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:
- --------------------------------------------------------------------------------

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

March 24, 2006

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 25, 2006 at 6:00 p.m. We sincerely
hope that you will be able to attend the meeting, and we 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 for the year ended December 31, 2005 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/ John R. Perrill
John R. Perrill
Acting Chief Executive Officer

/s/ D. Martin Goodman
D. Martin Goodman
Chairman of the Board of Directors

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

NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 25, 2006

The annual meeting of shareholders of Islands Bancorp will be held on
Tuesday, April 25, 2006 at 6:00 p.m. at the lobby of 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 I Directors for a
three-year term expiring in 2009; 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 13, 2006, 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/ John R. Perrill
John R. Perrill
Acting Chief Executive Officer

/s/ D. Martin Goodman
D. Martin Goodman
Chairman of the Board of Directors

March 24, 2006

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

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

PROXY STATEMENT FOR 2006 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 25, 2006 at 6:00 p.m. at the lobby of 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 13, 2006 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 March 24, 2006.

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 740,260 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 I Directors of the Company for a three-year term expiring in
2009. The persons nominated to serve as Class I Directors, as well as the
continuing Class II and Class III 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
John R. Perrill, Acting Chief Executive Officer of the Company, at the main
office of the Company, 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. There are no other 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.

Except as otherwise required by the South Carolina Business Corporation Act
of 1988, approval of any other matter that may properly come before the annual
meeting requires the affirmative vote of a majority of the votes cast in person
or by proxy on the matter. Abstentions and broker non-votes will not be counted
in determining the minimum number of votes required for approval of such
matters.

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: ELECTION OF DIRECTORS

The Company's Board of Directors consists of 13 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 I Directors listed
below to stand for re-election at the annual meeting. If elected, each of the
Class I Directors will serve a three-year term expiring in 2009.

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

The following table shows for each nominee and continuing director: (a)
his/her name and age at December 31, 2005; (b) how long he/she has been a
director of the Company; and (c) his/her position(s) with the Company, other
than as a director, and 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.

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

CLASS I DIRECTOR NOMINEES:
(For Three-Year Term Expiring 2009)

Louis O. Dore (60) 1999 Attorney and Managing Partner, Dore Law Firm, P.A.,
Beaufort, South Carolina.

Martha B. Fender (60) 1999 Vice Chairman of Islands Bancorp; President and Owner of
Coastal Carolina Realty, Inc.; Beaufort, South Carolina (real
estate sales).

D. Martin Goodman (59) 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.

Jimmy Lee Mullins, Sr. (53) 2004 President and Chief Executive Officer of Mullins Trucking
Company, Inc., Beaufort, South Carolina.

CLASS II CONTINUING DIRECTORS:
(Term Expiring 2007)

Paul M. Dunnavant, III (41) 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
- ----------------------------------- -------- ----------------------------------------------------------------

Daryl A. Ferguson (67) 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. (65) 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.

Edward J. McNeil, Jr. (51) 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.

Frances K. Nicholson (51) 1999 Managing Partner of Nicholson Investments LLC (real estate
leasing and securities portfolio company); Managing Partner of
Big Nickel Properties, LLC, South Carolina Licensed Realtor.

CLASS III CONTINUING DIRECTORS:
(Term Expiring 2008)

Carl E. Lipscomb (67) 2002 Realtor, Hilton Head Luxury Homes since January 2006;
President and Chief Executive Officer of Lipscomb
Construction, Hilton Head, South Carolina (custom home
construction in the Beaufort County area) from 1981 to 2001;
Realtor, Kiser & Assoc. from 2003 to 2005.

Dr. Narayan Shenoy (67) 2002 Anesthesiologist; Partner in Critical Health Systems, Inc.,
Columbia, South Carolina.

J. Frank Ward (59) 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.

Bruce K. Wyles (51) 1999 Dentist, sole proprietorship, Beaufort, South Carolina; Partner,
B.K.W. Squared.

