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U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q



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

For the quarterly period ended March 31, 2008



| ̈ | 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)

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                                                                       |  |                             
|---------------------------------------------------------------------- |  | ----------------------------
|Large accelerated filer   ̈                                             |  | Accelerated filer   ̈        
|                                                                       | 
|Non-accelerated filer   ̈ (Do not check if a smaller reporting company) |  | Smaller reporting company  x

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 April 1, 2008: 2,191,961 shares; $1.50 par value.









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INDEX



|                              |  |         |  |                                                                                                                         |  |          
|----------------------------- |  | ------- |  | ----------------------------------------------------------------------------------------------------------------------- |  | ---------
|                              |  | Page   
|Part I. Financial Information |  |        
|                              |  |         | 
|                              |  | Item 1. |  | Financial Statements (unaudited)                                                                                        |  |          
|                              |  |         | 
|                              |  |         |  | Condensed Consolidated Balance Sheet as of March 31, 2008                                                               |  | 3        
|                              |  |         | 
|                              |  |         |  | Condensed Consolidated Statements of Income and Comprehensive Income for the Three Months Ended March 31, 2008 and 2007 |  | 4        
|                              |  |         | 
|                              |  |         |  | Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2008 and 2007                      |  | 5        
|                              |  |         | 
|                              |  |         |  | Notes to Condensed Consolidated Financial Statements                                                                    |  | 6 - 11   
|                              |  |         | 
|                              |  | Item 2. |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                   |  | 12 - 17  
|                              |  |         | 
|                              |  | Item 4. |  | Controls and Procedures                                                                                                 |  | 17       
|                              | 
|Part II. Other Information    |  |        
|                              |  |         | 
|                              |  | Item 1. |  | Legal Proceedings                                                                                                       |  | 18       
|                              |  |         | 
|                              |  | Item 2. |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                             |  | 18       
|                              |  |         | 
|                              |  | Item 3. |  | Defaults Upon Senior Securities                                                                                         |  | 18       
|                              |  |         | 
|                              |  | Item 4. |  | Submission of Matters to a Vote of Security Holders                                                                     |  | 18       
|                              |  |         | 
|                              |  | Item 5. |  | Other Information                                                                                                       |  | 18       
|                              |  |         | 
|                              |  | Item 6. |  | Exhibits                                                                                                                |  | 18 and 19
|                              |  |         | 
|                              |  |         |  | Signatures                                                                                                              |  | 20       
|                              |  |         | 
|                              |  |         |  | Certifications                                                                                                          |  | 21 - 24  



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PART I - FINANCIAL INFORMATION



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

CAPITOL CITY BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

March 31, 2008

(Unaudited)



|                                                                                                                  |  |   |            
|----------------------------------------------------------------------------------------------------------------- |  | - | -----------
|Assets                                                                                                            |  |   |            
|Cash and due from banks                                                                                           |  | $ | 6,122,034  
|Interest-bearing deposits at other financial institutions                                                         |  |   | 40,601     
|Federal funds sold                                                                                                |  |   | 2,177,000  
|Securities available for sale                                                                                     |  |   | 51,225,059 
|Restricted equity securities, at cost                                                                             |  |   | 512,700    
|Loans, net of unearned income                                                                                     |  |   | 212,850,561
|Less allowance for loan losses                                                                                    |  |   | 3,562,814  
|                                                                                                                  |  |   |            
|Loans, net                                                                                                        |  |   | 209,287,747
|                                                                                                                  |  |   |            
|Premises and equipment, net                                                                                       |  |   | 10,414,633 
|Other real estate owned                                                                                           |  |   | 2,132,461  
|Other assets                                                                                                      |  |   | 5,517,112  
|                                                                                                                  |  |   |            
|Total assets                                                                                                      |  | $ | 287,429,347
|                                                                                                                  |  |   |            
|                                                                                                                  | 
|Liabilities and Stockholders Equity                                                                              |  |   |            
|Liabilities:                                                                                                      |  |   |            
|Deposits:                                                                                                         |  |   |            
|Noninterest-bearing                                                                                               |  | $ | 33,057,182 
|Interest-bearing                                                                                                  |  |   | 228,270,271
|                                                                                                                  |  |   |            
|Total deposits                                                                                                    |  |   | 261,327,453
|Note payable                                                                                                      |  |   | 452,000    
|Company guaranteed trust preferred securities                                                                     |  |   | 3,403,000  
|Other liabilities                                                                                                 |  |   | 2,957,305  
|                                                                                                                  |  |   |            
|Total liabilities                                                                                                 |  |   | 268,139,758
|                                                                                                                  |  |   |            
|Stockholders equity                                                                                              |  |   |            
|Series A 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; 2,191,961 shares issued and outstanding              |  |   | 3,287,942  
|Surplus                                                                                                           |  |   | 2,388,840  
|Retained earnings                                                                                                 |  |   | 12,197,933 
|Accumulated other comprehensive income                                                                            |  |   | 414,874    
|                                                                                                                  |  |   |            
|Total stockholders equity                                                                                        |  |   | 19,289,589 
|                                                                                                                  |  |   |            
|Total liabilities and stockholders equity                                                                        |  | $ | 287,429,347
|                                                                                                                  |  |   |            

