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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
  FORM 10-QSB þQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended March 31, 2005
OR
  ̈ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Transition Period from ___to___
 Commission File No. 333-123386 NORTHSIDE BANCSHARES, INC.  Georgia
(State of Incorporation)
    
    31-1840578
(I.R.S. Employer Identification Number)
  
 7741 Adairsville Highway
Adairsville, Georgia 30103
(Address of Principal Executive Offices) (770) 773-7300
(Issuers Telephone Number, Including Area Code)  
 Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Exchange Act during the past 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes  ̈ No þ As of June 15, 2005, there were 10 shares of the issuers common stock outstanding. Transitional Small Business Disclosure Format (check one): Yes  ̈ No þ




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TABLE OF CONTENTS PART IFINANCIAL INFORMATIONItem 1. Financial StatementsItem 2. Managements Plan of OperationItem 3. Controls and ProceduresPART IIOTHER INFORMATIONItem 2. Unregistered Sales of Equity Securities and Use of ProceedsItem 6. ExhibitsSIGNATURESEX-31.1 302 Certificaton of CEOEX-31.2 302 Certificaton of CFOEX-32.1 906 Certificaton of CEO and CFO




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PART I
FINANCIAL INFORMATION 
 Item 1. Financial Statements NORTHSIDE BANCSHARES, INC.
(A Development Stage Corporation)
Balance Sheet
(unaudited) March 31, 2005 AssetsCash
    
    $
    22,901Deferred offering expenses
    
    
    8,205Equipment
    
    
    2,850Other assets
    
    
    6,506$
    40,462Liabilities and Stockholders DeficitAccounts payable and accrued expenses
    
    $
    33,495Line of credit
    
    
    227,094Total liabilities
    
    
    260,589Stockholders deficit:Preferred stock, no par value, 10,000,000 shares authorized
and no shares issued and outstanding
    
    
    Common stock, $1 par value; 10,000,000 shares authorized
10 shares issued and outstanding
    
    
    10Common stock subscription receivable
    
    
    (100
    )Additional paid-in capital
    
    
    90Deficit accumulated during the development stage
    
    
    (220,127
    )Total stockholders deficit
    
    
    (220,127
    )$
    40,462
 See accompanying notes to unaudited financial statements.




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NORTHSIDE BANCSHARES, INC.
(A Development Stage Corporation)
Statements of Operations
(unaudited) For the Three Months Ended March 31, 2005
and the Period from August 3 (inception) to March 31, 2005 Three Months Ended
    
    
    Cumulative ThroughMarch 31, 2005
    
    
    March 31, 2005Expenses:Legal and consulting
    
    $
    11,850
    
    
    
    61,850Salaries and benefits
    
    
    72,569
    
    
    
    96,833Filing fees
    
    
    
    
    
    
    20,100Other operating
    
    
    17,251
    
    
    
    41,344Net loss
    
    $
    (101,670
    )
    
    
    (220,127
    )
 See accompanying notes to unaudited financial statements.




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NORTHSIDE BANCSHARES, INC.
(A Development Stage Corporation)
Statements of Cash Flows
(unaudited) For the Three Months Ended March 31, 2005
and the Period from August 3 (inception) to March 31, 2005 Three Months Ended
    
    
    Cumulative ThroughMarch 31, 2005
    
    
    March 31, 2005Cash flows from operating activities:Net loss
    
    $
    (101,670
    )
    
    
    (220,127
    )Adjustments to reconcile net loss to net cash used
by operating
activities:Change in other assets
    
    
    (6,506
    )
    
    
    (6,506
    )Change in accounts payable and accrued expenses
    
    
    14,767
    
    
    
    33,495Net cash used by operating activities
    
    
    (93,409
    )
    
    
    (193,138
    )Cash flows from investing activities consisting of
purchases of equipment
    
    
    (2,850
    )
    
    
    (2,850
    )Cash flows from financing activities:Proceeds from line of credit
    
    
    126,450
    
    
    
    227,094Deferred offering expenses
    
    
    (8,205
    )
    
    
    (8,205
    )Net cash provided by financing activities
    
    
    118,245
    
    
    
    218,889Net change in cash and cash equivalents
    
    
    21,986
    
    
    
    22,901Cash and cash equivalents at beginning of period
    
    
    915
    
    
    
    Cash and cash equivalents at end of period
    
    $
    22,901
    
    
    
    22,901Supplemental disclosure of cash paid for interest
    
    $
    1,450
    
    
    
    2,094
 See accompanying notes to unaudited financial statements.




