SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. N/A )

Filed by the registrant [X]
Filed by a party other than the registrant [_]
Check the appropriate box:
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[_] Preliminary proxy statement
[X] Definitive proxy statement
[_] Definitive additional materials
[_] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12

ISLANDS BANCORP
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.

(1) Title of each class of securities to which transaction applies:

- --------------------------------------------------------------------------------

(2) Aggregate number of securities to which transactions applies:

- --------------------------------------------------------------------------------

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:

- --------------------------------------------------------------------------------
(5) Total fee paid:

- --------------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.

- --------------------------------------------------------------------------------
[_] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date of
its filing.

(1) Amount previously paid:

- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:

- --------------------------------------------------------------------------------
(3) Filing Party:

- --------------------------------------------------------------------------------
(4) Date Filed:

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ISLANDS BANCORP
2348 Boundary Street
Beaufort, South Carolina 29902
(843) 521-1968

April 4, 2005

Dear Shareholder:

You are cordially invited to attend our annual meeting of shareholders,
which will be held at the Lobby of Islands Community Bank, N.A., 2348 Boundary
Street, Beaufort, South Carolina, on April 26, 2005 at 6:00 p.m. I sincerely
hope that you will be able to attend the meeting, and I look forward to seeing
you.

The attached notice of the annual meeting and proxy statement describes the
formal business to be transacted at the meeting. We will also report on our
operations since our opening in July 2001, as well as our plans for the future.

To ensure the greatest number of shareholders will be present either in
person or by proxy, we ask that you mark, date, and sign the enclosed proxy
card, and return it to us in the envelope provided as soon as possible. If you
attend the meeting in person, you may revoke your proxy at the meeting and vote
in person. You may revoke your proxy at any time before it is voted.

Sincerely,

/s/ William B. Gossett
President and Chief Executive Officer

ISLANDS BANCORP
2348 Boundary Street
Beaufort, South Carolina 29902
(843) 521-1968

NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 26, 2005

The annual meeting of shareholders of Islands Bancorp will be held on
Tuesday, April 26, 2005 at 6:00 p.m. at the Lobby of the Islands Community Bank,
N.A., 2348 Boundary Street, Beaufort, South Carolina, for the following
purposes:

(1) to elect four (4) persons to serve as Class III Directors for a
three-year term expiring in 2008; and

(2) to transact any other business as may properly come before the
meeting or any adjournments of the meeting.

The Board of Directors has set the close of business on March 14, 2005, as
the record date for determining the shareholders who are entitled to notice of,
and to vote at, the meeting.

We hope that you will be able to attend the meeting. Whether or not you
plan to attend the meeting, we ask that you mark, date, sign, and return the
enclosed proxy card as soon as possible. If you attend the meeting in person,
you may revoke your proxy at the meeting and vote your shares in person. You
may revoke your proxy at any time before the proxy is exercised.

By Order of the Board of Directors,

/s/ William B. Gossett
President and Chief Executive Officer

April 4, 2005

ISLANDS BANCORP
2348 Boundary Street
Beaufort, South Carolina 29902
(843) 521-1968

__________________________________________________________

PROXY STATEMENT FOR 2005 ANNUAL MEETING
__________________________________________________________

INTRODUCTION

TIME AND PLACE OF THE MEETING

Our Board of Directors is furnishing this proxy statement in connection
with its solicitation of proxies for use at the annual meeting of shareholders
to be held on Tuesday, April 26, 2005 at 6:00 p.m. at the Lobby of the Islands
Community Bank, N.A., 2348 Boundary Street, Beaufort, South Carolina, and at any
adjournments of the meeting.

RECORD DATE AND MAILING DATE

The close of business on March 14, 2005 is the record date for the
determination of shareholders entitled to notice of and to vote at the meeting.
We first mailed this proxy statement and the accompanying proxy card to
shareholders on or about April 4, 2005.

NUMBER OF SHARES OUTSTANDING

As of the close of business on the record date, the Company had 10,000,000
shares of common stock, no par value, authorized, of which 652,705 shares were
issued and outstanding. Each issued and outstanding share is entitled to one
vote on all matters presented at the meeting.

VOTING AT THE ANNUAL MEETING

PROPOSAL TO BE CONSIDERED

Shareholders will be asked to consider the election of four persons to
serve as Class III Directors of the Company for a three-year term expiring in
2008. The persons nominated to serve as Class III Directors, as well as the
continuing Class I and Class II Directors, are described beginning on page 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL.