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



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CAPITOL CITY BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(Unaudited)



|                                                                                    |  |                             |           |      |   |          
|----------------------------------------------------------------------------------- |  | --------------------------- | --------- | ---- | - | ---------
|                                                                                    |  | Three Months EndedMarch 31,
|                                                                                    |  | 2008                        |           | 2007
|Interest income:                                                                    |  |                             |           |      |   |          
|Loans, including fees                                                               |  | $                           | 4,377,763 |      | $ | 4,208,364
|Securities:                                                                         |  |                             |           |      |   |          
|Taxable                                                                             |  |                             | 515,360   |      |   | 514,167  
|Nontaxable                                                                          |  |                             | 65,958    |      |   | 89,655   
|Federal funds sold                                                                  |  |                             | 20,508    |      |   | 69,067   
|                                                                                    |  |                             |           |      |   |          
|Total interest income                                                               |  |                             | 4,979,589 |      |   | 4,881,253
|                                                                                    |  |                             |           |      |   |          
|Interest expense:                                                                   |  |                             |           |      |   |          
|Deposits                                                                            |  |                             | 2,594,996 |      |   | 2,309,674
|Other borrowings                                                                    |  |                             | 81,025    |      |   | 86,573   
|                                                                                    |  |                             |           |      |   |          
|Total interest expense                                                              |  |                             | 2,676,021 |      |   | 2,396,247
|                                                                                    |  |                             |           |      |   |          
|Net interest income                                                                 |  |                             | 2,303,568 |      |   | 2,485,006
|Provision for loan losses                                                           |  |                             | 260,000   |      |   |         
|                                                                                    |  |                             |           |      |   |          
|Net interest income after provision for loan losses                                 |  |                             | 2,043,568 |      |   | 2,485,006
|                                                                                    |  |                             |           |      |   |          
|Other income:                                                                       |  |                             |           |      |   |          
|Service charges on deposit accounts                                                 |  |                             | 431,708   |      |   | 476,335  
|Other fees and commissions                                                          |  |                             | 18,765    |      |   | 5,016    
|Mortgage origination income                                                         |  |                             |          |      |   | 8,642    
|Other operating income                                                              |  |                             | 70,889    |      |   | 68,768   
|                                                                                    |  |                             |           |      |   |          
|Total other income                                                                  |  |                             | 521,362   |      |   | 558,761  
|                                                                                    |  |                             |           |      |   |          
|Other expenses:                                                                     |  |                             |           |      |   |          
|Salaries and employee benefits                                                      |  |                             | 1,055,197 |      |   | 946,257  
|Occupancy and equipment expenses, net                                               |  |                             | 282,414   |      |   | 288,047  
|Other operating expenses                                                            |  |                             | 991,266   |      |   | 898,126  
|                                                                                    |  |                             |           |      |   |          
|Total other expenses                                                                |  |                             | 2,328,877 |      |   | 2,132,430
|                                                                                    |  |                             |           |      |   |          
|Income before income taxes                                                          |  |                             | 236,053   |      |   | 911,337  
|Income tax expense                                                                  |  |                             | 78,265    |      |   | 308,321  
|                                                                                    |  |                             |           |      |   |          
|Net income                                                                          |  |                             | 157,788   |      |   | 603,016  
|                                                                                    |  |                             |           |      |   |          
|Other comprehensive income                                                          |  |                             |           |      |   |          
|Unrealized gains on securities available for sale arising during period, net of tax |  |                             | 378,256   |      |   | 110,877  
|                                                                                    |  |                             |           |      |   |          
|Comprehensive income                                                                |  | $                           | 536,044   |      | $ | 713,893  
|                                                                                    |  |                             |           |      |   |          
|Basic earnings per common share                                                     |  | $                           | 0.07      |      | $ | 0.28     
|                                                                                    |  |                             |           |      |   |          
|Diluted earnings per common share                                                   |  | $                           | 0.07      |      | $ | 0.25     
|                                                                                    |  |                             |           |      |   |          
|Cash dividends declared per share of common stock                                   |  | $                           |          |      | $ |         
|                                                                                    |  |                             |           |      |   |          

