UNITED STATESSECURITIES AND EXCHANGE
COMMISSION Washington, D.C. 20549

# Form 10-KSB

|[X] | Annual Report Pursuant to Section 13 Or 15(d) of the Securities Exchange Act of 1934
|--- | ------------------------------------------------------------------------------------

| | For the fiscal year ended December 31, 2003.
| | --------------------------------------------

| | Or
| | --

| | Report Pursuant to Section 13 or 15(D) of the Securities Exchange Act of 1934
| | -----------------------------------------------------------------------------
| | For the transition period from __________ to ________                        

Commission file no.
333-83851

Greenville First Bancshares, Inc.
(Exact name of registrant as specified in its charter)

|South Carolina           |  | 58-2459561         
|------------------------ |  | -------------------
|(State of Incorporation) |  | (I.R.S. Employer   
|                         |  | Identification No.)

|112 Haywood Road                         |  |           
|---------------------------------------- |  | ----------
|Greenville, S.C.                         |  | 20607     
|(Address of principal executive offices) |  | (Zip Code)

864-679-9000(Telephone Number)

Securities registered pursuant to Section 12(b) of the Act:   None
Securities registered pursuant to Section 12(g) of the Act:   Common Stock

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

Check
if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B
in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB. [X]

The issuer's  revenue for its most recent fiscal year was  $10,143,238.  As of March 17, 2004,  1,724,994  shares
of Common Stock were issued and outstanding.

The estimated aggregate market value of the Common Stock held by non-affiliates  (shareholders  holding less than
5% of an  outstanding  class of stock,  excluding  directors and  executive  officers) of the Company on March 18, 2004 is
$28,324,079.  This  calculation  is based upon an  estimate  of the fair  market  value of the Common  Stock of $21.75 per
share, which was the price of the last trade of which management is aware prior to this date.

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

DOCUMENTS INCORPORATED
BY REFERENCECompany's Proxy Statement for the 2004 Annual Meeting of Shareholders        
            Part III

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# 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:

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

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

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

| | o | 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;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | o | changes in technology;
| | - | ----------------------

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

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

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

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

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

| | o | loss of consumer confidence and economic disruptions resulting from terrorist
activities.
| | - | -----------------------------------------------------------------------------------------

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

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

# General

Greenville
First Bancshares, Inc.(the Company) is a South Carolina
corporation that owns all of the capital stock of Greenville First Bank, N.A. (the
bank) and all of the stock of Greenville First Statutory Trust I (the
Trust). The bank is a national bank organized under the laws of the United
States located in Greenville County, South Carolina. The bank is primarily engaged in the
business of accepting demand deposits and savings deposits insured by the Federal Deposit
Insurance Corporation, and providing commercial, consumer and mortgage loans to the
general public. The Trust is a special purpose subsidiary organized for the sole purpose
of issuing trust preferred securities.

On
October 26, 1999, the Company sold 1,100,000 shares of its common stock at $10 per share
and on November 30, 1999 sold 50,000 additional shares for a total of 1,150,000 shares
(1,724,994 after adjustment for the 3 for 2 stock split). The offering raised $10,646,700
net of underwriting discounts, commissions and offering expenses. The directors and
executive officers of the Company purchased 266,900 shares of common stock at $10 per
share, for a total of $2,669,000. The Company has used $10.4 million of the proceeds to
capitalize the Bank. On June 26, 2003, the Trust offered and sold $6,000,000 of floating
rate securities. On November 17, 2003, shareholders of record as of November 3, 2003,
received one additional share of stock for every two shares of stock owned prior to the 3
for 2 stock split. All fractional shares were paid in cash. The earnings per share amounts
for all periods shown have been adjusted to reflect the 3 for 2 split.

2

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# Marketing Focus

The
bank is the first independent bank organized in the City of Greenville in over ten years.
Because there are few locally owned banks left in Greenville, we believe we offer a unique
banking alternative for the market by offering a higher level of client service and a
management team more focused on the needs of the community than most of our competitors.
The bank uses the theme Welcome to Hometown Banking, and actively promotes it
in our target market. While the bank has the ability to offer a breadth of products
similar to large banks, we emphasize the client relationship. We believe that the
continued community focus of the bank will succeed in this market, and that the area will
react favorably to the banks emphasis on service to small businesses, individuals,
and professional concerns. We will continue to take advantage of existing contacts and
relationships with individuals and companies in this area to more effectively market the
services of the bank.

# Location and Service Area

Our
primary service area consists of Greenville County, South Carolina. We will draw a large
percentage of our business from the central portion of Greenville County, within a ten
mile radius of our main office. This principal service area is bounded by Rutherford Road
to the north, Poinsett Highway to the west, Mauldin Road and Butler Road to the south, and
Highway 14 and Batesville Road to the east. Included in this area is the highest per
capita income tract in the county. Our expansion plans include the development of two
service centers located along the periphery of our service area. These service
centers will extend the market reach of our bank, and they will increase our personal
service delivery capabilities to all of our clients.

# Lending Activities

General.
          We emphasize a range of lending services, including real estate, commercial, and
          equity-line consumer loans to individuals and small- to medium-sized businesses
          and professional firms that are located in or conduct a substantial portion of
          their business in the banks market area. We compete for these loans with
          competitors who are well established in the Greenville County area and have
          greater resources and lending limits. As a result, we may sometimes have to
          charge lower interest rates to attract borrowers.

Loan
Approval and Review. The banks loan approval policies provide for various levels
of officer lending authority. When the amount of aggregate loans to a single borrower
exceeds an individual officers lending authority, the loan request will be
considered and approved by an officer with a higher lending limit or the officers
loan committee. The officers loan committee has lending limits, and any loans in
excess of this lending limit will be approved by the directors loan committee. The
bank does not make any loans to any director, officer, or employee of the bank unless the
loan is approved by the board of directors of the bank and is made on terms not more
favorable to such person than would be available to a person not affiliated with the bank.

Lending
Limits. The banks lending activities are subject to a variety of lending limits
imposed by federal law. In general, the bank is subject to a legal limit on loans to a
single borrower equal to 15% of the banks capital and unimpaired surplus. Different
limits may apply in certain circumstances based on the type of loan or the nature of the
borrower, including the borrowers relationship to the bank. These limits will
increase or decrease as the banks capital increases or decreases. Based upon the
capitalization of the bank, at December 31, 2003, the bank has a self-imposed loan limit
of $2.2 million, which represents approximately 87% of our legal lending limit at December
31, 2003. These limits will increase or decrease in response to increases or decreases in
the banks level of capital. The bank is able to sell participations in its loans to
other financial institutions, which allows the bank the ability to meet all of the lending
needs of loan customers requiring aggregate extensions of credit above these limits.

3

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Real
Estate Mortgage Loans. At December 31, 2003, loans secured by first or second
mortgages on real estate made up 80% of the banks loan portfolio. These loans will
generally fall into one of four categories: commercial real estate loans, construction and
development loans, residential real estate loans, or home equity loans. Each of these
categories is discussed in more detail below, including their specific risks. Interest
rates for all categories may be fixed or adjustable, and will more likely be fixed for
shorter-term loans. The bank will generally charge an origination fee for each loan.

Real
estate loans are subject to the same general risks as other loans. They are particularly
sensitive to fluctuations in the value of real estate, which is generally the underlying
security for real estate loans. Fluctuations in the value of real estate, as well as other
factors arising after a loan has been made, could negatively affect a borrowers cash
flow, creditworthiness, and ability to repay the loan.

We
have the ability to originate real estate loans for sale into the secondary market. We can
limit our interest rate and credit risk on these loans by locking the interest rate for
each loan with the secondary investor and receiving the investors underwriting
approval prior to originating the loan.

| | o | Commercial Real Estate Loans. Commercial real estate loans generally have terms of
five years or less, although payments may be structured on a longer amortization basis. We
evaluate each borrower on an individual basis and attempt to determine its business risks
and credit profile. We attempt to reduce credit risk in the commercial real estate
portfolio by emphasizing loans on owner-occupied office and retail buildings where the
loan-to-value ratio, established by independent appraisals, does not exceed 80%. We also
generally require that debtor cash flow exceed 115% of monthly debt service obligations.
We typically review all of the personal financial statements of the principal owners and
require their personal guarantees. These reviews generally reveal secondary sources of
payment and liquidity to support a loan request.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | Construction and Development Real Estate Loans.We offer adjustable and fixed rate
residential and commercial construction loans to builders and developers and to consumers
who wish to build their own home. The term of construction and development loans generally
is limited to eighteen months, although payments may be structured on a longer
amortization basis. Most loans mature and require payment in full upon the sale of the
property. Construction and development loans generally carry a higher degree of risk than
long term financing of existing properties. Repayment depends on the ultimate completion
of the project and usually on the sale of the property. Specific risks include:
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | cost overruns;
| | - | --------------

| | o | mismanaged construction;
| | - | ------------------------

| | o | inferior or improper construction techniques;
| | - | ---------------------------------------------

| | o | economic changes or downturns during construction;
| | - | --------------------------------------------------

| | o | a downturn in the real estate market;
| | - | -------------------------------------

| | o | rising interest rates which may prevent sale of the property; and
| | - | -----------------------------------------------------------------

| | o | failure to sell completed projects in a timely manner.
| | - | ------------------------------------------------------

We
attempt to reduce risk by obtaining personal guarantees where possible, and by keeping the
loan-to-value ratio of the completed project below specified percentages. We also reduce
risk by selling participations in larger loans to other institutions when possible.

Residential
Real Estate Loans. Residential real estate loans generally have longer terms up to 30
years. We offer fixed and adjustable rate mortgages. We have limited credit risk on these
loans as most are sold to third parties soon after closing.

Commercial
Loans. We make loans for commercial purposes in various lines of businesses.
Commercial loans are generally considered to have greater risk than first or second
mortgages on real estate because they may be unsecured, or if they are secured, the value
of the security may be difficult to assess and more likely to decrease than real estate.

4

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We
also offer small business loans utilizing government enhancements such as the Small
Business Administrations (SBA) 7(a) program and SBAs 504 programs.
These loans typically are partially guaranteed by the government, which helps to reduce
the banks risk. Government guarantees of SBA loans do not exceed 80% of the loan
value and are generally less. As of December 31, 2003, the bank has not originated any
small business loans utilizing government enhancements.

The
well-established banks in the Greenville County area make proportionately more loans to
medium to large-sized businesses than we can. Many of the banks commercial loans are
made to small- to medium-sized businesses that may be less able to withstand competitive,
economic, and financial conditions than larger borrowers.

Consumer
Loans. The bank makes a variety of loans to individuals for personal and household
purposes, including secured and unsecured installment loans and revolving lines of credit.
Installment loans typically carry balances of less than $50,000 and are amortized over
periods up to 60 months. Consumer loans are offered with a single maturity basis where a
specific source of repayment is available. Revolving loan products typically require
monthly payments of interest and a portion of the principal. Consumer loans are generally
considered to have greater risk than first or second mortgages on real estate because they
may be unsecured, or if they are secured, the value of the security may be difficult to
assess and more likely to decrease than real estate.

We
also offer home equity loans. Our underwriting criteria for, and the risks associated
with, home equity loans and lines of credit will generally be the same as those for first
mortgage loans. Home equity lines of credit typically have terms of 15 years or less,
typically carry balances less than $125,000, and may extend up to 100% of the available
equity of each property.

# Deposit Services

We
offer a full range of deposit services that are typically available in most banks and
savings and loan associations, including checking accounts, commercial accounts, savings
accounts, and other time deposits of various types, ranging from daily money market
accounts to longer-term certificates of deposit. The transaction accounts and time
certificates are tailored to our primary market area at rates competitive to those offered
in the Greenville County area. In addition, we offer certain retirement account services,
such as IRAs. We solicit these accounts from individuals, businesses, associations,
organizations, and governmental authorities.

# Other Banking Services

The
bank offers other bank services including safe deposit boxes, travelers checks,
direct deposit, U.S. Savings Bonds, and banking by mail. The bank is associated with the
Honor, Cirrus, and Master-Money ATM networks, which are available to its customers
throughout the country. We believe that by being associated with a shared network of ATMs,
we are better able to serve our customers and are able to attract customers who are
accustomed to the convenience of using ATMs, although we do not believe that maintaining
this association is critical to our success. We also offer Internet banking services, bill
payment services and cash management services. We do not expect the bank to exercise trust
powers during its next few years of operation.

# Market Share

As
of June 30, 2003, the most recent date for which market data is available, total deposits
in the banks primary service area were almost $6.6 billion, which represented a 7.8%
deposit increase from 2003. At June 30, 2003 the bank represented 2.3% of the market. Our
plan over the next five years is to grow our deposit base to $300 million. Of course, we
cannot be sure that these deposit growth rates will continue, or that we will accomplish
this objective.

# Employees

As
of March 20, 2004, the bank had 30 employees and the holding company had no full-time
employees.

5

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# SUPERVISION AND
REGULATION

Both
the company and the bank are subject to extensive state and federal banking laws and
regulations that 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 national
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 2002

In
October 2002, the USA Patriot Act of 2002 was enacted in response to the terrorist attacks
in New York, Pennsylvania and Washington D.C. that 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 is not effective until 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:

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

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

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

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

| | o | 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
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | 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.

6

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# Greenville First
Bancshares, Inc.

We
own the outstanding capital stock of the bank, and therefore we are considered to be 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, we are subject to
periodic examination by the Federal Reserve and required to file periodic reports of its
operations and any additional information that the Federal Reserve may require. Our
activities at the bank and holding company levels are limited to:

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

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

| | o | 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: | 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 

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

| | o | 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
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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. Our 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:

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

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

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

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

| | o | owning savings associations; and
| | - | --------------------------------

| | o | 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, we are 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 will be subject to regulatory restrictions as described below
in Greenville First Bank  Dividends. We are 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.

7

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Source
of Strength; Cross-Guarantee. In accordance with Federal Reserve Board policy, we are
expected to act as a source of financial strength to the bank and to commit resources to
support the bank in circumstances in which we 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 subsidiaries depository institution of the bank holding company. Further, federal bank
regulatory authorities have additional discretion to require a bank holding company to
divest itself of any bank or nonbank subsidiaries 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.

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 South Carolina bank holding company 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. Prior to
acquiring the capital stock of a national bank, we are not required to obtain the approval
of the Board, but we must notify them at least 15 days prior to doing so. We must receive
the Boards approval prior to engaging in the acquisition of a South Carolina state
chartered bank or another South Carolina bank holding company.

# Greenville First Bank

The
bank operates as a national banking association incorporated under the laws of the United
States and subject to examination by the Office of the Comptroller of the Currency.
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
Office of the Comptroller of the Currency and the FDIC regulate or monitor virtually all
areas of the banks operations, including:

| | o | security devices and procedures;
| | - | --------------------------------

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

| | o | loans;
| | - | ------

| | o | investments;
| | - | ------------

| | o | borrowings;
| | - | -----------

| | o | deposits;
| | - | ---------

| | o | mergers;
| | - | --------

| | o | issuances of securities;
| | - | ------------------------

| | o | payment of dividends;
| | - | ---------------------

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

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

| | o | establishment of branches;
| | - | --------------------------

| | o | corporate reorganizations;
| | - | --------------------------

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

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

8

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The
Office of the Comptroller of the Currency 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 Office of the Comptroller of the Currency
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:

| | o | internal controls;
| | - | ------------------

| | o | information systems and audit systems;
| | - | --------------------------------------

| | o | loan documentation;
| | - | -------------------

| | o | credit underwriting;
| | - | --------------------

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

| | o | asset quality.
| | - | --------------

National
banks and their holding companies which have been chartered or registered or have
undergone a change in control within the past two years or which have been deemed by the
Office of the Comptroller of the Currency or the Federal Reserve Board to be troubled
institutions must give the Office of the Comptroller of the Currency or the Federal
Reserve Board thirty days prior notice of the appointment of any senior executive
officer or director. Within the 30 day period, the Office of the Comptroller of the
Currency or 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 that 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. 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.

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 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

9

---

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 has recently 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:

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

| | o | 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.
          A national bank may not pay dividends from its capital. All dividends must be
          paid out of undivided profits then on hand, after deducting expenses, including
          reserves for losses and bad debts. In addition, a national bank is prohibited
          from declaring a dividend on its shares of common stock until its surplus equals
          its stated capital, unless there has been transferred to surplus no less than
          one-tenth of the banks net profits of the preceding two consecutive
          half-year periods (in the case of an annual dividend). The approval of the
          Office of the Comptroller of the Currency is required if the total of all
          dividends declared by a national bank in any calendar year exceeds the total of
          its net profits for that year combined with its retained net profits for the
          preceding two years, less any required transfers to surplus.