PROCEDURES FOR VOTING BY PROXY

If you properly sign, return and do not revoke your proxy, the persons
appointed as proxies will vote your shares according to the instructions you
have specified on the proxy card. If you sign and return your proxy card but do
not specify how the persons appointed as proxies are to vote your shares, your
proxy will be voted FOR the election of the director nominees and in the best
judgment of the persons appointed as proxies as to all other matters properly
brought before the meeting. If any nominee for election to the Board of
Directors named in this proxy statement becomes unavailable for election for any
reason, the proxy may be voted for a substitute nominee selected by the Board of
Directors.

You can revoke your proxy at any time before it is voted by delivering to
William B. Gossett, president and chief executive officer of the Company, at the
main office of the Bank, either a written revocation of the proxy or a duly
executed proxy bearing a later date or by attending the meeting and voting in
person.

REQUIREMENTS FOR SHAREHOLDER APPROVAL

A quorum will be present at the meeting if a majority of the outstanding
shares of common stock entitled to vote at the meeting is represented in person
or by valid proxy. We will count abstentions and broker non-votes, which are
described below, in determining whether a quorum exists. Only those votes
actually cast for the election of a director, however, will be counted for
purposes of determining whether a particular director nominee receives
sufficient votes to be elected. To be elected, a director nominee must receive
more votes than any other nominee for the particular seat on the Board of
Directors. As a result, if you withhold your vote as to one or more nominees,
it will have no effect on the outcome of the election unless you cast that vote
for a competing nominee. At the present time we do not know of any competing
nominees.

ABSTENTIONS. A shareholder who is present in person or by proxy at the
annual meeting and who abstains from voting on any or all proposals will be
included in the number of shareholders present at the annual meeting for the
purpose of determining the presence of a quorum. Abstentions do not count as
votes in favor of or against a given matter.

BROKER NON-VOTES. Brokers who hold shares for the accounts of their
clients may vote these shares either as directed by their clients or in their
own discretion if permitted by the exchange or other organization of which they
are members. Proxies that contain a broker vote on one or more proposals but no
vote on others are referred to as "broker non-votes" with respect to the
proposal(s) not voted upon. Broker non-votes are included in determining the
presence of a quorum. A broker non-vote, however, does not count as a vote in
favor of or against a particular proposal for which the broker has no
discretionary voting authority.

Approval any other matter that may properly come before the annual meeting
requires the affirmative vote of a majority of shares of common stock present in
person or by proxy and entitled to vote on the matter. Abstentions and broker
non-votes will be counted in determining the minimum number of votes required
for approval and will, therefore, have the effect of negative votes.

PROXY SOLICITATION

The Company will pay the cost of proxy solicitation. Our directors,
officers and employees may, without additional compensation, solicit proxies by
personal interview, telephone, fax, or otherwise. We will direct brokerage
firms or other custodians, nominees or fiduciaries to forward our proxy
solicitation material to the beneficial owners of common stock held of record by
these institutions and will reimburse them for the reasonable out-of-pocket
expenses they incur in connection with this process.

PROPOSAL ONE: ELECTION OF DIRECTORS

The Company's Board of Directors consists of 14 members and is divided into
three classes. Each class of directors serves a staggered three-year term. The
term of each class expires at the annual meeting in the years indicated below
and upon the election and qualification of the director's successor.

The Board of Directors has nominated each of the Class III Directors listed
below to stand for re-election at the annual meeting. If elected, each of the
Class III Directors will serve a three-year term expiring in 2008.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS ELECT
THE PERSONS IDENTIFIED BELOW AS DIRECTOR NOMINEES TO SERVE AS CLASS III
DIRECTORS FOR THE TERM INDICATED BELOW.

The following table shows for each nominee and continuing director: (a)
his or her name; (b) his or her age at December 31, 2004; (c) how long he or she
has been a director of the Company; (d) his or her position(s) with the Company,
other than as a director; and (e) his principal occupation and business
experience for the past five years. Each of the Company directors and director
nominees listed below are also directors of Islands Community Bank, N.A., except
for Mr. Ferguson who resigned from the board of Islands Community Bank on
September 1, 2004.

DIRECTOR POSITION WITH THE COMPANY
NAME (AGE) SINCE AND BUSINESS EXPERIENCE
- ----------------------------------- -------- -----------------------------------------------------------

CLASS III NOMINATED DIRECTORS:
(For Three-Year Term Expiring 2008)

Carl E. Lipscomb (66) 2002 Vice President of Argus Corp. (custom home construction
and home renovation); Formerly President and Chief
Executive Officer of Lipscomb Construction, Hilton Head,
South Carolina (custom home construction in the Beaufort
County area); Realtor, Kiser & Assoc.