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



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CAPITOL CITY BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(Unaudited)



|                                                                                  |  |                             |             |   |      |   |             |  
|--------------------------------------------------------------------------------- |  | --------------------------- | ----------- | - | ---- | - | ----------- | -
|                                                                                  |  | Three Months EndedMarch 31, |            
|                                                                                  |  | 2008                        |             |   | 2007 |  
|OPERATING ACTIVITIES                                                              |  |                             |             |   |      |   |             |  
|Net income                                                                        |  | $                           | 157,788     |   |      | $ | 603,016     |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                             |             |   |      |   |             |  
|Depreciation                                                                      |  |                             | 136,879     |   |      |   | 123,847     |  
|Provision for loan losses                                                         |  |                             | 260,000     |   |      |   |            |  
|Net gain on sale of securities available for sale                                 |  |                             | (38,301     | ) |      |   |            |  
|Loss of sale of other real estate owned                                           |  |                             |            |   |      |   | 2,257       |  
|Net other operating activities                                                    |  |                             | 6,794       |   |      |   | 76,899      |  
|                                                                                  |  |                             |             |   |      |   |             |  
|Net cash provided by operating activities                                         |  |                             | 523,160     |   |      |   | 806,019     |  
|                                                                                  |  |                             |             |   |      |   |             |  
|INVESTING ACTIVITIES                                                              |  |                             |             |   |      |   |             |  
|Purchases of securities available for sale                                        |  |                             | (17,968,634 | ) |      |   | (13,180,325 | )
|Proceeds from sales of securities available for sale                              |  |                             | 10,150,449  |   |      |   |            |  
|Proceeds from maturities of securities available for sale                         |  |                             | 9,428,348   |   |      |   | 3,016,913   |  
|Purchases of restricted equity securities                                         |  |                             | (40,800     | ) |      |   |            |  
|Net increase (decrease) in interest-bearing deposits                              |  |                             | 34,294      |   |      |   | (7,477      | )
|Net increase in federal funds sold                                                |  |                             | (224,000    | ) |      |   | (2,294,000  | )
|Net (increase) decrease in loans                                                  |  |                             | (14,990,894 | ) |      |   | 3,095,574   |  
|Purchase of premises and equipment                                                |  |                             | (118,604    | ) |      |   | (257,164    | )
|Proceeds from sale of other real estate owned                                     |  |                             |            |   |      |   | 674,663     |  
|                                                                                  |  |                             |             |   |      |   |             |  
|Net cash used in investing activities                                             |  |                             | (13,729,841 | ) |      |   | (8,951,816  | )
|                                                                                  |  |                             |             |   |      |   |             |  
|FINANCING ACTIVITIES                                                              |  |                             |             |   |      |   |             |  
|Net increase in deposits                                                          |  |                             | 14,767,474  |   |      |   | 6,991,373   |  
|Net decrease in securities sold under repurchase agreements                       |  |                             | (1,000,000  | ) |      |   |            |  
|Issuance of preferred stock                                                       |  |                             |            |   |      |   | 1,000,000   |  
|Proceeds from issuance of common stock under ESOP plan                            |  |                             | 3,530       |   |      |   |            |  
|                                                                                  |  |                             |             |   |      |   |             |  
|Net cash provided by financing activities                                         |  |                             | 13,771,004  |   |      |   | 7,991,373   |  
|                                                                                  |  |                             |             |   |      |   |             |  
|Net increase (decrease) in cash and due from banks                                |  |                             | 564,323     |   |      |   | (154,424    | )
|Cash and due from banks, beginning of period                                      |  |                             | 5,557,711   |   |      |   | 4,292,248   |  
|                                                                                  |  |                             |             |   |      |   |             |  
|Cash and due from banks, end of period                                            |  | $                           | 6,122,034   |   |      | $ | 4,137,824   |  
|                                                                                  |  |                             |             |   |      |   |             |  
|SUPPLEMENTAL DISCLOSURES                                                          |  |                             |             |   |      |   |             |  
|Cash paid for:                                                                    |  |                             |             |   |      |   |             |  
|Interest                                                                          |  | $                           | 2,712,654   |   |      | $ | 2,431,227   |  
|Income taxes                                                                      |  | $                           |            |   |      | $ |            |  
|NONCASH TRANSACTIONS                                                              |  |                             |             |   |      |   |             |  
|Principal balances of loans transferred to other real estate owned                |  | $                           | 1,582,183   |   |      | $ | 216,911     |  