Branching.
          National banks are required by the National Bank Act to adhere to branch office
          banking laws applicable to state banks in the states in which they are located.
          Under current South Carolina law, the bank may open branch offices throughout
          South Carolina with the prior approval of the Office of the Comptroller of the
          Currency. In addition, with prior regulatory approval, the bank is able to
          acquire existing banking operations in South Carolina. Furthermore, federal
          legislation has been passed which permits interstate branching. The new law
          permits out-of-state acquisitions by bank holding companies, interstate
          branching by banks if allowed by state law, and interstate merging by banks.

Community
Reinvestment Act. The Community Reinvestment Act requires that, in connection with
examinations of financial institutions within their respective jurisdictions, the Federal
Reserve, the FDIC, or the Office of the Comptroller of the Currency, 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
our 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-

10

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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.

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:

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

| | o | 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;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

| | o | 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:

| | o | 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
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | 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.

11

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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. At December 31, 2003, based on the banks calculations, we will qualify 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:

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

| | o | raise additional capital;
| | - | -------------------------

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

| | o | improve their management;
| | - | -------------------------

| | o | eliminate management fees; or
| | - | -----------------------------

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

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 more than 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. 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.

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
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

12

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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 the extent
to which our business may be affected by any new regulation or statute.

# Location and Service Area

We
conduct a general commercial and retail banking business, emphasizing the needs of
individuals and small- to medium-sized businesses. We operate our banking business through
our bank, Greenville First Bank, N.A. Our main office is located at 212 Haywood Road in
Greenville, South Carolina. We primarily serve Greenville, South Carolina and the
surrounding area.

# Competition

The
banking business is highly competitive. We compete with other commercial banks, savings
and loan associations, credit unions and money market mutual funds operating in the
Greenville County area and elsewhere. As of June 30, 2003, there were 25 commercial banks
and 2 savings banks operating in Greenville County. Some of these competitors have been in
business for a long time and have already established their customer base and name
recognition. We believe that our community bank focus, with our emphasis on service to
small businesses, individuals, and professional concerns, gives us an advantage in the
market. Nevertheless, a number of these competitors have greater financial and personnel
resources than we may have. Most of them offer services, including extensive and
established branch networks and trust services, that we do not currently provide. In
addition, competitors that are not depository institutions are generally not subject to
the extensive regulations that apply to our bank. As a result of these competitive
factors, we may have to pay higher rates of interest to attract deposits.

# Item 2.  Description of
Property

Our
main office facility is located at the corner of Haywood Road and Halton Road in downtown
Greenville. The bank is leasing the building. The building is a full service banking
facility with three drive-through-banking stations and an automatic teller machine. On
March 5, 2004, the bank received permission from the Comptroller of the Currency to open
two new branches. The bank has entered into a lease arrangement for the use of land for a
future branch site.

# Item 3.  Legal
Proceedings.

None.

# 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.

13

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# Item 5.  Market for
Common Equity and Related Stockholder Matters.

Since
our public offering on October 26, 1999, our common stock has been quoted on the OTC
Bulletin Board under the symbol GVBK. However, trading and quotations in our
common stock have been limited and sporadic and we do not believe that there is a publicly
established trading market in the common stock. The price of the last trade of which we
are aware is $21.75 per share, but we have not determined that this trade was the result
of arms length negotiations between the parties and we can provide no assurance this
price reflects the market value of our common stock. Our articles of incorporation
authorize us to issue up to 10,000,000 shares of common stock, of which 1,724,994 shares
were outstanding as of March 18, 2004. We have approximately 950 shareholders of record.

To
date, we have not paid cash dividends on our common stock. We currently intend to retain
earnings to support operations and finance expansion and therefore do not anticipate
paying cash dividends in the foreseeable future. All of our outstanding shares of common
stock are entitled to share equally in dividends from funds legally available when, and
if, declared by the board of directors.

The
following is a summary of the bid prices for our common stock reported by the OTC Bulletin
Board for the periods indicated (the bid prices have been adjusted for the 3 for 2 stock
split):

| | 2003 | High | Low           
| | ---- | ---- | --------------
| |      |      | First Quarter 
| |      |      | Second Quarter
| |      |      | Third Quarter 
| |      |      | Fourth Quarter

| | 2002 | High | Low           
| | ---- | ---- | --------------
| |      |      | First Quarter 
| |      |      | Second Quarter
| |      |      | Third Quarter 
| |      |      | Fourth Quarter

The
prices listed above are quotations, which reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not represent actual transactions.

# Item 6.  Managements
Discussion and Analysis of Financial Condition and Results of Operation.

# DISCUSSION OF
FORWARD-LOOKING STATEMENTS

The following is our discussion and
analysis of certain significant factors that have affected our financial position and
operating results and those of our subsidiaries, Greenville First Bank, N.A., during the
periods included in the accompanying financial statements. This commentary should be read
in conjunction with the financial statements and the related notes and the other
statistical information included in this report.

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

| | o | the effects of future economic conditions;
| | - | ------------------------------------------

| | o | governmental monetary and fiscal policies, as well as legislative and regulatory changes;
| | - | -----------------------------------------------------------------------------------------

| | o | changes in interest rates and their effect on the level and composition of deposits, loan
demand, and the values of loan collateral, securities and other interest-sensitive assets
and liabilities;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

14

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| | o | the effects of competition from other commercial banks, thrifts, mortgage banking firms,
consumer finance companies, credit unions, securities brokerage firms, insurance
companies, money market and other mutual funds and other financial institutions operating
in our market area and elsewhere, including institutions operating regionally, nationally,
and internationally, together with such competitors offering banking products and services
by mail, telephone, computer and the Internet;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

| | o | the rates of loan growth; and
| | - | -----------------------------

| | o | adverse changes in asset quality and resulting credit risk-related losses and expenses.
| | - | ---------------------------------------------------------------------------------------

# CRITICAL ACCOUNTING
POLICIES

We
have adopted various accounting policies that govern the application of accounting
principles generally accepted in the United States in the preparation of our financial
statements. Our significant accounting policies are described in the footnotes to the
consolidated financial statements at December 31, 2003 as filed on our annual report on
Form 10-KSB.

Certain
accounting policies involve significant judgments and assumptions by us that have a
material impact on the carrying value of certain assets and liabilities. We consider these
accounting policies to be critical accounting policies. The judgment and assumptions we
use are based on historical experience and other factors, which we believe to be
reasonable under the circumstances. Because of the nature of the judgment and assumptions
we make, actual results could differ from these judgments and estimates that could have a
material impact on our carrying values of assets and liabilities and our results of
operations.

We
believe the allowance for loan losses is a critical accounting policy that requires the
most significant judgment and estimates used in preparation of our consolidated financial
statements. Refer to the portion of this discussion that addresses our allowance for loan
losses for a description of our processes and methodology for determining our allowance
for loan losses.

# GENERAL

The
following is a discussion of our financial condition as of December 31, 2003 and 2002, and
the results of operations for the two years ended December 31, 2003. These comments should
be read in conjunction with our consolidated financial statements and accompanying
consolidated footnotes appearing in this report. The significant accounting policies are
described throughout the Management and Discussion section of this document and included
in Note 1 to the consolidated financial statements.

# NATIONAL AND ECONOMIC
EVENTS

Nationally,
during most of 2001 and during 2002, the United States experienced a slowing economy
following a tenth year of expansion. During this period, the economy was also affected by
lower returns and expectations of the stock markets. Economic data led the Federal Reserve
to begin an aggressive program of rate cutting, which moved the Federal Funds rate down 11
times during 2001 for a total reduction of 475 basis points, bringing the Federal Funds
rate to its lowest level in 40 years. During the fourth quarter of 2002 and the first
quarter of 2003, the Federal Reserve reduced the Federal Funds rate down an additional 75
basis points.

Despite
sharply lower short-term rates, stimulus to the economy has been muted and consumer demand
and business investment activity has been weak. The financial markets are operating now
under very low historical interest rates. As a result of these unusual conditions,
Congress passed an economic stimulus plan. Many economists believe the Federal Reserve
will not begin increasing interest rates until the year 2005. No assurance can be given
that the Federal Reserve will not take action sooner or that they will raise rates
beginning in 2005. We continue to believe that the markets we serve generally perform
better than national markets, even in times of recession.

15

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# FINANCIAL OVERVIEW

After
only four years, total assets for the Company total $230.7 million. The primary driver of
our asset growth continues to be the expansion of our loan portfolio. Our lending officers
continued to capitalize on their experience and knowledge of the Greenville market and
grew net loans by $58.0 million during the year ended December 31, 2003.

The
Company continued its momentum of earnings growth as pre-tax earnings for the 2003 year
increased 116% compared to the 2002 year. During 2002 the Company had no income tax
expense as a result of prior years tax losses. The Company was fully taxable for all of
2003. After taxes, the company generated net income of $1.0 million in 2003 compared to
net income of $752 thousand in 2002. The diluted earnings per share for the 2003 year was
$.53 per share compared to $.43 per share in 2002. The significant improvement in earnings
reflects the continued growth of earning assets coupled with the efficiency of our banking
model. While loans and deposits grew 39% and 27%, respectively for the year, overhead
expenses increased by only 14%. One of the measurements of efficiency that the Company
monitors is the assets managed per employee, which increased to $8.0 million at December
31, 2003.

During
2003 the Companys stock price increased 110% during the year. As part of the
Companys definitive long-term capital plan, shareholders received a 3 for 2 stock
split in November of 2003. During June 2003, the Company issued $6.0 million in trust
preferred securities, which provides significant additional regulatory capital without
dilution to existing sharesholders.

During
2003, the Company expanded its infrastructure. We significantly improved our risk
manangement systems, committed to two additional offices and added additional talent to
our executive team. The two offices will expand our presence and improve convenience for
our clients. The first office is expected to open in the third quarter of 2004 and the
second office to open near year-end 2004. The first additional member of our executive
team will manage credit risk systems and loan operations. The second additional member
will provide strategic leadership and manage retail deposit strategies.

16

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# INCOME STATEMENT REVIEW 
Net Interest Income

Net
interest income, the largest component of our income, was $6,103,614 in 2003 compared to
$4,660,647 in 2002, or an increase of 30.1%. The level of net interest income is
determined by the level of earning assets and the successfully managing of the net
interest margin. Changes in interest rates paid on assets and liabilities, the rate of
growth of the asset and liability base, the ratio of interest-earning assets to
interest-bearing liabilities, and management of the balance sheets interest rate
sensitivity all factor into changes in net interest income.

The
following table sets forth, for the years ended December 31, 2003 and 2002, information
related to our average balance sheet and average yields on assets and average costs of
liabilities. We derived these yields by dividing income or expense by the average balance
of the corresponding assets or liabilities. We derived average balances from the daily
balances throughout the periods indicated.

# Average Balances,
Income and Expenses, and Rates (in $000s)

|                                           | For the years ended December 31,
|------------------------------------------ | --------------------------------
|
|
|
|
|Earning Assets:                            |                                 
|Federal funds sold                         |                                 
|Investment securities                      |                                 
|Loans                                      |                                 
|                                           |                                 
|Total earning-assets                       |                                 
|                                           |                                 
|Non-earning assets                         |                                 
|                                           |                                 
|Total assets                               |                                 
|                                           |                                 
|                                           |                                 
|Interest-bearing liabilities:              |                                 
|NOW accounts                               |                                 
|Savings & money market                     |                                 
|Time deposits                              |                                 
|                                           |                                 
|Total interest-bearing deposits            |                                 
|FHLB advance                               |                                 
|Other borrowings                           |                                 
|                                           |                                 
|Total interest-bearing liabilities         |                                 
|                                           |                                 
|Non-interest bearing liabilities           |                                 
|Shareholders' equity                       |                                 
|                                           |                                 
|Total liabilities and shareholders' equity |                                 
|                                           |                                 
|                                           |                                 
|Net interest spread                        |                                 
|Net interest income/margin                 |                                 
|                                           |                                 

Our
net interest spread was 3.17% for the year ended December 31, 2003 as compared to 3.18%
for the year ended December 31, 2002. The net interest spread is the difference between
the yield we earn on our interest-earning assets and the rate we pay on our
interest-bearing liabilities.

Our
net interest margin for the period ended December 31, 2003 was 3.24% as compared to 3.30%
for the year ended December 31, 2002. During 2003, earning assets averaged $188.5 million
as compared to $141.1 million in 2002. The net interest margin is calculated as net
interest income divided by year-to-date average earning assets.

17

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The
following table sets forth, for the years ended December 31, 2001 and 2000, information
related to our average balance sheet and average yields on assets and average costs of
liabilities. We derived these yields by dividing income or expense by the average balance
of the corresponding assets or liabilities. We derived average balances from the daily
balances throughout the periods indicated.

# Average Balances,
Income and Expenses, and Rates (in $000s)

|                                           | For the years ended December 31,
|------------------------------------------ | --------------------------------
|
|
|
|
|
|Federal funds sold                         |                                 
|Investment securities                      |                                 
|Loans                                      |                                 
|                                           |                                 
|Total earning-assets                       |                                 
|                                           |                                 
|Non-earnings assets                        |                                 
|                                           |                                 
|Total assets                               |                                 
|                                           |                                 
|                                           |                                 
|NOW accounts                               |                                 
|Savings & money market                     |                                 
|Time deposits                              |                                 
|                                           |                                 
|Total interest-bearing deposits            |                                 
|FHLB advance                               |                                 
|Other borrowings                           |                                 
|                                           |                                 
|Total interest-bearing liabilities         |                                 
|                                           |                                 
|Non-interest bearing liabilities           |                                 
|Shareholders' equity                       |                                 
|                                           |                                 
|Total liabilities and shareholders' equity |                                 
|                                           |                                 
|                                           |                                 
|Net interest spread                        |                                 
|Net interest income/margin                 |                                 
|                                           |                                 

Our
net interest spread was 3.04% for the year ended December 31, 2001 as compared to 3.16%
for the year ended December 31, 2000. The net interest spread is the difference between
the yield we earn on our interest-earning assets and the rate we pay on our
interest-bearing liabilities.

Our
net interest margin for the period ended December 31, 2001 was 3.43% as compared to 4.41%
for the year ended December 31, 2000. During 2001, earning assets averaged $86.2 million
as compared to $36.8 million in 2000. The net interest margin is calculated as net
interest income divided by year-to-date average earning assets.

18

---

# Rate/Volume Analysis

Net
interest income can be analyzed in terms of the impact of changing rates and changing
volume. 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 for the periods presented.

|                       | December 31, 2003 vs 2002 | December 31, 2002 vs 2001
|---------------------- | ------------------------- | -------------------------
|
|
|
|
|Interest income        |                           |                          
|Loans                  |                           |                          
|Investment securites   |                           |                          
|Federal funds sold     |                           |                          
|                       |                           |                          
|Total interest income  |                           |                          
|                       |                           |                          
|                       |                           |                          
|Interest expense       |                           |                          
|Deposits               |                           |                          
|FHLB advances          |                           |                          
|Other borrowings       |                           |                          
|                       |                           |                          
|Total interest expense |                           |                          
|                       |                           |                          
|                       |                           |                          
|Net interest income    |                           |                          

# Provision for Loan Losses

Included
in the statement of income for the periods ended December 31, 2003 and 2002 is a non-cash
expense of $1.1 million in each year, related to the provision for loan losses. The loan
loss reserve was $2.7 million and $1.8 million as of December 31, 2003 and 2002,
respectively. The allowance for loan losses as a percentage of gross loans was 1.30% at
December 31, 2003 and 1.22% at December 31, 2002. The loan portfolio is periodically
reviewed to evaluate the outstanding loans and to measure both the performance of the
portfolio and the adequacy of the allowance for loan losses. Managements judgment as
to the adequacy of the allowance is based upon a number of assumptions about future events
that it believes to be reasonable, but which may or may not be accurate. Because of the
inherent uncertainty of assumptions made during the evaluation process, there can be no
assurance that loan losses in future periods will not exceed the allowance for loan losses
or that additional allocations will not be required. For the years ended December 31, 2003
and 2002, we reported net charge-offs of $168,999 and $418,098, respectively.

# Noninterest Income and
Expense

Noninterest
income in 2003 was $421,684, a decrease of $98,567 compared to noninterest income of
$520,251 in 2002. During 2003, the bank incurred a $253,699 write-down on real estate
that was previously acquired in foreclosure and was sold in December 2003. Excluding the
$253,699 loss on real estate owned, noninterest income from loan and service fees
increased $155,132, or 29.8%. This increase was primarily due to the increases in the
volume of service charges on deposits, increases in the volume of fees charged on ATM
transactions, and additional loan fees received on the origination of mortgage loans that
were sold.