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NORTHSIDE BANCSHARES, INC.
(A Development Stage Corporation)
Notes to Financial Statements  (1)
    
    OrganizationNorthside Bancshares, Inc., (the Company) was incorporated for the purpose of becoming a
bank holding company. The Company intends to acquire 100% of the outstanding common stock of
Northside Bank (in Organization) (the Bank), which will operate in Adairsville, Bartow
County, Georgia. The organizers of the Bank filed an application to charter the Bank with the
Georgia Department of Banking and Finance on December 23, 2004 and an application for deposit
insurance for the Bank with the Federal Deposit Insurance Corporation. In addition, the
Company will file an application to serve as the holding company for the Bank with the board
of Governors for the Federal Reserve System. Provided that the application is timely approved
and necessary capital is raised, it is expected that operations will commence in the third
quarter of 2005.The Company was incorporated on January 6, 2005 and organizing activities and expenditures
associated with organization commenced August 3, 2004. The accompanying financial statements
reflect all transactions from August 3, 2004 through March 31, 2005. Operations through March
31, 2005, relate primarily to expenditures by the Company and the organizers for incorporating
and organizing the Company. All expenditures by the organizers and the Company are considered
expenditures of the Bank.The Company plans to raise between $10,600,000 and $15,000,000 through an offering of its
common stock at $10 per share. The organizers and directors expect to subscribe for a minimum
of approximately $3,600,000 (360,000 shares) of the Companys stock.In connection with the Companys formation and initial offering, warrants to purchase shares
of common stock at $10.00 per share will be issued to the organizers. The organizers will
receive warrants to purchase one share of common stock for each share they purchase. The
warrants expire ten years after the date of grant. The Company also intends to reserve
225,000 shares of its common stock for issuance under a stock option plan.(2)
    
    Summary of Significant Accounting PoliciesOrganization CostsCosts incurred for the organization of the Company and the Bank (consisting principally of
legal, accounting, consulting and incorporation fees) are being expensed as incurred.Deferred Offering ExpensesCosts incurred in connection with the stock offering, consisting of direct, incremental costs
of the offering, are being deferred and will be offset against the proceeds of the stock sale
as a charge to additional paid in capital.Pre-Opening ExpensesCosts incurred for overhead and other operating expenses are included in the current
periods operating results.




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Item 2. Managements Plan of Operation  The purpose of the following discussion is to address information relating to the plan of
operations of Northside Bancshares, Inc. that may not be readily apparent from the unaudited
financial statements and notes thereto, which begin on page 1 of this Report. This discussion
should be read in conjunction with the information provided in our unaudited financial
statements and notes thereto.GeneralDuring the period ended March 31, 2005, we were in the development stage. We anticipate that
we will begin our banking operations in the third quarter of 2005. Northside Bancshares was
incorporated on January 6, 2005 to serve as a holding company for Northside Bank (in
organization). During the quarter ended March 31, 2005, our main activities were:  
    
    seeking, interviewing and selecting our officers;
    
    preparing our business plan;
    
    applying for a state bank charter under the laws of the State of Georgia;
    
    applying for FDIC deposit insurance;
    
    preparation of the sites for our banking facility in Adairsville, Georgia and selection of the site for
our branch office in Cartersville, Georgia; and
    
    raising equity capital through an initial public offering.  On May 9, 2005, we began an initial public offering of a minimum of 1,060,000 shares and a
maximum of 1,500,000 shares of the common stock of Northside Bancshares. The initial public
offering is scheduled to expire on August 7, 2005.Financial ResultsFrom January 1, 2005 through March 31, 2005, our net loss amounted to $ 101,670. Our financial
statements and related notes, which are included in this Report, provide additional information
relating to the discussion of our financial condition.We anticipate completing our organizational activities and beginning our banking operations in
the third quarter of 2005. We will incur substantial expenses in establishing our banking
subsidiary, Northside Bank, as a going concern, and we can give you no assurance that we will
be profitable or that future earnings, if any, will meet the levels prevailing in the banking
industry. Typically new banks are not profitable in their first year of banking operations and,
in some cases are not profitable for several years. Our future results will be determined
primarily by our ability to manage effectively interest income and expense, to minimize loan
and investment losses, to generate non-interest income, and to control non-interest expenses.
Since interest rates will be determined by market forces and economic conditions beyond our
control, our ability to generate net interest income will be dependent upon our ability to
maintain an adequate spread between the rate earned on earning assets, such as loans and
investment securities, and the rate paid on interest-bearing liabilities, such as deposits and
borrowings.Liquidity and Interest Rate SensitivityOrganizational Period.During our organizational period, our cash requirements consisted
principally of funding our pre-opening expenses, as well as capital expenditures for the
purchase, construction, furnishing and equipping of our main office facility in Adairsville,
Georgia and our branch office in Cartersville, Georgia.




