U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)
ý	Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended June 30, 2004
o	Transition report under Section 13 or 15(d) of the Exchange Act
	For the transition period from to
Commission File No. 333-74710

(Mark One)

ý		Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the quarterly period ended September 30, 2005

o		Transition report under Section 13 or 15(d) of the Exchange Act
		For the transition period from to

Commission File No. 333-74710

Georgia Bancshares, Inc.

(Exact name of registrant as specified in its charter)

Georgia		58-2646154
(State of Incorporation)		(I.R.S. Employer Identification No.)
100 Westpark Drive, Peachtree City, GA 30269
(Address of principal executive offices)
(770) 631-9488
(Issuer’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

100 Westpark Drive, Peachtree City, GA 30269

(Address of principal executive offices)

(770) 631-9488

(Issuer’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in rule 12b-2 of the Exchange Act). ~~Yes o No ý~~

~~Indicate the number of shares outstanding of each of the issuer’s~~Yes ~~classes~~o No ~~of common equity, as of the latest practicable date: 2,940,261 shares of common stock were issued and outstanding as of August 10, 2004.~~ý

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).

Yes o No ý

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 2,977,032 shares of common stock were issued and outstanding as of November 8, 2005.

GEORGIA BANCSHARES, INC. AND SUBSIDIARY

Index

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets – June 30, 2004 and December 31, 2003 Condensed Consolidated Statements of Income- Three months ended June 30, 2004 and 2003 Condensed Consolidated Statements of Income- Six months ended June 30, 2004 and 2003 Condensed Consolidated Statements of Cash Flows - Six months ended June 30, 2004 and 2003 Notes to Condensed Consolidated Financial Statements Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures PART II. – OTHER INFORMATION Item 1. Legal Proceedings Item 2. Changes in Securities and Use of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Report on 8-K Signature Page Exhibit Index

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets – September 30, 2005 (Unaudited) and December 31, 2004

	Condensed Consolidated Statements of Income (Unaudited)
	Three months ended September 30, 2005 and 2004

	Condensed Consolidated Statements of Income (Unaudited)
	Nine months ended September 30, 2005 and 2004

	Condensed Consolidated Statements of Cash Flows (Unaudited)
	Nine months ended September 30, 2005 and 2004

	Notes to Condensed Consolidated Financial Statements (Unaudited)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Item 4. Controls and Procedures

PART II. – OTHER INFORMATION

Item 1. Legal Proceedings

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Item 3. Defaults Upon Senior Securities

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

Item 5. Other Information

Item 6. Exhibits

Signature Page

Exhibit Index

GEORGIA BANCSHARES, INC. AND SUBSIDIARY

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets

	June 30, 2004			December 31, 2003
	September 30, 2005			December 31, 2004
	(Unaudited)
	(unaudited)
Assets:
Cash and cash equivalents:
Cash and due from banks	$	59,~~573~~572,~~235~~389		$	84,~~516~~631,~~138~~303
Interest-bearing deposits in other banks	590,~~064,937~~654			295,~~860~~115,984
Federal funds sold	242,~~664~~485,000			~~6,887,000~~0
Cash and cash equivalents	3512,~~302~~148,~~172~~043			159,~~432~~747,~~998~~287
Investment securities:
Securities available-for-sale	3225,~~836~~750,~~368~~626			3435,~~147~~039,~~840~~356
Other investments	1,~~307~~997,~~366~~241			1,~~357~~540,~~566~~466
	34,143,734			35,505,406
	27,747,867			36,579,822
Loans, net of allowance for loan losses of $2,222,233 and $2,131,752, respectively	161,313,540			147,463,301
Loans, gross	217,687,155			192,294,881
Accrued interest receivable	1,559,993			1,340,445
Loan loss reserve	2,888,848			2,654,334
Premises and equipment, net	5,294,049			4,772,339
Loans, net	214,798,307			189,640,547
Other assets	1,019,518			577,141
Accrued interest receivable	2,377,332			1,612,109
Total assets	$	238,633,006		$	205,091,630
Premises and equipment, net	6,546,528			6,212,760
Bank owned life insurance	4,848,006			4,715,027
Other assets	1,426,338			1,042,499
Total assets	$	269,892,421		$	249,550,051
Liabilities:
Deposits:
Noninterest-bearing	$	3230,~~935~~034,~~521~~175		$	2322,~~448~~666,~~570~~896
NOW	1438,~~693~~628,~~059~~841			629,~~308~~139,~~343~~505
Savings	1923,~~158~~713,~~941~~173			1929,~~018~~340,~~079~~650
Time deposits $100,000 and over	8673,~~982~~408,~~707~~621			6278,~~745~~243,~~922~~539
Other time deposits	6162,~~957~~359,~~340~~069			7052,~~446~~867,~~862~~428
Total deposits	~~215~~228,~~727~~143,~~568~~879			~~181~~212,~~967~~258,~~776~~018
Securities sold under agreements to repurchase	~~614~~215,~~016~~165			~~670~~529,~~052~~358
Federal Home Loan Bank advances	2,000,000			2,000,000
Federal funds purchased	0			5,500,000
Stock purchase obligation	0			369,250
Federal Home Loan Bank advances	10,000,000			2,000,000
Other liabilities	925,562			821,737
Junior subordinated debentures	6,702,000			6,702,000
Total liabilities	219,267,146			185,828,815
Accrued interest payable and other liabilities	1,762,231			1,454,492
Shareholders’ equity:
Total liabilities	246,823,275			228,443,868
Common stock; no par value, 10,000,000 shares authorized; 2,936,119 shares issued and outstanding	15,034			15,034
Shareholders’ Equity
Capital surplus	17,001,789			17,290,269
Common stock	17,248,549			17,217,471
Retained earnings	25,~~895~~825,~~578~~097			23,~~015~~861,~~345~~473
Accumulated other comprehensive income (loss)	(~~546~~4,~~541~~500		)	~~(57~~27,~~833~~239		)
Total shareholders’ equity	1923,~~365~~069,~~860~~146			1921,~~262~~106,~~815~~183
Total liabilities and shareholders’ equity	$	~~238~~269,~~633~~892,~~006~~421		$	~~205~~249,~~091~~550,~~630~~051

See notes to condensed consolidated financial statements.

GEORGIA BANCSHARES, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Income

(Unaudited)

	Three Months Ended June 30,
	Three Months Ended September 30,
	2004		2003
	2005		2004
Interest income:
Interest and fees on loans	$	23,~~811~~993,~~235~~443	$	23,~~453~~131,~~015~~931
Interest and dividends on investments	~~295~~265,~~355~~949		~~282~~390,~~130~~252
Interest on federal funds sold and other interest income	2011,~~872~~019		1112,~~797~~997
Total interest income	34,~~127~~270,~~462~~411		23,~~746~~535,~~942~~180
Interest expense:
Interest on deposits	~~993~~1,~~623~~384,434		1,~~140~~036,~~296~~877
Interest on securities sold under agreements to repurchase	~~1,345~~713		52,~~249~~001
Interest on other borrowed funds	10217,~~233~~845		420,~~442~~958
Total interest expense	1,~~005~~602,~~201~~992		1,~~149~~059,~~987~~836
Net interest income	2,~~122~~667,~~261~~419		12,~~596~~475,~~955~~344
Provision for loan losses	7096,~~000~~600		75280,000
Net interest income after provision for loan losses	2,~~052~~570,~~261~~819		12,~~521~~195,~~955~~344
Other income:
Service charges on deposit accounts	7888,~~644~~422		5073,~~715~~372
Loss on sale of other assets	0		0
Losses on sale of other assets	0		(5,000		)
Gains on sales of securities available-for-sale	~~4,795~~0		5411,~~384~~146
Other operating income	44,193		13,572
Mortgage banking income	240,532		87,352
Total other income	127,632		118,671
Other operating income	111,513		47,295
Total other income	440,467		214,165
Other expense:
Salaries and employee benefits	~~849~~1,~~785~~306,908		~~600~~976,~~549~~884
Occupancy and equipment expense	~~180~~211,~~580~~104		~~116~~197,~~377~~554
Data processing	~~140~~162,~~909~~250		~~110~~151,~~153~~420
Other operating expenses	~~302~~315,~~245~~129		~~259~~360,~~681~~141
Total other expense	1,~~473~~995,~~519~~391		1,~~086~~685,~~760~~999
Income before income taxes	~~706~~1,~~374~~015,895		~~553~~723,~~866~~510
Income tax expense	~~213~~306,000		~~206~~238,000
Net income	$	493,374	$	347,866
Net earnings	$	709,895	$	485,510
Basic earnings per share	$	0.1724	$	0.1517
Diluted earnings per share	$	0.1520	$	0.1214

See notes to condensed consolidated financial statements.

GEORGIA BANCSHARES, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Income

(Unaudited)

	Six Months Ended June 30,
	Nine Months Ended September 30,
	2004			2003
	2005			2004
Interest income:
Interest and fees on loans	$	511,~~546~~351,~~345~~640		$	48,~~757~~678,~~928~~276
Interest and dividends on investments	~~607~~858,~~267~~683			~~621~~997,~~284~~519
Interest on federal funds sold and other interest income	3733,~~957~~180			2650,~~319~~954
Total interest income	612,~~191~~243,~~569~~503			59,~~405~~726,~~531~~749
Interest expense:
Interest on deposits	23,~~009~~818,~~831~~125			23,~~314~~046,~~483~~708
Interest on securities sold under agreements to repurchase	23,~~663~~565			134,~~994~~664
Interest on other borrowed funds	21537,~~062~~587			1142,~~099~~020
Total interest expense	24,~~033~~359,~~556~~277			23,~~339~~093,~~576~~392
Net interest income	47,~~158~~884,~~013~~226			36,~~065~~633,~~955~~357
Provision for loan losses	~~150~~289,~~000~~800			~~150~~430,000
Net interest income after provision for loan losses	47,~~008~~594,~~013~~426			26,~~915~~203,~~955~~357
Other income:
Service charges on deposit accounts	~~157~~252,~~983~~837			98231,~~847~~355
Loss on sale of other assets	(4,678		)	0
Gains (losses) on sale of other assets	599			(9,678		)
Gains on sales of securities available-for-sale	~~5,869~~0			7817,~~034~~015
Other operating income	74,263			33,053
Mortgage banking income	505,635			87,352
Total other income	233,437			209,934
Other operating income	316,168			121,558
Total other income	1,075,239			447,602
Other expense:
Salaries and employee benefits	13,~~729~~720,~~078~~764			12,~~195~~705,~~476~~962
Occupancy and equipment expense	~~344~~632,~~585~~408			~~262~~542,~~150~~139
Data processing	~~290~~472,~~591~~727			~~226~~442,~~117~~011
Other operating expenses	~~573~~1,~~963~~023,071			~~488~~934,~~661~~104
Total other expense	25,~~938~~848,~~217~~970			24,~~172~~624,~~404~~216
Income before income taxes	12,~~303~~820,~~233~~695			~~953~~2,~~485~~026,743
Income tax expense	~~423~~857,~~000~~071			~~333~~661,000
Net income	$	880,233		$	620,485
Net earnings	$	1,963,624		$	1,365,743
Basic earnings per share	$	0.3066		$	0.2746
Diluted earnings per share	$	0.2656		$	0.2240

See notes to condensed consolidated financial statements.

