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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-QSB
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarter Ended September 30, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Transition Period fromto
 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)
 
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NORTHSIDE BANCSHARES, INC.
 INDEX
 Page No.PART I
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsBalance Sheet (unaudited) as of September 30, 2005
    
    
    3Statements of Operations For the Three and Nine Months Ended September 30, 2005 (unaudited)
    
    
    4Statements of Cash Flows For the Nine Months Ended September 30, 2005 (unaudited)
    
    
    5Notes to Financial Statements (unaudited)
    
    
    6Item 2.
    
    Managements Discussion and Analysis or Plan of Operations
    
    
    7Item 3.
    
    Controls and Procedures
    
    
    10PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    11Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    11Item 3.
    
    Defaults Upon Senior Securities
    
    
    11Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    11Item 5.
    
    Other Information
    
    
    11Item 6.
    
    Exhibits
    
    
    11EX-31.1 SECTION 302, CERTIFICATION OF THE CEOEX-31.2 SECTION 302, CERTIFICATION OF THE CFOEX-32.1 SECTION 906, CERTIFICATION OF THE CEO AND CFO
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PART I
FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 NORTHSIDE BANCSHARES, INC.
 
 Balance Sheet
 (unaudited)
 September 30, 2005
 AssetsCash and due from banks
    
    $
    784,474Federal funds sold
    
    
    8,199,000Cash and cash equivalents
    
    
    8,983,474Investment securities available-for-sale
    
    
    4,061,275Loans, net
    
    
    1,485Premises and equipment, net
    
    
    2,032,519Accrued interest receivable
    
    
    9,243Other assets
    
    
    107,044$
    15,195,040Liabilities and Stockholders EquityLiabilities:Deposits:Non interest bearing
    
    $
    354,458Interest bearing
    
    
    27,942Savings
    
    
    330,085Time
    
    
    235,192Total deposits
    
    
    947,677Accrued interest payable and other liabilities
    
    
    126Total liabilities
    
    
    947,803CommitmentsStockholders equity: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
1,500,000 shares issued and outstanding
    
    
    1,500,000Additional paid-in capital
    
    
    13,428,370Accumulated deficit
    
    
    (679,694
    )Accumulated other comprehensive income (loss)
    
    
    (1,439
    )Total stockholders equity
    
    
    14,247,237$
    15,195,040
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NORTHSIDE BANCSHARES, INC.
 
 Statements of Operations
 (unaudited)
 For the Three and Nine Months Ended September 30, 2005
 Three Months Ended
    
    
    Nine Months EndedSeptember 30, 2005
    
    
    September 30, 2005Interest Income:Interest and dividends on investment securities
    
    $
    4,085
    
    
    
    4,085Interest on federal funds sold
    
    
    121,082
    
    
    
    121,082Total interest income
    
    
    125,167
    
    
    
    125,167Interest expense:Deposits
    
    
    246
    
    
    
    246Other
    
    
    10,545
    
    
    
    16,709Total interest expense
    
    
    10,791
    
    
    
    16,955Net interest income
    
    
    114,376
    
    
    
    108,212Provision for loan losses
    
    
    15
    
    
    
    15Net interest income after provision for loan losses
    
    
    114,361
    
    
    
    108,197Other expense:Salaries and benefits
    
    
    177,654
    
    
    
    344,377Net occupancy and equipment expense
    
    
    46,042
    
    
    
    106,365Other operating expense
    
    
    116,523
    
    
    
    218,692Total other expenses
    
    
    340,219
    
    
    
    669,434Net loss
    
    $
    (225,858
    )
    
    
    (561,237
    )Basic and diluted loss per share
    
    $
    (.15
    )
    
    
    (.37
    )
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NORTHSIDE BANCSHARES, INC.
 
