##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-QSB



|x | QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------

For the quarterly period ended June 30, 2007



| ̈ | TRANSITION REPORT UNDER 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------

For the transition period from ____________ to __________

Commission File Number: 000-25227

CAPITOL CITY BANCSHARES, INC.

(Exact name of small business issuer as specified in its charter)



|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Georgia                                                        |  | 58 - 2452995                           
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)

562 Lee Street, S.W., Atlanta, Georgia 30311

(Address of principal executive office)

(404) 752-6067

(Issuers telephone number)

N/A

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

Check whether the 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 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  x    No ̈

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).    Yes ̈No  x

State the number of shares outstanding of each of the issuers classes of common stock, as of August 1, 2007: 2,188,352; $1.50 par value

Transitional Small Business Disclosure Format     Yes ̈No  x



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##### Table of Contents

INDEX



|                                                                                                                               |  |       
|------------------------------------------------------------------------------------------------------------------------------ |  | ------
|                                                                                                                               |  | Page  
|Part I. Financial Information                                                                                                  |  |       
|                                                                                                                               | 
|Item 1. Financial Statements (unaudited)                                                                                       |  |       
|                                                                                                                               | 
|Condensed Consolidated Balance Sheet as of June 30, 2007                                                                       |  | 2     
|                                                                                                                               | 
|Condensed Consolidated Statements of Income and Comprehensive Income for the Three and Six Months Ended June 30, 2007 and 2006 |  | 3     
|                                                                                                                               | 
|Condensed Consolidated Statements of Cash Flows For The Six Months Ended June 30, 2007 and 2006                                |  | 4     
|                                                                                                                               | 
|Notes to Condensed Consolidated Financial Statements                                                                           |  | 5 -8  
|                                                                                                                               | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                                  |  | 8 -13 
|                                                                                                                               | 
|Item 3. Controls and Procedures                                                                                                |  | 14    
|                                                                                                                               | 
|Part II. Other Information                                                                                                     |  |       
|                                                                                                                               | 
|Item 1. Legal Proceedings                                                                                                      |  | 15    
|                                                                                                                               | 
|Item 2. Unregistered Sale of Equity Securities and Use of Proceeds                                                             |  | 15    
|                                                                                                                               | 
|Item 3. Defaults Upon Senior Securities                                                                                        |  | 15    
|                                                                                                                               | 
|Item 4. Submission of Matters to a Vote of Security Holders                                                                    |  | 15    
|                                                                                                                               | 
|Item 5. Other Information                                                                                                      |  | 16    
|                                                                                                                               | 
|Item 6. Exhibits                                                                                                               |  | 16    
|                                                                                                                               | 
|Signatures                                                                                                                     |  | 17    
|                                                                                                                               | 
|Certifications                                                                                                                 |  | 18 -21



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##### Table of Contents

PART I - FINANCIAL INFORMATION



|ITEM I. | FINANCIAL STATEMENTS
|------- | --------------------

CAPITOL CITY BANCSHARES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

June 30, 2007

(Unaudited)



|                                                                                                                      |  |   |             |  
|--------------------------------------------------------------------------------------------------------------------- |  | - | ----------- | -
|Assets                                                                                                                |  |   |             |  
|Cash and due from banks                                                                                               |  | $ | 4,647,971   |  
|Interest-bearing deposits at other financial institutions                                                             |  |   | 81,484      |  
|Federal funds sold                                                                                                    |  |   | 1,575,000   |  
|Securities available for sale, at fair value                                                                          |  |   | 57,117,077  |  
|Restricted equity securities, at cost                                                                                 |  |   | 449,400     |  
|Loans, net of unearned income                                                                                         |  |   | 179,819,059 |  
|Less allowance for loan losses                                                                                        |  |   | 3,267,697   |  
|                                                                                                                      |  |   |             |  
|Loans, net                                                                                                            |  |   | 176,551,362 |  
|                                                                                                                      |  |   |             |  
|Premises and equipment, net                                                                                           |  |   | 9,882,021   |  
|Other real estate owned                                                                                               |  |   | 646,670     |  
|Other assets                                                                                                          |  |   | 5,184,110   |  
|                                                                                                                      |  |   |             |  
|Total assets                                                                                                          |  | $ | 256,135,095 |  
|                                                                                                                      |  |   |             |  
|Liabilities and Stockholders Equity                                                                                  |  |   |             |  
|Liabilities:                                                                                                          |  |   |             |  
|Deposits:                                                                                                             |  |   |             |  
|Noninterest-bearing                                                                                                   |  | $ | 30,435,271  |  
|Interest-bearing                                                                                                      |  |   | 202,585,045 |  
|                                                                                                                      |  |   |             |  
|Total deposits                                                                                                        |  |   | 233,020,316 |  
|Note payable                                                                                                          |  |   | 622,000     |  
|Company guaranteed trust preferred securities                                                                         |  |   | 3,403,000   |  
|Other liabilities                                                                                                     |  |   | 1,808,130   |  
|                                                                                                                      |  |   |             |  
|Total liabilities                                                                                                     |  |   | 238,853,446 |  
|                                                                                                                      |  |   |             |  
|Stockholders equity                                                                                                  |  |   |             |  
|Series A non-cumulative, non voting preferred stock, par value $100, 10,000 shares authorized, issued and
outstanding |  |   | 1,000,000   |  
|Common stock, par value $1.50; 20,000,000 shares authorized; 2,188,352 shares issued and outstanding                  |  |   | 3,282,528   |  
|Surplus                                                                                                               |  |   | 2,358,164   |  
|Retained earnings                                                                                                     |  |   | 11,266,676  |  
|Accumulated other comprehensive loss                                                                                  |  |   | (625,719    | )
|                                                                                                                      |  |   |             |  
|Total stockholders equity                                                                                            |  |   | 17,281,649  |  
|                                                                                                                      |  |   |             |  
|Total liabilities and stockholders equity                                                                            |  | $ | 256,135,095 |  
|                                                                                                                      |  |   |             |  

The accompanying notes are an integral part of these condensed consolidated financial
statements.