GEORGIA BANCSHARES, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended June 30,
	Nine Months Ended September 30,
	2004			2003
	2005			2004
Cash flows from operating activities:
Net income	$	880,233		$	620,485
Net earnings	$	1,963,624		$	1,365,743
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation, amortization and accretion	~~261~~434,~~121~~904			~~106~~441,~~735~~477
Provision for loan losses	~~150~~289,~~000~~800			~~150~~430,000
Gains on sales of securities available-for-sale	~~(5,869~~0		)	(7817,~~034~~015		)
Loss on sale of other assets	4,678			0
(Gains) losses on sale of other assets	(599		)	9,678
Deferred income taxes	(97115,~~611~~921		)	(94209,~~817~~612		)
Changes in operating assets and liabilities:
Accrued interest receivable	(219,548		)	(222,018		)
Unearned loan fees, net	(62,819		)	2,479
Other assets	(97,685		)	(48,755		)
Accrued interest receivable	(765,223		)	(244,085		)
Income taxes payable	(23,880		)	(11,510		)
Increase in bank owned life insurance	(132,979		)	0
Accrued interest payable	20,510			50,437
Other assets	(247,867		)	(330,682		)
Other liabilities	107,195			(235,321		)
Accrued interest payable and other liabilities	307,739			364,175
Net cash provided by operating activities	~~979~~1,~~144~~670,659			~~237~~1,~~202~~812,158
Cash flows from investing activities:
Purchases of available-for-sale maturities	(8,449,634		)	(13,471,171		)
Purchases of available-for-sale securities	(1,343,424		)	(15,395,412		)
Proceeds from sales and pay downs of securities available-for-sale	73,~~015~~430,~~427~~210			177,~~181~~361,~~762~~469
Proceeds from maturities of securities available-for-sale	17,~~930~~000,000			14,~~250~~270,~~000~~853
Purchase of other investments	0			(706,400		)
Purchases of other investments	(456,775		)	0
Proceeds from sale of other investments	50,200			0
Proceeds from redemption of other investments	0			50,200
Net increase in loans	(1425,~~000~~384,~~239~~741		)	(538,~~208~~536,~~846~~364		)
Purchases of premises and equipment	(~~701~~617,~~750~~919		)	(~~748~~1,~~460~~076,928		)
Net cash used in investing activities	(1417,~~155~~372,~~996~~649		)	(143,~~703~~326,~~115~~182		)
Cash flows from financing activities:
Net increase in deposits	3315,~~759~~885,~~792~~861			2338,~~075~~096,~~662~~363
Payments on Federal Home Loan Bank advances	0			(2,000,000		)
Net change in federal funds purchased	(5,500,000		)	0
Net change in federal funds purchased	0			(4,200,000		)
Net change in securities sold under agreements to repurchase	(314,193		)	61,337
Net change in securities sold under agreements to repurchase	(56,036		)	(2,031,573		)
Payments on Federal Home Loan Bank advances	(2,000,000		)	0
Settlement of stock purchase obligation	(657,730		)	0
Proceeds from Federal Home Loan Bank advances	10,000,000			0
Net cash provided by financing activities	33,046,026			14,844,089
Proceeds from junior subordinated debentures	0			6,702,000
Net change in cash and cash equivalents	19,869,174			13,378,176
Proceeds from exercise of employee stock options	31,078			33,983
Cash and cash equivalents at beginning of period	15,432,998			5,329,014
Settlement of stock purchase obligation	0			(657,730		)
Cash and cash equivalents at end of period	$	35,302,172		$	18,707,190
Net cash provided by financing activities	18,102,746			44,235,953
Net increase in cash and cash equivalents	2,400,756			2,721,929
Cash and cash equivalents at beginning of period	9,747,287			15,432,998
Cash and cash equivalents at end of period	$	12,148,043		$	18,154,927
Supplemental disclosures:
Cash paid during the period for interest	$	24,~~013~~310,~~046~~010		$	23,~~289~~007,~~139~~147
Cash paid during the period for income taxes	$	~~545~~1,~~909~~015,000		$	~~321~~795,~~940~~909
Non-cash investing and financing activities:
Change in unrealized gains on securities available-for-sale, net of tax	$	31,739		$	(47,596	)

See notes to condensed consolidated financial statements.

GEORGIA BANCSHARES, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with the requirements for interim financial statements and, accordingly, they are condensed and omit disclosures ~~which~~that would substantially duplicate those contained in the most recent annual report to shareholders. The financial statements as of ~~June~~September 30, 2005 ~~2004~~ and for the interim periods ended ~~June~~September 30, ~~2004~~2005 and ~~2003 are~~2004 are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation. The financial information as of December 31, ~~2003~~2004 has been derived from the audited financial statements as of that date. For further information, refer to the financial statements and the notes included in Georgia Bancshares, Inc. ~~2003~~2004 Annual Report.

Critical Accounting Policies

We have adopted various accounting policies ~~which~~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 notes to the consolidated financial statements at December 31, ~~2003~~2004 as filed in our Annual Report on Form 10-~~KSB~~K.

Certain accounting policies involve significant judgments and assumptions by us ~~which~~ 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 judgments 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 judgments and assumptions we make, actual results could differ from these judgments and estimates which could have a material impact on our carrying values of assets and liabilities and our results of operations.

We believe the process for establishing the allowance for loan losses is a critical accounting policy that requires the most significant judgments and estimates used in preparation of our consolidated financial statements. We have developed policies and procedures for evaluating the overall quality of our credit portfolio and the timely identification of potential credit problems. 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. We have established an allowance for loan losses through a provision for loan losses charged to expense on our statement of operations.

Stock Compensation Plans

Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation, encourages all entities to adopt a fair value based method of accounting for employee stock compensation plans, whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. However, it also allows an entity to continue to measure compensation costs for those plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, whereby compensation cost is the excess, if any, of the quoted market price of the stock at the grant date (or other measurement date) over the amount an employee must pay to acquire the stock. Accordingly, the Company has recorded no expense in the ~~six~~nine months ended ~~June~~September 30, ~~2004~~2005 and ~~June~~ September 30, ~~2003~~2004 related to its stock options. The Company has elected to continue with the accounting methodology in Opinion No. 25 and, as a result, has provided the following pro forma disclosure of net income and basic and diluted earnings per common share.

			For the six months ended June 30,
				For the nine months ended
			2004			2003
				September 30,
Net income	As reported		$	880,233		$	620,485
				2005			2004
	Effect of stock option grants		(81,992		)	(41,618		)
Net earnings		As reported		$	1,963,624		$	1,365,743
	Pro forma		$	798,241		578,867
		Effect of stock
Basic earnings per share	As reported		$	0.30		$	0.27
		option grants		(137,752		)	(132,116		)
	~~Pro forma~~	Pro forma	$	~~0.27~~$	1,825,872	$	~~0.25~~$	1,233,627
Diluted earnings per share	As reported		$	0.26		$	0.22
Basic earnings per share		As reported		$	0.66		$	0.46
	~~Pro forma~~	Pro forma	$	~~0.23~~$	0.61	$	~~0.20~~$	0.42
Diluted earnings per share		As reported		$	0.56		$	0.40
		Pro forma		$	0.52		$	0.36

NOTE 2 - COMPREHENSIVE INCOME

Comprehensive income includes net income and other comprehensive income, which is defined as non-owner related transactions in equity. ~~The~~ The following table sets forth the amounts of other comprehensive income ~~included~~ included in equity along with the related tax effect for the ~~six~~ nine-month periods ~~ended~~ ~~June~~ended September 30, ~~2004~~2005 and ~~2003~~2004.

	Pre-tax Amount			Income Tax Effect			Net-of-tax Amount
For the Six Months Ended June 30, 2004:
For the Nine Months Ended September 30, 2005:
Unrealized gains on securities available-for-sale:
Unrealized holding gains arising during the period	$	(~~746~~51,~~336~~191	)	$	~~253~~19,~~754~~452		$	(~~492~~31,~~582~~739	)
Reclassification adjustment for gains included in net income	5,869			(1,995		)	3,874
Reclassification adjustment for gains included in net earnings	—			—			—
Other comprehensive income (loss)	$	(~~740~~51,~~467~~191	)	$	~~251~~19,~~759~~452		$	(~~488~~31,~~708~~739	)

	Pre-tax Amount			Income Tax Effect			Net-of-tax Amount
For the Six Months Ended June 30, 2003:
For the Nine Months Ended September 30, 2004:
Unrealized gains on securities available-for-sale:
Unrealized holding gains arising during the period	$	~~(17~~54,~~293~~100	)	$	5(17,~~880~~892	)	$	~~(11~~36,~~413~~208	)
Reclassification adjustment for gains included in net income	78,034			(26,532		)	51,502
Reclassification adjustment for gains included in net earnings	17,015			(5,627		)	11,388
Other comprehensive income	$	60,741		$	(20,652	)	$	40,089
Other comprehensive income (loss)	$	71,115		$	(23,519	)	$	47,596

Accumulated other comprehensive income consists solely of the unrealized gain on securities available for sale, net of the deferred tax effects.

NOTE 3 - EARNINGS PER SHARE

Net ~~income~~ earnings per share - basic is computed by dividing net ~~income~~earnings by the weighted average number of common shares outstanding. Net ~~income~~ earnings per share - diluted is computed by dividing net ~~income~~earnings by the ~~weighted~~ weighted average number of common shares outstanding plus dilutive common share ~~equivalents~~ equivalents using the treasury stock method. Dilutive common share equivalents include common shares issuable upon exercise of outstanding stock options.

	Three Months Ended June 30,
	Three Months Ended September 30,
	2004		2003
	2005		2004
Net income per share – basic computation:
Net earnings per share – basic computation:
Net income	$	493,374	$	347,866
Net earnings	$	709,895	$	485,510
Average common shares outstanding - basic	2,~~936~~974,~~119~~539		2,~~337~~939,~~573~~406
Net income per share - basic	$	0.17	$	0.15
Net earnings per share - basic	$	0.24	$	0.17
Net income per share - diluted computation:
Net earnings per share - diluted computation:
Net income	$	493,374	$	347,866
Net earnings	$	709,895	$	485,510
Average common shares outstanding - basic	2,~~936~~974,~~119~~539		2,~~337~~939,~~573~~406
Incremental shares from assumed conversions:
Stock options and warrants	~~442~~500,~~867~~629		~~489~~411,~~002~~690
Average common shares outstanding - diluted	3,~~378~~475,~~986~~168		23,~~826~~351,~~575~~096
Net income per share – diluted	$	0.15	$	0.12
Net earnings per share – diluted	$	0.20	$	0.14

All information has been adjusted for any stock splits and stock dividends effected during the periods presented.