19

---

We
incurred general and administrative expenses of $3,852,849 during 2003 compared to
$3,378,482 in 2002. The $474,367 increase in general and administrative expenses resulted
primarily from additional data processing costs and the additional staff hired to handle
the increases in both loans and deposits. Salaries and benefits for 2003 were $1,983,204,
or an increase of $214,326. Salaries and benefits represented 51.5% of the total
noninterest expense. Salaries and benefits in 2002 were $1,768,878. All other expenses
increased $260,041. This increase relates primarily to $152,202 additional data processing
and related costs, resulting from the higher number of loan and deposit accounts.

Income
tax expense was $616,534 for the year ended December 31, 2003. No income tax expense was
record in 2002.

# BALANCE SHEET REVIEW

# General

At
December 31, 2003, we had total assets of $230.6 million, consisting principally of $206.1
million in loans, $15.6 million in investments, $2.8 million in federal funds sold and
$4.1 million in cash and due from banks. Liabilities at December 31, 2003 totaled $219.5
million, consisting principally of $169.0 million in deposits, $32.5 million in FHLB
advances, $9.3 million of short-term borrowings and $6.0 million of trust preferred
securities. At December 31, 2003, shareholders equity was $11.2 million.

# Federal Funds Sold

At
December 31, 2003, the $2.8 million of short-term investments in federal funds sold on an
overnight basis comprised 1.2% of total assets at December 31, 2003, as compared to
$41,736, or .02% of total assets, at December 31, 2002.

# Investments

At
December 31, 2003, the $15.7 million of investment securities portfolio represented
approximately 6.8% of our total assets. We were invested in U.S. Government agency
securities and mortgage-backed securities with a fair value of $15.5 million and an
amortized cost of $15.4 million for an unrealized gain of $74 thousand.

Contractual
maturities and yields on our investments at December 31, 2003 are shown in the following
table (dollars in thousands). Expected maturities may differ from contractual maturities
because issuers may have the right to call or prepay obligations with or without call or
prepayment penalties.

|                   |  |  | After one but |   |  |  |   | 
|------------------ |  |  | ------------- | - |  |  | - | 
|
|
|Available for Sale |  |  |               |   |  |  |   | 
|U.S.Government     |  | 
|agencies           |  |  | $             | - |  |  | - | 
|Mortgage-backed    |  | 
|securitieshr       |  |  |               | - |  |  | - | 
|                   |  |  |               |   |  |  |   | 
|Total              |  |  |               |   |  |  |   | 
|                   |  |  |               |   |  |  |   | 
|                   |  | 
|Held to Maturity   |  | 
|Mortgage-backed    |  | 
|securities         |  |  | $             | - |  |  | - | 
|                   |  |  |               |   |  |  |   | 

20

---

# Investments, continued

The
amortizated costs and the fair value of our investments at December 31, 2003, 2002, and
2001 are shown in the following table.

|                           | December 31, 2003 | December 31, 2002 | December 31, 2001
|-------------------------- | ----------------- | ----------------- | -----------------
|
|
|Available for Sale         |                   |                   |                  
|U. S. Government agencies  |                   |                   | $                
|                           |                   |                  
|Mortgage-backed securities |                   |                   |                  
|                           |                  
|Total                      |                   |                   | $                
|                           | >                
|Held to Maturity           |                   |                  
|Mortgage-backed securities |                   |                   | $                
|                           |                  

Other
investments securities totaled $2,110,150 and $905,000 at December 31, 2003 and 2002,
respectively. Other investments at December 31, 2003, consisted of Federal Reserve Bank
stock with a cost of $485,150 and Federal Home Loan Bank stock with a cost of $1,625,000.
At December 31, 2002, the company owned Federal Reserve Bank stock with a cost of $255,000
and Federal Home Loan Bank stock with a cost of $650,000.

# Loans

Since
loans typically provide higher interest yields than do other types of interest earning
assets, it is our intent to channel a substantial percentage of our earning assets into
the loan portfolio. Average loans for the years ended December 31, 2003 and 2002 were
$174.3 million and $123.3 million, respectively. Total loans outstanding at December 31,
2003 and 2002 were $208.8 million and $149.9 million, respectively, before allowance for
loan losses.

The
principal component of our loan portfolio ares loans secured by real estate mortgages.
Management attempts to maintain a relatively diversified loan portfolio to help reduce the
risk inherent in concentration of collateral.

21

---

# Loans, continued

The
following table summarizes the composition of the loan portfolio at December 31, 2003 and
2002.

|                                        | 2003 | 2002
|--------------------------------------- | ---- | ----
|
|Real estate:                            |      |     
|Commercial                              |      |     
|Owner occupied                          |      |     
|Non-owner occupied                      |      |     
|Construction                            |      |     
|                                        |     
|Total commercial real-estate            |      |     
|                                        |     
|                                        |      |     
|Consumer                                |      |     
|Residential                             |      |     
|Home Equity                             |      |     
|Construction                            |      |     
|                                        |     
|Total consumer real-estate              |      |     
|                                        |     
|                                        |      |     
|Total real-estate                       |      |     
|                                        |      |     
|Commercial business                     |      |     
|Consumer-other                          |      |     
|Deferred origination fees, net          |      |     
|                                        |     
|Total gross loans, net of deferred fees |      |     
|                                        |      |     
|Less--allowance for loan losses         |      |     
|                                        |      |     
|Total loans, net                        |      |     
|                                        |      |     

The
following table summarizes the composition of the loan portfolio at December 31, 2001 and
2000.

|                                        | 2001 | 2000
|--------------------------------------- | ---- | ----
|
|Real estate:                            |      |     
|Commercial                              |      |     
|Owner occupied                          |      |     
|Non-owner occupied                      |      |     
|Construction                            |      |     
|                                        |     
|Total commercial real-estate            |      |     
|                                        |     
|Consumer                                |      |     
|Residential                             |      |     
|Home Equity                             |      |     
|Construction                            |      |     
|                                        |     
|Total consumer real-estate              |      |     
|                                        |     
|Total real-estate                       |      |     
|                                        |      |     
|Commercial business                     |      |     
|Consumer-other                          |      |     
|Deferred origination fees, net          |      |     
|                                        |     
|Total gross loans, net of deferred fees |      |     
|                                        |      |     
|                                        |      |     
|Less--allowance for loan losses         |      |     
|                                        |      |     
|Total loans, net                        |      |     
|                                        |      |     

The
bank had no loans outstanding at December 31, 1999.

22

---

# Maturities and
Sensitivity of Loans to Changes in Interest Rates

The
information in the following table is based on the contractual maturities of individual
loans, including loans which may be subject to renewal at their contractual maturity.
Renewal of such loans is subject to review and credit approval, as well as modification of
terms upon their maturity. Actual repayments of loans may differ from maturities reflected
below because borrowers have the right to prepay obligations with or without prepayment
penalties.

The
following table summarizes the loan maturity distribution, by type, and related interest
rate characteristics at December 31, 2003 (dollars in thousands):

| |  |  | After one but                       |  | 
| |  |  | ----------------------------------- |  | 
|
|
|
| |  |  | Commercial                          |  | 
| |  |  | Real estate - construction          |  | 
| |  |  | Real estate - mortgage              |  | 
| |  |  | Consumer and other                  |  | 
| |  |  | Deferred origination fees, net      |  | 
| |  |  |                                     |  | 
| |  |  | Total loans                         |  | 
| |  |  |                                     |  | 
| |  |  | Loans maturing after one year with: |  | 
| |  |  | Fixed interest rates                |  | 
| |  |  | Floating interest rates             |  | 

# Provision and Allowance
for Loan Losses

We
have developed policies and procedures for evaluating the overall quality of our credit
portfolio and the timely identification of potential credit problems. Managements
judgment as to the adequacy of the allowance is based on a number of assumptions about
future events, which it believes to be reasonable, but which may or may not be valid.
Based on our judgments, evaluation, and analysis of the loan portfolio, we consider the
allowance for loan losses to be adequate. However, there can be no assurance that
charge-offs in future periods will not exceed the allowance for loan losses as estimated
at any point in time or that provisions for loan losses may be significant to a particular
accounting period.

We
have established an allowance for loan losses through a provision for loan losses charged
to expense on our statement of income. The allowance represents an amount which we believe
will be adequate to absorb probable losses on existing loans that may become
uncollectible. Our judgment in determining the adequacy of the allowance is based on
evaluations of the collectibility of loans, including consideration of factors such as the
balance of impaired loans; the quality, mix and size of our overall loan portfolio;
economic conditions that may affect the borrowers ability to repay; the amount and
quality of collateral securing the loans; our historical loan loss experience and a review
of specific problem loans. We adjust the amount of the allowance periodically based on
changing circumstances as a component of the provision for loan losses. We charge
recognized losses to the allowance and add subsequent recoveries back to the allowance.

23

---

# Provision and Allowance
for Loan Losses, continued

The
following table summarizes the activity related to the banks allowance for loan
losses:

|                                           | December 31,
|------------------------------------------ | ------------
|
|
|Balance, beginning of year                 |             
|                                           |             
|Recoveries of loans previously charged-off |             
|                                           |             
|Provision for loan losses                  |             
|                                           |             
|Loans charged-off                          |             
|                                           |             
|Balance, end of year                       |             
|                                           |             
|Allowance for loan losses to total loans   |             
|                                           |             
|Net charge-offs to average loans           |             
|                                           |             

We
do not allocate the allowance for loan losses to specific categories of loans but evaluate
the adequacy on an overall portfolio basis utilizing our credit grading system which we
apply to each loan. The bank has an independent consultant to review the loan files on a
test basis, to verify that the lenders have properly graded each loan. The banks
analysis of the adequacy of the allowance also considers subjective issues such as changes
in the lending policies and procedures, changes in local/national economy, changes in
volume or type of credits, changes in volume/severity of problem loans, quality of loan
review and board of director oversight, concentrations of credit, and peer group
comparisions. Due to our limited operating history, the provision for loan losses has been
made primarily as a result of managements assessment of general loan loss risk as
compared to banks of similar size and maturity.

24

---

# Nonperforming Assets

Nonperforming
assets, percentages of net charge-offs, and the related percentage of allowance for loan
losses are shown in the following table:

|                                           | December 31,
|------------------------------------------ | ------------
|
|
|Loans over 90 days past due                |             
|                                           |             
|Loans on non-accrual                       |             
|Mortgage                                   |             
|Commercial                                 |             
|Consumer                                   |             
|                                           |             
|Total non-accrual loans                    |             
|                                           |             
|Trouble debt restructuring                 |             
|                                           |             
|Total of nonperforming loans               |             
|                                           |             
|Other nonperforming assets                 |             
|                                           |             
|Total nonperforming assets                 |             
|                                           |             
|                                           |             
|Percentage of total assets                 |             
|                                           |             
|Percentage on nonperforming loans to       |             
|total loans and other nonperforming assets |             
|                                           |             
|Allowance for loan losses to total loans   |             
|                                           |             
|Net charge-offs to average loans           |             

At
December 31, 2003 and 2002, the allowance for loan losses was $2.7 million and $1.8
million, respectively, or 1.30% of outstanding loans at December 31, 2003 and 1.22% at
December 31, 2002, respectively. During the year ended December 31, 2003, we charged off
loans of $172,646. During the year ended December 31, 2002, we charged off loans of
$418,098.

At
December 31, 2003, nonaccrual loans represented .21% of total loans. At December 31, 2003
and 2002, the bank had $443,939 and $113,105, respectively on non-accrual status.
Generally, a loan is placed on nonaccrual status when it becomes 90 days past due as to
principal or interest, or when management believes, after considering economic and
business conditions and collection efforts, that the borrowers financial condition
is such that collection of the loan is doubtful. A payment of interest on a loan that is
classified as nonaccrual is recognized as income when received.

25

---

# Deposits and Other
Interest-Bearing Liabilities

Our
primary source of funds for loans and investments is our deposits, advances from FHLB, and
short-term repurchase agreements. National and local market trends over the past several
years suggest that consumers have moved an increasing percentage of discretionary savings
funds into investments such as annuities and stock and fixed income mutual funds.

The
following is a table of deposits by category at December 31 (dollars in thousands):

| |  | 2003 | 2002                             
| |  | ---- | ---------------------------------
|
| |  |      | Demand deposit accounts          
| |  |      | NOW accounts                     
| |  |      | Money market accounts            
| |  |      | Savings accounts                 
| |  |      | Time deposits less than $100,000 
| |  |      | Time deposits of $100,000 or more
| |  |      |                                  
| |  |      | Total deposits                   
| |  |      |                                  

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
$89.9 million and $82.7 million at December 31, 2003 and 2002, respectively. The increase
in time deposits of $100,000 or more resulted from the bank utilizing deposits that were
obtained outside of the banks primarily market. At December 31, 2003 the total of
deposits outside of the banks primary market totaled $79.6 million. The bank
anticipates being able to either renew or replace these deposits when they mature,
however, no assurance can be given that the bank will be able to replace these deposits
with the same terms or rates. Our loan-to-deposit ratio was 122% and 111% at year-end 2003
and 2002, respectively. The maturity distribution of our time deposits of $100,000 or more
at December 31, 2003 and 2002 is as follows:

| |  | 2003 | 2002                            
| |  | ---- | --------------------------------
|
|
| |  |      | Three months or less            
| |  |      | Over three through six months   
| |  |      | Over three through twelve months
| |  |      | Over twelve months              
| |  |      |                                 
| |  |      | Total                           
| |  |      |                                 

# Borrowings

At
December 31, 2003 the bank had sold $9,296,999 of securities under agreements to
repurchase with brokers with a weighted rate of 1.12% that mature in less than 90 days.
These agreements are secured with approximately $9,800,000 of investment securities. The
securities, under agreement to repurchase, averaged $5,689,259 during 2003, with
$9,865,000 being the maximum amount outstanding at any month-end.

At
December 31, 2002 the bank had sold $7,892,000 of securities under agreements to
repurchase with brokers with a weighted rate of 1.38% that mature in less than 90 days.
These agreements are secured with approximately $8,000,000 of investment securities. The
securities, under agreement to repurchase, averaged $4,349,076 during 2002, with
$8,482,600,000 being the maximum amount outstanding at any month-end.

At
December 31, 2001 the bank had $7,682,600 sales of securities under agreements to
repurchase with brokers with a weighted rate of 1.96% that mature in less than 90 days.
These agreements are secured with approximately $8,000,000 of investment securities. The
securities under agreement to repurchase averaged $1,335,382 during 2002, with $7,682,600
being the maximum amount outstanding at any month-end.

At
December 31, 2003, the bank had two unused federal funds purchased line of credit totaling
$7,000,000. At December 31, 2002 the bank had utilized $1,215,000 of its $3,700,000 of
federal funds purchased line of credit. At December 31, 2001 the bank had utilized
$800,000 of its $2,800,000 of federal funds purchased line of credit. These lines of
credit are unsecured and bear interest at the daily rate of federal funds plus 25 basis
points (1.25% at December 31, 2003).

26

---

# Borrowings, continued

At
December 31, 2003 the bank had $32,500,000 of advances from the FHLB. These advances are
secured with approximately $99,800,000 of first mortgage loans and stock in the FHLB.
Listed below is a summary of the terms and maturities of the advances:

| | o | The maturity on $5,000,000 of the advances with a weighted rate of 1.63% is July 16, 2004.
The FHLB has the option to re-price this advance as of April 16, 2004.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | The maturity on $5,000,000 of the advances with a weighted rate of 1.56% is October 15,
2007. The FHLB has the option to re-price this advance as of April 15, 2004.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | The maturity on $3,000,000 of the advances with a weighted rate of 4.86% is August 24,
2011. The FHLB has the option to re-price this advance as of August 24, 2006.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | The maturity on $5,000,000 of the advances with a weighted rate of 3.36% is January 30,
2013. The FHLB has the option to re-price this advance as of January 30, 2008.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | The maturity on $7,500,000 of the advances with a weighted rate of 1.21% is March 10,
2006. The FHLB has the option to re-price this advance as of March 10, 2004.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | The maturity on $7,000,000 of advances with a variable daily floating rate at December 31,
2003 of 1.15% is October 1, 2004. The $7,000,000 of floating rate advances can be repaid
at any time without any prepayment penalties.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

At
December 31, 2002, the bank had $13,000,000 of advances from the FHLB. These advances are
secured with approximately $22,400,000 of first mortgage loans and stock in the FHLB.
Listed below is a summary of the term and maturities of the advances:

| | o | The maturity on $5,000,000 of the advances with a weighted rate of 1.63% is July 16, 2004.
The FHLB had the option to re-price this advance as of April 16, 2003.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | The maturity on $5,000,000 of the advances with a weighted rate of 1.56% is October 15,
2007. The FHLB had the option to re-price this advance as of October 15, 2003.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | The maturity on $3,000,000 of the advances with a weighted rate of 4.86% is August 24,
2011. The FHLB has the option to re-price this advance as of August 24, 2006.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

At
December 31, 2001 the bank had $6,000,000 of advances from the FHLB of Atlanta. These
advances are secured by a combination of approximately $9,000,000 of first mortgage loans,
investment securities and stock in the FHLB. The maturity on $3,000,000 of the advances
with a weighted rate of 2.67% is March 27, 2003 and the remaining $3,000,000 with a
weighted rate of 4.83% has a maturity of August 24, 2011. The FHLB has the option to
re-price this advance as of August 24, 2006.