2



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##### Table of Contents

CAPITOL CITY BANCSHARES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE
INCOME

THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006

(Unaudited)



|                                                                                     |  |                            |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|------------------------------------------------------------------------------------ |  | -------------------------- | --------- | - | ------------------------- | - | --------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                                                                     |  | Three Months EndedJune 30, |           |   | Six Months Ended June 30, |  
|                                                                                     |  | 2007                       |           |   | 2006                      |   |           | 2007 |  |   | 2006      |  
|Interest income:                                                                     |  |                            |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Loans, including fees                                                                |  | $                          | 4,384,520 |   |                           | $ | 4,292,361 |      |  | $ | 8,592,884 |   |  | $ | 8,237,342 |  
|Deposits in banks                                                                    |  |                            | 1,607     |   |                           |   |          |      |  |   | 1,607     |   |  |   |          |  
|Securities:                                                                          |  |                            |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Taxable                                                                              |  |                            | 612,931   |   |                           |   | 470,593   |      |  |   | 1,127,098 |   |  |   | 907,015   |  
|Nontaxable                                                                           |  |                            | 79,135    |   |                           |   | 98,307    |      |  |   | 168,790   |   |  |   | 205,303   |  
|Federal funds sold                                                                   |  |                            | 31,618    |   |                           |   | 35,435    |      |  |   | 100,685   |   |  |   | 76,157    |  
|                                                                                     |  |                            |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Total interest income                                                                |  |                            | 5,109,811 |   |                           |   | 4,896,696 |      |  |   | 9,991,064 |   |  |   | 9,425,817 |  
|                                                                                     |  |                            |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Interest expense:                                                                    |  |                            |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Deposits                                                                             |  |                            | 2,389,220 |   |                           |   | 2,027,088 |      |  |   | 4,698,894 |   |  |   | 3,919,721 |  
|Other borrowings                                                                     |  |                            | 116,860   |   |                           |   | 95,888    |      |  |   | 203,433   |   |  |   | 224,609   |  
|                                                                                     |  |                            |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Total interest expense                                                               |  |                            | 2,506,080 |   |                           |   | 2,122,976 |      |  |   | 4,902,327 |   |  |   | 4,144,330 |  
|                                                                                     |  |                            |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Net interest income                                                                  |  |                            | 2,603,731 |   |                           |   | 2,773,720 |      |  |   | 5,088,737 |   |  |   | 5,281,487 |  
|Provision for loan losses                                                            |  |                            | 25,000    |   |                           |   | 121,000   |      |  |   | 25,000    |   |  |   | 245,100   |  
|                                                                                     |  |                            |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Net interest income after provision for loan losses                                  |  |                            | 2,578,731 |   |                           |   | 2,652,720 |      |  |   | 5,063,737 |   |  |   | 5,036,387 |  
|                                                                                     |  |                            |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Other income:                                                                        |  |                            |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Service charges on deposit accounts                                                  |  |                            | 527,593   |   |                           |   | 507,310   |      |  |   | 1,003,928 |   |  |   | 968,753   |  
|Other fees and commissions                                                           |  |                            | 36,222    |   |                           |   | (5,756    | )    |  |   | 41,238    |   |  |   | 10,848    |  
|Mortgage origination income                                                          |  |                            | 14,343    |   |                           |   | 45,705    |      |  |   | 22,985    |   |  |   | 77,385    |  
|Other operating income                                                               |  |                            | (274      | ) |                           |   | 42,674    |      |  |   | 68,494    |   |  |   | 87,692    |  
|                                                                                     |  |                            |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Total other income                                                                   |  |                            | 577,884   |   |                           |   | 589,933   |      |  |   | 1,136,645 |   |  |   | 1,144,678 |  
|                                                                                     |  |                            |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Other expenses:                                                                      |  |                            |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Salaries and employee benefits                                                       |  |                            | 1,006,475 |   |                           |   | 958,695   |      |  |   | 1,952,732 |   |  |   | 1,912,539 |  
|Occupancy and equipment expenses, net                                                |  |                            | 272,945   |   |                           |   | 311,616   |      |  |   | 560,992   |   |  |   | 571,731   |  
|Loss on sale of securities available for sale                                        |  |                            | 2,698     |   |                           |   |          |      |  |   | 2,698     |   |  |   |          |  
|Other operating expenses                                                             |  |                            | 1,007,261 |   |                           |   | 1,240,910 |      |  |   | 1,905,387 |   |  |   | 2,293,405 |  
|                                                                                     |  |                            |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Total other expenses                                                                 |  |                            | 2,289,379 |   |                           |   | 2,511,221 |      |  |   | 4,421,809 |   |  |   | 4,777,675 |  
|                                                                                     |  |                            |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Income before income taxes                                                           |  |                            | 867,236   |   |                           |   | 731,432   |      |  |   | 1,778,573 |   |  |   | 1,403,390 |  
|Income tax expense                                                                   |  |                            | 285,886   |   |                           |   | 227,949   |      |  |   | 594,207   |   |  |   | 430,450   |  
|                                                                                     |  |                            |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Net income                                                                           |  |                            | 581,350   |   |                           |   | 503,483   |      |  |   | 1,184,366 |   |  |   | 972,940   |  
|                                                                                     |  |                            |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Other comprehensive income (loss)                                                    |  |                            |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Unrealized losses on securities available for sale arising during period, net of tax |  |                            | (349,553  | ) |                           |   | (242,288  | )    |  |   | (238,676  | ) |  |   | (362,544  | )
|Reclassification adjustment for losses realized in net income, net of tax            |  |                            | 1,781     |   |                           |   |          |      |  |   | 1,781     |   |  |   |          |  
|                                                                                     |  |                            |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Comprehensive income                                                                 |  | $                          | 233,578   |   |                           | $ | 261,195   |      |  | $ | 947,471   |   |  | $ | 610,396   |  
|                                                                                     |  |                            |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Basic earnings per common share                                                      |  | $                          | 0.27      |   |                           | $ | 0.23      |      |  | $ | 0.54      |   |  | $ | 0.45      |  
|                                                                                     |  |                            |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Diluted earnings per common share                                                    |  | $                          | 0.24      |   |                           | $ | 0.21      |      |  | $ | 0.49      |   |  | $ | 0.40      |  
|                                                                                     |  |                            |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Cash dividends declared per share of common stock                                    |  | $                          | 0.10      |   |                           | $ | 0.07      |      |  | $ | 0.10      |   |  | $ | 0.07      |  
|                                                                                     |  |                            |           |   |                           |   |           |      |  |   |           |   |  |   |           |  