MEETINGS AND COMMITTEES OF THE BOARD

During the year ended December 31, 2005, the Board of Directors of the
Company held seven meetings and the Board of Directors of the Bank held 13
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 Mr. Ferguson, who attended 71% of
the meetings of the Company's Board of Directors and the committees on which he
serves.

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. All of the Company's 13 directors attended the 2005 annual
meeting of shareholders, except Messrs. Lipscomb and Ferguson.

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 are independent directors under the National
Association of Securities Dealers' definition of "independent director." Since
the Company is a small business issuer and all of its directors are independent,
the Company believes a standing nominating committee is not necessary. See
"Director Nominations and Shareholder Communications" on page 11.

STOCK INCENTIVE COMMITTEE. The Board of Directors has established a Stock
Incentive Committee for the purpose of administering the Islands Bancorp 2002
Stock Incentive Plan. The Stock Incentive Committee members are Stancel E.
Kirkland, Sr. and Paul M. Dunnavant, III. The Stock Incentive Committee held
two meetings during the year ended December 31, 2005.

HUMAN RESOURCES COMMITTEE. The Boards of Directors of the Company and the
Bank have established a joint Human Resources Committee which recommends
executive officer compensation to the full Board for approval and reviews: (a)
management recommendations regarding other officer compensation; (b) management
organization and development; and (c) significant employee benefit programs.
The Human Resources Committee members are Edward J. McNeil, Jr. (Chairman),
Louis O. Dore, Martha B. Fender, Frances K. Nicholson and J. Frank Ward. The
Human Resources Committee held two meetings during 2005.

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 four meetings during the year ended December 31, 2005.

The joint Audit Committee members are: Louis O. Dore (Chairman), Paul M.
Dunnavant, III, Stancel E. Kirkland, Sr., Edward J. McNeil, Jr. and Jimmy Lee
Mullins, Sr. 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 2005 audited consolidated financial statements.

- The Audit Committee has reviewed and discussed the Company's 2005
audited consolidated financial statements with the Company's
management;

- The Audit Committee has discussed with the independent auditors
Frances & Company 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 2005 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 2005 audited
consolidated financial statements be included in the Company's Annual
Report on Form 10-KSB.

February 21, 2006 By: Louis O. Dore (Chairman)
Paul M. Dunnavant, III
Stancel E. Kirkland, Sr.
Edward J. McNeil, Jr.
Jimmy Lee Mullins, Sr.

EXECUTIVE OFFICERS

The following table shows for each executive officer of the Company: (a)
his/her name and age at December 31, 2005; (b) how long he/she has been an
officer of the Company; and (c) his/her position(s) with the Company and the
Bank:

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

Carol J. Nelson (48) 2005 Chief Financial Officer of Islands Bancorp and
Islands Community Bank, N.A. since December
2005; Senior Vice President and Chief Financial
Officer of The Buckhead Community Bank,
Atlanta, Georgia from September 2002 to April
2005; Owner, Financial Management Resources
Group LLC (which provided consulting services to
financial institutions), Atlanta, Georgia from 1999
to 2002.

John R. Perrill (58) 2001 Acting Chief Executive Officer of Islands Bancorp
and Islands Community Bank, N.A. since
November 2005; Senior Vice President and Senior
Lender of Islands Bancorp and Islands Community
Bank, N.A. from May 2001 to December 2005;
Prior to May 2001, Vice President (lender),
Wachovia Bank, N.A., Beaufort, South Carolina.

COMPENSATION

COMPENSATION OF EXECUTIVE OFFICERS

The following table presents the total compensation paid by the Company
during fiscal years 2005, 2004 and 2003 to its chief executive officer. No
other executive officer of the Company earned over $100,000 in salary and bonus
during fiscal years 2005, 2004 and 2003.

SUMMARY COMPENSATION TABLE

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

John R. Perrill, 2005 $ 114,258 $ 20,000 -- $ 3,239
Acting Chief Executive 2004 $ 99,717 $ 5,000 -- $ 2,992
Officer 2003 $ 93,960 $ 2,500 -- $ 2,879

William B. Gossett, 2005 $ 148,554 -- -- $ 4,457
Former President and Chief 2004 $ 155,341 $ 10,000 -- $ 4,661
Executive Officer 2003 $ 143,000 $ 10,000 -- $ 4,590
(2001 through Nov. 2005)
<FN>
- ----------------------------------
(1) Represents matching contributions to the named executive's 401(k) plan.