	Six Months Ended June 30,
	Nine Months Ended September 30,
	2004		2003
	2005		2004
Net income per share – basic computation:
Net earnings per share – basic computation:
Net income	$	880,233	$	620,485
Net earnings	$	1,963,624	$	1,365,743
Average common shares outstanding - basic	2,~~936~~973,~~119~~482		2,~~337~~937,~~573~~223
Net income per share - basic	$	0.30	$	0.27
Net earnings per share - basic	$	0.66	$	0.46
Net income per share - diluted computation:
Net earnings per share - diluted computation:
Net income	$	880,233	$	620,485
Net earnings	$	1,963,624	$	1,365,743
Average common shares outstanding - basic	2,~~936~~973,~~119~~482		2,~~337~~937,~~573~~223
Incremental shares from assumed conversions:
Stock options and warrants	~~467~~505,~~899~~921		~~487~~448,~~239~~441
Average common shares outstanding - diluted	3,~~404~~479,~~018~~403		23,~~824~~385,~~812~~664
Net income per share – diluted	$	0.26	$	0.22
Net earnings per share – diluted	$	0.56	$	0.40

All information has been adjusted for any stock splits and stock dividends effected during the periods presented.

NOTE 4 – STOCK PURCHASE OBLIGATION

The condensed consolidated balance sheet as of December 31, 2003, reflects a liability of $369,250 described as “Stock purchase obligation”. This amount was recorded in 2001 following the dissention by a minority shareholder to the plan of share exchange to reorganize the bank into a holding company structure.

On April 12, 2004, an order was received from the court establishing the aggregate principal sum of $657,730 to be paid to the dissenting shareholder. This amount was paid on April 13, 2004.

The impact of this settlement on the consolidated balance sheet of the Company as of April 13, 2004 was the elimination of the $369,250 stock purchase obligation liability and a reduction of capital surplus in the amount of the differential, $288,480.

~~Item~~GEORGIA 2BANCSHARES, INC. ~~Management’s~~AND ~~Discussion and Analysis of Financial Condition and Results of Operations~~SUBSIDIARY

~~This~~Item ~~Report~~2. ~~contains~~Management’s ~~statements which~~Discussion ~~constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933~~ and ~~the~~Analysis ~~Securities Exchange Act~~ of ~~1934. These~~Financial ~~statements~~Condition ~~are based on many assumptions~~ and ~~estimates~~Results ~~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:Operations

~~• significant~~This Report ~~increases~~contains statements that constitute forward-looking statements within inthe ~~competitive~~meaning ~~pressure~~of inSection 27A of the ~~banking~~Securities Act of 1933 and ~~financial~~the ~~services~~Securities Exchange ~~industries;~~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 that 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:

• ~~changes~~significant increases in ~~the interest~~competitive ~~rate~~pressure ~~environment~~in ~~which~~the ~~could~~banking ~~reduce~~and ~~anticipated~~financial ~~or actual margins~~services industries;

• changes in ~~political~~in ~~conditions~~the orinterest ~~the~~rate ~~legislative~~environment orwhich ~~regulatory~~could ~~environment~~reduce anticipated or actual margins;

• ~~the~~changes in ~~level~~political ~~of allowance~~conditions ~~for~~or ~~loan~~the ~~loss~~legislative or regulatory environment;

• the level ~~rate~~ of ~~delinquencies~~ ~~and~~allowance ~~amounts~~for ofloan ~~charge-offs~~loss;

• the rate ~~rates~~of delinquencies and amounts of ~~loan~~ ~~growth~~charge-offs;

• ~~adverse changes~~the inrates ~~asset~~of ~~quality~~loan ~~and resulting credit risk-related losses and expenses~~growth;

• ~~general economic~~adverse ~~conditions,~~changes ~~either~~in ~~nationally~~asset orquality ~~regionally~~ and ~~especially in our primary service area, becoming less favorable than expected~~ resulting ~~in,~~credit ~~among~~risk-related ~~other things,~~losses aand ~~deterioration in credit quality~~expenses;

• ~~changes~~general ~~occurring~~economic inconditions, ~~business~~either ~~conditions~~nationally or regionally and ~~inflation~~especially in our primary service area, becoming less favorable than expected resulting in, among other things, a deterioration in credit quality;

• changes occurring in ~~technology~~ business conditions and inflation;

• changes in ~~monetary~~in ~~and tax policies~~technology;

• ~~loss~~changes in ofmonetary ~~consumer confidence~~ and ~~economic disruptions~~tax ~~resulting from terrorist activities~~policies;

• ~~changes~~loss inof ~~the securities~~consumer ~~markets;~~confidence and economic disruptions resulting from terrorist activities;

• ~~other risks and~~changes ~~uncertainties detailed from time to time~~ in ~~our filings with~~ the ~~Securities~~securities ~~and Exchange~~markets; ~~Commission.~~and

~~Results~~• other risks ofand ~~Operations~~uncertainties detailed from time to time in our filings with the Securities and Exchange Commission.

~~Net~~Results of ~~Interest Income~~Operations

~~For the~~Net ~~three months ended June 30, 2004, net interest income increased $525,306, or 32.89% to $2,122,261 as compared to $1,596,955 for the same period in 2003.~~ Interest income from loans, including fees, increased $358,220 or 14.60% to $2,811,235 at June 30, 2004, as compared to $2,453,015 at June 30, 2003. This increase in net interest income is a direct result of the combination of an increase in the outstanding balances of net loans, which increased from $147,463,301 at December 31, 2003, to $161,313,540 at June 30, 2004, and a decrease in the average interest cost of deposits and other interest bearing liabilities. Income on investment securities increased $13,225, or 4.69%, to $295,355 for the three months ended June 30, 2004 as compared to $282,130 at June 30, 2003. This increase is primarily attributable to growth in the overall size of the investment securities portfolio during the period, as well as adjustments to the mix of the types of securities within the portfolio. Interest expense for the three months ended June 30, 2004 was $1,005,201 as compared to $1,149,987 for the same period in 2003.

For the ~~six~~three months ended ~~June~~September 30, ~~2004~~2005, net interest income increased $1192,~~092~~075,~~058,~~ or 357.6276%, to $42,~~158~~667,~~013~~419 as compared to $32,~~065~~475,~~955~~344 for the same period in ~~2003~~ 2004. Interest income from loans, including fees, increased $~~788~~861,~~417,~~512 or 1627.5751%, to $53,~~546~~993,~~345~~443 at ~~June~~September 30, ~~2004~~2005, as compared to $43,~~757~~131,~~928~~931 at ~~June~~September 30, ~~2003~~2004. ~~Income~~This onincrease ~~investment~~in ~~securities~~net interest income is a direct result of the combination of an increase in the outstanding balances of net loans, ~~however~~which increased from $185,567,186 ~~declined~~at September 30, 2004, to $14214,~~017~~798,307 at September 30, 2005, and increases in loan rates as evidenced by the steady increases in the prime interest rate experienced over the past twelve months. Income on investment securities decreased $124,303, or 2-31.2685%, to $~~607~~265,~~267~~949 for the ~~six~~three months ended ~~June~~September 30, ~~2004~~ 2005 as compared to $~~621~~390,~~284~~252 at ~~June~~ September 30, ~~2003~~2004. This decrease ~~was~~is primarily attributable to ~~heavy~~the ~~prepayments~~decrease onin ~~higher~~the ~~yielding~~overall size ~~mortgage~~of ~~backed~~the investment securities ~~experienced~~ portfolio during ~~2003~~the period. Interest expense for the ~~six~~three months ended September ~~June~~ 30, ~~2004~~2005 was $21,~~033~~602,~~556~~992 as compared to $21,~~339~~059,~~576~~836 for the same period in ~~2003~~2004.

For the nine months ended September 30, 2005, net interest income increased $1,250,869, or 18.86%, to $7,884,226 as compared to $6,633,357 for the same period in 2004. Interest income from loans, including fees, increased $2,673,364, or 30.81%, to $11,351,640 at September 30, 2005, as compared to $8,678,276 at September 30, 2004. Income on investment securities, however, declined $138,836 or -13.92% to $858,683 for the nine months ended September 30, 2005 as compared to $997,519 at September 30, 2004. This decrease was primarily attributable to maturities of several short-term investments and heavy prepayments on higher yielding mortgage backed securities experienced during 2004 and 2005. Interest expense for the nine months ended September 30, 2005 was $4,359,277 as compared to $3,093,392 for the same period in 2004.

~~Provision and Allowance for Loan Losses~~11

~~The~~Provision provision for loan losses is the charge to operating earnings that management believes is necessary to maintain the allowance for possible loan losses at an adequate level. For the three months ended June 30, 2004, the provision charged to expense was $70,000 as compared to $75,000 for the same period in 2003. For the six months ended June 30, 2004, the provision charged to expense was $150,000, which was equal to the provision for the same period in 2003. The total loan loss allowance as a percentage of gross loans changed only slightly, as it represented 1.36% of gross loans at June 30, 2004 and ~~1.43%~~Allowance at December 31, 2003. There are risks inherent in making all loans, including risks with respect to the period of time over which loans may be repaid, risks resulting from changes in economic and industry conditions, risks inherent in dealing with individual borrowers, and, in the case of a collateralized loan, risks resulting from uncertainties about the future value of the collateral. We maintain an allowance for ~~loan losses~~Loan based on, among other things, historical experience, an evaluation of economic conditions, and regular reviews of delinquencies and loan portfolio quality. Our judgment about the adequacy of the allowance is based upon a number of assumptions about future events, which we believe to be reasonable, but which may not prove to be accurate. We consider our loss history, the practices of other financial institutions in regard to loan loss allowances, general economic conditions nationally and within our market area, business conditions within each segment of the markets that we lend to and possible loss exposures on specific loans that we have identified for special scrutiny.Losses

InThe provision ~~addition,~~for ~~regulatory agencies,~~loan aslosses anis ~~integral~~the ~~part~~charge ofto ~~their~~operating ~~examination~~earnings ~~processes,~~that ~~periodically~~management ~~review~~believes ~~our~~is necessary to maintain the allowance for loan losses ~~for~~at ~~adequacy~~an adequate level. For ~~Our~~the ~~losses~~three ~~will~~months ~~undoubtedly~~ended ~~vary~~September ~~from~~30, ~~our estimates~~2005, ~~and~~the ~~there~~provision iswas a$96,600 ~~possibility~~as ~~that~~compared ~~charge~~to ~~offs~~$280,000 for the same period in ~~future~~2004. For the nine months ~~periods~~ended ~~could~~September ~~exceed~~30, 2005, the ~~allowance~~provision was $289,800 as compared to $430,000 for the same period in 2004. The total loan loss ~~losses~~allowance as ~~estimated~~a percentage of gross loans changed only slightly, as it represented 1.33% of gross loans at ~~any~~September ~~given~~30, 2005 and 1.38% at December ~~point~~31, 2004. There are risks inherent in making all loans, including risks with respect to the period of time orover ~~that~~which loans ~~substantial~~may ~~additional~~be ~~increases~~repaid, risks resulting from changes in economic and industry conditions, risks inherent in dealing with individual borrowers, and, in the case of a collateralized loan, risks resulting from uncertainties about the future value of the collateral. We maintain an allowance for loan losses ~~could~~based beon, ~~required~~among other things, historical experience, an evaluation of economic conditions, and regular reviews of delinquencies and loan portfolio quality. ~~Additions~~Our tojudgment about the ~~allowance~~adequacy ~~for~~of ~~loan~~the ~~losses~~allowance ~~could~~is ~~result~~based inupon a ~~decrease~~ number of assumptions about future events, which we believe to be reasonable, but ~~our~~which ~~net~~may ~~income~~not ~~and~~prove to be accurate. We consider our loss history, ~~possibly~~the practices of other financial institutions in regard to loan loss allowances, general economic conditions nationally and within our ~~capital~~market area, business conditions within each segment of the markets that we lend to and loss exposures on specific loans that we have identified for special scrutiny.