The accompanying notes are an integral part of these condensed consolidated financial
statements.



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##### Table of Contents

CAPITOL CITY BANCSHARES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2007 AND 2006

(Unaudited)



|                                                                                  |  |      |             |   |      |   |            |  
|--------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ---------- | -
|                                                                                  |  | 2007 |             |   | 2006 |  
|OPERATING ACTIVITIES                                                              |  |      |             |   |      |   |            |  
|Net income                                                                        |  | $    | 1,184,366   |   |      | $ | 972,940    |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |      |             |   |      |   |            |  
|Depreciation                                                                      |  |      | 249,546     |   |      |   | 242,869    |  
|Provision for loan losses                                                         |  |      | 25,000      |   |      |   | 245,100    |  
|Loss on sales of securities available for sale                                    |  |      | 2,698       |   |      |   |           |  
|Loss on sale of other real estate owned                                           |  |      | 2,257       |   |      |   |           |  
|Net other operating activities                                                    |  |      | (85,015     | ) |      |   | (178,997   | )
|                                                                                  |  |      |             |   |      |   |            |  
|Net cash provided by operating activities                                         |  |      | 1,378,852   |   |      |   | 1,281,912  |  
|                                                                                  |  |      |             |   |      |   |            |  
|INVESTING ACTIVITIES                                                              |  |      |             |   |      |   |            |  
|Purchases of securities available for sale                                        |  |      | (17,890,357 | ) |      |   | (4,951,154 | )
|Proceeds from maturities of securities available for sale                         |  |      | 6,767,157   |   |      |   | 4,648,511  |  
|Proceeds from sales of securities available for sale                              |  |      | 4,494,754   |   |      |   |           |  
|Net (increase) decrease in interest-bearing deposits                              |  |      | (47,257     | ) |      |   | 91,336     |  
|Net (increase) decrease in federal funds sold                                     |  |      | 17,000      |   |      |   | (1,944,000 | )
|(Purchase) redemption of restricted equity securities                             |  |      | 31,600      |   |      |   | (102,600   | )
|Net (increase) decrease in loans                                                  |  |      | 994,604     |   |      |   | (1,775,932 | )
|Proceeds from sale of other real estate owned                                     |  |      | 674,663     |   |      |   |           |  
|Purchase of premises and equipment                                                |  |      | (1,015,721  | ) |      |   | (231,278   | )
|                                                                                  |  |      |             |   |      |   |            |  
|Net cash used in investing activities                                             |  |      | (5,973,557  | ) |      |   | (4,265,117 | )
|                                                                                  |  |      |             |   |      |   |            |  
|FINANCING ACTIVITIES                                                              |  |      |             |   |      |   |            |  
|Net increase in deposits                                                          |  |      | 6,169,548   |   |      |   | 5,767,879  |  
|Net decrease in securities sold under repurchase agreements                       |  |      | (2,000,000  | ) |      |   | (1,000,000 | )
|Proceeds from exercise of stock options                                           |  |      |            |   |      |   | 50,000     |  
|Issuance of preferred stock                                                       |  |      | 1,000,000   |   |      |   |           |  
|Dividends paid to shareholders                                                    |  |      | (219,120    | ) |      |   |           |  
|                                                                                  |  |      |             |   |      |   |            |  
|Net cash provided by financing activities                                         |  |      | 4,950,428   |   |      |   | 4,817,879  |  
|                                                                                  |  |      |             |   |      |   |            |  
|Net increase in cash and due from banks                                           |  |      | 355,723     |   |      |   | 1,834,674  |  
|Cash and due from banks, beginning of period                                      |  |      | 4,292,248   |   |      |   | 3,253,013  |  
|                                                                                  |  |      |             |   |      |   |            |  
|Cash and due from banks, end of period                                            |  | $    | 4,647,971   |   |      | $ | 5,087,687  |  
|                                                                                  |  |      |             |   |      |   |            |  
|SUPPLEMENTAL DISCLOSURES                                                          |  |      |             |   |      |   |            |  
|Cash paid for:                                                                    |  |      |             |   |      |   |            |  
|Interest                                                                          |  | $    | 4,736,013   |   |      | $ | 3,823,560  |  
|Income taxes                                                                      |  | $    | 648,422     |   |      | $ | 517,178    |  
|NONCASH TRANSACTIONS                                                              |  |      |             |   |      |   |            |  
|Principal balances of loans transferred to other real estate owned                |  | $    | 418,531     |   |      | $ | 604,000    |  
|Financed sales of other real estate owned                                         |  | $    |            |   |      | $ | 604,000    |  
|Transfer of other real estate to premises and equipment                           |  | $    |            |   |      | $ | 2,518,407  |  