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Since August 3, 2004, our pre-opening expenses have been, and will continue to be, funded
through an organizing line of credit from Nexity Bank. As of
March 31, 2005, the total amount available on the line
of credit was $500,000, of which $227,094 was outstanding. On
June 7, 2005, the amount available under the line of credit was
increased to $750,000. Our organizers
have guaranteed the full amount of this loan, which bears interest at 1.0% less than the prime
rate as published in the Money Rates section of The Wall Street Journal, and is due on August
16, 2005. We plan to repay the line of credit by using a portion of the proceeds of our
initial public offering.We expect to incur additional costs of $2,800,000 to construct, furnish and equip our
Adairsville, office. On June 20, 2005, we entered into an
agreement to purchase an existing facility in Cartersville, Georgia
for $850,000. This facility is fully furnished and will require only
minor changes prior to opening. We
expect to use a portion of the net proceeds from our initial public offering to complete the
purchase, construction, furnishing and equipping of these facilities, as applicable.We expect to complete our organizational activities and begin banking operations in the third
quarter of 2005. Any delay in beginning our banking operations will increase our pre-opening
expenses and postpone our realization of potential revenues. Such a delay may occur as a
result of, among other things, delays in receiving requisite regulatory approvals or our
inability to achieve the minimum offering of $10,600,000 in our initial public offering. In
the event we experience an extended delay in beginning our banking operations, we may be
required to seek additional borrowings, whether through an increase in the amount available
under our existing line of credit with Nexity Bank, or through an additional organizing line of
credit with another bank. There can be no assurance that we will be able to obtain such
financing on satisfactory terms.Commencement of Banking Operations.Since we have been in the development stage, there are no
operating results to present at this time. Nevertheless, once we begin banking operations, net
interest income, our primary source of earnings, will fluctuate with significant interest rate
movements. To lessen the impact of these margin swings, we intend to structure our balance
sheet so we will have regular opportunities to reprice or change the interest rates on our
interest-bearing assets and liabilities. Imbalance in these repricing opportunities at any
point in time constitutes interest rate sensitivity.Interest rate sensitivity refers to the responsiveness of interest-bearing assets and
liabilities to changes in market interest rates. The rate sensitive position, or gap, is the
difference in the volume of rate sensitive assets and liabilities at a given time interval.
The general objective of gap management is to actively manage rate sensitive assets and
liabilities in order to reduce the impact of interest rate fluctuations on the net interest
margin. We will generally attempt to maintain a balance between rate sensitive assets and
liabilities as the exposure period is lengthened to minimize our overall interest rate risks.We will evaluate regularly our balance sheets asset mix in terms of several variables,
including yield, credit quality, appropriate funding sources and liquidity. To effectively
manage our balance sheets liability mix, we plan to focus on expanding our deposit base and
converting assets to cash as necessary.As we continue to grow, we will restructure our rate sensitivity position in an effort to hedge
against rapidly rising or falling interest rates. Our Asset/Liability/Investment Committee
will meet on a quarterly basis to develop a strategy for the upcoming period.For an operating bank, liquidity represents the ability to provide steady sources of funds for
loan commitments and investment activities, as well as to maintain sufficient funds to cover
deposit withdrawals and payment of debt and operating obligations. Initially, we expect that
approximately $4.6 million of the net proceeds from our initial public offering will be
available for working capital purposes. In addition, we can obtain funds by converting assets
to cash or by attracting new deposits. Through our banking operations, our ability to maintain
and increase deposits will serve as our primary source of liquidity. To provide additional
sources of liquidity, we plan to maintain a federal funds borrowed line of credit with one or
more correspondent banks and to apply for membership to the Federal Home Loan Bank of Atlanta.