At
December 31, 2003 the Company had an unused $3,500,000 revolving line of credit with
another bank with a maturity of March 20, 2004. The Company has utilized this line of
credit in the past to provide proceeds to increase the capital investment in the
Companys wholly-owned bank. The line of credit bears interest at the 30 day LIBOR
rate plus 2.00%, which at December 31, 2003 was 3.12. The Company has pledged all of the
stock of the Bank as collateral for this line of credit. The line of credit agreement
contains various covenants related to net income and asset quality. As of December 31,
2003, the Company believes it is in compliance with all covenants.

At
December 31, 2002 the company had a $2,500,000 revolving line of credit with another bank
with a maturity of June 30, 2003. At December 31, 2002, the company had outstanding
$2,500,000. This line of credit had similar covenants and collateral requirements as the
$3.5 million revolving line of credit.

On
June 26, 2003, Greenville First Bancshares, Inc., through a newly-formed wholly-owned
subsidiary, issued $6.0 million floating rate trust preferred securities with a maturity
of June 26, 2033. The rate is adjusted quarterly and was 4.27% at December 31, 2003. The
current regulatory rules allow certain amounts of the trust preferred securities to be
included in the calculation of regulatory capital.

27

---

# CAPITAL RESOURCES

Total
shareholders equity amounted to $11,186,968 at December 31, 2003 and $10,231,789 at
December 31, 2002. The increase between 2002 and 2003 primarily resulted from the $1.0
million of net income incurred during 2003, less $50,736 decrease in unrealized gain on
investment securities, net of tax.

The
following table shows the return on average assets (net income divided by average total
assets), return on average equity (net income divided by average equity), and equity to
assets ratio (average equity divided by average total assets) for 2003 and 2002. Since our
inception, we have not paid cash dividends.

| |  | 2003 | 2002                     | 2001
| |  | ---- | ------------------------ | ----
|
| |  |      | Return on average assets |     
| |  |     
| |  |      | Return on average equity |     
| |  |     
| |  |      | Equity to assets ratio   |     

The
Federal Reserve Board and bank regulatory agencies require bank holding companies and
financial institutions to maintain capital at adequate levels based on a percentage of
assets and off-balance sheet exposures, adjusted for risk weights ranging from 0% to 100%.

Under
the capital adequacy guidelines, capital is classified into two tiers. These guidelines
require an institution to maintain a certain level of Tier 1 and Tier 2 capital to
risk-weighted assets. Tier 1 capital consists of common stockholders equity,
excluding the unrealized gain or loss on securities available for sale, minus certain
intangible assets. In determining the amount of risk-weighted assets, all assets,
including certain off-balance sheet assets, are multiplied by a risk-weight factor of 0%
to 100% based on the risks believed inherent in the type of asset. Tier 2 capital consists
of Tier 1 capital plus the general reserve for loan losses subject to certain limitations.
The bank is also required to maintain capital at a minimum level based on total average
assets, which is known as the Tier 1 leverage ratio.

We
are both subject to various regulatory capital requirements administered by the federal
banking agencies. Under these capital guidelines, we must maintain a minimum total
risk-based capital of 8%, with at least 4% being Tier 1 capital. In addition, we must
maintain a minimum Tier 1 leverage ratio of at least 4%. To be considered
well-capitalized, we must maintain total risk-based capital of at least 10%,
Tier 1 capital of at least 6%, and a leverage ratio of at least 5%.

The
following table sets forth the companys and the banks various capital ratios
at December 31, 2003 and 2002. At December 31, 2003 and 2002, we both were in compliance
with each of the applicable regulatory capital requirements and were considered to be
well capitalized at the bank level.

| |  | 2003 | 2002                     
| |  | ---- | -------------------------
|
|
| |  |      | Total risk-based capital 
| |  |      | Tier 1 risk-based capital
| |  |      | Leverage capital         

We
believe that capital is sufficient to fund the activities of the bank over the next two
years. The company is currently evaluating various alternatives for increasing capital. It
is managements objective to maintain the capital levels such that the bank will
continue to be considered well capitalized. However, no assurance can be given that this
objective will be achieved. We do anticipate that capital levels will be maintained at
levels that will allow the company and the bank to qualify as being adequately capitalized
as defined by OCC regulations. Depending on the timing of when additional capital is
obtained, the bank may be required to limit the level of growth that has been experienced
in the past three years. As of December 31, 2003, there were no significant firm
commitments outstanding for capital expenditures.

28

---

# EFFECT OF INFLATION AND
CHANGING PRICES

The
effect of relative purchasing power over time due to inflation has not been taken into
effect in our financial statements. Rather, the statements have been prepared on an
historical cost basis in accordance with generally accepted accounting principles.

Unlike
most industrial companies, the assets and liabilities of financial institutions such as
our company and bank are primarily monetary in nature. Therefore, the effect of changes in
interest rates will have a more significant impact on our performance than will the effect
of changing prices and inflation in general. In addition, interest rates may generally
increase as the rate of inflation increases, although not necessarily in the same
magnitude. As discussed previously, we seek to mange the relationships between interest
sensitive assets and liabilities in order to protect against wide rate fluctuations,
including those resulting from inflation.

# OFF-BALANCE SHEET RISK

Commitments
to extend credit are agreements to lend to a customer as long as there is no violation of
any material condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require the payment of a fee. At
December 31, 2003, unfunded commitments to extend credit were $51,211,000, of which
$16,075,000 is at fixed rates and $35,136,000 is at variable rates. The significant
portion of the unfunded commitments relates to consumer equity lines of credit. The bank
anticipates, based on historical experience, that the significant portion of these lines
of credit will not be funded. The bank evaluates each customers credit worthiness on
a case-by-case basis. The amount of collateral obtained, if deemed necessary by the bank
upon extension of credit, is based on managements credit evaluation of the borrower.
Collateral varies but may include accounts receivable, inventory, property, plant and
equipment, and commercial and residential real estate.

At
December 31, 2003, there was a $1,678,000 commitment under a letter of credit. The credit
risk involved in issuing letters of credit is essentially the same as that involved in
extending loan facilities to customers. Collateral varies but may include accounts
receivable, inventory, equipment, marketable securities and property. Since most of the
letters of credit are expected to expire without being drawn upon, they do not necessarily
represent future cash requirements.

Except
as disclosed in this report, we are not involved in off-balance sheet contractual
relationships, unconsolidated related entities that have off-balance sheet arrangements or
transactions that could result in liquidity needs or other commitments or significantly
impact earnings.

# MARKET RISK

Market
risk is the risk of loss from adverse changes in market prices and rates, which
principally arises from interest rate risk inherent in our lending, investing, deposit
gathering and borrowing activities. Other types of market risks, such as foreign currency
exchange rate risk and commodity price risk, do not normally arise in the normal course of
our business. Management actively monitors and manages its interest rate risk exposure.

The
principal interest rate risk monitoring technique we employ is the measurement of 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, selling securities available-for-sale, 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. We generally would benefit from increasing market rates of interest when
we have an asset-sensitive gap position and generally would benefit from decreasing market
rates of interest when we are liability-sensitive.

29

---

# MARKET RISK, continued

Due
to the fact that approximately 69% of our loans were variable rate loans at December 31,
2003, we are currently asset sensitive during most of the one-year time frame. However,
our gap analysis is not a precise indicator of our 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. For example, rates paid on a substantial
portion of core deposits may change contractually within a relatively short time frame,
but those rates are viewed by management as significantly less interest-sensitive than
market-based rates such as those paid on non-core deposits. Net interest income may be
impacted by other significant factors in a given interest rate environment, including
changes in the volume and mix of earning assets and interest-bearing liabilities.

# LIQUIDITY & INTEREST
RATE SENSITIVITY

Liquidity
management involves monitoring our sources and uses of funds in order to meet our
day-to-day cash flow requirements while maximizing profits. Liquidity represents the
ability of a company to convert assets into cash or cash equivalents without significant
loss and to raise additional funds by increasing liabilities. Liquidity management is made
more complicated because different balance sheet components are subject to varying degrees
of management control. For example, the timing of maturities of the investment portfolio
is fairly predictable and subject to a high degree of control at the time the investment
decisions are made. However, net deposit inflows and outflows are far less predictable and
are not subject to nearly the same degree of control.

At
December 31, 2003 and 2002, our liquid assets, consisting of cash and due from banks and
federal funds sold, amounted to $6,947,291 and $4,471,026, representing 3.0% and 2.6% of
total assets, respectively. Investment securities at December 31, 2003 and 2002 amounted
to $13,463,320 and $14,592,190, representing 5.8% and 8.6% of total assets, respectively;
these securities provide a secondary source of liquidity since they can be converted into
cash in a timely manner. Our ability to maintain and expand our deposit base and borrowing
capabilities also serves as a source of liquidity.

We
plan to meet our future cash needs through the liquidation of temporary investments,
maturities and sale of loans and maturity of investment securities, and generation of
deposits. During most of 2003, as a result of historically low rates that were being
earned on short-term liquidity investments, we chose to maintain a lower than normal level
of short-term liquidity securities. In addition, the bank maintains two federal funds
purchased lines of credit with correspondent banks totaling $7,000,000. The bank is also a
member of the Federal Home Loan Bank of Atlanta from which applications for borrowings can
be made for leverage purposes, if so desired. The FHLB requires that securities,
qualifying mortgage loans, and stock of the FHLB owned by the bank be pledged to secure
any advances from the FHLB. The unused borrowing capacity currently available from the
FHLB at December 31, 2003 was $20.0 million and assumes that the banks $1.6 million
investment in FHLB stock as well as qualifying mortgages would be pledged to secure any
future borrowings.

Management
believes that our existing stable base of core deposits, borrowings from the FHLB, and
short-term repurchase agreements will enable us to successfully meets our long term
liquidity needs.

Asset/liability
management is the process by which we monitor and control the mix and maturities of our
assets and liabilities. The essential purposes of asset/liability management are to ensure
adequate liquidity and to maintain an appropriate balance between interest sensitive
assets and liabilities to minimize potentially adverse impacts on earnings from changes in
market interest rates. The banks asset/liability management committee
(ALCO) monitors and considers methods of managing exposure to interest rate
risk. The ALCO consists of members of the board of directors and senior management of the
bank and meets quarterly. The ALCO is charged with the responsibility to maintain the
level of interest rate sensitivity of the banks interest sensitive assets and
liabilities within Board-approved limits.

30

---

# LIQUIDITY & INTEREST
RATE SENSITIVITY, continued

The
following table presents our rate sensitivity at each of the time intervals indicated as
of December 31, 2003. The table may not be indicative of our rate sensitivity position at
other points in time. In addition, the tables maturity distribution may differ from
the contractual maturities of the earning assets and interest bearing liabilities
presented due to consideration of prepayment speeds under various interest rate change
scenarios in the application of the interest rate sensitivity methods described above.

|                                   | Within | After three but | After one but | After   |  
|---------------------------------- | ------ | --------------- | ------------- | ------- | -
|
|
|
|                                   |        |                 |               |         |  
|Interest-earning assets:           |        |                
|Federal funds sold                 |        |                 | $             | 2,843   |  
|Investment securities              |        |                 |               | 501     |  
|Loans                              |        |                 |               | 148,763 |  
|                                   |        |                 |               |         |  
|Total earning assets               |        |                 | $             | 152,107 |  
|                                   |        |                 |               |         |  
|                                   |        |                
|Interest-bearing liabilities:      |        |                
|Money market and NOW               |        |                 | $             | 42,253  |  
|Regular savings                    |        |                 |               | 1,589   |  
|Time deposits                      |        |                 |               | 26,088  |  
|Repurchase Agreements              |        |                 |               | 9,297   |  
|FHLB advances                      |        |                 |               | 24,500  |  
|Trust preferred securities         |        |                 |               | 6,000   |  
|                                   |        |                 |               |         |  
|Total interest-bearing liabilities |        |                 | $             | 109,727 |  
|                                   |        |                 |               |         |  
|Period gap                         |        |                 | $             | 42,380  |  
|                                   |        |                
|Cumulative gap                     |        |                 | $             | 42,380  |  
|                                   |        |                
|Ratio of cumulative gap to         |        |                
|total earning assets               |        |                 |               | 18.8    | %

# ACCOUNTING, REPORTING AND REGULATORY
MATTERS

In
December 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 148,
Accounting for Stock-based CompensationTransition and Disclosure, an
amendment of FASB Statement No. 123, Accounting for Stock-Based Compensation,
to provide alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation. SFAS No. 148 also
amends the disclosure provisions of SFAS No. 123 and Accounting Pronouncement Board
(APB) Opinion No. 28, Interim Financial Reporting, to require
disclosure in the summary of significant accounting policies of the effects of an
entitys accounting policy with respect to stock-based employee compensation on
reported net income and earnings per share in annual and interim financial statements.
While SFAS No. 148 does not amend SFAS No. 123 to require companies to account
for employee stock options using the fair value method, the disclosure provisions of SFAS
No. 148 are applicable to all companies with stock-based employee compensation,
regardless of whether they account for that compensation using the fair value method

31

---

# ACCOUNTING,
REPORTING AND REGULATORY MATTERS, continued

of
SFAS No. 123 or the intrinsic value method of APB Opinion No. 25. The provisions
of SFAS No. 148 are effective for annual financial statements for fiscal years ending
after December 15, 2002, and for financial reports containing condensed financial
statements for interim periods beginning after December 15, 2002.

In
April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative instruments
embedded in other contracts and loan commitments that relate to the origination of
mortgage loans held for sale, and for hedging activities under SFAS No. 133. SFAS
No. 149 is generally effective for contracts entered into or modified after
June 30, 2003. The adoption of SFAS No. 149 will not have a material impact on
the financial condition or operating results of the Company.

In
May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150
establishes standards for how an issuer classifies and measures certain financial
instruments with characteristics of both liabilities and equity. It requires that an
issuer classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances.) Many of those instruments were previously classified as
equity. SFAS No. 150 is generally effective for financial instruments entered into or
modified after May 31, 2003, and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did
not have a material impact on the financial condition or operating results of the Company.

In
November 2002, the FASB issued Interpretation (FIN) No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN No. 45 requires a company, at the
time it issues a guarantee, to recognize an initial liability for the fair value of
obligations assumed under the guarantee and elaborates on existing disclosure requirements
related to guarantees and warranties. The initial recognition requirements of FIN No. 45
are effective for guarantees issued or modified after December 31, 2002. The disclosure
requirements are effective for financial statements of periods ending after December 15,
2002. The adoption of FIN No. 45 did not have a material effect on the Companys
financial position or results of operations.

In
January 2003, the FASB issued FIN No. 46, Consolidation of Variable
Interest Entities. FIN No. 46 requires a variable interest entity to be consolidated
by a company if that company is subject to a majority of the risk of loss from the
variable interest entitys activities or entitled to receive a majority of the
entitys residual returns, or both. FIN No. 46 also requires disclosures about
variable interest entities that a company is not required to consolidate, but in which it
has a significant variable interest. FIN No. 46 provides guidance for determining whether
an entity qualifies as a variable interest entity by considering, among other
considerations, whether the entity lacks sufficient equity or its equity holders lack
adequate decision-making ability. The consolidation requirements of FIN No. 46 apply
immediately to variable interest entities created after January 31, 2003. The
consolidation requirements apply to existing entities in the first fiscal year or interim
period beginning after June 15, 2003. Certain of the disclosure requirements apply in
all financial statements issued after January 31, 2003, regardless of when the
variable interest entity was established. The adoption of FIN No. 46 did not have a
material effect on the Companys financial position or results of operations. As a
result of adoption of FIN 46, the Company will be required to deconsolidate the Trust for
years ending December 31, 2004 and years thereafter.