The accompanying notes are an integral part of these condensed consolidated financial
statements.



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##### Table of Contents

CAPITOL CITY BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1.   BASIS
OF PRESENTATION

The consolidated financial information included for Capitol City Bancshares, Inc. (the
Company), Capitol City Bank & Trust Company (the Bank) and Capitol City Home Loans (the Mortgage Company) herein is unaudited; however, such information reflects all adjustments (consisting solely of
normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim periods. These statements should be read in conjunction with the consolidated financial statements and related notes
included in the Companys Annual Report on Form 10-KSB for the year ended December 31, 2006.

The results of
operations for the three and six month periods ended June 30, 2007 are not necessarily indicative of the results to be expected for the full year.

NOTE 2.   EARNINGS PER COMMON SHARE

Presented below is a summary of the
components used to calculate basic and diluted earnings per common share for the three and six months ended June 30, 2007 and 2006.



|                                                                                                                                     |  |                            |           |                           |   |           |  |      |           |  |   |          
|------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------- | --------- | ------------------------- | - | --------- |  | ---- | --------- |  | - | ---------
|                                                                                                                                     |  | Three Months EndedJune 30, |           | Six Months Ended June 30,
|                                                                                                                                     |  | 2007                       |           | 2006                      |   | 2007      |  | 2006
|Net income                                                                                                                           |  | $                          | 581,350   |                           | $ | 503,483   |  | $    | 1,184,366 |  | $ | 972,940  
|                                                                                                                                     |  |                            |           |                           |   |           |  |      |           |  |   |          
|Weighted average common shares outstanding                                                                                           |  |                            | 2,188,352 |                           |   | 2,188,352 |  |      | 2,188,352 |  |   | 2,181,722
|Net effect of the assumed exercise of stock options based on the treasury stock method using the average market price for the
period |  |                            | 217,684   |                           |   | 216,934   |  |      | 217,684   |  |   | 223,453  
|                                                                                                                                     |  |                            |           |                           |   |           |  |      |           |  |   |          
|Total weighted average common shares and common stock equivalents outstanding                                                        |  |                            | 2,406,036 |                           |   | 2,405,286 |  |      | 2,406,036 |  |   | 2,405,175
|                                                                                                                                     |  |                            |           |                           |   |           |  |      |           |  |   |          
|Diluted earnings per common share                                                                                                    |  | $                          | 0.24      |                           | $ | 0.21      |  | $    | 0.49      |  | $ | 0.40     
|                                                                                                                                     |  |                            |           |                           |   |           |  |      |           |  |   |          



5



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##### Table of Contents

NOTE 3.   STOCK BASED COMPENSATION

The Company has a stock option plan in which the Company can grant to directors, emeritus directors, and employees options for an
aggregate of 638,400 shares of the Companys stock. For incentive stock options, the option price shall be not less than the fair market value of such shares on the date the option is granted. If the optionee owns shares of the Company
representing more than 10% of the total combined voting power, then the price shall not be less than 110% of the fair market value of such shares on the date the option is granted. With respect to nonqualified stock options, the option price shall
be set at the Boards sole and absolute discretion. The option period for all grants will not exceed ten years from the date of grant.

At December 31, 2006, all outstanding options were fully vested and there were no options granted during the three and six month periods ended June 30, 2007 and 2006. Therefore, there was no compensation
cost related to share-based payments for the three and six months ended June 30, 2007.

The following table represents
stock option activity for the three and six months ended June 30, 2007:



|                                        |  |                                 |  |                                |      |                 |         |                              |   |                                      |  |        
|--------------------------------------- |  | ------------------------------- |  | ------------------------------ | ---- | --------------- | ------- | ---------------------------- | - | ------------------------------------ |  | -------
|                                        |  | Three Months EndedJune 30, 2007 |  | Six Months Ended June 30, 2007
|                                        |  | Number of Shares                |  | WeightedAverageExercisePrice   |      | Numberof Shares |         | WeightedAverageExercisePrice |   | WeightedAverageRemainingContractLife
|Options outstanding beginning of period |  | 418,000                         |  | $                              | 2.67 |                 | 418,000 |                              | $ | 2.67                                 |  |        
|Options granted                         |  |                                |  |                                |     |                 |        |                              |   |                                     |  |        
|Options exercised                       |  |                                |  |                                |     |                 |        |                              |   |                                     |  |        
|                                        |  |                                 |  |                                |      |                 |         |                              |   |                                      |  |        
|Options outstanding end of period       |  | 418,000                         |  |                                | 2.67 |                 | 418,000 |                              |   | 2.67                                 |  | 2.5 Yrs
|                                        |  |                                 |  |                                |      |                 |         |                              |   |                                      |  |        
|Outstanding exercisable end of period   |  | 418,000                         |  |                                | 2.67 |                 | 418,000 |                              |   | 2.67                                 |  | 2.5 Yrs
|                                        |  |                                 |  |                                |      |                 |         |                              |   |                                      |  |        

The range of option prices for options outstanding and exercisable at June 30,
2007 was $2.50 to $3.75.