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



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CAPITOL CITY BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO 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-K for the year ended December 31, 2007.

The results of operations for the
three month period ended March 31, 2008 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 months ended March 31, 2008 and 2007.



|                                                                                                                                     |  |                             |           |      |   |          
|------------------------------------------------------------------------------------------------------------------------------------ |  | --------------------------- | --------- | ---- | - | ---------
|                                                                                                                                     |  | Three Months EndedMarch 31,
|                                                                                                                                     |  | 2008                        |           | 2007
|Net income                                                                                                                           |  | $                           | 157,788   |      | $ | 603,016  
|                                                                                                                                     |  |                             |           |      |   |          
|Weighted average common shares outstanding                                                                                           |  |                             | 2,191,875 |      |   | 2,188,352
|Net effect of the assumed exercise of stock options based on the treasury stock
method using the average market price for the period |  |                             | 215,684   |      |   | 216,934  
|                                                                                                                                     |  |                             |           |      |   |          
|Total weighted average common shares and common stock equivalents outstanding                                                        |  |                             | 2,407,559 |      |   | 2,405,286
|                                                                                                                                     |  |                             |           |      |   |          
|Diluted earnings per common share                                                                                                    |  | $                           | 0.07      |      | $ | 0.25     
|                                                                                                                                     |  |                             |           |      |   |          



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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, 2007, all outstanding options
were fully vested and there were no options granted during the three months ended March 31, 2008 and 2007. Therefore, there was no compensation cost related to share-based payments for the three months ended March 31, 2008 and 2007.

The following table represents stock option activity for the three months ended March 31, 2008:



|                                        |  |                 |  |                              |      |                                      |        
|--------------------------------------- |  | --------------- |  | ---------------------------- | ---- | ------------------------------------ | -------
|                                        |  | Numberof Shares |  | WeightedAverageExercisePrice |      | WeightedAverageRemainingContractLife
|Options outstanding beginning of period |  | 418,000         |  | $                            | 2.67 |                                      |        
|Options granted                         |  |                |  |                              |     |                                      |        
|Options exercised                       |  |                |  |                              |     |                                      |        
|                                        |  |                 |  |                              |      |                                      |        
|Options outstanding end of period       |  | 418,000         |  |                              | 2.67 |                                      | 1.8 Yrs
|                                        |  |                 |  |                              |      |                                      |        
|Outstanding exercisable end of period   |  | 418,000         |  |                              | 2.67 |                                      | 1.8 Yrs
|                                        |  |                 |  |                              |      |                                      |        

The range of option prices for options outstanding and exercisable at
March 31, 2008 was $2.50 to $3.75.