~~Noninterest~~In addition, ~~Income~~regulatory agencies, as an integral part of their examination processes, periodically review our allowance for loan losses for adequacy. Our losses will undoubtedly vary from our estimates, and there is a possibility that charge offs in future periods could exceed the allowance for loan losses as estimated at any given point in time or that substantial additional increases in the allowance for loan losses could be required. Additions to the allowance for loan losses would result in a decrease of our net earnings and our capital.

~~Non-interest~~Noninterest income for the three months ended June 30, 2004 was $127,632, an increase of $8,961 from $118,671 during the comparable period in 2003. Gains on sales of securities available-for-sale decreased $49,589 from $54,384 in 2003 to $4,795 in 2004. We sell securities from time to time in order to adjust the mix of our investment portfolio or, on rare occasions, to provide liquidity for ongoing operations. However, the service charge income component of non-interest income increased $27,929, or 55.07%, to $78,644 as compared to $50,715 for the same period in 2003. This increase is reflective of the increase in consumer deposit accounts realized between the two periods. Also, other operating income increased $30,621 to $44,193 for the three months ended June 30, 2004 as compared to $13,572 for the three month period in 2003. This amount is reflective of the additional ATM surcharge fees that are generated as we continue to expand our branch network.Income

~~For~~Noninterest income for the ~~six~~three months ended ~~June~~September 30, ~~2004,~~2005 ~~non-interest income~~ was $~~233~~440,~~437~~467, an increase of $23226,~~503~~302, or 11105.2067%, ~~over~~from the $~~209~~214,~~934~~165 ~~recognized~~recorded ~~for~~during the ~~same period~~comparable period in ~~2003~~2004. ~~This~~Gains ~~increase~~on ~~was realized~~sales inof ~~spite~~securities available-for-sale ofamounted ato ~~significant~~only ~~decrease~~$11,146 in ~~income~~2004 ~~from~~and ~~security~~there ~~transactions~~were no such gains or losses in ~~2004~~2005. ~~Gains~~We onsell securities ~~sales~~from time to time in order to adjust the mix of ~~securities~~our ~~available-for-sale~~investment ~~decreased~~portfolio ~~$72~~or,~~165~~ ~~from~~on ~~$78~~rare occasions,~~034~~ ~~in 2003~~ to ~~$5,869~~provide inliquidity ~~2004~~for ongoing operations. ~~Service~~The service charge income component of noninterest income increased $5915,~~136~~050, or 59 20.8351%, ~~when~~to $88,422 as compared to ~~2003~~$73,372 ~~figures~~for ~~and~~the three months ended September 30, 2004. This increase is reflective of the increase in consumer deposit accounts realized between the two periods. Also, other operating income increased $4164,~~210~~218 to $111,513 orfor ~~124.68%~~the three months ended September 30, ~~over~~2005 as compared to $47,295 for the ~~same~~three-month period in ~~2003~~2004. ~~Again~~ This amount is reflective of the additional ATM surcharge fees that are generated as we continue to expand our branch network and a $45,380 ~~both~~increase in the cash value of ~~these~~bank ~~components~~owned life insurance recognized during the third quarter of ~~non-interest~~2005. The most significant component of noninterest income ~~are~~has become ~~indicative~~mortgage ofbanking income. A mortgage origination department within the ~~successes~~bank ~~realized~~was started ~~from~~up on July 1, 2004. Mortgage origination and related fees totaled $240,532 during the ~~continued~~three ~~expansion~~months ofended ~~our~~September ~~branch~~30, 2005 as compared to ~~network~~$87,352 for the same period in 2004.

~~Noninterest~~For ~~Expense~~the nine months ended September 30, 2005, noninterest income was $1,075,239, an increase of $627,637, or 140.22%, over the $447,602 recognized for the same period in 2004. Service charges on deposit accounts increased from $231,355 in 2004 to $252,837 for the nine-month period ended September 30, 2005. Sales of other assets produced a gain of $599 during the first nine months of 2005 and a $9,678 loss during the same period in 2004. Gains on sales of securities available-for-sale totaled $17,015 in 2004 and were $0 in 2005. Mortgage banking income for the nine-month period ended September 30, 2005 totaled $505,635. Comparable figures for 2004 were only $87,352, as the mortgage origination department was started up during the third quarter of 2004. Reflected in the $194,610 increase in other operating income between the two periods, is $132,979 increase in cash value of bank owned life insurance. These policies were acquired by the bank in December 2004.

Total non-interest expense for the three months ended June 30, 2004 was $1,473,519 or 35.59% higher than the $1,086,760 for the three months ended June 30, 2003. The largest increase was in personnel costs, which increased from $600,549 in the first quarter of 2003 to $849,785, or an increase of 41.50%. The increase is attributable to the hiring of additional staff to support the growth in our branch network. Occupancy expense increased to $180,580 from $116,377. This increase is attributable to the opening of new locations in Kroger Towne Center and in Tyrone during the latter part of 2003 and the opening of the Sharpsburg location in early 2004. Data processing costs rose to $140,909 from $110,153, for an increase of $30,756, or 27.92%, over the comparable period from a year ago. Other operating expenses increased to $302,245 from $259,681, an increase of $42,564, or 16.39%, over the same period in 2003. Other operating expenses include legal and accounting fees, office supplies, telephone service, postage expense, credit related expenses such as credit reports and filing fees, FDIC insurance premiums and business insurance premiums. This increase is attributable to the growth we have experienced during the past twelve months. This growth is evidenced by the fact that total assets have increased from $186,926,783 at June 30, 2003 to $205,091,630 at December 31, 2003, to $238,633,00612

12Noninterest Expense

atTotal noninterest expense ~~June~~for the three months ended September 30, 2005 was $1,995,391 or 18.35% higher than the $1,685,999 for the three months ended September 30, 2004. The largest increase was in personnel costs, which increased from $976,884 in the third quarter of 2004 to $1,306,908 in the third quarter of 2005, or an increase of 33.78%. The increase is attributable to the hiring of additional staff to support the growth in our branch network as well as the staffing of our mortgage origination department. Occupancy expense increased to $211,104 from $197,554. This increase is attributable to the opening of new locations in Sharpsburg in early 2004 and in Fairburn in late 2004. Data processing costs rose modestly to $162,250 from $151,420, for an increase of $10,830, or 7.15%, over the comparable period from a year ago. Other operating expenses actually decreased $45,012 to $315,129 for the three-month period ended September 30, 2005 as compared to the $360,141 recorded during the same period in 2004. Other operating expenses include legal and accounting fees, office supplies, telephone service, postage expense, credit related expenses such as credit reports and filing fees, FDIC insurance premiums and business insurance premiums. This decrease is attributable to the efforts to control costs in spite of the growth we have experienced during the past twelve months. This growth is evidenced by the fact that total assets have increased from $251,105,097 at September 30, 2004 to $269,892,421 at September 30, 2005.

For the ~~six~~nine months ended September ~~June~~ 30, ~~2004~~2005, total ~~non-interest~~noninterest expense was $25,~~938~~848,~~217~~970, or 3526.2549% higher than the $24,~~172~~624,~~404~~216 realized during the ~~six~~nine months ended ~~June~~ September 30, ~~2003~~ 2004. The salaries and employee ~~benefits~~ benefits component of ~~non-interest~~noninterest expense realized the largest increase over the two periods, increasing from $12,~~195~~705,~~476~~962 at ~~June~~September 30, ~~2003~~2004 to $13,~~729~~720,~~078~~764, or an an increase of 4437.6450%. As mentioned in ~~the~~ the previous paragraph, additional personnel have been hired to support the ~~growth~~ growth realized in the past twelve months. These additional personnel include branch personnel and middle managers to support the expanding branch network. as well as staffing a new mortgage origination department. Occupancy expense increased from $~~262~~542,~~150~~139 in ~~2003~~2004 to $~~344~~632,~~585~~408 in ~~2004~~ 2005. Data processing costs rose to $~~290~~472,~~591~~ 727 from $~~226~~442,~~117~~011 for an increase of $6430,~~474~~716, or 286.5195% over the comparable period from a year ago. The modest increase in data processing costs is reflective inof ~~the~~our ~~increase~~efforts into ~~the~~lessen ~~number of~~our ~~transaction~~dependence ~~accounts~~on ~~realized~~outside ~~over~~contractors for ~~the~~our ~~past~~information ~~twelve~~technology ~~months~~support. Other operating expenses increased to $~~573~~1,~~963~~023,071 from $~~488~~934,~~661~~104, an increase of $8588,~~302~~967, or 179.4652%, over the same period in ~~2003~~2004. ~~The largest component of other operating expenses was legal and accounting expenses which increased 32.90% between the two periods.~~

Income Taxes

The income tax provision for the three months ended ~~June~~September 30, ~~2004~~2005 was $~~213~~306,000 as compared to $~~206~~238,000 for the same period in ~~2003~~2004, and $~~423~~857,~~000~~071 for the ~~six~~ nine months ended ~~June~~September 30, ~~2004~~2005, as compared to $~~333~~661,000 for the same period in ~~2003~~ 2004. These increases in provisions for income taxes resulted from increased income before taxes. The effective tax rates for the three-month and nine-month periods ended September 30, 2005 are lower than previous periods. The effective rate in 2005 was adjusted during the second quarter to bring the current year’s income tax provision in line with our calculations for an adequate provision based on projected income and tax preference items.