Shares available for future stock options grants to employees and directors under existing plans
were 158,400 at June 30, 2007. At June 30, 2007, the aggregate intrinsic value of options outstanding and exercisable was $3.1 million.



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NOTE 4.   CONTINGENCIES

In the normal course of business, the Company is involved in various legal proceedings. In the opinion of management, any liability
resulting from such proceedings would not have a material effect on the Companys consolidated financial statements.

NOTE
5.   RECENT ACCOUNTING PRONOUNCEMENTS

In July 2006, the Financial Accounting Standards Board issued
Interpretation No. 48, Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109. This interpretation addresses the accounting for uncertainty in income taxes recognized in a Companys financial
statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. It prescribes a comprehensive model for recognizing, measuring, presenting and disclosing in the financial statements tax positions taken or expected to
be taken in a tax return. It requires that only benefits from tax positions that are more-likely-than-not of being sustained upon examination should be recognized in the financial statements. These benefits would be recorded at amounts considered to
be the maximum amounts more-likely-than-not of being sustained. At the time these positions become more-likely-than-not to be disallowed, their recognition would be reversed. This interpretation is effective for fiscal years beginning after
December 15, 2006 and did not have a material impact on the Companys financial condition or results of operations.

In September 2006, the FASB issued FAS 157, Fair Value Measurements. The standard provides guidance for using fair value to measure assets and liabilities. It defines fair value, establishes a framework for measuring fair value under
generally accepted accounting principles and expands disclosures about fair value measurement. Under the standard, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants in the market in which the reporting entity transacts. It clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability. In support of this
principle, the standard establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy.
Statement 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact the adoption of this statement could have on its financial condition, results of
operations and cash flows.



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NOTE 5.   RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

In February 2007, the FASB issued FAS No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities. Statement 159 permits entities to make an irrevocable election, at specified election dates, to measure eligible financial instruments and certain other items at fair value. This statement also establishes presentation and
disclosure requirements designed to facilitate comparison between entities that choose different measurement attributes for similar types of assets and liabilities. The provisions of this statement are effective as of the beginning of the first
fiscal year that begins after November 15, 2007. The Company has not chosen to early adopt this statement.



|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

The following is managements discussion and analysis of certain significant factors which have affected our financial position and operating results
during the periods included in the accompanying consolidated financial statements.

FORWARD-LOOKING STATEMENTS

This quarterly report contains certain forward-looking statements which are based on certain assumptions and describe future plans, strategies, and our
expectations. These forward-looking statements are generally identified by use of the words believe, expect, intend, anticipate, estimate, project, or similar expressions. Our
ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations include, but are not limited to, changes in interest rates, general economic
conditions, legislation and regulation, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of our loan or investment portfolios, demand for loan
products, deposit flows, competition, demand for financial services in our market area, and accounting principles and guidelines. You should consider these risks and uncertainties in evaluating forward-looking statements and should not place undue
reliance on such statements. We will not publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.

CRITICAL ACCOUNTING POLICIES

We have established policies to govern the application of accounting principles in the preparation of our financial statements. Certain accounting policies involve assumptions and decisions by
management which may have a material impact on the carrying value of certain assets and liabilities, and the results of our operations. We consider these accounting policies to be our critical accounting policies. The assumptions and decisions used
by management are based on historical data and other factors which are believed to be reasonable considering the circumstances.



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##### Table of Contents

Allowance for loan losses. We believe the allowance for loan losses is a critical accounting
policy that requires the most significant decisions and estimates used in the preparation of our financial statements. The allowance for loan losses represents managements estimate of probable loan losses inherent in the loan portfolio.

The allowance is an amount that management believes will be adequate to absorb estimated losses relating to specifically identified loans,
as well as probable credit losses inherent in the balance of the loan portfolio, based on an evaluation of the collectibility of existing loans and prior loss experience. This evaluation also takes into consideration such factors as changes in the
nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, concentrations, and current economic conditions that may affect the borrowers ability to pay. This evaluation does not include the effects of
expected losses on specific loans or groups of loans that are related to future events or expected changes in economic conditions.

FINANCIAL CONDITION

Total assets increased during the first six months of 2007 by $6.0 million from $250.1 million to
$256.1 million, or 2.40%. The growth was funded by increases in total deposits, which increased by $6.0 million, or 2.72%. The increase in total assets for the six months ended June 30, 2007 consisted primarily of a net increase of $6.3 million
in securities available for sale. The loan to deposit ratio at June 30, 2007 was 77% compared to 80% at December 31, 2006.

Stockholders equity increased by $1.7 million for the six months ended June 30, 2007. This net increase consisted of net income of $1.2 million and issuance of preferred stock of $1 million less dividends declared of $219,000,
and a net increase in accumulated other comprehensive losses of $237,000.

LIQUIDITY

Liquidity management involves the matching of the cash flow requirements of customer withdrawals of funds and the funding of loan originations, and the
ability of our subsidiary bank to meet those requirements. Management monitors and maintains appropriate levels of liquidity so that maturities of assets and deposit growth are such that adequate funds are provided to meet estimated customer
withdrawals and loan requests.