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 2005

The Company granted no stock options during fiscal 2005 to its named
executive officers. The Company has no outstanding stock appreciation rights
and granted no stock appreciation rights during fiscal year 2005.

FISCAL YEAR-END OPTION VALUES

Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options December 31, 2005
NAME Exercisable Unexercisable Exercisable Unexercisable
- --------------- ----------- ------------- ------------ -------------

John R. Perrill 4,500 -- $ 4,500 --

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,
2005 as possible. Based on information known to us, this sale occurred on
December 8, 2005, at a sales price of $11.00 per share.

EMPLOYMENT AGREEMENT. On July 27, 1999, the Company entered into an
employment agreement with William B. Gossett regarding his employment as
president and chief executive officer of the Company and the Bank. The initial
term of the agreement was five years. The agreement automatically renewed for
additional two-year terms unless either party notified the other party of its
intent not to renew at least 180 days prior to the end of the then-current term.
On August 16, 2005, the Company notified Mr. Gossett of its intent not to renew
the agreement for an additional term. Accordingly, the agreement was due to
terminate on July 26, 2006. On November 15, 2005, however, the Company
terminated for cause Mr. Gossett's employment as the Company's president and
chief executive officer.

Under the agreement, during 2005 Mr. Gossett received $148,554 in salary
and was provided with an automobile, life insurance and reimbursement for
automobile expenses, club dues and business expenses. He also participated in
the Bank's retirement, medical and other benefit programs.

Pursuant to Mr. Gossett's employment agreement, in 2002 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. Under the terms of the option award, the option,
which was fully vested, terminated on November 15, 2005 upon the Company's
termination of Mr. Gossett's employment for cause.

The employment agreement with Mr. Gossett also provides that for a period
expiring one year after termination of his employment for any reason other than
without cause 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 for a period expiring one year
after termination of his employment for any reason 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.

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; (b) all executive officers and directors, as a
group; and (c) each person known by the Company to be the beneficial owner of
more than 5% of the Company's common stock. Except as indicated below, the
Company believes that each person is the record owner and has sole voting and
investment power with respect to his or her shares. Additionally, the address
of each of the directors and executive officers listed below 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:

Louis O. Dore 11,050 11,005 22,055 2.9

Paul M. Dunnavant, III 12,100 12,051 24,151 3.2

Martha B. Fender 20,059 -- 20,059 2.7

Daryl A. Ferguson 20,000 19,919 39,919 5.3

D. Martin Goodman 11,250 11,204 22,454 3.0 Includes 11,050 shares held jointly
with Mr. Goodman's spouse and
200 shares held jointly with his
children.

Stancel E. Kirkland, Sr. 30,000 9,919 39,919 5.3 Includes 4,000 shares held jointly
with Mr. Kirkland's spouse.

Carl E. Lipscomb 43,439 -- 43,439 5.9 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 2.9

Jimmy Lee Mullins, Sr. 20,000 13,279 33,279 4.4

Frances K. Nicholson 12,350 12,300 24,650 3.3

Narayan Shenoy 30,100 10,019 40,119 5.4

J. Frank Ward 18,770 3,724 22,494 3.0

Bruce K. Wyles 11,450 11,404 22,854 3.0 Includes 400 shares held jointly
with Mr. Wyles' children.