Dr. Narayan Shenoy (66) 2002 Anesthesiologist; Partner in Critical Health Systems, Inc.,
Columbia, South Carolina.

J. Frank Ward (58) 1999 Realtor with SCN Realty since September 2004 to present.
Realtor with Coastal Carolina Realty; from March 2002 to
September 2004; Sales Coordinator and Realtor,
Renaissance Marketing, LLC, Beaufort, South Carolina
from February 1998 to March 2002; prior to 1998, New Car
Sales Manager, Toyota Center in West Columbia/Lexington,
South Carolina.

Bruce K. Wyles (50) 1999 Dentist, sole proprietorship, Beaufort, South Carolina;
Partner, B.K.W. Squared.

CLASS I CONTINUING DIRECTORS:
(Term Expiring 2006)

Jimmy Lee Mullins, Sr. (52) 2004 President and Chief Executive Officer of Mullins Trucking
Company, Inc., Ridgeland, South Carolina.

DIRECTOR POSITION WITH THE COMPANY
NAME (AGE) SINCE AND BUSINESS EXPERIENCE
- ----------------------------------- -------- -----------------------------------------------------------

William B. Gossett (61) 1999 President and Chief Executive Officer of Islands Bancorp;
previously President and Chief Executive Officer of Liberty
National Bank, Longwood, Florida.

Louis O. Dore (59) 1999 Attorney and Managing Partner, Dore Law Firm, P.A.,
Beaufort, South Carolina.

Martha B. Fender (59) 1999 Vice President of Islands Bancorp; President and Owner of
Coastal Carolina Realty, Inc.; Beaufort, South Carolina
(real estate sales).

D. Martin Goodman (58) 1999 Chairman of the Board of Islands Bancorp; Area Manager
of the University of South Carolina Small Business
Development Center in Beaufort, South Carolina; Co-
owner, with his wife, of Ollie's Seafood Restaurant in
Beaufort, South Carolina.

CLASS II CONTINUING DIRECTORS:
(Term Expiring 2007)

Daryl A. Ferguson (66) 2002 Retired 2005 as Co-Chairman of Hungarian Telephone
Company, Budapest, Hungary and Stamford, Connecticut
(telecommunications); served as President and Chief
Operating Officer of Citizens Utilities in Stamford,
Connecticut from 1990 to 2000; CEO of Electric Lightware
from 1992 to 2000.

Stancel E. Kirkland, Sr. (64) 2002 Managing Member of Bull Point Plantation, Seabrook,
South Carolina (developer of residential communities);
Attorney, Kirkland Law Firm, Beaufort, South Carolina,
Kirkland & Taylor Realty & Development - Licensed Real
Estate Broker, South Carolina

Paul M. Dunnavant, III (40) 1999 Treasurer of Islands Bancorp; Chief Financial Officer of
Holmes Timber, Inc. and Atlantic Coast Homes, Inc. from
November 2002 to present, Batesburg, South Carolina;
Chief Financial Officer and Treasurer of Amick Farms, Inc.
from August 1993 to May 2002, Batesburg, South Carolina
(integrated poultry processing); Manager of Beaufort
Properties, LLC from August 1993 to October 2002;
Manager of Waterside Properties, LLC from August 1993 to
October 2002.

DIRECTOR POSITION WITH THE COMPANY
NAME (AGE) SINCE AND BUSINESS EXPERIENCE
- ----------------------------------- -------- -----------------------------------------------------------

Edward J. McNeil, Jr. (50) 1999 Secretary of Islands Bancorp; President of Internal
Medicine Healthcare, P.A.; practicing physician with
Internal Medicine Health Care in Beaufort from January
1997 to December 1997 and from October 1999 to present.
Physician, Low Country Medical Group, Beaufort, South
Carolina, from January 1998 to October 1999, and with
Southeast Health Care Association from January 1995 to
December 1996.

Frances K. Nicholson (40) 1999 Managing Partner of Nicholson Investments LLC (real estate
leasing and securities portfolio company); Managing Partner
of Big Nickel Properties, LLC.

MEETINGS AND COMMITTEES OF THE BOARD

During the year ended December 31, 2004, the Board of Directors of the
Company held two meetings and the Board of Directors of the Bank held 12
meetings. Each of the incumbent directors attended at least 75% of the total
number of meetings of the Company's and the Bank's Boards of Directors and the
committees on which he or she serves, except for Messrs. Dunnavant, Ferguson and
Shenoy.

Although the Company does not have a formal policy regarding its directors'
attendance at the annual meeting of shareholders, all directors are expected to
attend the meeting. Twelve of the Company's fourteen directors attended the
2004 annual meeting of shareholders.