 Statements of Cash Flows
 (unaudited)
 For the Nine Months Ended September 30, 2005
 Cash flows from operating activities:Net loss
    
    $
    (561,237
    )Adjustments
to reconcile net loss to net cash used by operating activities:Provision for loan losses
    
    
    15Depreciation, amortization, and accretion
    
    
    46Change in other assets and liabilities
    
    
    (134,890
    )Net cash used by operating activities
    
    
    (696,066
    )Cash flows from investing activities:Purchases of investment securities available-for-sale
    
    
    (4,062,759
    )Net change in loans
    
    
    (1,500
    )Purchases of premises and equipment
    
    
    (1,082,519
    )Net cash used by investing activities
    
    
    (5,146,778
    )Cash flows from financing activities:Net change in deposits
    
    
    947,677Proceeds
from line of credit
    
    
    839,424Repayment of
line of credit
    
    
    (940,068
    )Proceeds from sale of common stock
    
    
    14,050,000Offering expenses
    
    
    (71,630
    )Net cash provided by financing activities
    
    
    14,825,403Net change in cash and cash equivalents
    
    
    8,982,559Cash and cash equivalents at beginning of period
    
    
    915Cash and cash equivalents at end of period
    
    $
    8,983,474Supplemental disclosure of cash paid for interest
    
    $
    10,674Supplemental disclosure of noncash financing and investing activities:Change in unrealized gain/loss on investment securities
available-for-sale
    
    $
    (1,439
    )Issuance of common stock in exchange for premises
    
    $
    950,000
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NORTHSIDE BANCSHARES, INC.
 
 Notes to Financial Statements
 (1)
    
    Organization and Basis of PresentationNorthside Bancshares, Inc., (the Company) was incorporated for the purpose of becoming a
bank holding company. The Company acquired 100% of the outstanding common stock of Northside
Bank (the Bank), which currently operates in Adairsville, Bartow County, Georgia. The Bank
opened for business on September 26, 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 transactions from January 1, 2005 through September 30, 2005. Operations through
September 30, 2005 relate primarily to expenditures by the Company and the organizers for
incorporating and organizing the Company and the Bank. All expenditures by the organizers are
considered expenditures of the Company.The Company raised $15,000,000 through an offering of its common stock at $10 per share. The
organizers and directors purchased $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 were issued to the organizers. They received warrants to
purchase one share of common stock for each share they purchased. The warrants expire ten
years after the date of grant. The Company also reserved 225,000 shares of its common stock
for issuance under a stock option plan.(2)
    
    Critical Accounting Policies and EstimatesThe accompanying unaudited interim consolidated financial statements reflect all adjustments
which, in the opinion of management, are necessary to present fairly the Companys financial
position as of September 30, 2005, and the results of its operations and its cash flows for
the three and nine month periods then ended. All such adjustments are normal and recurring in
nature. The Company has adopted various accounting policies, which govern the application of
accounting principles generally accepted in the United States of America in the preparation of
our financial statements.Certain accounting policies involve significant estimates and assumptions by the Company,
which have a material impact on the carrying value of certain assets and liabilities. The
Company considers these accounting policies to be critical accounting policies. The estimates
and assumptions used are based on historical experience and other factors, which are believed
to be reasonable under the circumstances. Because of the nature of the estimates and
assumptions made, actual results could differ from these estimates and assumptions which could
have a material impact on carrying values of assets and liabilities and results of operations.The Company believes that the allowance for loan losses is a critical accounting policy that
requires the most significant judgments and estimates used in preparation of its financial
statements. The 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.
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 anticipate maintaining an allowance for loan losses 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. Thus, there is a risk that charge-offs in future periods
could exceed the allowance for loan losses 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 income and, possibly, our capital.(3)
    
    Earnings Per ShareNet earnings (loss) per share are based on the total number of shares issued during our
initial offering, which was 1,500,000.
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Item 2. Managements Discussion and Analysis or Plan of Operation
  Cautionary Notice Regarding Forward Looking Statements
   General
  Financial Condition
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Results of Operations
  Net Interest Income .
 Provision and Allowance for Loan Losses
 Other Expenses.
 Income Tax Expense.
 Off-Balance Sheet Risk
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Liquidity and Capital Resources
     ActualMinimumRegulatoryBank
    
    RequirementLeverage capital ratios
    
    
    70
    %
    
    
    4.00
    %Risk-based capital ratios:Core capital
    
    
    269
    %
    
    
    4.00
    %Total capital
    
    
    269
    %
    
    
    8.00
    %
    Critical Accounting Policies
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Item 3. Controls and Procedures
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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
 31.1
    
    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
  NORTHISDE BANCSHARES, INC./s/ Gregory F. PattonGregory F. PattonPresident and Chief Executive Officer/s/ Barry AdcockBarry AdcockChief 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
 13