In
November 2003, the Emerging Issues Task Force (EITF) reached a consensus that
certain quantitative and qualitative disclosures should be required for debt and
marketable equity securities classified as available for sale or held to maturity under
SFAS No. 115 and SFAS No. 124 that are impaired at the balance sheet date but for which an
other-than-temporary impairment has not been recognized. Accordingly the EITF issued EITF
No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to
Certain Investments. This issue addresses the meaning of other-than-temporary
impairment and its application to investments classified as either available for sale or
held to maturity under SFAS No. 115 and provides guidance on quantitative and qualitative
disclosures. EITF No. 03-1 is effective for fiscal years ending after December 15, 2003.
Adopting the disclosure provisions of EITF No. 03-1 did not have a material effect on the
Companys financial position or results of operations.

Other
accounting standards that have been issued or proposed by the FASB or other
standards-setting bodies that do not require adoption until a future date are not expected
to have a material impact on the consolidated financial statements upon adoption.

32

---

# Item 7.  Financial
Statements

# INDEX TO FINANCIAL
STATEMENTS

# FOR THE YEARS ENDED
DECEMBER 31, 2003 AND 2002

|                                                                                | 
|------------------------------------------------------------------------------- | 
|Independent Accountants' Report                                                 | 
|Consolidated Balance Sheets                                                     | 
|Consolidated Statements of Income                                               | 
|Consolidated Statements of Shareholders' Equity and Comprehensive Income (Loss) | 
|Statements of Cash Flows                                                        | 
|Notes to Consolidated Financial Statements                                      | 

33

---

# INDEPENDENT
ACCOUNTANTS REPORT

The Directors Greenville First
Bancshares, Inc. and SubsidiariesGreenville, South Carolina

We
have audited the accompanying consolidated balance sheets of Greenville First
Bancshares, Inc. and Subsidiariesas of December 31, 2003 and 2002 and the
related consolidated statements of income, shareholders equity and comprehensive
income (loss), and cash flows for the years then ended. 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 auditing standards generally accepted in the
United States of America. Those standards require that we plan and perform the audits 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 Greenville First Bancshares, Inc.
and Subsidiariesas of December 31, 2003 and 2002 and the results of their
operations and their cash flows for the years ended in conformity with accounting
principles generally accepted in the United States of America.

/s/ Elliott Davis, LLCElliott
Davis, LLCGreenville, South CarolinaFebruary 13, 2004

34

---

# GREENVILLE FIRST
BANCSHARES, INC. & SUBSIDIARIES CONSOLIDATED BALANCE
SHEETS

|                                                                        | December 31,
|----------------------------------------------------------------------- | ------------
|
|Assets                                                                  |             
|Cash and due from banks                                                 |             
|Federal funds sold                                                      |             
|Investment securities available for sale                                |             
|Investment securities held to maturity-                                 |             
|( market value $9,761,305 and $0, respectively)                         |             
|Other investments, at cost                                              |             
|Loans, net                                                              |             
|Accrued interest                                                        |             
|Property and equipment, net                                             |             
|Other real estate owned                                                 |             
|Other assets                                                            |             
|                                                                        |             
|Total assets                                                            |             
|                                                                        |             
|Liabilities                                                             |             
|Deposits                                                                |             
|Official checks outstanding                                             |             
|Federal funds purchased and repurchase agreements                       |             
|Federal Home Loan Bank advances                                         |             
|Note payable                                                            |             
|Trust preferred securities                                              |             
|Accrued interest payable                                                |             
|Accounts payable and accrued expenses                                   |             
|                                                                        |             
|Total liabilities                                                       |             
|                                                                        |             
|Commitments and contingencies - Note 13                                 |             
|                                                                        |             
|Shareholders' equity                                                    |             
|Preferred stock, par value $.01 per share, 10,000,000 shares            |             
|authorized, no shares issued                                            |             
|Common stock, par value $.00667 and $.01 per share at December 31, 2003 |             
|and 2002, respectively; authorized, 10,000,000 shares; issued 1,724,994 |             
|and 1,150,000 shares at December 31, 2003 and 2002, respectively        |             
|Additional paid-in capital                                              |             
|Accumulated other comprehensive income                                  |             
|Retained earnings (deficit)                                             |             
|                                                                        |             
|Total shareholders' equity                                              |             
|                                                                        |             
|Total liabilities and shareholders' equity                              |             
|                                                                        |             

See
notes to consolidated financial statements that are an integral part of these consolidated
statements.

35

---

# GREENVILLE FIRST
BANCSHARES, INC. & SUBSIDIARIES CONSOLIDATED BALANCE
SHEETS

|                                                    | For the years ended
|--------------------------------------------------- | -------------------
|
|
|Interest income                                     |                    
|Loans                                               |                    
|Investment securities                               |                    
|Federal funds sold                                  |                    
|                                                    |                    
|Total interest income                               |                    
|                                                    |                    
|Interest expense                                    |                    
|Deposits                                            |                    
|Borrowings                                          |                    
|                                                    |                    
|Total interest expense                              |                    
|                                                    |                    
|Net interest income                                 |                    
|Provision for loan losses                           |                    
|                                                    |                    
|Net interest income after provision for loan losses |                    
|                                                    |                    
|Noninterest income                                  |                    
|Loan fee income                                     |                    
|Service fees on deposit accounts                    |                    
|Write-down  of real estate owned                    |                    
|Other income                                        |                    
|                                                    |                    
|Total noninterest income                            |                    
|                                                    |                    
|Noninterest expenses                                |                    
|Salaries and benefits                               |                    
|Professional fees                                   |                    
|Marketing                                           |                    
|Insurance                                           |                    
|Occupancy                                           |                    
|Data processing and related costs                   |                    
|Telephone                                           |                    
|Other                                               |                    
|                                                    |                    
|Total noninterest expenses                          |                    
|                                                    |                    
|Income before income tax expense                    |                    
|                                                    |                    
|Income tax expense                                  |                    
|                                                    |                    
|Net income                                          |                    
|                                                    |                    
|Earnings per common share:                          |                    
|Basic                                               |                    
|                                                    |                    
|Diluted                                             |                    
|                                                    |                    
|Weighted average common shares outstanding          |                    
|Basic                                               |                    
|                                                    |                    
|Diluted                                             |                    
|                                                    |                    

See
notes to consolidated financial statements that are an integral part of these consolidated
statements.

36

---

# GREENVILLE FIRST
BANCSHARES, INC. & SUBSIDIARIES CONSOLIDATED BALANCE
SHEETSAND COMPREHENSIVE INCOME (LOSS)FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

|                        |  |  |  | Accumu-   |  |  
|----------------------- |  |  |  | --------- |  | -
|
|
|
|
|
|
|December 31, 2001       |  |  |  | 1,150,000 |  | $
|                        |  | 
|Net income              |  |  |  | -         |  |  
|                        |  | 
|Comprehensive loss,     |  | 
|net of tax -            |  | 
|Unrealized holding gain |  | 
|on securities available |  | 
|for sale                |  |  |  | -         |  |  
|                        |  |  |  |           |  |  
|Comprehensive income    |  |  |  | -         |  |  
|                        |  |  |  |           |  |  
|December 31, 2002       |  |  |  | 1,150,000 |  |  
|                        |  | 
|Net  income             |  |  |  | -         |  |  
|                        |  | 
|Stock split- 3 for 2    |  |  |  | 574,994   |  |  
|                        |  | 
|Comprehensive income,   |  | 
|net of tax -            |  | 
|Unrealized holding loss |  | 
|on securities available |  | 
|for sale                |  |  |  | -         |  |  
|                        |  |  |  |           |  |  
|Comprehensive income    |  |  |  | -         |  |  
|                        |  |  |  |           |  |  
|December 31, 2003       |  |  |  | 1,724,994 |  | $
|                        |  |  |  |           |  |  

See
notes to consolidated financial statements that are an integral part of these consolidated
statements.

37

---

# GREENVILLE FIRST BANCSHARES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS
OF CASH FLOWS

|                                                          | For the years ended
|--------------------------------------------------------- | -------------------
|
|
|Operating activities                                      |                    
|Net income                                                |                    
|Adjustments to reconcile net income to cash               |                    
|provided by operating activities:                         |                    
|Provision for loan losses                                 |                    
|Depreciation and other amortization                       |                    
|Accretion and amortization of securities                  |                    
|discounts and premium, net                                |                    
|Decrease (increase) in other assets, net                  |                    
|Increase in other liabilities, net                        |                    
|                                                          |                    
|Net cash provided by operating activities                 |                    
|                                                          |                    
|Investing activities                                      |                    
|Increase (decrease) in cash realized from:                |                    
|Origination of loans, net                                 |                    
|Purchase of property and equipment                        |                    
|Purchase of investment securities:                        |                    
|Available for sale                                        |                    
|Held to maturity                                          |                    
|Other investments                                         |                    
|Payments and maturity of investment securities:           |                    
|Available for sale                                        |                    
|Held to maturity                                          |                    
|Other investments                                         |                    
|                                                          |                    
|Net cash for investing activities                         |                    
|                                                          |                    
|Financing activities                                      |                    
|Increase in deposits, net                                 |                    
|Increase in short-term borrowings                         |                    
|Increase(decrease) in other borrowings                    |                    
|Proceeds from issuance of trust preferred securities      |                    
|Increase in Federal Home Loan Bank advances               |                    
|                                                          |                    
|Net cash provided by financing activities                 |                    
|                                                          |                    
|Net increase in cash and cash equivalents                 |                    
|                                                          |                    
|Cash and cash equivalents at beginning of  the year       |                    
|                                                          |                    
|Cash and cash equivalents at end of the year              |                    
|                                                          |                    
|Supplemental information                                  |                    
|Cash paid for                                             |                    
|Interest                                                  |                    
|                                                          |                    
|Income taxes                                              |                    
|                                                          |                    
|Schedule of non-cash transactions                         |                    
|Foreclosure of  real estate                               |                    
|                                                          |                    
|Unrealized gain (loss) on securities, net of income taxes |                    
|                                                          |                    

See
notes to consolidated financial statements that are an integral part of these consolidated
statements.

38

---

# GREENVILLE FIRST
BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

# NOTE 1  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES

Greenville
First Bancshares, Inc.(the Company) is a South Carolina
corporation that owns all of the capital stock of Greenville First Bank, N.A. (the
bank) and all of the stock of Greenville First Statutory Trust I (the
Trust). The bank is a national bank organized under the laws of the United
States located in Greenville County, South Carolina. The bank is primarily engaged in the
business of accepting demand deposits and savings deposits insured by the Federal Deposit
Insurance Corporation, and providing commercial, consumer and mortgage loans to the
general public. The Trust is a special purpose subsidiary organized for the sole purpose
of issuing trust preferred securities.

On
October 26, 1999, the Company sold 1,100,000 shares of its common stock at $10 per share
and on November 30, 1999 sold 50,000 additional shares for a total of 1,150,000 shares
(1,724,994 after adjustment of 3 for 2 stock split). The offering raised $10,646,700 net
of underwriting discounts, commissions and offering expenses. The directors and executive
officers of the Company purchased 266,900 shares of common stock at $10 per share, for a
total of $2,669,000. The Company has used $10.4 million of the proceeds to capitalize the
Bank.

On
June 26, 2003, The Trust offered and sold $6,000,000 of floating rate securities.

On November
17, 2003, shareholders of record as of November 3, 2003, received one additional share of
stock for every two shares of stock owned prior to the 3 for 2 stock split. All fractional
shares were paid in cash. The earnings per share amounts for all periods shown have been
adjusted to reflect the 3 for 2 split.

The
following is a description of the more significant accounting and reporting policies which
the Company follows in preparing and presenting consolidated financial statements.

|Basis of presentation | 
|--------------------- | 

| | The accompanying consolidated financial statements include the accounts of the Company and its
wholly owned subsidiaries, Greenville First Bank, N.A. and Greenville Statutory Trust I.
In consolidation, all significant intercompany transactions have been eliminated. The
accounting and reporting policies conform to generally accepted accounting principles.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Estimates | 
|--------- | 

| | The
preparation of consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities as of the date of the consolidated financial
statements and the reported amount of income and expenses during the reporting periods.
Actual results could differ from those estimates.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Risks and uncertainties | 
|----------------------- | 

| | In the normal course of its business the Company encounters two significant types of risks:
economic and regulatory. There are three main components of economic risk: interest rate
risk, credit risk and market risk. The Company is subject to interest rate risk to the
degree that its interest-bearing liabilities mature or reprice at different speeds, or on
different bases, than its interest-earning assets. Credit risk is the risk of default
within the Companys loan portfolio that results from borrowers inability or
unwillingness to make contractually required payments. Market risk reflects changes in the
value of collateral underlying loans receivable and the valuation of real estate held by
the Company.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company is subject to the regulations of various governmental agencies. These regulations
can and do change significantly from period to period. The Company also undergoes periodic
examinations by the regulatory agencies, which may subject it to changes with respect to
valuation of assets, amount of required loss allowance and operating restrictions
resulting from the regulators judgments based on information available to them at
the time of their examinations. The bank makes loans to individuals and businesses in and
around Upstate South Carolina for various personal and commercial purposes.
The Bank has a diversified loan portfolio. Borrowers ability to repay their loans is
not dependent upon any specific economic sector.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

39

---

# NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES,
(Continued)

|Investment securities | 
|--------------------- | 

| | The Company accounts for investment
securities in accordance with Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities. The
statement requires investments in equity and debt securities to be classified into three
categories:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 1. | Available for sale securities: These are securities that are not
               classified as either held to maturity or as trading securities. These securities
               are reported at fair market value. Unrealized gains and losses are reported, net
               of income taxes, as separate components of shareholders equity
               (accumulated other comprehensive income).
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2. | Held to maturity securities: These are investment securities that the
               Company has the ability and intent to hold until maturity. These securities are
               stated at cost, adjusted for amortization of premiums and the accretion of
               discounts.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. | Trading securities: These are securities that are bought and held
               principally for the purpose of selling in the near future. Trading securities
               are reported at fair market value, and related unrealized gains and losses are
               recognized in the income statement. The Company has no trading securities.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Gains or losses on dispositions of
investment securities are based on the differences between the net proceeds and the
adjusted carrying amount of the securities sold, using the specific identification method.
Premiums and discounts are amortized or accrued into interest income by a method that
approximates a level yield.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Other investments | 
|----------------- | 

| | The Bank, as a member institution, is
required to own stock investments in the Federal Home Loan Bank of Atlanta and the Federal
Reserve Bank. The stock is generally pledged against any borrowings from these
institutions. No ready market exists for the stock and it has no quoted market value.
However, redemption of these stocks has historically been at par value.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Loans, interest and fee income on loans | 
|--------------------------------------- | 

| | Loans are stated at the principal
balance outstanding. Unamortized net loan fees and the allowance for possible loan losses
are deducted from total loans on the balance sheet. Interest income is recognized over the
term of the loan based on the principal amount outstanding. The net of loan origination
fees received and direct costs incurred in the origination of loans is deferred and
amortized to interest income over the contractual life of the loans adjusted for actual
principal prepayments using a method approximating the interest method.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Loans are generally placed on
non-accrual status when principal or interest becomes ninety days past due, or when
payment in full is not anticipated. When a loan is placed on non-accrual status, interest
accrued but not received is generally reversed against interest income. Cash receipts on
non-accrual loans are not recorded as interest income, but are used to reduce principal.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Allowance for loan losses | 
|------------------------- | 

| | The provision for loan losses charged
to operating expenses reflects the amount deemed appropriate by management to establish an
adequate reserve to meet the present and foreseeable risk characteristics of the current
loan portfolio. Managements judgment is based on periodic and regular evaluation of
individual loans, the overall risk characteristics of the various portfolio segments, past
experience with losses and prevailing and anticipated economic conditions. Loans that are
determined to be uncollectable are charged against the allowance. Provisions for loan
losses and recoveries on loans previously charged off are added to the allowance.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