NOMINATING COMMITTEE. The Company does not have a standing nominating
committee and has not adopted a nominating committee charter. Rather, the full
Board of Directors participates in the consideration of director nominees. All
of the Company's directors, except for Mr. Gossett, are independent directors
under the National Association of Securities Dealers' definition of "independent
director." Since the Company is a small business issuer and only one of its
directors is not independent, the Company believes a standing nominating
committee is not necessary. See "Director Nominations and Shareholder
Communications" on page 11.

COMPENSATION COMMITTEE. The Board of Directors has established a
compensation committee for the purpose of administering the Islands Bancorp 2002
Stock Incentive Plan. The compensation committee members are Stancel E.
Kirkland, Sr. and Paul M. Dunnavant, III. The compensation committee held no
meetings during the year ended December 31, 2004.

AUDIT COMMITTEE. The Boards of Directors of the Company and the Bank have
established a joint audit committee which reviews the annual report and internal
audit report of the independent public accountants. The Boards of Directors
have not adopted a written audit committee charter. The joint audit committee
held five meetings during the year ended December 31, 2004.

The joint audit committee members are: Louis O. Dore (Chairman), Edward J.
McNeil, Jr., Paul M. Dunnavant, III, Stancel E. Kirkland, Sr. and Narayan
Shenoy. All of these members are independent directors under the National
Association of Securities Dealers' definition of "independent director." Mr.
Dunnavant meets the criteria specified under applicable Securities and Exchange
Commission regulations for an "audit committee financial expert," and the board
believes that all of the other members

have the financial knowledge, business experience and independent judgment
necessary for service on the audit committee.

AUDIT COMMITTEE REPORT

The audit committee reports as follows with respect to the audit of the
Company's 2004 audited consolidated financial statements.

- The audit committee has reviewed and discussed the Company's 2004
audited consolidated financial statements with the Company's
management;

- The audit committee has discussed with the independent auditors
Frances & Co., CPAs, the matters required to be discussed by SAS 61,
which include, among other items, matters related to the conduct of
the audit of the Company's consolidated financial statements;

- The audit committee has received written disclosures and the
letter from the independent auditors required by Independence
Standards Board Standard No. 1 (which relates to the auditor's
independence from the corporation and its related entities) and has
discussed with the auditors the auditors' independence from the
Company; and

- Based on review and discussions of the Company's 2004 audited
consolidated financial statements with management and discussions with
the independent auditors, as described above, the audit committee
recommended to the Board of Directors that the Company's 2004 audited
consolidated financial statements be included in the Company's Annual
Report on Form 10-KSB.

March 25, 2005 By: Louis O. Dore (Chairman)
Edward J. McNeil, Jr.
Paul M. Dunnavant, III
Stancel E. Kirkland, Sr.
Dr. Narayan Shenoy

EXECUTIVE OFFICERS

The following table shows for each executive officer of the Company: (a)
his name; (b) his age at December 31, 2004; (c) how long he has been an officer
of the Company; and (d) his positions with the Company and the Bank:

NAME (AGE) OFFICER SINCE POSITION WITH THE COMPANY AND THE BANK
- ---------- ------------- --------------------------------------

William B. Gossett (61) 1999 President and Chief Executive Officer of Islands
Bancorp; President and Chief Executive Officer of
Islands Community Bank, National Association

COMPENSATION

COMPENSATION OF EXECUTIVE OFFICERS

The following table presents the total compensation paid by the Company
during fiscal years 2004, 2003 and 2002 to its chief executive officer. No
other executive officer of the Company earned over $100,000 in salary and bonus
during fiscal years 2004, 2003 and 2002.

SUMMARY COMPENSATION TABLE

Annual Compensation Long-Term Compensation Awards

--------------------------------- ------------------------------------
Number of
Compensation Salary Bonus Securities All Other
Year ($) ($) Underlying Options Compensation (1)
------------ --------- -------- ------------------ ----------------

William B. Gossett, 2004 $ 155,341 $ 10,536 - 4,671
President and Chief 2003 $ 143,000 $ 10,000 -- 4,656
Executive Officer 2002 $ 130,000 $ 10,000 19,581 4,237

_______________
(1) Includes a matching contribution to Mr. Gossett's 401(k) plan of
$4,660, $4,590 and $3,912 in 2004, 2003 and 2002, respectively, and
premiums paid on a term life insurance policy for the benefit of Mr.
Gossett of $10, $66 and $325 in 2004, 2003 and 2002, respectively.

We have omitted information on "perks" and other personal benefits because
the aggregate value of these items does not meet the minimum amount required for
disclosure under the Securities and Exchange Commission's regulations.