Shares available for future stock options grants to employees and directors under
existing plans were 158,400 at March 31, 2008. At March 31, 2008, 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. FAIR VALUE MEASUREMENTS

On January 1, 2008, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value
Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS No. 157 applies to reported balances that are required or permitted to be measured
at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances.

SFAS No. 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market
participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, SFAS No. 157 establishes a fair value hierarchy that distinguishes between market participant
assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entitys own assumptions about market participant
assumptions (unobservable inputs classified within Level 3 of the hierarchy).



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NOTE 5. FAIR VALUE MEASUREMENTS (Continued)

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability
to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active
markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable
inputs for the asset or liability, which are typically based on an entitys own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from
different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The
Companys assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

The table below presents the Companys assets and liabilities measured at fair value on a recurring basis as of March 31, 2008,
aggregated by the level in the fair value hierarchy within which those measurements fall.



|                                         |  |                                                             |   |                                             |   |                                         |  |       |   |  |   |           
|---------------------------------------- |  | ----------------------------------------------------------- | - | ------------------------------------------- | - | --------------------------------------- |  | ----- | - |  | - | ----------
|                                         |  | Quoted Prices in ActiveMarkets for IdenticalAssets(Level 1) |   | Significant OtherObservable Inputs(Level 2) |   | SignificantUnobservable Inputs(Level 3) |  | Total
|Assets                                   |  |                                                             |   |                                             |   |                                         |  |       |   |  |   |           
|Investment securities available for sale |  | $                                                           |  |                                             | $ | 51,225,059                              |  | $     |  |  | $ | 51,225,059
|                                         |  |                                                             |   |                                             |   |                                         |  |       |   |  |   |           
|Total assets at fair value               |  | $                                                           |  |                                             | $ | 51,225,059                              |  | $     |  |  | $ | 51,225,059
|                                         |  |                                                             |   |                                             |   |                                         |  |       |   |  |   |           



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NOTE 6. RECENT ACCOUNTING PRONOUNCEMENTS

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, which replaces SFAS 141. SFAS 141(R) establishes
principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. SFAS 141(R) also provides
guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business
combination. SFAS 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company believes the adoption
of SFAS 141(R) will not have a material impact on its financial statements.

In December 2007, the FASB issued SFAS 160,
Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB NO. 51. SFAS 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation
of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity and should be reported as equity in the consolidated financial statements. In addition to the amendments to ARB 51, SFAS
160 amends SFAS No. 128, Earnings per Share; so that earnings per share data will continue to be calculated the same way those data were calculated before SFAS 160 was issued. SFAS 160 is effective for fiscal years, and interim periods
within those fiscal years, beginning on or after December 15, 2008. The Company believes the adoption of SFAS 160 will not have a material impact on its financial statements.

In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment to SFAS 133
intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments,
(b) how derivative instruments and related hedged items are account for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entitys financial position, financial
performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company believes the adoption of SFAS 161 will not have
a material impact on its financial statements.



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NOTE 7. SUBSEQUENT EVENTS

Subsequent to March 31, 2008, the Company filed an S-1 registration statement for a stock offering of up to 1,500,000 shares of the Companys common stock at a price of $10 per share.



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|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.

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.



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FINANCIAL CONDITION

Total assets increased during the first quarter of 2008 by $14.5 million from $273.0 million to $287.4 million, or 5.31% for the quarter. The growth was funded by increases in total deposits, which increased by $14.8
million, or 5.99%. The increase in total assets for the quarter ended March 31, 2008 consisted primarily of an increase of $13.2 million in net loans, an increase of $1.6 million in other real estate owned, offset by a decrease in securities
available for sale of $999,000. The loan to deposit ratio was 81% at March 31, 2008 and December 31, 2007.