At June 30, 2007, the Banks liquidity ratio of 17.60% was considered satisfactory in relation to
regulatory guidelines and internal target ratios.



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REGULATORY CAPITAL REQUIREMENTS

Banking regulations require us to maintain minimum capital levels in relation to assets. At June 30, 2007, the Banks capital ratios were considered well capitalized based on regulatory
minimum capital requirements. The minimum capital requirements and the actual capital ratios for the Company and Bank at June 30, 2007 are as follows:



|                          |  |         |   |  |       |   |  |                              |  
|------------------------- |  | ------- | - |  | ----- | - |  | ---------------------------- | -
|                          |  | Company |   |  | Bank  |   |  | RegulatoryMinimumRequirement |  
|Leverage Capital Ratio    |  | 8.28    | % |  | 8.30  | % |  | 4.00                         | %
|Risk-Based Capital Ratios |  |         |   |  |       |   |  |                              |  
|Core Capital              |  | 9.83    | % |  | 9.86  | % |  | 4.00                         | %
|Total Capital             |  | 11.08   | % |  | 11.12 | % |  | 8.00                         | %

We are not aware of any other recommendations by the regulatory authorities, events or trends,
which, if they were to be implemented, would have a material effect on our liquidity, capital resources, or operations.

OFF BALANCE
SHEET ARRANGEMENTS

Our financial statements do not reflect various commitments and contingent liabilities that arise in the normal
course of business. These off-balance sheet financial instruments include commitments to extend credit and standby letters of credit. Such financial instruments are included in the financial statements when funds are distributed or the instruments
become payable. Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments.
We use the same credit policies in making commitments as we do for on-balance sheet instruments. Although these amounts do not necessarily represent future cash requirements, a summary of our commitments as of June 30, 2007 are as follows:



|                                    |  |              |           
|----------------------------------- |  | ------------ | ----------
|                                    |  | June 30,2007
|Commitments to extend credit        |  | $            | 17,517,000
|Financial standby letters of credit |  |              | 1,724,000 
|Other standby letters of credit     |  |              | 584,000   
|                                    |  |              |           
|                                    |  | $            | 19,825,000
|                                    |  |              |           



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RESULTS OF OPERATIONS

Three and Six Months Ended June 30, 2007 and 2006

Net Interest
Income. Net interest income decreased by $170,000 and $193,000 for the three and six month periods ended June 30, 2007, respectively, compared to the same periods in 2006. The decrease in net interest income is primarily attributable to the
decrease in our net yield on average interest-earning assets. The net yield on interest-earning assets decreased to 4.39% at June 30, 2007 as compared to 4.72% at June 30, 2006 and 4.69% for the entire year ended December 31, 2006.

The yield on interest-earning assets increased to 8.62%, or 19 basis points, from June 30, 2006 to June 30, 2007. The rate paid
on interest-bearing liabilities increased from 4.28% to 4.82%, or 54 basis points, for the same period. The increase in the rate paid on interest-bearing liabilities is due primarily to a higher cost of funds which is the result of strong
competition for deposits in our market areas.

Provision for Loan Losses. The provision for loan losses is based on
managements evaluation of the economic environment, the history of charged off loans and recoveries, size and composition of the loan portfolio, nonperforming and past due loans, and other aspects of the loan portfolio. We review the allowance
for loan loss on a quarterly basis and make provisions as necessary. A provision of $25,000 was made during the six month period ending June 30, 2007 as compared to a provision of $245,000 made during the six month period ending June 30,
2006. The allowance for loan loss as a percentage of total loans was 1.82%, 1.83%, and 1.68% at June 30, 2007, December 31, 2006 and June 30, 2006, respectively. Total nonaccrual loans increased by $1,012,000, net charge-offs
decreased by $8,000, and loans past due ninety days or more and still accruing increased by $496,000 for the six months ended June 30, 2007 as compared to the same period in 2006. Due to collateral values of the underlying collateral, we do not
anticipate significant additional losses related to identified impaired loans. Management believes the allowance for loan loss at June 30, 2007 is adequate to absorb any foreseeable losses in the loan portfolio.

At June 30, 2007 and 2006, nonaccrual, past due and restructured loans were as follows:



|                                                                                                         |  |                        |       |              |   |      
|-------------------------------------------------------------------------------------------------------- |  | ---------------------- | ----- | ------------ | - | -----
|                                                                                                         |  | June 30,2007           |       | June 30,2006
|                                                                                                         |  | (Dollars in thousands)
|Total nonaccruing loans                                                                                  |  | $                      | 5,166 |              | $ | 4,154
|Loans contractually past due ninety days or more as to interest or principal payments and still accruing |  |                        | 599   |              |   | 103  
|Restructured loans                                                                                       |  |                        |      |              |   |     



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It is our policy to discontinue the accrual of interest income when, in the opinion of management,
collection of such interest becomes doubtful. This status is accorded such interest when (1) there is a significant deterioration in the financial condition of the borrower and full repayment of principal and interest is not expected and
(2) the principal or interest is more than ninety days past due, unless the loan is both well-secured and in the process of collection. Accrual of interest on such loans is resumed when, in managements judgment, the collection of interest
and principal becomes probable.

Loans classified for regulatory purposes as loss, doubtful, substandard, or special mention that have not
been included in the table above do not represent or result from trends or uncertainties which management reasonably expects will materially impact future operating results, liquidity, or capital resources. These classified loans do not represent
material credits about which management is aware of any information which causes management to have serious doubts as to the ability of such borrowers to comply with the loan repayment terms.