STOCK OPTION GRANTS IN FISCAL 2004

The Company granted no stock options during fiscal 2004 to its named
executive officer. The Company has no outstanding stock appreciation rights and
granted no stock appreciation rights during fiscal year 2004.

FISCAL YEAR-END OPTION VALUES

Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options December 31, 2004
NAME Exercisable Unexercisable Exercisable Unexercisable
- ------------------ ----------- ------------- ----------- -------------

William B. Gossett 19,581 - - -

Because no public market exists for our common stock, we calculated the
in-the-money value of unexercised options at fiscal year end based on the
per-share sales price of our common stock as of the date closest to December 31,
2004 as possible. Based on information known to us, this sale occurred on
December 31, 2004 at a sales price of $10.00 per share. Since the exercise
price is also equal to $10.00, the in-the-money value of the unexercised options
at December 31, 2004 is zero.

EMPLOYMENT AGREEMENT. On July 27, 1999, the Company entered into an
employment agreement with William B. Gossett pursuant to which Mr. Gossett
serves as president and chief executive

officer of the Company and the Bank. The initial term of the agreement is five
years. The agreement automatically renews for additional two-year terms unless
either party notifies the other party of its intent not to renew at least 180
days prior to the end of the then current term.

Currently, under the agreement, Mr. Gossett's annual salary is $155,870.
For each year following the first full calendar year of the Bank's operations,
Mr. Gossett is entitled to a bonus of 5% of the Bank's net income, if the Board
of Directors determines the bonus is appropriate in light of its analysis of
various performance criteria.

In addition to his salary and bonus compensation, Mr. Gossett is provided
with an automobile, or an automobile allowance; life insurance; and
reimbursement for automobile expenses, club dues, business expenses, and moving
and relocation expenses. He also participates in the Bank's retirement, medical
and other benefit programs.

Mr. Gossett is eligible to participate in any long-term equity incentive
program of the Company and is eligible for the grant of stock options,
restricted stock and other awards under such program or any similar program
adopted by the Company. Pursuant to Mr. Gossett's employment agreement, he was
granted an option to purchase 19,581 shares of the Company's common stock at a
purchase price of $10.00 per share. One-third (1/3) of the shares covered by
the option vest on each of the first, second and third anniversaries of the date
the Bank opened for business, subject to accelerated vesting upon a change in
control of the Company.

The employment agreement with Mr. Gossett also provides that during the
term of his employment and for a period expiring on the earlier to occur of (a)
one year after termination of his employment for any reason other than without
cause, (b) six months after expiration of the employment agreement where
expiration results from Mr. Gossett's timely notification of his intent not to
renew the agreement, and (c) the expiration of the agreement where expiration
results from the Company's or the Bank's timely notification to Mr. Gossett of
its intent not to renew the agreement, Mr. Gossett will not compete, directly or
indirectly, with the Company or the Bank, or any of their subsidiaries, or have
more than a 2% passive investment in any financial institution that maintains an
office or branch within 25 miles of each location where the Company or the Bank
maintains an office or branch at any time during Mr. Gossett's employment under
the agreement. The agreement also provides that during the term of his
employment and for a period expiring on the earlier to occur of one year after
termination of his employment for any reason and one year following the
expiration of the agreement, Mr. Gossett will not solicit employees of the
Company or the Bank for employment and will not solicit customers of the Bank to
any other financial institution.

Upon termination of Mr. Gossett's employment by the Company or the Bank
without cause or for any reason following a change in control of the Company,
Mr. Gossett will be entitled to a lump sum severance payment equal to two times
his base salary in effect at the time, plus any accrued bonus, and all of his
outstanding options will immediately vest.

COMPENSATION OF DIRECTORS

Neither the Company nor the Bank will compensate their directors until the
Company and the Bank have recovered all of their losses. Thereafter, the
Company and the Bank will adopt director compensation policies that conform to
applicable law.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the number of shares of the Company's common
stock beneficially owned as of the record date by (a) each director and
executive officer of the Company and (b) all executive officers and directors,
as a group. The information shown below is based upon information furnished to
the Company by the named persons. Unless otherwise indicated, each person is
the record owner and has sole voting and investment power with respect to his or
her shares. Other than the directors and executive officers listed below, Mr.
Bill Amick is the only holder of more than 5% of the Company's common stock.
Additionally, the address of each person is 2348 Boundary Street, Beaufort,
South Carolina 29902.