Net ~~Income~~ Earnings

The combination of the above factors resulted in net ~~income~~earnings for the three months ended ~~June~~September 30, ~~2004~~2005 of $~~493~~709,~~374~~895 as compared to $~~347~~485,~~866~~510 for the same period in ~~2003~~2004, an increase of $~~145~~224,~~508~~385, or 4146.8322%. For the ~~six~~nine months ended ~~June~~September 30, ~~2004~~2005, net ~~income~~earnings was $~~880~~1,~~233~~963,624 as compared to $~~620~~1,~~485~~365,743 for the same period in ~~2003~~ 2004, an increase of $~~259~~597,~~748~~881 or 4143.8678%.

~~Assets and Liabilities~~13

~~During the first six months of~~Assets 2004, total assets increased $33,541,376, or 16.35%, to $238,633,006 as compared to $205,091,630 at December 31, 2003. The primary sources of growth in assets were net loans, which increased $13,850,239 from December 31, 2003 to June 30, 2004, and federal funds sold, which increased from $6,887,000 to $24,664,000 during the first six months of 2004. This increase in federal funds sold is a result of prepayments on our investments in mortgage-backed securities, the sale of securities, the proceeds of which were being held as overnight funds until they could be profitably redeployed into loans and other investments, and growth in deposits resulting from expansion of our retail branch network. Investment securities have decreased by $1,361,672 over the balances reflected in the December 31, 2003 financial statements. Total deposits increased $33,759,792, or 18.55%, to $215,727,568 from the December 31, 2003 amount of $181,967,776. At June 30, 2004, securities sold under agreements to repurchase had decreased slightly to $614,016 from $670,052. These agreements are for our commercial sweep accounts for corporate customers and are not FDIC insured. In order to fund loan growth and provide liquidity for daily operating needs, we occasionally utilize advances from the Federal Home Loan Bank of Atlanta. At December 31, 2003 and at June 30, 2004, we had $2,000,000 outstanding in FHLB advances.Liabilities

During the first nine months of 2005, total assets increased $20,342,370, or 8.15%, to $269,892,421 as compared to $249,550,051 at December 31, 2004. The primary sources of growth in assets were net loans, which increased $25,157,760 from December 31, 2004 to September 30, 2005, and federal funds sold, which increased from $0 to $2,485,000 during the first nine months of 2005. This increase in federal funds sold is a result of prepayments on our investments in mortgage backed securities, the maturity of securities in our portfolio, the proceeds of which were being held as overnight funds until they could be profitably redeployed into loans and other investments, and growth in deposits resulting from expansion of our retail branch network. Investment ~~Securities~~securities have decreased by $9,288,730 over the balances reflected in the December 31, 2004 financial statements, primarily due to certain securities reaching scheduled maturity dates to meet anticipated cash requirements. Total deposits increased $15,885,861, or 7.48%, to $228,143,879 from the December 31, 2004 amount of $212,258,018. At September 30, 2005, securities sold under agreements to repurchase had decreased slightly to $215,165 from $529,358. These agreements are for our commercial sweep accounts for corporate customers and are not FDIC insured. $5,500,000 in federal funds purchased were outstanding on December 31, 2004, however we were in a net federal funds sold position at September 30, 2005. In order to fund loan growth and provide liquidity for daily operating needs, we occasionally utilize advances from the Federal Home Loan Bank of Atlanta. At December 31, 2004, we had $2,000,000 outstanding in FHLB advances. These were repaid at their maturity in February 2005 and $10,000,000 in new advances was borrowed in May 2005.

Investment ~~securities~~ available-for-sale decreased from $34,147,840 at December 31, 2003 to $32,836,368 at June 30, 2004. Although the overall value of investment securities available-for-sale changed very little since the beginning of 2004 ($1,311,472 or a 3.84% decrease), market conditions have required changes in the mix of securities within the portfolio. The recent refinancing boom among homeowners has caused high rates of repayments on our higher coupon mortgage backed securities. These prepayments have also caused many of our mortgage backed security balances to decrease rapidly, resulting in small balances on many of our securities. We sold these securities and intend to reinvest the funds in higher yielding loans, or in lower coupon rate mortgage backed securities that will provide more stable cash flows. Generally, our purpose in purchasing mortgage backed securities is that they provide good income yields as well as a consistent cash flow from the monthly mortgage payments. These cash flows are then reinvested in new loans or additional purchases of mortgage backed securities, depending on loan demand and market conditions. This also allows us to regularly invest at current market rates. While we do invest in traditional government agency securities on occasion, recent market conditions have resulted in historically low yields on those securities and we have chosen toSecurities

13Investment securities available-for-sale decreased from $35,039,356 at December 31, 2004 to $25,750,626 at September 30, 2005. Changes in the investment securities portfolio (as reflected in the Condensed Consolidated Statements of Cash Flows), include $1,343,424 in new purchases, $7,000,000 in maturities and $3,430,210 in pay downs during the nine months ended September 30, 2005. The maturities of the $7,000,000 in securities were scheduled to meet certain cash requirements in the second quarter of 2005. The recent refinancing boom among homeowners has caused high rates of repayments on certain of our higher coupon mortgage backed securities. These prepayments have also caused many of our mortgage backed security balances to decrease rapidly. Generally, our purpose in purchasing mortgage backed securities is that they provide good income yields as well as a consistent cash flow from the monthly mortgage payments. These cash flows are then reinvested in new loans or additional purchases of mortgage backed securities, depending on loan demand and market conditions. This also allows us to regularly invest at current market rates. While we do invest in traditional government agency securities on occasion, recent market conditions have resulted in historically low yields on those securities, and we have chosen to maximize our yields by investing in other segments of the market. We also allocate a portion of our investment portfolio to tax-free securities, and we have increased our purchases of tax-free securities during the last 12 months. When we purchase tax-free securities we typically give priority to the purchase of tax-free municipal securities issued by municipalities domiciled in the State of Georgia, although we do purchase securities from other states when we deem it beneficial. It is generally our policy to designate our marketable investment securities as available-for-sale, and all securities were so designated at September 30, 2005.

~~maximize~~Other investments ~~our~~increased ~~yields~~ by ~~investing~~ in$456,775 ~~other~~from ~~segments~~December of31, ~~the~~2004 ~~market.~~to WeSeptember ~~also~~30, ~~allocate~~2005 as a ~~portion~~result of ~~our investment~~the ~~portfolio~~Federal toHome ~~tax-free~~Loan ~~securities~~Bank ~~and~~requiring ~~we have increased our purchases of tax-free securities during~~ the ~~last~~bank ~~12 months. When we purchase tax-free securities we typically give priority~~ to ~~the~~increase ~~purchase of tax-free municipal~~the ~~securities~~amount ~~issued by municipalities domiciled in the State~~ of ~~Georgia,~~FHLB ~~although we~~stock ~~do purchase securities from other states when we deem it beneficial~~owned. ~~It is generally our policy to designate our marketable investment securities as available-for-sale, and all securities were so designated at June 30, 2004.~~

~~Other investments decreased by $50,200 from December 31, 2003 to June 30, 2004 as a result of the Federal Home Loan Bank redeeming a portion of the stock owned by the company.~~14

14Loans

~~Loans~~Net loans increased $25,157,760, or 13.27%, from December 31, 2004 to September 30, 2005. As shown below, the main component of growth in the loan portfolio was real estate construction and land development loans, which increased 19.55%, or $20,826,548. In addition, residential mortgage loans increased $2,779,142, or 52.01%, over the balances outstanding on December 31, 2004. Generally, we do not make and retain first mortgages on 1-4 family real estate. Our typical real estate-mortgage loan is on commercial real estate. Balances within the major loans receivable categories as of September 30, 2005 and December 31, 2004 are as follows:

~~Net loans increased~~COMPOSITION ~~$13,850,239,~~OF orLOAN 9.39%, from December 31, 2003 to June 30, 2004. As shown below, the main component of growth in the loan portfolio was non residential mortgage loans, which increased 14.63%, or $6,816,729. In addition, real estate construction and land development loans increased $6,227,666, or 7.68%, over the balances outstanding on December 31, 2003. Generally, we do not make and retain first mortgages on 1-4 family real estate. Our typical real estate-mortgage loan is on commercial real estate. Balances within the major loans receivable categories as of June 30, 2004 and December 31, 2003 are as follows:PORTFOLIO

COMPOSITION OF LOAN PORTFOLIO

	September 30, 2005					December 31, 2004
				Percent					Percent
	Amount			of Total		Amount			of Total
Real estate - construction and land development	$	127,366,148		58.47	%	$	106,539,600		55.34	%
Real estate - residential	8,122,222			3.73	%	5,343,080			2.78	%
Real estate - non-farm and non-residential	55,523,088			25.49	%	58,210,477			30.24	%
Commercial, financial and agricultural	19,729,130			9.06	%	15,350,256			7.97	%
Consumer	4,913,802			2.25	%	6,300,757			3.27	%
All other loans	2,184,912			1.00	%	765,676			0.40	%
Loans, gross	217,839,302			100.00	%	192,509,846			100.00	%
Deferred loan fees	(152,147		)			(214,965		)
Allowance for loan losses	(2,888,848		)			(2,654,334		)
Loans, net	$	214,798,307				$	189,640,547

	June 30, 2004					December 31, 2003
	Amount			Percent of Total		Amount			Percent of Total
Real estate - construction and land development	$	87,360,242		53.36	%	$	81,132,576		54.17	%
Real estate - residential	4,428,445			2.71	%	5,883,066			3.93	%
Real estate - non-farm and non-residential	53,398,557			32.62	%	46,581,828			31.10	%
Commercial, financial and agricultural	12,226,678			7.47	%	11,705,627			7.82	%
Consumer	5,133,347			3.14	%	4,419,451			2.95	%
All other loans	1,153,878			0.70	%	38,076			0.03	%
Loans, gross	$	163,701,147		100.00	%	$	149,760,624		100.00	%
Deferred loan fees	(165,374		)			(165,571		)
Allowance for possible losses	(2,222,233		)			(2,131,752		)
Loans, net	$	161,313,540				$	147,463,301

Risk Elements in the Loan Portfolio

~~Risk~~The following ~~Elements~~is a summary of risk elements in the ~~Loan~~loan ~~Portfolio~~portfolio:

The following is a summary of risk elements in the loan portfolio:

	September 30, 2005		December 31, 2004
Loans: Non-accrual loans	$	419,023	$	154,381

Accruing loans more than 90 days past due	$	0	$	0

Loans identified by the internal review mechanism:
Criticized	$	0	$	0
Classified	$	3,434,058	$	4,615,607

	June 30, 2004		December 31, 2003
Loans: Non-accrual loans	$	20,960	$	100,680
Accruing loans more than 90 days past due	$	—	$	—
Loans identified by the internal review mechanism:
Criticized	$	212,820	$	266,394
Classified	$	2,285,150	$	2,159,382

15The following table sets forth certain information with respect to our allowance for loan losses and the composition of charge-offs and recoveries for the nine months ended September 30, 2005 and the year ended December 31, 2004.