Information regarding certain loans and allowance for loan loss data for the six months ended June 30, 2007 and 2006 is as follows:



|                                                                              |  |                          |         |   |      |   |         |  
|----------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | -
|                                                                              |  | Six Months EndedJune 30, |        
|                                                                              |  | 2007                     |         |   | 2006 |  
|                                                                              |  | (Dollars in thousands)   |        
|Average amount of loans outstanding                                           |  | $                        | 172,459 |   |      | $ | 168,814 |  
|                                                                              |  |                          |         |   |      |   |         |  
|Balance of allowance for loan losses at beginning of period                   |  | $                        | 3,317   |   |      | $ | 2,763   |  
|                                                                              |  |                          |         |   |      |   |         |  
|Loans charged off                                                             |  |                          |         |   |      |   |         |  
|Commercial                                                                    |  |                          | (102    | ) |      |   | (13     | )
|Real estate                                                                   |  |                          |        |   |      |   | (73     | )
|Installment                                                                   |  |                          | (28     | ) |      |   | (31     | )
|                                                                              |  |                          |         |   |      |   |         |  
|                                                                              |  |                          | (130    | ) |      |   | (117    | )
|                                                                              |  |                          |         |   |      |   |         |  
|Loans recovered                                                               |  |                          |         |   |      |   |         |  
|Commercial                                                                    |  |                          | 13      |   |      |   | 23      |  
|Real estate                                                                   |  |                          |        |   |      |   | 4       |  
|Installment                                                                   |  |                          | 43      |   |      |   | 7       |  
|                                                                              |  |                          |         |   |      |   |         |  
|                                                                              |  |                          | 56      |   |      |   | 34      |  
|                                                                              |  |                          |         |   |      |   |         |  
|Net charge-offs                                                               |  |                          | (74     | ) |      |   | (83     | )
|                                                                              |  |                          |         |   |      |   |         |  
|Additions to allowance charged to operating expense during period             |  |                          | 25      |   |      |   | 245     |  
|                                                                              |  |                          |         |   |      |   |         |  
|Balance of allowance for loan losses at end of period                         |  | $                        | 3,268   |   |      | $ | 2,925   |  
|                                                                              |  |                          |         |   |      |   |         |  
|Ratio of net loans charged-off during the period to average loans outstanding |  |                          | .04     | % |      |   | .05     | %
|                                                                              |  |                          |         |   |      |   |         |  



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##### Table of Contents

Other Income. Other income decreased by $12,000 and $8,000 for the three and six months ended
June 30, 2007, respectively, compared to the same periods in 2006. The most significant component of other income is service charges on deposit accounts which accounts for 88% and 85% of total other income for June 30, 2007 and 2006,
respectively. Service charges on deposit accounts include monthly service charges, non-sufficient funds (NSF) charges, and other miscellaneous maintenance fees. The amount of service charges fluctuates with the volume of transaction
accounts and the volume of NSF activity.

Other Expenses. Other expenses decreased by $222,000 and $356,000 for the three and six
months ended June 30, 2007, respectively, as compared to the same periods in 2006. The decreases consist of decreases of $39,000 and $11,000 in occupancy and equipment expenses, and $234,000 and $388,000 in other operating expenses for the
three and six month periods, offset by increases of $48,000 and $40,000 in salaries and employee benefits, and increases of $3,000 and $3,000 in losses on sales of securities available for sale, respectively. The increase in salaries and employee
benefits includes normal increases in salaries and benefits and an increase in the number of full-time equivalent employees. At June 30, 2007, the number of full-time equivalent employees was 92 compared to 89 at June 30, 2006. The
decrease in other expenses were primarily the result of decreased legal fees of $501,000 which were partially offset by increased professional and consultant fees of $112,000. Legal expenses in 2006 included expenses incurred related to litigation
involving a dispute with another financial institution over the legal name of our bank subsidiary as well as a lawsuit that was filed by the Commissioner of Insurance for the State of Georgia against multiple defendants, including the Company. As of
June 30, 2007, both of these lawsuits have been settled.

The mortgage company originates loans which are table funded through
independent investors. The net loss for the three and six months ended June 30, 2007 was $25,000 and $36,000, respectively, as compared to a loss of $3,000 and $21,000 for the three and six months ended June 30, 2006, respectively.

Income Taxes. Income tax expense increased by $58,000 and $164,000 for the three and six months ended June 30, 2007,
respectively, as compared to the same periods in 2006. The effective tax rate for the six month periods in 2007 and 2006 was 33% and 31%, respectively. The effective tax rate is less than the statutory tax rate due to nontaxable interest income on
securities.

Net Income. Net income increased by $78,000 and $211,000 for the three and six months ended June 30, 2007 as
compared to the same periods in 2006. The increase in net income during the first six months and second quarter of 2007 is mainly due to the decreases in other expenses and lower provision for loan losses.



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##### Table of Contents

|ITEM 3. | CONTROLS AND PROCEDURES
|------- | -----------------------

As
of the end of the period covered by this report, the Company carried out an evaluation under the supervision and with the participation of our Chief Executive Officer and the Principal Financial and Accounting Officer, of the design and operation of
the Companys disclosure controls and procedures. Based upon this evaluation, our Chief Executive Officer and the Principal Financial and Accounting Officer concluded that the Companys disclosure controls and procedures are effective.

There have been no changes in the Companys internal control over financial reporting in the period covered by this report that have
materially affected, or are reasonably likely to materially affect, the Companys internal controls over financial reporting.