Information relating to beneficial ownership of the Company is based upon
"beneficial ownership" concepts set forth in the rules promulgated under the
Securities Exchange Act. Under these rules a person is deemed to be a
"beneficial owner" of a security if that person has or shares "voting power,"
which includes the power to vote or to direct the voting of a security, or
"investment power," which includes the power to dispose or to direct the
disposition of a security. Under the rules, more than one person may be deemed
to be a beneficial owner of the same securities. A person is also deemed to be
a beneficial owner of any security as to which that person has the right to
acquire beneficial ownership within sixty (60) days from the date of this
report. Except as otherwise indicated, each person is the sole beneficial owner
of the shares listed.

NUMBER OF SHARES
SUBJECT TO
NUMBER OF OPTIONS/WARRANTS AGGREGATE PERCENT
NAME OF SHARES EXERCISABLE NUMBER OF OF
BENEFICIAL OWNER HELD WITHIN 60 DAYS SHARES CLASS NATURE OF BENEFICIAL OWNERSHIP
- ---------------------------------- --------- ---------------- --------- -------- ------------------------------

DIRECTORS AND EXECUTIVE OFFICERS:
- ----------------------------------

Louis O. Dore 11,050 11,005 22,055 3.3

Paul M. Dunnavant, III 12,100 12,051 24,151 3.6

Martha B. Fender 10,050 10,009 20,059 3.0

Daryl A. Ferguson 20,000 19,919 39,919 5.9

D. Martin Goodman 11,250 11,204 22,454 3.4 Includes 11,050 shares held jointly with
Mr. Goodman's spouse and 200 shares
held jointly with his children.

William B. Gossett 30,250 49,708 79,958 11.4 Includes 27,550 shares held jointly with
Mr. Gossett's spouse.

Stancel E. Kirkland, Sr. 20,000 19,919 39,919 5.9 Includes 4,000 shares held jointly with Mr.
Kirkland's spouse.

Carl E. Lipscomb 20,600 19,919 40,519 6.0 Includes 19,200 shares held jointly with
Mr. Lipscomb's spouse and 600 shares
held in an IRA for Mr. Lipscomb's spouse.

Edward J. McNeil, Jr. 11,050 11,005 22,055 3.3

Jimmy Lee Mullins, Sr. 20,000 6,640 26,640 4.0

Frances K. Nicholson 12,350 12,300 24,650 3.7

Narayan Shenoy 20,100 20,019 40,119 6.0

J. Frank Ward 11,270 11,224 22,494 3.4

Bruce K. Wyles 11,450 11,404 22,854 3.4 Includes 400 shares held jointly with Mr.
Wyles' children.

ALL DIRECTORS AND EXECUTIVE 202,520 226,326 447,846 51.0%
OFFICERS AS A GROUP (14
PERSONS)

5% BENEFICIAL OWNER:
- ----------------------------------
Bill L. Amick 50,000 0 50,000 7.7% Includes 25,000 shares held by Amick
Farms.

RELATIONSHIPS AND RELATED TRANSACTIONS

From time to time our directors, officers and their affiliates, including
members of their families or businesses and other organizations with which they
are associated, may have banking transactions in the ordinary course of business
with the Bank. The Bank's policy is that any loans or other transactions with
those persons or entities (a) are made in accordance with applicable law and the
Bank's lending policies, (b) are made on substantially the same terms, including
price, interest rates and collateral, as those prevailing at the time for
comparable transactions with other unrelated parties of similar standing, and
(c) do not involve more than the normal risk of collectibility or present other
unfavorable features to the Company and the Bank. In addition, all future
transactions with our directors, officers and their affiliates are intended to
be on terms no less favorable than could be obtained from an unaffiliated third
party, and must be approved by a majority of our directors, including a majority
of the directors who do not have an interest in the transaction.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

During the fiscal year ended December 31, 2004, Section 16(a) of the
Securities Exchange Act of 1934 required the Company's directors and executive
officers and persons who own beneficially more than 10% of the Company's
outstanding common stock to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in their ownership of the
Company's common stock. Directors, executive officers and greater than 10%
shareholders are required to furnish the Company with copies of the forms they
file. To our knowledge, based solely on a review of a copy of these reports
furnished to the Company, during the fiscal year ended December 31, 2004, all of
our directors and executive officers, who are listed above, complied with all
applicable Section 16(a) filing requirements, except for Mr. Mullins who filed
one late Form 3 reporting his initial beneficial ownership of the Company's
stock.

INDEPENDENT PUBLIC ACCOUNTANTS

The Company has selected Francis & Co., CPAs to serve as its principal
accountant for the fiscal year ending December 31, 2005. Francis & Co. has
served as the Company's principal accountant since 1998. A representative of
Francis & Co. is expected to be present at the meeting and will be given the
opportunity to make a statement if he or she desires to do so and will be
available to respond to appropriate questions from shareholders.