EXECUTIVE OFFICERS:

Carol J. Nelson - 5,000 5,000 0.7

John R. Perrill 1,200 4,500 5,700 0.8

ALL DIRECTORS AND 252,818 135,329 388,147 44.3
EXECUTIVE OFFICERS AS A
GROUP (15 PERSONS)

GREATER THAN 5%
BENEFICIAL OWNERS:

Bill L. Amick 50,000 - 50,000 6.8 Includes 25,000 shares held by
P.O. Box 2309 Amick Farms
Batesburg-Leesville, SC
29070

William B. Gossett 60,377 - 60,377 8.1 Includes 27,550 shares held jointly
711 Ribaut Road with Mr. Gossett's spouse.
Beaufort, SC
29902

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, 2005, 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, 2005, all of
our directors and executive officers, who are listed above, complied with all
applicable Section 16(a) filing requirements, except Ms. Nelson and Messrs.
Mullins and Perrill, who each filed late a report of their initial ownership of
the Company's securities. Ms. Nelson also filed late a report of change in
ownership related to a stock option award.

INDEPENDENT PUBLIC ACCOUNTANTS

On December 14, 2005, the Company engaged Elliott Davis, LLC to serve as
its principal accountant for the fiscal year ending December 31, 2006 and
dismissed Francis & Company CPAs as the Company's principal accountant pending
the completion of Francis & Company's audit of the Company's consolidated
financial statements for the fiscal year ending December 31, 2005. The decision
to change independent public accountants was made by the Audit Committee of the
Company's Board of Directors.

Francis & Company performed audits of the consolidated financial statements
for the years ended December 31, 2005 and 2004. Their reports did not contain
an adverse opinion or a disclaimer of opinion and were not qualified or modified
as to uncertainty, audit scope, or accounting principles.

During the two years ended December 31, 2005, there have been no
disagreements between the Company and Francis & Company on any matter of
accounting principles or practice, financial statement disclosure, or auditing
scope or procedure, which disagreements would have caused Francis & Company to
make reference to the subject matter of such disagreements in connection with
its report. None of the "reportable events" described in Item 304(a)(1)(iv)(B)
of Regulation S-B of the SEC's rules and regulations have occurred during the
two years ended December 31, 2005.

A representative of Francis & Company 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, 2005 and 2004 by Francis & Company:

2005 2004
----------- ----------

Audit fees $ 37,400 33,400
Audit-related fees -- --
Tax fees 2,900 2,700
All other fees -- 500
----------- ----------
Total Fees $ 40,300 36,600
=========== ==========

AUDIT FEES

Audit fees represent fees billed by Francis & Company for professional
services rendered in connection with the (1) audit of the Company's annual
financial statements for 2005 and 2004, 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. There were no audit-related fees in 2005 or 2004.

TAX FEES

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

ALL OTHER FEES

In 2004, Francis & Company attended the Company's strategic planning
session, for which it was paid $500. The Company was not billed any other fees
during 2005.

The fees billed by Francis & Company 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 2005,
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 2006 annual
meeting, notice of the proposal was required to be delivered to the Secretary of
the Company on or before January 28, 2006.

To be included in the Company's 2007 proxy statement, shareholder proposals
submitted for consideration at the 2007 annual meeting of shareholders must be
received by the Company no later than November 27, 2006. We anticipate that our
2007 annual meeting will be held no earlier than April 24, 2007. Therefore, the
deadline for submitting a shareholder proposal for consideration at the 2007
annual meeting, other than by inclusion in the 2007 proxy statement, should be
no earlier than January 25, 2007. The exact date of the deadline, however, will
depend on the date set for the 2007 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 8, 2007 and 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 2007 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 other than a shareholder proposal properly omitted
from this proxy statement pursuant to SEC Rule 14a-8. If the omitted proposal
or 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.

March 24, 2006

ISLANDS BANCORP
PROXY
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, APRIL 25, 2006

The undersigned hereby constitutes and appoints D. Martin Goodman and John
R. Perrill, or either of them, as proxies, each with full power of substitution,
to vote as designated below the number of shares of common stock of Islands
Bancorp that 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 25,
2006 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: To elect the four (4) persons listed below to serve as Class I
Directors of Islands Bancorp for a three-year term expiring at
the 2009 annual meeting:

CLASS I DIRECTORS: LOUIS O. DORE D. MARTIN GOODMAN
MARTHA B. FENDER JIMMY LEE MULLINS, SR.

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

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