14



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##### Table of Contents

PART II - Other Information



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

There have been no material developments in the legal proceedings previously reported in the Companys Annual Report on Form 10-KSB (filed with the Commission on April 2, 2007) nor have any new reportable legal proceedings
involving the Company been instituted.



|ITEM 2. | UNREGISTERED SALES OF EQUITY 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 stockholders of Capitol City Bancshares, Inc. was held on June 26, 2007. A total of 1,279,128 of the shares issued and outstanding registered for the meeting either
in person or by proxy. The results of the meeting were as follows:

Proposal: To elect the fifteen nominees to serve as
directors for the following year.



|                          |  |           |  |         |  |        
|------------------------- |  | --------- |  | ------- |  | -------
|Directors                 |  | For       |  | Against |  | Abstain
|George D. Andrews         |  | 1,279,126 |  | 0       |  | 2      
|Dr. Gloria Campbell DHue |  | 1,279,126 |  | 0       |  | 2      
|J. Al Cochran             |  | 1,279,126 |  | 0       |  | 2      
|Leon Goodrum              |  | 1,279,126 |  | 0       |  | 2      
|Agnes H. Harper           |  | 1,279,126 |  | 0       |  | 2      
|Charles W. Harrison       |  | 1,279,126 |  | 0       |  | 2      
|Robert A. Holmes          |  | 1,279,126 |  | 0       |  | 2      
|Moses M. Jones            |  | 1,279,126 |  | 0       |  | 2      
|Marian S. Jordan          |  | 1,279,126 |  | 0       |  | 2      
|Kaneta R. Lott            |  | 1,279,126 |  | 0       |  | 2      
|Donald F. Marshall        |  | 1,279,126 |  | 0       |  | 2      
|Elvin Mitchell, Sr.       |  | 1,279,126 |  | 0       |  | 2      
|Roy W. Sweat              |  | 1,279,126 |  | 0       |  | 2      
|William Thomas            |  | 1,279,126 |  | 0       |  | 2      
|Cordy T. Vivian           |  | 1,279,126 |  | 0       |  | 2      



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##### Table of Contents

|ITEM 5. | OTHER INFORMATION
|------- | -----------------

None.



|ITEM 6. | EXHIBITS
|------- | --------



|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | 
|2.1    |  | Plan of Reorganization and Agreement of Merger, dated April 14, 1998, by and between Capitol City Bancshares, Inc., Capitol City Bank and Trust, and Capitol City
Interim, Inc., which Agreement is included as Appendix A to the Proxy Statement included in this Registration Statement filed by Registrant on Form S-4 on September 30, 1998, Registration No. 333-64789 (incorporated by reference as Exhibit 2.1
to the Registrants 10-KSB filed on March 31, 1999).
|       | 
|3.1    |  | Articles of Incorporation of Registrant (incorporated by reference as Exhibit 3.1 to the Registrants 10-KSB filed on March 31, 1999).                                                                                                                                                                                                                                                                                                                                    
|       | 
|3.1(A) |  | Amendment to the Articles of Incorporation of Registrant (incorporated by reference as Exhibit 3.1(A) to the Registrants Annual Report on Form 10-KSB filed on March 31,
2005).                                                                                                                                                                                                                                                                                          
|       | 
|3.1(B) |  | Articles of Amendment to the Articles of Incorporation of the Registrant filed February 9, 2007 (incorporation by referenced as Exhibit 3.1(B) to the Registrants
Current Report on Form 8-K filed on February 15, 2007).                                                                                                                                                                                                                                                
|       | 
|3.1(C) |  | Articles of Amendment to the Articles of Incorporation of the Registrant filed February 12, 2007 (incorporation by referenced as Exhibit 3.1(C) to the Registrants
Current Report on Form 8-K filed on February 15, 2007).                                                                                                                                                                                                                                               
|       | 
|3.1(D) |  | Articles of Amendment to the Articles of Incorporation of the Registrant filed February 15, 2007 (incorporation by referenced as Exhibit 3.1(D) to the Registrants
Current Report on Form 8-K filed on February 15, 2007).                                                                                                                                                                                                                                               
|       | 
|3.2    |  | Bylaws of Registrant (incorporated by reference as Exhibit 3.2 to the Registrants 10-KSB filed on March 31, 1999).                                                                                                                                                                                                                                                                                                                                                       
|       | 
|31.1   |  | Section 302 Certification of Principal Executive Officer                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | 
|31.2   |  | Section 302 Certification of Principal Financial and Accounting Officer                                                                                                                                                                                                                                                                                                                                                                                                   
|       | 
|32.1   |  | Section 906 Certification of Principal Executive Officer                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | 
|32.2   |  | Section 906 Certification of Principal Financial and Accounting Officer                                                                                                                                                                                                                                                                                                                                                                                                   



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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant has caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.



|                      |  |  |  |                                                                                                         
|--------------------- |  |  |  | --------------------------------------------------------------------------------------------------------
|                      |  |  |  | CAPITOL CITY BANCSHARES, INC.                                                                           
|                      |  | 
|Date: August 14, 2007 |  |  |  | /s/ George G. Andrews                                                                                   
|                      |  |  |  | George G. Andrews                                                                                       
|                      |  |  |  | CEO, President and Director                                                                             
|                      |  | 
|Date: August 14, 2007 |  |  |  | /s/ Tatina Brooks                                                                                       
|                      |  |  |  | Tatina Brooks                                                                                           
|                      |  |  |  | Senior Vice President of Accounting and Financial Reporting (Principal Financial and Accounting Officer)



17