
each person whose signature appears below constitutes and appoints R. Dennis Hennett, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto attorney-in-fact
and agent full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming
all that attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.



In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates
indicated.



| |  |                                     |  |  |  |  |  |                     
| |  | ----------------------------------- |  |  |  |  |  | --------------------
| |  |                                     |  | 
| |  | /s/    Gary M. Griffin              |  |  |  |  |  | Date: March 24, 2005
| |  | Gary M. Griffin, Director; Chairman |  |  |  |  |  |                     



| |  |                             |  |  |  |  |  |                     
| |  | --------------------------- |  |  |  |  |  | --------------------
| |  |                             |  | 
| |  | /s/    Anthony C. Cannon    |  |  |  |  |  | Date: March 24, 2005
| |  | Anthony C. Cannon, Director |  |  |  |  |  |                     



| |  |                           |  |  |  |  |  |                     
| |  | ------------------------- |  |  |  |  |  | --------------------
| |  |                           |  | 
| |  | /s/    David M. Rogers    |  |  |  |  |  | Date: March 24, 2005
| |  | David M. Rogers, Director |  |  |  |  |  |                     



| |  |                           |  |  |  |  |  |                     
| |  | ------------------------- |  |  |  |  |  | --------------------
| |  |                           |  | 
| |  |                           |  |  |  |  |  | Date: March 24, 2005
| |  | Mark S. Ashmore, Director |  |  |  |  |  |                     



| |  |                           |  |  |  |  |  |                     
| |  | ------------------------- |  |  |  |  |  | --------------------
| |  |                           |  | 
| |  | /s/    Walter M. Burch    |  |  |  |  |  | Date: March 24, 2005
| |  | Walter M. Burch, Director |  |  |  |  |  |                     



| |  |                             |  |  |  |  |  |                     
| |  | --------------------------- |  |  |  |  |  | --------------------
| |  |                             |  | 
| |  | /s/    Kenneth M. Harper    |  |  |  |  |  | Date: March 24, 2005
| |  | Kenneth M. Harper, Director |  |  |  |  |  |                     



| |  |                             |  |  |  |  |  |                     
| |  | --------------------------- |  |  |  |  |  | --------------------
| |  |                             |  | 
| |  | /s/    R. Dennis Hennett    |  |  |  |  |  | Date: March 24, 2005
| |  | R. Dennis Hennett, Director |  |  |  |  |  |                     



| |  |                           |  |  |  |  |  |                     
| |  | ------------------------- |  |  |  |  |  | --------------------
| |  |                           |  | 
| |  | /s/    Harold K. James    |  |  |  |  |  | Date: March 24, 2005
| |  | Harold K. James, Director |  |  |  |  |  |                     



| |  |                          |  |  |  |  |  |                     
| |  | ------------------------ |  |  |  |  |  | --------------------
| |  |                          |  | 
| |  | /s/    Paul D. Lister    |  |  |  |  |  | Date: March 24, 2005
| |  | Paul D. Lister, Director |  |  |  |  |  |                     



| |  |                               |  |  |  |  |  |                     
| |  | ----------------------------- |  |  |  |  |  | --------------------
| |  |                               |  | 
| |  | /s/    Theron C. Smith, III   |  |  |  |  |  | Date: March 24, 2005
| |  | Theron C. Smith III, Director |  |  |  |  |  |                     



| |  |                       |  |  |  |  |  |                     
| |  | --------------------- |  |  |  |  |  | --------------------
| |  |                       |  | 
| |  |                       |  |  |  |  |  | Date: March 24, 2005
| |  | C. Don Wall, Director |  |  |  |  |  |                     



| |  |                                                                               |  |  |  |  |  |                     
| |  | ----------------------------------------------------------------------------- |  |  |  |  |  | --------------------
| |  |                                                                               |  | 
| |  | /s/    J. Richard Medlock, Jr.                                                |  |  |  |  |  | Date: March 24, 2005
| |  | J. Richard Medlock, Jr. Chief
Financial Officer (principal financial officer) |  |  |  |  |  |                     



19



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##### Table of Contents

EXHIBIT INDEX



|     |  |                                                                                                                                                                                                                                                                                                                                   
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|3.1  |  | Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.3 of the Registration Statement on Form 10-12G, File No. 000-33021).                                                                                                                                                                             
|     | 
|3.2  |  | Bylaws of the Company (incorporated by reference to Exhibit 3.4 of the Registration Statement on Form 10-12G, File No.000-33021).                                                                                                                                                                                                 
|     | 
|4.1  |  | Provisions in the Companys Articles of Incorporation and Bylaws defining the rights of holders of the Companys Common Stock (incorporated by reference to Exhibit 4.1 to the
Companys Registration Statement on Form 10-12G, File No.000-33021).                                                                               
|     | 
|4.2  |  | Form of Certificate of Common Stock (incorporated by reference to Exhibit 4.2 to the Companys Registration Statement on Form 10-12G, File No.000-33021).                                                                                                                                                                         
|     | 
|10.1 |  | Form of Greer State Bank Director Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Companys Annual Report on Form 10-K for December 31, 2002, File
No.000-33021).                                                                                                                                          
|     | 
|10.2 |  | Form of Greer State Bank Employee Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to the Companys Annual Report on Form 10-K for December 31, 2002, File
No.000-33021).                                                                                                                                          
|     | 
|10.3 |  | Form of Salary Continuation Plan for Executive Officer of Greer State Bank (incorporated by reference to Exhibit 10.3 to the Companys Annual Report on Form 10-K for December 31, 2002,
File No.000-33021).                                                                                                                      
|     | 
|10.4 |  | Form of Director Deferred Compensation Plan (incorporated by reference to Exhibit 10.4 to the Companys Annual Report on Form 10-K for December 31, 2002, File
No.000-33021).                                                                                                                                                     
|     | 
|10.5 |  | Greer State Bank Stock Appreciation Rights Agreement with R. Dennis Hennett dated July 13, 2004 (incorporated by reference to Exhibit 10.1 of the Companys Current Report on Form 8-K
filed March 29, 2005, File No.000-33021.                                                                                                   
|     | 
|13   |  | Annual Report to Shareholders for the year ended December 31, 2004.                                                                                                                                                                                                                                                               
|     | 
|14   |  | Director and Senior Officer Code of Ethics of Greer Bancshares Incorporated and Greer State Bank approved by the Board of Directors on May 22, 2003.                                                                                                                                                                              
|     | 
|21.1 |  | Subsidiaries of the Company.                                                                                                                                                                                                                                                                                                      
|     | 
|24   |  | Power of Attorney (contained on the signature page hereof).                                                                                                                                                                                                                                                                       
|     | 
|31.1 |  | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                           
|     | 
|31.2 |  | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                           
|     | 
|32   |  | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This exhibit is not filed for purposes of Section
18 of the Securities Exchange Act of 1934 but is instead furnished as provided by applicable rules of the Securities and Exchange Commission.



20