40

---

# NOTE
1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, Continued

|Impaired loans | 
|-------------- | 

| | The
Bank accounts for impaired loans in accordance with SFAS No. 114, Accounting by
Creditors for Impairment of a Loan. This statement requires that all lenders value
loans at the loans fair value if it is probable that the lender will be unable to
collect all amounts due according to the terms of the loan agreement. Fair value may be
determined based upon the present value of expected cash flows, market price of the loan,
if available, or value of the underlying collateral. Expected cash flows are required to
be discounted at the loans effective interest rate. SFAS No. 114 was amended by SFAS
No. 118 to allow a lender to use existing methods for recognizing interest income on an
impaired loan and by requiring additional disclosures about how a creditor recognizes
interest income on an impaired loan.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Under SFAS No. 114, as amended by SFAS No. 118, when the ultimate collectibility of an impaired
loans principal is in doubt, wholly or partially, all cash receipts are applied to
principal. Once the reported principal balance has been reduced to zero, future cash
receipts are applied to interest income, to the extent that any interest has been
foregone. Further cash receipts are recorded as recoveries of any amounts previously
charged off. When this doubt does not exist, cash receipts are applied under the
contractual terms of the loan agreement first to interest income then to principal.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | A loan is also considered impaired if its terms are modified in a troubled debt
restructuring. For these accruing impaired loans, cash receipts are typically applied to
principal and interest receivable in accordance with the terms of the restructured loan
agreement. Interest income is recognized on these loans using the accrual method of
accounting. As of December 31, 2003 and 2002, the Bank had no impaired loans.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Non-performing assets | 
|--------------------- | 

| | Non-performing assets include real estate acquired through foreclosure or deed taken in lieu of
foreclosure, and loans on non-accrual status. Loans are placed on non-accrual status when,
in the opinion of management, the collection of additional interest is questionable.
Thereafter no interest is taken into income unless received in cash or until such time as
the borrower demonstrates the ability to pay principal and interest.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Real estate acquired in settlement of loans | 
|------------------------------------------- | 

| | estate acquired through foreclosure is initially recorded at the lower of cost or
estimated fair value. Subsequent to the date of acquisition, it is carried at the lower of
cost or fair value, adjusted for net selling costs. Fair values of real estate owned are
reviewed regularly and writedowns are recorded when it is determined that the carry value
of real estate exceeds the fair value less estimated costs to sell. Costs relating to the
development and improvement of such property are capitalized, whereas those costs relating
to holding the property are expensed.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Property and equipment | 
|---------------------- | 

| | Property
and equipment are stated at cost. Major repairs are charged to operations, while major
improvements are capitalized. Depreciation is computed using the straight-line method over
the estimated useful lives of the related assets. Upon retirement, sale, or other
disposition of property and equipment, the cost and accumulated depreciation are
eliminated from the accounts, and gain or loss is included in income from operations.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Securities sold under agreements to repurchase | 
|---------------------------------------------- | 

| | The
Bank enters into sales of securities under agreements to repurchase. Fixed-coupon
repurchase agreements are treated as financing, with the obligation to repurchase
securities sold being reflected as a liability and the securities underlying the
agreements remaining as assets.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Advertising and public relations expense | 
|---------------------------------------- | 

| | Advertising,
promotional and other business development costs are generally expensed as incurred.
External costs incurred in producing media advertising are expensed the first time the
advertising takes place. External costs relating to direct mailing costs are expensed in
the period in which the direct mailings are sent.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

41

---

# NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AND ACTIVITIES, Continued>

|Income taxes | 
|------------ | 

| | The
financial statements have been prepared on the accrual basis. When income and expenses are
recognized in different periods for financial reporting purposes versus for purposes of
computing income taxes currently payable, deferred taxes are provided on such temporary
differences. The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. Under SFAS No. 109, deferred tax assets and
liabilities are recognized for the expected future tax consequences of events that have
been recognized in the consolidated financial statements or tax returns. Deferred tax
assets and liabilities are measured using the enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to be
realized or settled.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Stock Based Compensation | 
|------------------------ | 

| | The
Company has a stock-based employee compensation plan that is further described in Note 18.
The Company accounts for the plan under the recognition and measurement principles of
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock
Issued to Employees, and related Interpretations. No stock-based employee
compensation cost is reflected in net income, as all stock options granted under these
plans had an exercise price equal to the market value of the underlying common stock on
the date of grant. The following table illustrates the effect on net income and earnings
per share if the Company had applied the fair value recognition provisions of Financial
Accounting Standards Board (FASB), SFAS No. 123, Accounting for
Stock-Based Compensation, to stock-based employee compensation. All amounts have
been restated for the 3 for 2 stock split.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | For the years ended December 31,
| |  | --------------------------------
|
|
| |  |                                 
| |  |                                 
| |  |                                 
| |  |                                 
| |  |                                 
| |  |                                 
| |  |                                 
| |  |                                 
| |  |                                 
| |  |                                 
| |  |                                 
| |  |                                 
| |  |                                 
| |  |                                 

| | The fair market value of the option grant is estimated on the date of grant using the
Black-Scholes option-pricing model. The following assumptions were used for grants:
expected volatility of 10% for 2003 and 2002, risk-free interest rate of 3.00% for 2003
and 2002, respectively, and expected lives of the options 10 years and the assumed
dividend rate was zero.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Statement of cash flows | 
|----------------------- | 

| | For
purposes of reporting cash flows, cash and cash equivalents are defined as those amounts
included in the balance sheet captions Cash and Due From Banks and Federal Funds
Sold. Cash and cash equivalents have an original maturity of three months or less.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

42

---

# NOTE 1  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, Continued

|Reclassifications | 
|----------------- | 

| | Certain amounts, previously reported, have been reclassified to state all periods on a comparable
basis that had no effect on shareholders equity or net income.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|Earnings per common share | 
|------------------------- | 

| | The following schedule reconciles the numerators and denominators of the basic and diluted
earnings per share computations for the years ended December 31, 2003 and 2002. Dilutive
common shares arise from the potentially dilutive effect of Greenville First Bancshares,
Inc.s stock options and warrants that are outstanding. The assumed conversion of
stock options and warrants can create a difference between basic and dilutive net income
per common share. The numbers of shares and the earnings per share have been adjusted for
the 3 for 2 stock split.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | For the years ended December 31,
| |  | --------------------------------
|
| |  |                                 
| |  |                                 
| |  |                                 
| |  |                                 
| |  |                                 
| |  |                                 
| |  |                                 
| |  |                                 
| |  |                                 
| |  |                                 
| |  |                                 
| |  |                                 

|Recently issued accounting pronouncements | 
|----------------------------------------- | 

| | The following is a summary of recent authoritative pronouncements that affect accounting,
reporting, and disclosure of financial information by the Company.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In December 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 148,
Accounting for Stock-based CompensationTransition and Disclosure, an
amendment of FASB Statement No. 123, Accounting for Stock-Based Compensation,
to provide alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation. SFAS No. 148 also
amends the disclosure provisions of SFAS No. 123 and Accounting Pronouncement Board
(APB) Opinion No. 28, Interim Financial Reporting, to require
disclosure in the summary of significant accounting policies of the effects of an
entitys accounting policy with respect to stock-based employee compensation on
reported net income and earnings per share in annual and interim financial statements.
While SFAS No. 148 does not amend SFAS No. 123 to require companies to account
for employee stock options using the fair value method, the disclosure provisions of SFAS
No. 148 are applicable to all companies with stock-based employee compensation,
regardless of whether they account for that compensation using the fair value method of
SFAS No. 123 or the intrinsic value method of APB Opinion No. 25. The provisions
of SFAS No. 148 are effective for annual financial statements for fiscal years ending
after December 15, 2002, and for financial reports containing condensed financial
statements for interim periods beginning after December 15, 2002. The Company adopted
the disclosure only provisions of this pronouncement which had no effect on the financial
condition or operating results of the Company.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative instruments
embedded in other contracts and loan commitments that relate to the origination of
mortgage loans held for sale, and for hedging activities under SFAS No. 133. SFAS
No. 149 is generally effective for contracts entered into or modified after
June 30, 2003. The adoption of SFAS No. 149 will not have a material impact on
the financial condition or operating results of the Company.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

43

---

# NOTE 1  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, Continued

| | In
May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150
establishes standards for how an issuer classifies and measures certain financial
instruments with characteristics of both liabilities and equity. It requires that an
issuer classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances.) Many of those instruments were previously classified as
equity. SFAS No. 150 is generally effective for financial instruments entered into or
modified after May 31, 2003, and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did
not have any impact on the financial condition or operating results of the Company.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
November 2002, the FASB issued Interpretation (FIN) No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN No. 45 requires a company, at the
time it issues a guarantee, to recognize an initial liability for the fair value of
obligations assumed under the guarantee and elaborates on existing disclosure requirements
related to guarantees and warranties. The initial recognition requirements of FIN No. 45
are effective for guarantees issued or modified after December 31, 2002. The disclosure
requirements are effective for financial statements of periods ending after December 15,
2002. The adoption of FIN No. 45 did not have any effect on the Companys financial
position or results of operations.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
January 2003, the FASB issued FIN No. 46, Consolidation of Variable
Interest Entities. FIN No. 46 requires a variable interest entity to be consolidated
by a company if that company is subject to a majority of the risk of loss from the
variable interest entitys activities or entitled to receive a majority of the
entitys residual returns, or both. FIN No. 46 also requires disclosures about
variable interest entities that a company is not required to consolidate, but in which it
has a significant variable interest. FIN No. 46 provides guidance for determining whether
an entity qualifies as a variable interest entity by considering, among other
considerations, whether the entity lacks sufficient equity or its equity holders lack
adequate decision-making ability. The consolidation requirements of FIN No. 46 apply
immediately to variable interest entities created after January 31, 2003. The
consolidation requirements apply to existing entities in the first fiscal year or interim
period beginning after June 15, 2003. Certain of the disclosure requirements apply in
all financial statements issued after January 31, 2003, regardless of when the
variable interest entity was established. The adoption of FIN No. 46 will not have a
material effect on the Companys financial position or results of operations. As a
result of adoption of FIN No. 46, the Company will be required to deconsolidate the Trust
for years ending December 31, 2004 and thereafter.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
November 2003, the Emerging Issues Task Force (EITF) reached a consensus that
certain quantitative and qualitative disclosures should be required for debt and
marketable equity securities classified as available for sale or held to maturity under
SFAS No. 115 and SFAS No. 124 that are impaired at the balance sheet date but for which an
other-than-temporary impairment has not been recognized. Accordingly the EITF issued EITF
No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to
Certain Investments. This issue addresses the meaning of other-than-temporary
impairment and its application to investments classified as either available for sale or
held to maturity under SFAS No. 115 and provides guidance on quantitative and qualitative
disclosures. EITF No. 03-1 is effective for fiscal years ending after December 15, 2003.
Adopting the disclosure provisions of EITF No. 03-1 did not any material effect on the
Companys financial position or results of operations.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Other
accounting standards that have been issued or proposed by the FASB or other
standards-setting bodies that do not require adoption until a future date are not expected
to have a material impact on the consolidated financial statements upon adoption.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# NOTE 2 
RESTRICTIONS ON CASH AND DUE FROM BANKS

The
Bank is required to maintain average cash reserve balances, computed by applying
prescribed percentages to its various types of deposits, either at the bank or on deposit
with the Federal Reserve Bank. At December 31, 2003 and 2002, the bank had $766,185 and
$606,623, respectively on deposit with the Federal Reserve Bank to meet this requirement.

# NOTE 3  FEDERAL
FUNDS SOLD

The
Banks cash reserves in excess of the required amounts to be held by the Federal
Reserve Bank (Note2) may be lent to other banks on a daily basis. At December 31, 2003 and
2002, federal funds sold amounted to $2,842,594 and $41,736, respectively.

44

---

# NOTE 4  INVESTMENT
SECURITIES

The
amortized costs and fair value of investment securities available for sale are as follows:

|                            | December 31, 2003
|--------------------------- | -----------------
|
|
|Federal agencies            |                  
|Mortgage-backed             |                  
|                            |                  
|Total investment securities |                  
|                            |                  

|                            | December 31, 2002
|--------------------------- | -----------------
|
|
|Federal agencies            |                  
|Mortgage-backed             |                  
|                            |                  
|Total investment securities |                  
|                            |                  

At
December 31, 2003, each of the investment securities available for sale had individual
unrealized gains.

The amortized costs and fair values of investment securities available for sale at
December 31, 2003 and 2002, by contractual maturity, are shown below. Expected maturities
may differ from contractual maturities because issuers have the right to prepay the
obligations.

| |  | December 31, 2003 | December 31, 2002                 
| |  | ----------------- | ----------------------------------
|
|
| |  |                   | Due in less than one year         
| |  |                   | Due after one through three years 
| |  |                   | Due after three through five years
| |  |                   | Due after five through ten years  
| |  |                   |                                   
| |  |                   | Total investment securities       
| |  |                   |                                   

At
December 31, 2003, the Companys held-to-maturity portfolio totaled $9,834,324 and is
recorded at amortized cost. The portfolio includes two FNMA mortgage-backed securities.
The first security has a balance of $8,871,418 with a 2023 maturity. The second security
has a balance of $962,906 with a maturity of 2013. The two securities were purchased in
July of 2003 and had an unrealized loss totaling $73,019 at December 31, 2003. The Company
believes, based on industry analyst reports and credit ratings that the deterioration in
value is attributed to changes in market interest rates and not in the credit quality of
the issuer and therefore, these losses are not considered other-than-temporary. The
company has the ability and intent to hold these securities until such time as the value
recovers or the securities mature. The Company had no securities at December 31, 2002
classified as held-to-maturity.

Other
investments securities totaled $2,110,150 and $905,000 at December 31, 2003 and 2002,
respectively. Other investments at December 31, 2003, consisted of Federal Reserve Bank
stock with a cost of $485,150 and Federal Home Loan Bank stock with a cost of $1,625,000.
At December 31, 2002, the company owned Federal Reserve Bank stock with a cost of $255,000
and Federal Home Loan Bank stock with a cost of $650,000.

No
investment securities were sold in 2003 or 2002. Accordingly, no gains or losses were
recorded. Included in the investment portfolios at December 31, 2003, are mortgage-backed
securities issued by the Federal National Mortgage Association totaling $11,937,797. At
December 31, 2003 and 2002 $9,932,763 and $14,244,440, respectively, of securities were
pledged as collateral for public funds or repurchase agreements.

45

---

# NOTE 5  LOANS

The
composition of net loans by major loan categories is as follows:

|                               | December 31,
|------------------------------ | ------------
|
|Real estate:                   |             
|Commercial                     |             
|Owner occupied                 |             
|Non-owner occupied             |             
|Construction                   |             
|                               |             
|                               |             
|                               |             
|Consumer                       |             
|Residential                    |             
|Home equity                    |             
|Construction                   |             
|                               |             
|                               |             
|                               |             
|Total real estate loans        |             
|                               |             
|Commercial business            |             
|Consumer-other                 |             
|Deferred origination fees, net |             
|                               |             
|Gross loans                    |             
|Less allowance for loan losses |             
|                               |             
|Loans, net                     |             
|                               |             

At
December 31, 2003 and 2002, there was $443,939 and $113,105, respectively of loans
classified as non-accruing loans. Foregone interest income on the non-accrual loans in
2003 was approximately $6,100 and was approximately $4,400 in 2002.

At
December 31, 2003, certain of the Banks first mortgage loans were pledged as
collateral for advances from the Federal Home Loan Bank of Atlanta (FHLB), as set forth in
Note 9.

The
composition of gross loans by rate type is as follows:

|                    | December 31,
|------------------- | ------------
|
|Variable rate loans |             
|Fixed rate loans    |             
|                    |             
|                    |             
|                    |             

The allowance
for loan losses is available to absorb future loan charge-offs. The allowance is increased
by provisions charged to operating income and by recoveries of loans that were previously
written-off. The allowance is decreased by the aggregate loan balances, if any, that were
deemed uncollectible during the year.

Activity
within the allowance for loan losses account follows:

|                                                                 | For the years ended
|---------------------------------------------------------------- | -------------------
|
|
|Balance, beginning of year                                       |                    
|Recoveries of loans previously charged-off against the allowance |                    
|Provision for loan losses                                        |                    
|Loans charged-off against the allowance                          |                    
|                                                                 |                    
|Balance, end of year                                             |                    
|                                                                 |                    

46

---

# NOTE 6  PROPERTY
AND EQUIPMENT

Property
and equipment are stated at cost less accumulated depreciation. Components of property and
equipment included in the consolidated balance sheets are as follows:

|                             | December 31,
|---------------------------- | ------------
|
|Leasehold improvements       |             
|Furniture and equipment      |             
|Software                     |             
|                             |             
|                             |             
|Accumulated depreciation     |             
|                             |             
|Total property and equipment |             
|                             |             

The
Companys main office building is leased for twenty years (see note 13).