The following table sets forth the fees billed to the Company for the years
ended December 31, 2004 and 2003 by Francis & Co.:

2004 2003
--------- -------

Audit fees $ 21,300 31,400
Audit-related fees 12,100 4,000
Tax fees 2,700 2,300
All other fees -- --
--------- -------
Total Fees $ 36,100 37,700
========= =======

AUDIT FEES

Audit fees represent fees billed by Francis & Co. for professional services
rendered in connection with the (1) audit of the Company's annual financial
statements for 2004 and 2003, and (2) review of the financial statements
included in the Company's quarterly filings on Form 10-QSB and annual filings on
Form 10-KSB.

AUDIT-RELATED FEES

Audit-related fees represent fees for professional services rendered for
assurance and related services reasonably related to the performance of the
audit or review of the Company's financial statements and not included in "Audit
Fees" above. The audit related fees in 2004 and 2003 represent fees for
internal audits of the Bank's operations function.

TAX FEES

Tax fees represent the aggregate fees billed in each of the last two fiscal
years for professional services rendered by Francis & Co. for tax compliance,
tax advice, and tax planning.

ALL OTHER FEES

The Company was not billed any other fees during 2004 or 2003.

The fees billed by Francis & Co. are pre-approved by the audit committee of
the Company in accordance with the policies and procedures for the audit
committee. The audit committee pre-approves all audit and non-audit services
provided by the Company's independent auditors and may not engage the
independent auditors to perform any prohibited non-audit services. For 2004,
100% of the fees incurred were pre-approved.

DIRECTOR NOMINATIONS AND SHAREHOLDER COMMUNICATIONS

DIRECTOR NOMINATIONS. The full Board of Directors of the Company
participates in the consideration of director nominees. The board has not
adopted a formal policy or process for identifying or evaluating nominees, but
informally solicits and considers recommendations from a variety of sources,
including other directors, members of the community, customers and shareholders
of the Bank, and professionals in the financial services and other industries.
Similarly, the board does not prescribe any specific qualifications or skills
that a nominee must possess, although it considers the potential nominee's
business experience; knowledge of the Company and the financial services
industry; experience in serving as a director of the Company or another
financial institution or public company generally; wisdom, integrity and
analytical ability; familiarity with and participation in the communities served
by

the Company; commitment to and availability for service as a director; and any
other factors the board deems relevant.

In accordance with the Company's bylaws, a shareholder may nominate persons
for election as directors if written notice of the shareholders intent to make a
director nomination is given by personal delivery or U.S. mail, postage prepaid,
to the Secretary of the Company not later than (1) 90 days in advance of the
date of the annual meeting of shareholders or (2) the close of business on the
seventh day following the date on which notice of a special meeting for the
purpose of electing directors is first given to shareholders. The notice must
set forth:

(1) the name, business and residence address of the shareholder who
intends to make the nomination and the person or persons to be
nominated;

(2) the class and number of shares of the Company beneficially owned
by the shareholder and whether the shareholder intends to appear in
person or by proxy at the meeting to nominate the person or persons
specified in the notice;

(3) a description of all arrangements or understandings between the
shareholder and each nominee and any other person pursuant to which
the nomination is to be made;

(4) the information that would have been required to be included in a
proxy statement filed pursuant to the rules of the Securities and
Exchange Commission had the nominee been nominated by the Board of
Directors of the Company; and

(5) the consent of the nominee to serve as a director of the
Company if elected.

The chairman of a shareholder meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing procedure.
Additionally, the chairman of the meeting, for good cause shown and with proper
regard for the orderly conduct of business at the meeting, may waive in whole or
in part the foregoing notice requirements.

SHAREHOLDER PROPOSALS. In accordance with the Company's bylaws, a
shareholder may bring business (other than the nomination of directors) before
the Company's annual meeting of shareholders if the shareholder gives notice of
the proposal by personal delivery or U.S. mail, postage prepaid, return receipt
requested, to the Secretary of the Company not later than 90 days in advance of
the annual meeting. The notice must set forth for each matter the shareholder
proposes to bring before the annual meeting:

(1) a description of the business desired to be brought before the
annual meeting (including the specific proposal to be presented) and
the reasons for conducting such business at the annual meeting;

(2) the name and record address of the shareholder proposing such
business;

(3) the class and number of shares of the Company held of record and
beneficially by the shareholder making the proposal as of a date
within ten days of the shareholder's notice; and

(4) any interest of the shareholder in such business.