~~The following table sets forth~~ALLOWANCE ~~certain~~FOR ~~information~~LOAN ~~with respect to our allowance for loan losses and the composition of charge-offs and recoveries for the year ended December 31, 2003 and the six months ended June 30, 2004.~~LOSSES

ALLOWANCE FOR LOAN LOSSES

	September 30,			December 31,
	2005			2004

Average loans outstanding	$	206,413,762		$	171,729,818
Gross loans outstanding at period end	$	217,687,155		$	192,294,881
Total non-performing loans	$	419,023		$	154,381

Beginning balance of allowance	$	2,654,334		$	2,131,752

Loans charged off:
Real estate - construction	0			0
Real estate - mortgage	0			0
Commercial, financial and agricultural	(3,676		)	(40,164		)
Consumer	(53,021		)	(43,831		)
Total loans charged off	(56,697		)	(83,995		)

Recoveries:
Real estate - construction	0			0
Real estate - mortgage	0			0
Commercial, financial and agricultural	0			20,114
Consumer	1,411			1,463
Total recoveries	1,411			21,577

Net loans charged off	(55,286		)	(62,418		)

Provision for loan losses	289,800			585,000

Balance at period end	$	2,888,848		$	2,654,334

Allowance as a percent of total loans	1.33		%	1.38		%
Non-performing loans as a percentage of total loans	0.19		%	0.08		%
Non-performing loans as a percentage of allowance	14.50		%	5.82		%
Ratio of net charge-offs to average gross loans outstanding during the period	0.03		%	0.04		%

	December 31, 2003			June 30, 2004
Average loans outstanding	$	138,068,163		$	158,864,356
Gross loans outstanding at period end	$	149,595,053		$	163,535,773
Total non-performing loans	$	100,680		$	20,960
Beginning balance of allowance	$	1,889,306		$	2,131,752
Loans charged off:
Real estate - construction	0			0
Real estate - mortgage	0			0
Commercial, financial and agricultural	(17,519		)	(40,165		)
Consumer	(9,509		)	(24,744		)
Total loans charged off	(27,028		)	(64,909		)
Recoveries:
Real estate - construction	1,655			0
Real estate - mortgage	0			0
Commercial, financial and agricultural	570			4,115
Consumer	1,249			1,275
Total recoveries	3,474			5,390
Net loans charged off	(23,554		)	(59,519		)
Provision for loan losses	266,000			150,000
Balance at period end	$	2,131,752		$	2,222,233
Allowance as a percent of total loans	1.43		%	1.36		%
Non-performing loans as a percentage of total loans	0.07		%	0.01		%
Non-performing loans as a percentage of allowance	4.72		%	0.94		%
Ratio of net charge-offs to average gross loans outstanding during the period	0.02		%	0.04		%

16Deposits

~~Deposits~~At September 30, 2005, total deposits were $228,143,879, an increase of $15,885,861, or 7.48%, from December 31, 2004. All categories of deposits realized a gain over amounts recorded as of December 31, 2004, with the exception of savings (which includes money market) accounts. Noninterest-bearing demand deposits increased $7,367,279, or 32.50%, from December 31, 2004 to September 30, 2005. During this same period, interest-bearing demand deposits increased $9,489,336, or 32.57%. Certificates of deposit increased $4,656,723, or 3.55%, from December 31, 2004 to September 30, 2005. At September 30, 2005, certificates of deposit included brokered deposits totaling $39,344,000. We have found that the cost of using brokered deposits is reasonable in comparison to the cost of obtaining traditional local deposits. For this reason, we anticipate continuing to utilize brokered deposits as a funding source. However, our business plan places a strong emphasis on local deposit growth. In order to build local core deposits, we believe we need to provide convenience to both retail and consumer depositors in our market area. We believe this convenience can best be provided through a series of branch banks providing attractive deposit products, located in growth areas. Toward this end, we opened the supermarket branch in the Kroger store in Towne Center south of Fayetteville in June 2003, we opened our new full-service branch in Tyrone in August 2003, we opened our new full-service branch in Sharpsburg in April 2004 and we opened our new full-service branch in Fairburn in November 2004.

AtAdvances June 30, 2004, total deposits were $215,727,568, an increase of $33,759,792, or 18.55%, from December 31, 2003. All categories of deposits realized a gain over amounts recorded as of December 31, 2003. Noninterest bearing demand deposits increased $9,486,951, or 40.46%, from December 31, 2003 to June 30, 2004. During this same period, interest bearing demand deposits increased $8,384,716, or $132.91%. Certificates of deposit increased $15,747,263, or 11.82%, from December 31, 2003 to June 30, 2004. At June 30, 2004, certificates of deposit included brokered deposits totaling $21,723,000. We have found that the cost ofFederal usingHome brokeredLoan deposits is reasonable in comparison to the cost of obtaining traditional local deposits. For this reason, we anticipate continuing to utilize brokered deposits as a funding source. However, our business plan places a strong emphasis on local deposit growth. In order to build local core deposits, we believe that we need to provide convenience to both retail and consumer depositors in our market area. We believe this convenience can best be provided through a series of branch banks providing attractive deposit products, located in growth areas. Toward this end, we opened the supermarket branch in the Kroger store in Towne Center south of Fayetteville in June 2003, we opened our new full-service branch in Tyrone in August 2003, and we opened our new full-service branch in Sharpsburg in April 2004. Construction has begun on the branch scheduled to open in Fairburn in October or November 2004.Bank

~~Advances~~As of December 31, 2004, we had $2,000,000 in advances from the Federal Home Loan Bank outstanding. These advances were repaid at their maturity in February 2005. We borrow from the Federal Home Loan Bank from time to time. On May 6, 2005, we borrowed $10,000,000 from the Federal Home Loan Bank at a fixed rate of 3.33% for 90 days. This $10,000,000 was renewed in August 2005 under two $5,000,000 convertible and fixed rate hybrid facilities with current rates of 4.27% and 4.70%. We use these borrowings as a source of liquidity and to fund loans when appropriate. Borrowings are under a blanket lien agreement that we have executed with the Federal Home Loan Bank of Atlanta. Under this agreement, we assign the proceeds of loan repayments and payoffs to the Federal Home Loan Bank of Atlanta as collateral against future advances. This arrangement will provide greater access to borrowings if the need for such borrowings arises in the future.

As of June 30, 2004 and December 31, 2003, we had $2,000,000 in advances from the Federal Home Loan Bank outstanding. We borrow from the Federal Home Loan Bank from time to time. We use these borrowings as a source of liquidity and to fund loans when appropriate. Borrowings are under a blanket lien agreement that we have executed with the Federal Home Loan Bank of Atlanta. Under this agreement, we assign the proceeds of loan repayments and payoffs to the Federal Home Loan Bank of Atlanta as collateral against future advances. This arrangement will provide greater access to borrowings if the need for such borrowings arises in the future.Liquidity

Liquidity is the ability to meet current and future obligations through liquidation or maturity of existing assets or the acquisition of additional liabilities. Cash and federal funds sold are our primary sources of asset liquidity. We generate cash and federal funds sold from scheduled maturities of loans and investments on the asset side and through pricing policies on the liability side for interest-bearing deposit accounts and borrowings from the Federal Home Loan Bank. The level of liquidity is measured by the loan-to-total funds ratio, which was at 88.83% at September 30, 2005 and 84.72% at December 31, 2004.

~~Liquidity is the ability to~~Securities ~~meet~~available-for-sale, ~~current~~which ~~and~~totaled ~~future~~$25,750,626 ~~obligations~~at ~~through~~September ~~liquidation~~30, or2005, ~~maturity~~serve ofas ~~existing~~a ~~assets~~secondary orsource ~~the acquisition~~ of ~~additional liabilities~~liquidity. We ~~Cash and federal funds~~also ~~sold~~have ~~are~~lines ~~our primary sources~~ of ~~asset~~credit ~~liquidity.~~available Wewith ~~generate~~correspondent ~~cash~~banks ~~and~~to purchase federal funds ~~sold from scheduled maturities of loans and investments on the asset side and through pricing policies on the liability side~~ for ~~interest-bearing~~periods ~~deposit accounts and borrowings~~ from ~~the~~one ~~Federal~~to ~~Home~~seven ~~Loan Bank~~days. ~~The~~ ~~level~~At ofSeptember ~~liquidity~~30, is2005, ~~measured~~unused ~~by the~~federal ~~loan-to-total~~ funds ~~ratio,~~lines ~~which~~of ~~was~~credit attotaled ~~74.90% at June 30~~$14, ~~2004 and 81.02% at December 31~~700, ~~2003~~000.

~~Securities available-for-sale,~~When ~~which~~we ~~totaled~~deem ~~$32,836,368~~it atnecessary ~~June~~and ~~30,~~prudent ~~2004,~~we ~~serve~~access asdeposit amarkets ~~secondary~~other ~~source~~than ofthe local ~~liquidity. We~~market ~~also~~for ~~have~~sources ~~lines~~ of ~~credit available~~funds. ~~with~~These ~~correspondent banks to purchase federal~~ funds ~~for~~include ~~periods~~“brokered” ~~from one~~deposits ~~to seven days. At June 30, 2004, unused~~and ~~fed~~deposits ~~funds~~generated ~~lines~~from ofInternet ~~credit totaled $6,000,000~~sources.

When we deem it necessary and prudent we access deposit markets other than the local market for sources of funds. These funds include “brokered” deposits and deposits generated from internet sources.17

17Capital Resources

~~Capital~~Total shareholders’ ~~Resources~~equity increased from $21,106,183 at December 31, 2004 to $23,069,146 at September 30, 2005. The increase is due to net earnings for the nine months ending September 30, 2005 of $1,963,624, an after tax decrease of $31,739 in the fair value of securities available-for-sale and $31,078 in proceeds from the exercise of employee stock options.