Depreciation
expense for the years ended December 31, 2003 and 2002 was $162,618 and $209,810,
respectively. Depreciation is charged to operations over the estimated useful lives of the
assets. The estimated useful lives and methods of depreciation for the principal items
follow:

|                        |  | 
|----------------------- |  | 
|Type of Asset           |  | 
|                        |  | 
|Software                |  | 
|Furniture and equipment |  | 
|Leasehold improvements  |  | 

# NOTE 7  DEPOSITS

The
following is a detail of the deposit accounts:

|                         | December 31,
|------------------------ | ------------
|
|
|Non-interest bearing     |             
|Interest bearing:        |             
|NOW accounts             |             
|Money market accounts    |             
|Savings                  |             
|Time, less than $100,000 |             
|Time, $100,000 and over  |             
|                         |             
|Total deposits           |             
|                         |             

At
December 31, 2003 and 2002, the bank had approximately $79.6 million and $46.2 million of
time deposits that were obtained outside of the banks primarily market. Interest
expense on time deposits greater than $100,000 was $1,437,722 and $1,316,693 in the years
ended December 31, 2003 and 2002, respectively.

At
December 31, 2003 the scheduled maturities of certificates of deposit are as follows:

| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 

47

---

# NOTE 8 FEDERAL
FUNDS PURCHASED AND REPURCHASE AGREEMENTS

At
December 31, 2003 the bank had sold $9,296,999 of securities under agreements to
repurchase with brokers with a weighted rate of 1.12% that mature in less than 90 days.
These agreements are secured with approximately $9,800,000 of investment securities. The
securities, under agreement to repurchase, averaged $5,689,259 during 2003, with
$9,865,000 being the maximum amount outstanding at any month-end.

At
December 31, 2002 the bank had sold $7,892,000 of securities under agreements to
repurchase with brokers with a weighted rate of 1.38% that mature in less than 90 days.
These agreements were secured with approximately $8,000,000 of investment securities. The
securities, under agreement to repurchase, averaged $4,349,076 during 2002, with
$8,482,600,000 being the maximum amount outstanding at any month-end.

At
December 31, 2003 the bank had two unused federal funds purchased line of credit totaling
$7,000,000. At December 31, 2002, the bank had utilized $1,215,000 of its $3,700,000 of
federal funds purchased line of credit. These lines of credit were unsecured and accrued
interest at the daily rate of federal funds plus 25 basis points (1.25% at December 31,
2003).

# NOTE 9 FEDERAL
HOME LOAN BANK ADVANCES

At
December 31, 2003 the bank had $32,500,000 of advances from the FHLB. These advances are
secured with approximately $99,800,000 of first mortgage loans and stock in the FHLB.
Listed below is a summary of the terms and maturities of the advances:

| | o | The maturity on $5,000,000 of the advances with a weighted rate of 1.63% is July 16, 2004.
The FHLB has the option to re-price   this advance as of April 16, 2004.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | The maturity on $5,000,000 of the advances with a weighted rate of 1.56% is October 15,
2007. The FHLB has the option to re-  price this advance as of April 15, 2004.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | The maturity on $3,000,000 of the advances with a weighted rate of 4.86% is August 24,
2011. The FHLB has the option to re-  price this advance as of August 24, 2006.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | The maturity on $5,000,000 of the advances with a weighted rate of 3.36% is January 30,
2013. The FHLB has the option to re-  price this advance as of January 30, 2008.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | The maturity on $7,500,000 of the advances with a weighted rate of 1.21% is March 10,
2006. The FHLB has the option to re-  price this advance as of March 10, 2004.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | The maturity on $7,000,000 of advances with a variable daily floating rate at December 31,
2003 of 1.15% is October 1, 2004.   The $7,000,000 of floating rate advances can be repaid
at any time without any prepayment penalties.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

At
December 31, 2002 the bank had $13,000,000 of advances from the FHLB. These advances are
secured with approximately $22,400,000 of first mortgage loans and stock in the FHLB.
Listed below is a summary of the term and maturities of the advances:

| | o | The maturity on $5,000,000 of the advances with a weighted rate of 1.63% is July 16, 2004.
The FHLB had the option to re-  price this advance as of April 16, 2003.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | The maturity on $5,000,000 of the advances with a weighted rate of 1.56% is October 15,
2007. The FHLB had the option to re-  price this advance as of October 15, 2003.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | The maturity on $3,000,000 of the advances with a weighted rate of 4.86% is August 24,
2011. The FHLB has the option to re-  price this advance as of August 24, 2006.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

# NOTE 10  NOTE
PAYABLE

At
December 31, 2003 the Company had an unused $3,500,000 revolving line of credit with
another bank with a maturity of March 20, 2004. The Company has utilized this line of
credit in the past to provide proceeds to increase the capital investment in the
Companys wholly-owned bank. The line of credit bears interest at the 30 day LIBOR
rate plus 2.00%, which at December 31, 2003 was 3.12%. The Company has pledged all of the
stock of the Bank as collateral for this line of credit. The line of credit agreement
contains various covenants related to net income and asset quality. As of December 31,
2003, the Company believes it is in compliance with all covenants. At December 31, 2002,
the Company had a $2,500,000 revolving line of credit with another bank with a maturity of
June 30, 2003. At December 31, 2002, the company had an outstanding balance of $2,500,000.
This line of credit had similar covenants and collateral requirements as the $3.5 million
revolving line of credit.

48

---

# NOTE 11  TRUST
PREFERRED SECURITIES

On
June 26, 2003, Greenville First Bancshares, Inc., through a newly-formed wholly-owned
subsidiary, Greenville First Statutory Trust I, issued $6.0 million floating rate trust
preferred securities with a maturity of June 26, 2033. The rate is adjusted quarterly and
was 4.27% at December 31, 2003. The debt issuance cost, net of accumulated amortization,
from the trust preferred debt totaled $171,000 at December 31, 2003 and is included in
other assets on the consolidated balance sheet. Amortization of debt issuance costs from
the trust preferred debt totaled $15,000 for the year ended December 31, 2003 and is
included in other borrowings interest expense. The current regulatory rules allow certain
amounts of the trust preferred securities to be included in the calculation of regulatory
capital.

The
Company used $3.0 million of the proceeds to repay the outstanding balance on the
revolving line of credit (Note 10). The company invested $2.7 million in the
companys wholly-owned subsidiary, Greenville First Bank. The remaining balance will
be used by the company to fund operations.

# NOTE 12  UNUSED
LINES OF CREDIT

At
December 31, 2003, the Bank had two unused lines of credit to purchase federal funds of
$7,000,000. The line of credit is available on a one to seven day basis for general
corporate purposes of the Bank. The lender has reserved the right to withdraw the line at
their option. The Bank had a second line of credit with the Federal Home Loan Bank to
borrow funds, subject to a pledge of qualified collateral. The Bank has collateral that
would support approximately $20,000,000 in additional borrowings.

# NOTE 13 
COMMITMENTS AND CONTINGENCIES

The
Company has entered into an employment agreement with its president and chief executive
officer that includes a three year compensation term, annual bonus, incentive program,
stock option plan and a one-year non-compete agreement upon termination.

The
Company has entered into an agreement with a data processor with a remaining term of one
year to provide ATM services, item processing and general ledger processing. Components of
this contract include monthly charges of approximately $20,000.

The
Bank may become party to litigation and claims in the normal course of business. As of
December 31, 2003, management believes there is no material litigation pending.

The
Bank has a twenty-year lease on its main office building that began in January 2001. The
monthly rent for the year 2004 is $28,489. The Bank also has a lease on land to be used
for a future branch site. The monthly rent of $4,804 is expected to begin in January of
2005, at the time the branch is completed. Both leases provide for annual lease rate
escalations based on cost of living adjustments.

Future
minimum lease payments under this operating lease are summarized as follows:

| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 

*Amount
is estimated based on an increase of 2.49 percent per year. Actual lease will be adjusted
annually by the cost of living index as stated in the Consumer Price Index.

49

---

# NOTE 14  INCOME
TAXES

The
components of income tax expense for the years ended December 31, 2003 and 2002 were as
follows:

|                                | December 31,
|------------------------------- | ------------
|
|Current income taxes:           |             
|Federal                         |             
|State                           |             
|                                |             
|Total current tax expense       |             
|Deferred income tax benefit and |             
|change in valuation allowance   |             
|                                |             
|Income tax expense              |             
|                                |             

The
following is a summary of the items that caused recorded income taxes to differ from taxes
computed using the statutory tax rate:

|                                                       | For the years ended
|------------------------------------------------------ | -------------------
|
|
|
|Income tax expense (benefit) at federal statutory rate |                    
|Effect of state income taxes                           |                    
|Change in valuation allowance                          |                    
|Other                                                  |                    
|                                                       |                    
|Income tax expense                                     |                    
|                                                       |                    

The
components of the deferred tax assets and liabilities are as follows:

|                                                 | December 31,
|------------------------------------------------ | ------------
|
|Deferred tax assets:                             |             
|Allowance for loan losses                        |             
|Net deferred loan fees                           |             
|Premise and equipment                            |             
|Other                                            |             
|                                                 |             
|                                                 |             
|Valuation allowance                              |             
|                                                 |             
|                                                 |             
|Deferred tax liabilities:                        |             
|Unrealized gain on securities available for sale |             
|Premise and equipment                            |             
|Other                                            |             
|                                                 |             
|                                                 |             
|                                                 |             
|Net deferred tax asset                           |             
|                                                 |             

The net
of current taxes payable and net deferred tax assets are included in other assets in 2003
and included in accrued liabilities in 2002.

50

---

# NOTE 15 RELATED
PARTY TRANSACTIONS

Certain
directors, executive officers, and companies with which they are affiliated, are clients
of and have banking transactions with the Bank in the ordinary course of business. These
loans were made on substantially the same terms, including interest rates and collateral,
as those prevailing at the time for comparable arms-length transactions.

A
summary of loan transactions with directors, including their affiliates and executive
officers is as follows:

|                           | For the years ended December 31
|-------------------------- | -------------------------------
|
|
|Balance, beginning of year |                                
|                           |                                
|New loans                  |                                
|                           |                                
|Less loan payments         |                                
|                           |                                
|Balance, end of year       |                                
|                           |                                

Deposits
by officers and directors and their related interests at December 31, 2003 and 2002, were
$700,052 and $116,656, respectively.

The
Bank has a lease on its main office building with a director of the bank that began in
2001. The lease has a remaining term of seventeen years, with monthly payments in 2004 of
$28,489. The Bank also has a land lease with a director on property to be used for a
future branch site, with monthly payments of $4,804. The Bank is of the opinion that the
lease payments represent market costs that could have been obtained in similar arms
length transactions.

# NOTE 16  FINANCIAL
INSTRUMENTS WITH OFF BALANCE SHEET RISK

In
the ordinary course of business, and to meet the financing needs of its customers, the
Company is a party to various financial instruments with off balance sheet risk. These
financial instruments, which include commitments to extend credit and standby letters of
credit, involve, to varying degrees, elements of credit and interest rate risk in excess
of the amounts recognized in the balance sheets. The contract amount of those instruments
reflects the extent of involvement the Company has in particular classes of financial
instruments.

The
Companys exposure to credit loss in the event of nonperformance by the other party
to the financial instrument for commitments to extend credit and standby letters of credit
is represented by the contractual amounts of those instruments. The Company uses the same
credit policies in making commitments and conditional obligations as it does for on
balance sheet instruments.

Commitments
to extend credit are agreements to lend to a customer as long as there is no violation of
any material condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require the payment of a fee. At
December 31, 2003, unfunded commitments to extend credit were $51,211,000, of which
$16,075,000 is at fixed rates and $35,136,000 is at variable rates. The Company evaluates
each customers credit worthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Company upon extension of credit, is based on
managements credit evaluation of the borrower. Collateral varies but may include
accounts receivable, inventory, property, plant and equipment, and commercial and
residential real estate.

At
December 31, 2003, there was a $1,678,000 commitment under a letter of credit. The credit
risk involved in issuing letters of credit is essentially the same as that involved in
extending loan facilities to customers. Collateral varies but may include accounts
receivable, inventory, equipment, marketable securities and property. Since most of the
letters of credit are expected to expire without being drawn upon, they do not necessarily
represent future cash requirements. The fair value of off-balance sheet lending
commitments are based on fees currently charged to enter into similar agreements, taking
into account the remaining terms of the agreements and the counterparties credit standing.
The total fair value of such instruments is not material.

51

---

# NOTE 17  EMPLOYEE
BENEFIT PLAN

On
January 1, 2000, the Company adopted the Greenville First Bancshares, Inc. Profit Sharing
and 401(k) Plan for the benefit of all eligible employees. The Company contributes to the
Plan annually upon approval by the Board of Directors. Contributions made to the Plan in
2003 and 2002 amounted to $53,000 and $36,000, respectively.

# NOTE 18  STOCK
OPTIONS AND WARRANTS

On
March 21, 2002, the Company adopted a stock option plan for the benefit of the directors,
officers and employees. The Board may grant up to 258,750 options (adjusted for 3 for 2
stock split) at an option price per share not less than the fair market value on the date
of grant. The options granted to officers and employees vest either at 20 percent over
five years or 33 percent over three years and expire 10 years from the grant date.

A
summary of the status of the plan and changes for the years ended December 31, are
presented below:

|                                 | 2003 | 2002
|-------------------------------- | ---- | ----
|
|
|
|
|Outstanding at beginning of year |      |     
|Granted                          |      |     
|Exercised                        |      |     
|Forfeited or expired             |      |     
|                                 |      |     
|Outstanding at end of year       |      |     
|                                 |      |     
|Options exercisable at year-end  |      |     
|                                 |      |     
|Shares available for grant       |      |     
|                                 |      |     

Upon
completion of the 1999 stock offering, the Company issued warrants to each of its
organizers to purchase up to an additional 194,925 shares (adjusted for 3 for 2 stock
split) of common stock at $6.67 per share. These warrants vest over a three-year period
and expire on October 27, 2009.

# NOTE 19  COMMON
STOCK AND EARNINGS PER SHARE

SFAS
No. 128, Earnings per Share requires that the Company present basic and
diluted net earnings per common share. The assumed conversion of stock options and
warrants can create a difference between basic and diluted net earnings per common share.
The weighted average number of common shares outstanding for basic earnings in 2003
adjusted for the 3 for 2 stock split was 1,724,994, and the weighted average number of
common shares assumed outstanding in 2003 for diluted earnings per common share was
1,881,129. The weighted average number of common shares outstanding for basic earnings in
2002 adjusted for the 3 for 2 stock split was 1,724,994, and the weighted average number
of common shares assumed outstanding in 2002 for diluted earnings per common share was
1,753,877.

52

---

# NOTE 20 
REGULATORY MATTERS

The
Bank is subject to various regulatory capital requirements administered by the federal
banking agencies. Failure to meet minimum capital requirements can initiate certain
mandatory and possible additional discretionary actions by regulators that, if undertaken,
could have a direct material effect on the Banks financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines that involve quantitative measures of the
Banks assets, liabilities, and certain off balance sheet items as calculated under
regulatory accounting practices. The Banks capital amounts and classification are
also subject to qualitative judgments by the regulators about components, risk weightings,
and other factors.

Quantitative
measures established by regulation to ensure capital adequacy require the Bank to maintain
minimum amounts and ratios (set forth in the table below) of Total and Tier 1 capital to
risk-weighted assets, and of Tier 1 capital to average assets. Management believes, as of
December 31, 2003, that the Bank meets all capital adequacy requirements to which it is
subject.

As
of December 31, 2003, the most recent notification of the Office of the Comptroller of the
Currency categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. There are no conditions or events, since that notification that
management believes have changed the Banks category. The Banks actual capital
amounts and ratios and minimum regulatory amounts and ratios are presented as follows:

|                                         |  |  |   | To be well capitalized
|---------------------------------------- |  |  | - | ----------------------
|
|
|
|
|
|As of December 31, 2003                  |  |  |   |                       
|Total Capital (to risk weighted assets)  |  |  | $ | 19,176                
|Tier 1 Capital (to risk weighted assets) |  |  |   | 16,796                
|Tier 1 Capital (to average assets)       |  |  |   | 16,796                
|                                         |  | 
|As of December 31, 2002                  |  | 
|Total Capital (to risk weighted assets)  |  |  | $ | 14,116                
|Tier 1 Capital (to risk weighted assets) |  |  |   | 12,408                
|Tier 1 Capital (to average assets)       |  |  |   | 12,408                

# NOTE 21  DIVIDENDS

There
are no current plans to initiate payment of cash dividends and future dividend policy will
depend on the Banks and the Companys earnings, capital requirements, financial
condition and other factors considered relevant by the Companys Board of Directors.
The Bank is restricted in its ability to pay dividends under the national banking laws and
regulations of the OCC. Generally, these restrictions require the Bank to pay dividends
derived solely from net profits. Moreover, OCC prior approval is required if dividends
declared in any calendar year exceed the Banks net profit for that year combined
with its retained net profits for the preceding two years.