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Permanent Office Facility.In Adairsville, during our first year of operations, we
intend to construct a permanent facility on approximately 1.97 acres. In exchange for 95,000
shares of our common stock, and $50,000 cash, Orlando Wilson, our chairman, will contribute to us the land on
which we intend to construct the permanent office facility in Adairsville. We expect to
complete construction of this permanent main office facility in the
first quarter of 2006. The estimated
costs of furnishing and equipping this facility are $300,000. We plan to use a portion of the
net proceeds of our initial public offering to fund the construction, furnishing and equipping
of our permanent office facility. While our permanent office facility is under construction,
we intend to operate from a modular facility located at the same street address as the
permanent structure. In Cartersville, we have agreed to purchase an
existing, fully equipped and furnished facility for $850,000. We
believe this facility will require only minor changes prior to
opening. Other than our initial public offering and as discussed above, we know of no trends, demands,
commitments, events or uncertainties that should result in, or are reasonably likely to result
in, our liquidity increasing or decreasing in any material way in the foreseeable future. Capital Adequacy There are now two primary measures of capital adequacy for banks and bank holding companies:
(i) risk-based capital guidelines and (ii) the leverage ratio. The risk-based capital guidelines measure the amount of a banks required capital in relation
to the degree of risk perceived in its assets and its off-balance sheet items. Under the
risk-based capital guidelines, capital is divided into two tiers. Tier 1 capital consists of
common shareholders equity, noncumulative and cumulative perpetual preferred stock, and
minority interests. Goodwill is subtracted from the total. Tier 2 capital consists of the
allowance for loan losses, hybrid capital instruments, term subordinated debt and intermediate
term preferred stock. Banks are required to maintain a minimum risk-based capital ratio of 8%,
with at least 4% consisting of tier 1 capital. The second measure of capital adequacy relates to the leverage ratio. The FDIC has established
a 3% minimum leverage ratio requirement. The leverage ratio is computed by dividing tier 1
capital into total assets. In the case of Northside Bank and other banks that are experiencing
growth or have not received the highest regulatory rating from their primary regulator, the
minimum leverage ratio should be 3% plus an additional cushion of at least 1% to 2%, depending
upon risk profiles and other factors. We believe that the net proceeds from our initial public offering will satisfy our capital
requirements for at least the next 12 months following the opening of Northside Bank. 
 Item 3. Controls and Procedures As of the end of the period covered by this Report, we carried out an evaluation, under the
supervision and with the participation of our management, including our Chief Executive Officer
and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as
defined in Exchange Act Rule 13a-15(e). Based upon that evaluation, our Chief Executive
Officer and Chief Financial Officer have concluded that our current disclosure controls and
procedures are effective as of March 31, 2005. There have been no significant changes in our
internal controls over financial reporting during the first fiscal quarter ended March 31, 2005
that have materially affected, or are reasonably likely to materially affect, our internal
controls over financial reporting. The design of any system of controls and procedures is based in part upon certain assumptions
about the likelihood of future events. There can be no assurance that any design will succeed
in achieving its stated goals under all potential future conditions, regardless of how remote.




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PART II OTHER INFORMATION
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In January 2005, in connection with our initial organization we issued 10 shares of our
common stock to our Chief Executive for $100. The shares were issued pursuant to Section
4(2) of the Securities Act of 1933, as amended, as a transaction not involving a public
offering. On May 9, 2005, we commenced our initial public offering of a minimum of 1,060,000 shares and
a maximum of 1,500,000 shares. As of June 14, 2005, we had received subscriptions for
954,871 shares of common stock. However, until we have met the minimum offering conditions
for the closing of the initial public offering, we will not receive any of the proceeds from
such subscriptions. Item 5. Other
Information On
June 7, 2005, we amended our organizing line of credit to
increase the amount available under the line of credit from $500,000
to $750,000. All other terms of the line of credit remain unchanged.
As amended, the line of credit bears interest at 1.0% less the prime
rate as published in the Money Rates section of the The Wall
Street Journal, and is due on August 16, 2005. Our
organizers have guaranteed the full amount of the line of credit. 
 Item 6. Exhibits Exhibit Number
    
    Description31.1
    
    Rule 13a-14(a) Certification of Chief Executive Officer31.2
    
    Rule 13a-14(a) Certification of Chief Financial Officer32.1
    
    Section 1350 Certifications




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SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this Report to be signed on its behalf by the undersigned, in the City
of Adairsville, State of Georgia, on June 20, 2005. NORTHISDE BANCSHARES, INC./s/Gregory F. PattonGregory F. Patton
President and Chief Executive Officer
 /s/Barry AdcockBarry Adcock
Chief Financial Officer




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EXHIBIT INDEX Exhibit Number
    
    Description31.1
    
    Rule 13a-14(a) Certification of Chief Executive Officer31.2
    
    Rule 13a-14(a) Certification of Chief Financial Officer32.1
    
    Section 1350 Certifications