In accordance with the Company's bylaws, the chairman of the annual meeting
may declare that any business which a shareholder attempts to bring before the
annual meeting, other than in compliance with the foregoing notice requirements,
is improperly brought before the meeting and therefore will not

be transacted. Additionally, the chairman of the annual meeting, for good cause
shown and with proper regard for the orderly conduct of business at the meeting,
may waive in whole or in part the foregoing notice requirements.

In order for a shareholder proposal to be considered at the 2005 annual
meeting, notice of the proposal was required to be delivered to the Secretary of
the Company on or before January 28, 2005. The Company did not receive notice
of any shareholder proposals to be presented at the 2005 meeting prior to the
January 28, 2005 deadline.

To be included in the Company's 2006 proxy statement, shareholder proposals
submitted for consideration at the 2006 annual meeting of shareholders must be
received by the Company no later than November 23, 2005. We anticipate that our
2006 annual meeting will be held no earlier than April 26, 2006. Therefore, the
deadline for submitting a shareholder proposal for consideration at the 2006
annual meeting, other than by inclusion in the 2006 proxy statement, should be
no earlier than January 27, 2006. The exact date of the deadline, however, will
depend on the date set for the 2006 annual meeting. Proxies solicited by the
management of the Company will confer discretionary authority upon the
management of the Company to vote upon any proposal contained in a notice
received after February 7, 2006 but before the shareholder proposal notice
deadline provided in the Company's bylaws. SEC Rule 14a-8 provides additional
information regarding the content and procedure applicable to the submission of
shareholder proposals to be included in the Company's 2006 proxy statement.

SHAREHOLDER COMMUNICATIONS. Shareholders wishing to communicate with the
Board of Directors or with a particular director may do so in writing addressed
to the board, or to the particular director, and by sending it to the Secretary
of the Company at the Company's principal office at 2348 Boundary Street,
Beaufort, South Carolina 29902. The Secretary will promptly forward such
communications to the applicable director or to the Chairman of the Board for
consideration at the next scheduled meeting.

OTHER MATTERS

The Board of Directors of the Company knows of no other matters that may be
brought before the meeting. If, however, any matters other than those described
in the Notice of Annual Meeting of Shareholders should properly come before the
meeting, votes will be cast pursuant to the proxies in accordance with the best
judgment of the proxyholders.

If you cannot be present in person, you are requested to complete, sign,
date, and return the enclosed proxy promptly. An envelope has been provided for
that purpose. No postage is required if mailed in the United States.

April 4, 2005

ISLANDS BANCORP
PROXY
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, APRIL 26, 2005

The undersigned hereby appoints William B. Gossett as proxy, with the power
to appoint his substitute, and hereby authorizes him to represent and to vote,
as designated below, all of the common stock of Islands Bancorp, which the
undersigned would be entitled to vote if personally present at the annual
meeting of shareholders to be held at the Lobby of Islands Community Bank, N.A.,
2348 Boundary Street, Beaufort, South Carolina on Tuesday, April 26, 2005 at
6:00 p.m. and at any adjournments of the annual meeting, upon the proposal
described in the accompanying notice of the annual meeting and the proxy
statement relating to the annual meeting, receipt of which are hereby
acknowledged.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL.

PROPOSAL 1: To elect the four (4) persons listed below to serve
as Class III Directors of Islands Bancorp for a three-year term
expiring at the 2008 annual meeting:

CLASS III DIRECTORS: CARL E. LIPSCOMB J. FRANK WARD
DR. NARAYAN SHENOY BRUCE K. WYLES

[_] FOR all nominees listed above (except as [_] WITHHOLD authority to
vote for all nominees indicated below) listed above

INSTRUCTION: To withhold authority for any individual nominees,
mark "FOR" above, and write the nominees' names in this space.

_________________________________________________________________

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION TO THE CONTRARY IS INDICATED, IT
WILL BE VOTED FOR THE PROPOSAL. DISCRETIONARY AUTHORITY IS HEREBY CONFERRED AS
TO ALL OTHER MATTERS WHICH MAY COME BEFORE THE ANNUAL MEETING.

If stock is held in the name of more than one person, all holders must
sign. Signatures should correspond exactly with the name or names appearing on
the stock certificate(s). When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.

____________________________________________
Signature of Shareholder Date

____________________________________________
Print Name(s) of Shareholder(s)

Please mark, sign and date this Proxy, and return it in the enclosed
return-addressed envelope. No postage necessary.

I WILL __________ WILL NOT ___________ ATTEND THE ANNUAL SHAREHOLDERS MEETING.

PLEASE RETURN PROXY AS SOON AS POSSIBLE
---------------------------------------