~~Total~~The Federal ~~shareholders’~~Reserve ~~equity increased~~Board ~~from~~and ~~$19,262,815~~bank atregulatory ~~December~~agencies ~~31,~~require ~~2003~~bank holding companies and financial institutions to ~~$19,365,860~~maintain capital at ~~June~~adequate ~~30,~~levels ~~2004. The~~based ~~increase~~on isa ~~due~~percentage toof ~~net~~assets ~~income for~~and ~~the~~off-balance ~~six~~sheet ~~months~~exposures, ~~ending~~adjusted ~~June~~for risk-weights ~~30,~~ranging ~~2004~~from of0% ~~$880~~to 100%. Under the risk-based standard,~~233~~ ~~and~~capital ~~offsetting~~is anclassified ~~after~~into ~~tax~~two ~~decrease~~tiers. Tier 1 capital consists of ~~$488~~common shareholders’ equity,~~708~~ inexcluding the ~~fair~~unrealized ~~value~~gain of(loss) ~~securities~~ on available-for-sale ~~and a $288~~securities,~~480~~ ~~reduction~~minus incertain intangible assets. Tier 2 capital ~~surplus~~consists ~~related~~of the general reserve for loan losses subject to certain limitations. An institutions’ qualifying capital base for purposes of its risk-based capital ratio consists of the ~~settlement~~sum ~~with~~of aits ~~minority~~Tier 1 and ~~shareholder~~Tier in2 ~~April,~~capital. The ~~2004~~regulatory minimum requirements are 4% for Tier 1 and 8% for total risk-based capital.

~~The Federal Reserve Board and~~Banks ~~bank~~and ~~regulatory agencies require~~ bank holding companies ~~and~~are ~~financial institutions~~also required to maintain capital at ~~adequate~~a ~~levels~~minimum level based on atotal ~~percentage of~~ assets ~~and off-balance sheet exposures~~, ~~adjusted~~which ~~for~~is ~~risk-weights~~known ~~ranging~~as ~~from 0%~~the toleverage ~~100%~~ratio. ~~Under~~The minimum requirement for the ~~risk-based~~leverage ~~standard,~~ratio ~~capital~~ is ~~classified~~3%, ~~into~~but ~~two~~all ~~tiers. Tier~~but 1the ~~capital~~highest ~~consists~~rated ofinstitutions ~~common~~are ~~shareholders’~~required ~~equity, excluding~~to ~~the~~maintain ~~unrealized~~ratios ~~gain~~100 ~~(loss)~~to on200 ~~available-for-sale~~basis ~~securities,~~point ~~minus~~above ~~certain intangible~~the ~~assets~~minimum. ~~Tier~~Both 2the ~~capital consists~~company ofand the ~~general~~bank ~~reserve~~exceeded ~~for loan losses subject to certain limitations. An institutions’ qualifying capital base for~~their ~~purposes~~minimum ofregulatory ~~its risk-based~~ capital ~~ratio~~ratios ~~consists~~as of ~~the~~September ~~sum~~30, ~~of its Tier 1 and Tier 2 capital~~2005. The ~~regulatory~~following ~~minimum requirements~~table ~~are~~summarizes 4%our ~~for Tier 1 and 8% for total~~ risk-based capital. at September 30, 2005:

Banks and bank holding companies are also required to maintain capital at a minimum level based on total assets, which is known as the leverage ratio. The minimum requirement for the leverage ratio is 3%, but all but the highest rated institutions are required to maintain ratios 100 to 200 basis point above the minimum. Both the company and the bank exceeded their minimum regulatory capital ratios as of June 30, 2004

Shareholders’ equity	$	23,069,146
Plus: unrealized loss on available-for-sale securities	4,500
Plus: qualifying trust preferred securities	6,500,000
Tier 1 capital	29,573,646
Plus: allowance for loan losses (1)	2,888,848
Total capital	$	32,462,494
Risk-weighted assets	$	245,675,000
Total average assets for the quarter ended September 30, 2005	$	268,670,000

Risk based capital ratios
Tier 1 capital (to risk-weighted assets)	12.04		%
Total capital (to risk-weighted assets)	13.21		%
Tier 1 capital (to total average assets)	11.01		%

~~The~~(1) ~~following~~limited ~~table~~to ~~summarizes our~~1.25% of risk-~~based~~weighted ~~capital at June 30, 2004:~~assets

Shareholders’ equity	$	19,365,860
Less: unrealized gain (loss) on available-for-sale securities	(546,541		)
Tier 1 capital	19,912,401
Plus: allowance for loan losses (1)	2,222,233
Total capital	$	22,134,634
Risk-weighted assets	$	190,740,000
Total average assets for the quarter ended June 30, 2004	$	216,518,000
Risk based capital ratios
Tier 1 capital (to risk-weighted assets)	10.44		%
Total capital (to risk-weighted assets)	11.60		%
Tier 1 capital (to total average assets)	9.20		%

Regulatory Matters

~~(1)~~From time ~~limited~~to time, various bills are introduced in the United States Congress with respect to 1the regulation of financial institutions.~~25%~~ Certain of these proposals, if adopted, could ~~risk-weighted~~significantly ~~assets~~change the regulation of banks and the financial services industry. We cannot predict whether any of these proposals will be adopted or, if adopted, how these proposals would affect us.

~~Regulatory~~Item ~~Matters~~3. Quantitative and Qualitative Disclosures About Market Risk

~~From~~Market ~~time~~risk tois ~~time,~~the ~~various bills~~risk ~~are~~of ~~introduced~~loss from adverse changes in ~~the~~market ~~United~~prices ~~States~~and ~~Congress~~interest ~~with~~rates. Our ~~respect~~market torisk ~~the regulation~~arises ofprincipally ~~financial~~from ~~institutions. Certain~~interest ofrate ~~these~~risk ~~proposals~~inherent in our lending, ifdeposit, ~~adopted~~and borrowing activities. We actively monitor and manage our interest rate risk exposure. Although we manage certain other risks, ~~could~~such ~~significantly~~as ~~change~~credit quality and liquidity risk, in the ~~regulation~~ normal course of ~~banks~~business we consider interest rate risk to be our most significant market risk and the risk that could potentially have the largest material effect on our financial ~~services~~condition ~~industry~~and results of operations. We ~~cannot~~do ~~predict~~not ~~whether~~maintain ~~any~~a oftrading ~~these proposals~~portfolio ~~will~~or bedeal ~~adopted~~in orinternational instruments, ifand, ~~adopted~~therefore, ~~how~~other ~~these~~types ~~proposals~~of ~~would~~market ~~affect~~risks, ussuch as foreign currency risk and commodity price risk, do not arise in the normal course of our business activities.

~~Item~~Our interest rate risk management is the 3responsibility of the Asset/Liability Committee (“ALCO”). ~~Quantitative~~ALCO has established policies and limits to monitor, measure and ~~Qualitative~~coordinate ~~Disclosures~~the ~~About~~bank’s ~~Market~~sources, ~~Risk~~uses, and pricing of funds.

~~Market~~Interest rate risk isrepresents the ~~risk~~sensitivity of earnings ~~loss~~to ~~from adverse~~ changes in ~~market prices and~~ interest rates. ~~Our~~ As ~~market~~interest ~~risk~~rates ~~arises~~change, ~~principally~~the ~~from~~ interest ~~rate~~income ~~risk inherent in our lending, deposit,~~ and ~~borrowing~~expense ~~activities. We~~associated with ~~actively~~the ~~monitor~~bank’s ~~and manage our~~ interest ~~rate~~sensitive ~~risk~~assets ~~exposure. Although~~and weliabilities ~~manage~~also ~~certain other risks~~change, ~~such~~thereby impacting asnet ~~credit~~interest ~~quality and liquidity risk~~income, in the ~~normal~~primary ~~course~~component of ~~business we consider interest rate risk to be~~ our ~~most~~earnings. ALCO ~~significant~~utilizes ~~market risk and~~ the ~~risk that could potentially have the largest material effect on our financial condition and~~ results of ~~operations. We~~both ~~do not maintain~~ a ~~trading~~static and ~~portfolio~~dynamic orgap ~~deal~~report into ~~international~~quantify ~~instruments,~~the ~~and,~~estimated ~~therefore,~~exposure ~~other types~~ of ~~market~~net ~~risks,~~interest income ~~such~~to asa ~~foreign~~sustained ~~currency~~change ~~risk and commodity price risk, do not arise~~ in ~~the~~interest ~~normal course of our business activities~~rates.

~~Our~~The gap analysis projected net interest ~~rate~~income based ~~risk~~on ~~management~~both isa ~~the~~rise ~~responsibility~~and fall in interest rates of ~~the~~200 ~~Asset/Liability~~basis ~~Committee~~ points (~~“ALCO”~~i.e. 2.00%) over a twelve-month period. ~~ALCO~~The ~~has~~model ~~established policies~~is ~~and~~based ~~limits~~on toactual ~~monitor,~~repricing ~~measure~~dates of interest sensitive assets and ~~coordinate~~interest sensitive liabilities. The model incorporates assumptions regarding the ~~bank’s~~impact ~~sources,~~of ~~uses,~~changing ~~and~~interest rates on the ~~pricing~~prepayment rates of ~~funds~~certain assets.

~~Interest~~We ~~rate~~measure ~~risk~~this exposure based on an immediate ~~represents~~change in interest rates of up or down 200 basis points. Given this scenario, the ~~sensitivity~~bank had, at the end of ~~earnings~~the period, an exposure to ~~changes~~falling inrates ~~interest~~and a benefit from rising rates. AsMore ~~interest~~specifically, ~~rates~~for ~~change~~the period ended September 30, 2005 the model forecasts a decline in net interest income ~~and~~of ~~expense~~$1.244 ~~associated~~million ~~with~~or ~~the~~-15.79%, ~~bank’s~~as ~~interest~~a ~~sensitive~~result ~~assets~~of ~~and~~a 200 basis point decline ~~liabilities~~in rates. The model also ~~change,~~predicts ~~thereby~~a ~~impacting~~$343 thousand increase in net interest income, ~~the~~or ~~primary component~~+4.36% as a result of ~~our~~a ~~earnings~~200 basis point increase in rates. ~~ALCO~~The forecasted ~~utilizes~~results of the ~~results~~model are within the limits specified by ALCO. The following chart reflects our sensitivity to changes in interest rates as of ~~both~~September 30, 2005. The numbers are based on a static balance sheet, and ~~dynamic~~the ~~gap~~chart ~~report~~assumes tothat ~~quantify~~pay ~~the estimated~~downs ~~exposure~~and maturities of ~~net~~both ~~interest~~assets ~~income~~and liabilities toare areinvested ~~sustained~~in ~~change~~like ininstruments at current interest rates, rates down 200 basis points, and rates up 200 basis points.