53

---

# NOTE 22  SELECTED
QUARTERLY FINANCIAL DATA (UNAUDITED)

Following
is a summary of operations by quarter:

|                               | 
|------------------------------ | 
|
|
|
|Interest income                | 
|Interest expense               | 
|                               | 
|Net interest income            | 
|Provision for loan losses      | 
|Noninterest income             | 
|Noninterest expenses           | 
|                               | 
|Income before provision for    | 
|income taxes                   | 
|Income tax expense             | 
|                               | 
|Net income                     | 
|                               | 
|Earnings per share             | 
|Basic                          | 
|                               | 
|Diluted                        | 
|                               | 
|Weighted average common shares | 
|Basic                          | 
|                               | 
|Diluted                        | 
|                               | 

|                               | 
|------------------------------ | 
|
|
|
|Interest income                | 
|Interest expense               | 
|                               | 
|Net interest income            | 
|Provision for loan losses      | 
|Noninterest income             | 
|Noninterest expenses           | 
|                               | 
|Income before provision for    | 
|income taxes                   | 
|Income tax expense             | 
|                               | 
|Net income                     | 
|                               | 
|Earnings per share             | 
|Basic                          | 
|                               | 
|Diluted                        | 
|                               | 
|Weighted average common shares | 
|Basic                          | 
|                               | 
|Diluted                        | 
|                               | 

54

---

# NOTE 23 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 sheets,
when it is practical to estimate the fair value. SFAS No. 107 defines a financial
instrument as cash, evidence of an ownership interest in an entity or contractual
obligations which require the exchange of cash or other financial instruments. Certain
items are specifically excluded from the disclosure requirements, including the
Companys common stock, premises and equipment and other assets and liabilities.

Fair
value approximates carrying value for the following financial instruments due to the
short-term nature of the instrument: cash and due from banks, federal funds sold, federal
funds purchased, note payable, securities sold under agreement to repurchase and official
checks.

Securities
are valued using quoted fair market prices. Fair value for the Companys off-balance
sheet financial instruments is based on the discounted present value of the estimated
future cash flows.

Fair
value for variable rate loans and borrowings that reprice frequently and for loans that
mature in less than one year is based on the carrying value. Fair value for fixed rate
mortgage loans, personal loans and all other loans (primarily commercial) maturing after
one year 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 value. Certificate of deposit accounts and FHLB advances
with a maturity within one year are valued at their carrying value. The fair value of
certificate of deposit accounts and FHLB advances with a maturity after one year are
estimated by discounting cash flows from expected maturities using current interest rates
on similar instruments.

The
Company has used managements 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, which would be incurred in an actual sale or settlement, are not taken
into consideration in the fair value presented.

The
estimated fair values of the Companys financial instruments are as follows:

|                                                  | December 31,
|------------------------------------------------- | ------------
|
|
|
|Financial Assets:                                 |             
|Cash and due from banks                           |             
|Federal funds sold                                |             
|Investment securities available for sale          |             
|Investment securities held to maturity            |             
|Other investments                                 |             
|Loans, net                                        |             
|                                                  |             
|Financial Liabilities:                            |             
|Deposits                                          |             
|Official checks outstanding                       |             
|Federal funds purchased and repurchase agreements |             
|Note payable                                      |             
|Trust preferred securities                        |             
|Federal Home Loan Bank advances                   |             

55

---

# NOTE 24  PARENT
COMPANY FINANCIAL INFORMATION

Following
is condensed financial information of Greenville First Bancshares, Inc. (parent company
only):

# Condensed Balance
Sheets

|                                           | December 31,
|------------------------------------------ | ------------
|
|Assets                                     |             
|Cash and cash equivalents                  |             
|Investment in subsidiaries                 |             
|Other assets                               |             
|                                           |             
|Total assets                               |             
|                                           |             
|                                           |             
|Liabilities and Shareholders' Equity       |             
|Accounts payable and accrued expenses      |             
|Note payable                               |             
|Shareholders' equity                       |             
|                                           |             
|Total liabilities and shareholders' equity |             
|                                           |             

# Condensed Statements
of income

|                                                        | For the years ended
|------------------------------------------------------- | -------------------
|
|
|Revenues                                                |                    
|                                                        |                    
|Interest income                                         |                    
|                                                        |                    
|Expenses                                                |                    
|                                                        |                    
|Interest expense                                        |                    
|                                                        |                    
|Loss before equity in undistributed net income          |                    
|of subsidiaries                                         |                    
|                                                        |                    
|Equity in undistributed net income of Bank subsidiaries |                    
|                                                        |                    
|Net income                                              |                    
|                                                        |                    

56

---

# NOTE 24  PARENT
COMPANY FINANCIAL INFORMATION, Continued

# Condensed Statements
of Cash Flows

|                                                | For the years ended
|----------------------------------------------- | -------------------
|
|
|Operating Activities                            |                    
|Net income                                      |                    
|Adjustments to reconcile net income to net cash |                    
|used in operating activities                    |                    
|Equity in undistributed net income of           |                    
|bank subsidiaries                               |                    
|Increase in other assets                        |                    
|Increase in other liabilities                   |                    
|                                                |                    
|Net cash used in operating activities           |                    
|                                                |                    
|Financing Activities                            |                    
|Proceeds from note payable                      |                    
|Repayment of note payable                       |                    
|Proceeds from trust preferred securities        |                    
|Investment in Bank subsidiaries                 |                    
|                                                |                    
|Net cash provide (used) in financing activities |                    
|                                                |                    
|Net decrease in cash and cash equivalents       |                    
|                                                |                    
|Cash and cash equivalents, beginning of year    |                    
|                                                |                    
|Cash and cash equivalents, end of year          |                    
|                                                |                    

# Item 8.  Changes in and
Disagreements with Accountants on Accounting and Financial Disclosure

None.

# Item 8A.  Controls and
Procedures

As of the end of the period covered
by this report, we carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of our disclosure controls and procedures as defined in
Exchange Act Rule 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, 2003.

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.

57

---

# Item 9.  Directors,
Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the
Exchange Act

In
response to this Item, this information is contained in our Proxy Statement for the Annual
Meeting of Shareholders to be held on May 12, 2004 and is incorporated herein by
reference.

# Item 10.  Executive
Compensation

In
response to this Item, this information is contained in our Proxy Statement for the Annual
Meeting of Shareholders to be held on May 12, 2004 and is incorporated herein by
reference.

# Item 11.  Security
Ownership of Certain Beneficial Owners and Management

In
response to this Item, this information is contained in our Proxy Statement for the Annual
Meeting of Shareholders to be held on May 12, 2004 and is incorporated herein by
reference.

The following table sets forth equity
compensation plan information at December 31, 2003. The number of shares and the exercise
prices for options and warrants has been adjusted for the 3 for 2 stock split.

# Equity Compensation Plan Information

|                       |  |  | Number of securities
|---------------------- |  |  | --------------------
|
|
|
|
|
|
|
|Equity compensation    |  |  |                     
|plans approved by      |  | 
|security holders (1)   |  |  |                     
|                       |  | 
|Equity compensation    |  | 
|plans not approved     |  | 
|by security holders(2) |  |  |                     
|                       |  | 
|Total                  |  |  |                     

|(1) | The 258,750 of shares of common stock available under the 2000 Greenville First
               Bancshares, Inc. Stock Incentive Plan will automatically increase each time we
               issue additional shares so that it continues to equal 15% of our total
               outstanding shares.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(1) | Each of our organizers received, for no additional consideration, a warrant to
               purchase one share of common stock for $6.67 per share for each share purchased
               during our initial public offering. The warrants are represented by separate
               warrant agreements. One third of the warrants vest on each of the first three
               anniversaries of the date our bank opened for business, and they are exercisable
               in whole or in part during the ten year period following that date. The warrants
               may not be assigned, transferred, pledged, or hypothecated in any way. The
               194,925 of shares issued pursuant to the exercise of such warrants are
               transferable, subject to compliance with applicable securities laws. If the
               South Carolina Board of Financial Institutions or the FDIC issues a capital
               directive or other order requiring the bank to obtain additional capital, the
               warrants will be forfeited, if not immediately exercised.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

58

---

# Item 12.  Certain
Relationships and Related Transactions

In
response to this Item, the information required by Item 201(d) is contained in Item 5 of
this report. The information is contained in our Proxy Statement for the Annual Meeting of
Shareholders to be held on May 12, 2004 is incorporated herein by reference.

# Item 13.  Exhibits, List
and Reports on Form 8-K

|(a) | The following documents are filed as part of this report:
|--- | ---------------------------------------------------------

|3.1 | Articles of Incorporation, as amended (incorporated by reference to Exhibit 3.1
               of the Registration Statement on Form SB-2, File No. 333-83851).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.2 | Bylaws (incorporated by reference to Exhibit 3.2 of the Registration Statement
               on Form SB-2, File No. 333-83851).
|--- | --------------------------------------------------------------------------------------------------------------------------------

|4.1 | See Exhibits 3.1 and 3.2 for provisions in Greenville First Bancsharess
               Articles of Incorporation and Bylaws defining the rights of holders of the
               common stock (incorporated by reference to Exhibit 4.1 of the Registration
               Statement on Form SB-2, File No. 333-83851).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.2 | Form of certificate of common stock (incorporated by reference to Exhibit 4.2 of
               the Registration Statement on Form SB-2, File No. 333-83851).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.1 | Employment Agreement dated July 27, 1999 between Greenville First Bancshares and
               Art Seaver (incorporated by reference to Exhibit 10.1 of the Registration
               Statement on Form SB-2, File No. 333-83851).
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.2 | Lease Agreement incorporated by reference between Greenville First Bank and
               Halton Properties, LLC, formerly Cothran Properties, LLC (incorporated by
               reference to Exhibit 10.2 of Form 10-k filed on March 28, 2000).
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.3 | Data Processing Services Agreement dated June 28, 1999 between Greenville First Bancshares
and the Intercept Group (incorporated by reference to Exhibit 10.3 of the Registration
Statement on Form SB-2, File No. 333-83851).
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.4 | Form of Stock  Warrant  Agreement  (incorporated  by reference to Exhibit 10.4 of the  Registration  Statement on
Form SB-2, File No. 333-83851).
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------

|10.5 | Promissory Note dated February 22, 1999 from Greenville First  Bancshares,  Inc. in favor of John J. Meindl,  Jr.
(incorporated by reference to Exhibit 10.5 of the Registration Statement on Form SB-2, File No. 333-83851).
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.7 | Standard  Form of Agreement  between  Greenville  First  Bancshares,  Inc. and AMI  Architects  (incorporated  by
reference to Exhibit 10.2 of Form 10-k filed on March 28, 2000).
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|21 | Subsidiaries of our company
|-- | ---------------------------

|24 | Power of Attorney (contained herein as part of the signature pages).
|-- | --------------------------------------------------------------------

|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.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

59

---

# Item 13.  Exhibits, List
and Reports on Form 8-K, continued

|(b) | Reports on Form 8-K
|--- | -------------------

The
following reports were filed on Form 8-K during the fourth quarter ended December 31,
2003.

The
Company filed a Form 8-K on October 8, 2003 attaching a press release to announce a 3 for
2 stock split and announcing its financial results for the third quarter ended September
30, 2003.

# Item 14.  Principal
Accountant Fees and Services

The information required by Item 14
is incorporated by reference from our proxy statement for the 2004 annual meeting of
shareholders under the heading Audit Fees.

---

60

---

SIGNATURES

---

In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934 (the
Exchange Act), the registrant caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

| |  | GREENVILLE FIRST BANCSHARES, INC.
| |  | ---------------------------------

|Date:  March 16, 2004 |  | /s/  R. Arthur Seaver, Jr.           
|--------------------- |  | -------------------------------------
|                      |  | R. Arthur Seaver, Jr.                
|                      |  | President and Chief Executive Officer

KNOW
ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints R. Arthur Seaver, Jr., 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-KSB,
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 in the capacities and on the dates indicated.

|Signature | Title | Date
|--------- | ----- | ----

|/s/ James M. Austin, III
James M. Austin, III | Chief Financial Officer,
Principal Financial andAccounting Officer | March 16, 2004
|--------------------------------------------- | ------------------------------------------------------------------ | --------------

|Andrew B. Cajka | Director | March 16, 2004
|--------------- | -------- | --------------

|/s/ Mark A. Cothran
Mark A. Cothran | Director | March 16, 2004
|----------------------------------- | -------- | --------------

|/s/ Leighton M. Cubbage
Leighton M. Cubbage | Director | March 16, 2004
|------------------------------------------- | -------- | --------------

|/s/ David G. Ellison
David G. Ellison | Director | March 16, 2004
|------------------------------------- | -------- | --------------

|/s/ Anne S. Ellefson
Anne S. Ellefson | Director | March 16, 2004
|------------------------------------- | -------- | --------------

61

---

|/s/ Tecumseh Hooper, Jr.
Tecumseh Hooper, Jr. | Director | March 16, 2004
|--------------------------------------------- | -------- | --------------

|/s/ Rudolph G. Johnstone, III, M.D.
Rudolph G. Johnstone, III, M.D. | Director | March 16, 2004
|------------------------------------------------------------------- | -------- | --------------

|/s/ Keith J. Marrero
Keith J. Marrero | Director | March 16, 2004
|------------------------------------- | -------- | --------------

|/s/ James B. Orders, III
James B. Orders, III | Director, Chairman | March 16, 2004
|--------------------------------------------- | ------------------ | --------------

|/s/ William B. Sturgis
William B. Sturgis | Director | March 16, 2004
|----------------------------------------- | -------- | --------------

|/s/ R. Arthur Seaver, Jr.
R. Arthur Seaver, Jr. | Director, Chief Executive
Officer and President(principal executive officer) | March 16, 2004
|----------------------------------------------- | ---------------------------------------------------------------------------- | --------------

|/s/ Fred Gilmer, Jr.
Fred Gilmer, Jr. | Director, Senior Vice-President | March 16, 2004
|------------------------------------- | ------------------------------- | --------------

62

---

EXHIBIT INDEX

Exhibit Number
          Description

|3.1 | Articles of Incorporation, as amended (incorporated by reference to Exhibit 3.1
               of the Registration Statement on Form SB-2, File No. 333-83851).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.2 | Bylaws (incorporated by reference to Exhibit 3.2 of the Registration Statement
               on Form SB-2, File No. 333-83851).
|--- | --------------------------------------------------------------------------------------------------------------------------------

|4.1 | See Exhibits 3.1 and 3.2 for provisions in Greenville First Bancsharess
               Articles of Incorporation and Bylaws defining the rights of holders of the
               common stock (incorporated by reference to Exhibit 4.1 of the Registration
               Statement on Form SB-2, File No. 333-83851).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.2 | Form of certificate of common stock (incorporated by reference to Exhibit 4.2 of
               the Registration Statement on Form SB-2, File No. 333-83851).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.1 | Employment Agreement dated July 27, 1999 between Greenville First Bancshares and
               Art Seaver (incorporated by reference to Exhibit 10.1 of the Registration
               Statement on Form SB-2, File No. 333-83851).
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.2 | Lease Agreement incorporated by reference between Greenville First Bank and
               Halton Properties, LLC, formerly Cothran Properties, LLC (incorporated by
               reference to Exhibit 10.2 of Form 10-k filed on March 28, 2000).
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.3 | Data Processing Services Agreement dated June 28, 1999 between Greenville First Bancshares
and the Intercept Group (incorporated by reference to Exhibit 10.3 of the Registration
Statement on Form SB-2, File No. 333-83851).
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.4 | Form of Stock  Warrant  Agreement  (incorporated  by reference to Exhibit 10.4 of the  Registration  Statement on
Form SB-2, File No. 333-83851).
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------

|10.5 | Promissory Note dated February 22, 1999 from Greenville First  Bancshares,  Inc. in favor of John J. Meindl,  Jr.
(incorporated by reference to Exhibit 10.5 of the Registration Statement on Form SB-2, File No. 333-83851).
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.7 | Standard  Form of Agreement  between  Greenville  First  Bancshares,  Inc. and AMI  Architects  (incorporated  by
reference to Exhibit 10.2 of Form 10-k filed on March 28, 2000).
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|21 | Subsidiaries of our company
|-- | ---------------------------

|24 | Power of Attorney (contained herein as part of the signature pages).
|-- | --------------------------------------------------------------------

|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.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

63