~~The~~Interest ~~gap~~Rate analysis projected net interest income based on both a rise and fall in interest rates of 200 basis points (i.e. 2.00%) over a twelve-month period. The model is based on actual repricing dates of interest sensitive assets and interest sensitive liabilities. The model incorporates assumptions regarding the impact of changing interest rates on the prepayment rates of certain assets.Risk

WeIncome ~~measure~~Sensitivity this exposure based on an immediate change in interest rates of up or down 200 basis points. Given this scenario, the bank had, at the end of the period, an exposure to falling rates and a benefit from rising rates. More specifically, for the period ended June 30, 2004 the model forecasts a decline in net interest income of $225 thousand or -5.40%, as a result of a 200 basis point decline in rates. The model also predicts a $146 thousand increase in net interest income, or +3.52% as a result of a 200 basis point increase in rates. The forecasted results of the model are within the limits specified by ALCO. The following chart reflects our sensitivity to changes in interest rates as of June 30, 2004. The numbers are based on a static balance sheet, and the chart assumes that pay downs and maturities of both assets and liabilities are reinvested in like instruments at current interest rates, rates down 200 basis points, and rates up 200 basis points.Summary

~~Interest~~As ~~Rate~~of ~~Risk~~September 30, 2005

Income Sensitivity Summary

	DOWN 200 BP			CURRENT			UP 200 BP

Net interest income	$	6,639,691		$	7,884,226		$	8,227,704
Dollar change net interest income	$	(1,244,535	)	$	0		$	343,478
Percent change net interest income	(15.79		)%	0.00		%	4.36		%

AsThe preceding sensitivity analysis is a modeling analysis, which changes periodically and consists of ~~June 30~~hypothetical estimates based upon numerous assumptions including interest rate levels, ~~2004~~shape of the yield curve, prepayments on loans and securities, rates on loans and deposits, reinvestment of paydowns and maturities of loans, investments and deposits, among others. In addition, there are no assumptions for growth or a change in asset mix. While assumptions are developed based on the current economic and market conditions, management cannot make any assurances as to the predictive nature of these assumptions including how customer preferences or competitor influences might change.

	DOWN 200 BP			CURRENT			UP 200 BP
Net interest income	$	3,708,635		$	4,158,013		$	4,304,475
Dollar change net interest income	$	(224,689	)	—			$	146,462
Percent change net interest income	(5.40		)%	0.00		%	3.52		%

~~The~~As ~~preceding sensitivity~~market ~~analysis~~conditions isvary afrom ~~modeling~~those ~~analysis,~~assumed ~~which~~in ~~changes periodically and consists of hypothetical estimates based upon numerous assumptions including interest rate levels, shape of~~ the ~~yield curve, prepayments on loans and~~ ~~securities,~~sensitivity ~~rates on loans and deposits~~analysis, ~~reinvestment~~actual ofresults ~~paydowns~~will ~~and maturities of loans, investments and deposits, among others~~differ. ~~In addition~~Also, ~~there~~the ~~are~~sensitivity noanalysis ~~assumptions~~does ~~for~~not ~~growth~~reflect oractions athat ~~change~~ALCO inmight ~~asset~~take ~~mix.~~in ~~While~~responding ~~assumptions are developed based on the current economic and market conditions, management cannot make any assurances as~~ to ~~the~~or ~~predictive~~anticipating ~~nature of these assumptions including how customer~~changes ~~preferences~~in orinterest ~~competitor influences might change~~rates.

19Our primary objective of asset and liability management is to manage interest rate risk and achieve reasonable stability in net interest income throughout interest rate cycles. This is achieved by maintaining the proper balance of rate-sensitive earning assets and rate-sensitive interest-bearing liabilities. The relationship of rate-sensitive earning assets to rate-sensitive interest-bearing liabilities is the principal factor we consider in projecting the effect that fluctuating interest rates will have on future net interest income. Rate-sensitive assets and liabilities are those that can be re-priced to current market rates within a relatively short time period. We monitor the rate sensitivity of earning assets and interest-bearing liabilities over the entire life of these instruments, but place particular emphasis on the first year. At September 30, 2005, on a cumulative basis through 12 months, rate-sensitive assets exceeded rate-sensitive liabilities by $23,047,592. This asset-sensitive position is primarily attributable to the fact that 79.51% of the loan portfolio is scheduled to mature or reprice during the next 12 months, whereas only 73.14% of rate-sensitive deposits are scheduled to mature or reprice during the same 12 month period.

AsItem ~~market conditions vary from those assumed in the sensitivity analysis, actual results will differ~~4. ~~Also,~~ ~~the~~Controls ~~sensitivity~~and ~~analysis does not reflect actions that ALCO might take in responding to or anticipating changes in interest rates.~~Procedures

~~Our~~As ~~primary objective~~ of ~~asset~~the ~~and~~end ~~liability~~of ~~management~~the period iscovered toby ~~manage~~this ~~interest~~report, ~~rate~~we ~~risk~~carried ~~and~~out ~~achieve~~an ~~reasonable~~evaluation, ~~stability~~under ~~in net interest income throughout interest rate cycles. This is achieved by maintaining~~ the supervision ~~proper balance of rate-sensitive earning assets~~ and ~~rate-sensitive~~with ~~interest-bearing~~the ~~liabilities. The~~participation ~~relationship~~ of ~~rate-sensitive~~our ~~earning~~management, ~~assets~~including toour ~~rate-sensitive~~Chief Executive ~~interest-bearing~~Officer ~~liabilities~~and isChief ~~the~~Financial ~~principal~~Officer, ~~factor~~of ~~we consider in projecting~~ the ~~effect~~effectiveness ~~that~~of ~~fluctuating~~our disclosure ~~interest~~controls ~~rates~~and ~~will~~procedures ~~have~~as ondefined ~~future~~in ~~net~~Exchange ~~interest~~Act ~~income~~Rule 13a-15(e). ~~Rate-sensitive~~Based ~~assets~~upon ~~and liabilities are those~~ that ~~can~~evaluation, our beChief ~~re-priced~~Executive toOfficer ~~current~~and ~~market~~Chief ~~rates~~Financial ~~within~~Officer ahave ~~relatively~~concluded ~~short~~that ~~time~~our current ~~period. We~~disclosure ~~monitor~~controls ~~the rate sensitivity of earning assets~~ and ~~interest-bearing~~procedures ~~liabilities~~are ~~over~~effective ~~the~~as ~~entire life~~ of ~~these~~September ~~instruments, but place particular emphasis on the first year. At June~~ 30, 2005 ~~2004,~~in ontimely aalerting ~~cumulative~~us ~~basis~~to ~~through~~material 12information ~~months,~~that ~~rate-sensitive~~is ~~assets~~required ~~exceeded~~to ~~rate-sensitive~~be included ~~liabilities~~in byour ~~$12,734,987. This~~periodic ~~asset-sensitive~~filings ~~position~~with ~~is primarily attributable to~~ the ~~fact~~Securities ~~that~~and 76Exchange Commission.~~08%~~ There ofhave ~~the~~been ~~loan~~no ~~portfolio~~changes isin ~~scheduled~~our tointernal ~~mature~~controls orover ~~reprice~~financial reporting during the ~~next~~quarter 12ended ~~months~~September 30, ~~whereas~~2005 ~~only~~that ~~75.08%~~have ofmaterially ~~rate-sensitive~~affected ~~deposits~~ or are ~~scheduled~~reasonably likely to ~~mature~~affect orour ~~reprice~~internal ~~during~~control ~~the~~over ~~same~~financial ~~12 month period~~reporting.

~~Item~~The design of any system 4of controls and procedures is based in part upon certain assumptions about the likelihood of future events. ~~Controls~~There ~~and~~can ~~Procedures~~be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

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 June 30, 2004 in timely alerting us to material information that is required to be included in our periodic filings with the Securities and Exchange Commission. There have been no changes in our internal controls over financial reporting during the quarter ended June 30, 2004, that have materially affected or are reasonably likely to affect our internal control over financial reporting.20

~~The design of any system~~PART ofII ~~controls~~- ~~and~~OTHER 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.INFORMATION

20Item 1. Legal Proceedings

~~PART II - OTHER INFORMATION~~None.

Item 12. ~~Legal~~Unregistered ~~Proceedings~~Sales of Equity Securities and Use of Proceeds

On April 19, 2001, shareholders of the bank approved the reorganization of the bank into a holding company structure pursuant to that certain Reorganization Agreement and Plan of Share Exchange dated March 10, 2001None. Upon consummation of the reorganization on May 18, 2001, 2,080,078 shares of common stock of the bank were exchanged for 2,080,078 shares of common stock of the company. Pursuant to Section 14-2-1302 of the Georgia Business Corporation Code, a record shareholder of a corporation is entitled to dissent from, and obtain payment of the fair value of his shares in the event of certain corporate actions, including the consummation of a plan of share exchange. Cede & Co., the record holder of the remaining originally issued 68,359 shares of the bank’s common stock, dissented from the bank’s reorganization into a holding company structure. To resolve this matter in accordance with Section 14-2-1330 of the Georgia Business Corporation Code, the bank filed a Petition for Determination of Fair Value of Shares against Cede & Co. in the Superior Court of Fayette County, State of Georgia on September 14, 2001. Fayette Mortgage Company and Edgar E. Chapman, Jr. Individual Retirement Account subsequently replaced Cede & Co. as the real shareholders in interest. The case was completed on March 30, 2004, with the court determining that the amount to be paid to the dissenting shareholder was $657,730. We have made this payment and this case is now concluded. The numbers of shares and prices per share have been adjusted to reflect 5-for4 stock splits declared by the board of directors on August 16, 2001, September 19, 2002 and June 19, 2003.

Item 2. Changes in Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

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

~~The annual meeting of the shareholders of Georgia Bancshares, Inc~~None. was held on May 12, 2004. The only order of business was the election of Class I directors. A total of 2,103,944 shares of common stock voted in person or by proxy, representing 71.65% of the 2,936,119 shares of common stock eligible to vote at the meeting. Class I director, Arlie C. Auckerman received 2,016,996 votes for and 9,606 withheld authority. The remaining Class I directors, Joseph S. Black, Rick A. Duncan and Dale K. Geeslin each received 2,020,549 votes for and 6,053 withheld authority. These four Class I directors will serve a three year term until the 2007 annual meeting of the shareholders.

Item 5. Other Information

None.

Item 6. Exhibits ~~and Report on Form 8-K~~

(a) Exhibits:

Exhibit Number		Description

31.1	Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.

31.2	Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.

32	Section 1350 Certifications. 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.

Exhibit Number		Description
31.1		Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.
31.2		Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.
32		Section 1350 Certifications. 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.

(b) Reports on Form 8-K:

The following reports were filed on Form 8-K during the quarter ended June 30, 2004:

The Company filed a Form 8-K on April 14, 2004 to disclose the engagement of Porter Keadle Moore, LLP as its independent auditor for the fiscal year ending December 31, 2004.

The Company filed a Form 8-K on May 14, 2004 to disclose the issuance of a press release announcing its financial results for the quarter ended March 31, 2004.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		GEORGIA BANCSHARES, INC.
Date: August 11, 2004	By:	/s/ Ira P. Shepherd, III
Date: November 8, 2005	By:	/s/ Ira P. Shepherd, III
		Ira P. Shepherd, III
		President & Chief Executive Officer
	By:	/s/ C. Lynn Gable
		C. Lynn Gable
		Principal Accounting Officer and Chief Financial Officer

2322

EXHIBIT INDEX

Exhibit Number		Description

31.1	Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.

31.2	Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.

32	Section 1350 Certifications.

2423

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