Stockholders
equity increased by $540,000 for the quarter ended March 31, 2008. This net increase consisted of net income of $158,000, a net increase in accumulated other comprehensive income of $378,000, and proceeds from issuance of common stock under the
ESOP plan of $3,000.

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 March 31, 2008, the Banks liquidity ratio of 13.68% was considered satisfactory in relation to regulatory guidelines and internal target ratios.

REGULATORY CAPITAL REQUIREMENTS

Banking regulations require us to maintain minimum capital levels in relation to assets. At March 31, 2008, 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 March 31, 2008 are as follows:



|                          |  |         |   |  |       |   |  |                              |  
|------------------------- |  | ------- | - |  | ----- | - |  | ---------------------------- | -
|                          |  | Company |   |  | Bank  |   |  | RegulatoryMinimumRequirement |  
|Leverage Capital Ratio    |  | 7.93    | % |  | 7.80  | % |  | 4.00                         | %
|Risk-Based Capital Ratios |  |         |   |  |       |   |  |                              |  
|Core Capital              |  | 9.11    | % |  | 8.97  | % |  | 4.00                         | %
|Total Capital             |  | 10.36   | % |  | 10.20 | % |  | 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.



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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 March 31, 2008 are as follows:



|                                    |  |               |           
|----------------------------------- |  | ------------- | ----------
|                                    |  | March 31,2008
|Commitments to extend credit        |  | $             | 11,746,000
|Financial standby letters of credit |  |               | 2,307,000 
|Other standby letters of credit     |  |               | 814,000   
|                                    |  |               |           
|                                    |  | $             | 14,867,000
|                                    |  |               |           

RESULTS OF OPERATIONS

Three Months Ended March 31, 2008 and 2007

Net Interest Income.
Net interest income decreased by $181,000 or by 7.30% for the quarter ended March 31, 2008 compared to the same period in 2007. The decrease in net interest income for the quarter is primarily attributable to the decrease in our net yield on
average interest-earning assets. The net yield on interest-earning assets decreased to 3.62% at March 31, 2008 as compared to 4.33% at March 31, 2007 and 4.18% for the year ended December 31, 2007.

The yield on interest-earning assets decreased from 8.51% to 7.83%, or 68 basis points, from March 31, 2007 to March 31, 2008. The rate paid on
interest-bearing liabilities increased from 4.75% to 4.79% or 4 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 $260,000 was made during the three month period ending March 31, 2008 and no provision was made during the three month period ending March 31, 2007. The allowance for loan loss as a
percentage of total loans was 1.67%, 1.68% and 1.86% at March 31, 2008, December 31, 2007 and March 31, 2007, respectively. Total nonaccrual loans decreased by $1.3 million, net charge-offs increased by $48,000, and loans past
due ninety days or more and still accruing increased by $42,000 for the three months ended March 31, 2008 as compared to the same period in 2007. Due to collateral



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##### Table of Contents

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 March 31, 2008 is adequate to absorb any foreseeable losses in the loan portfolio.

At March 31, 2008
and 2007, nonaccrual, past due, and restructured loans were as follows:



|                                                                                                         |  |                        |       |               |   |      
|-------------------------------------------------------------------------------------------------------- |  | ---------------------- | ----- | ------------- | - | -----
|                                                                                                         |  | March 31,2008          |       | March 31,2007
|                                                                                                         |  | (Dollars in thousands)
|Total nonaccruing loans                                                                                  |  | $                      | 4,398 |               | $ | 5,741
|Loans contractually past due ninety days or more as to interest or principal payments and still accruing |  |                        | 196   |               |   | 154  
|Restructured loans                                                                                       |  |                        |      |               |   |     

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.



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Information regarding certain loans and allowance for loan loss data for the three months ended
March 31, 2008 and 2007 is as follows:



|                                                                              |  |                             |         |   |      |   |         |  
|----------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                              |  | Three Months EndedMarch 31, |        
|                                                                              |  | 2008                        |         |   | 2007 |  
|                                                                              |  | (Dollars in thousands)      |        
|Average amount of loans outstanding                                           |  | $                           | 206,402 |   |      | $ | 179,265 |  
|                                                                              |  |                             |         |   |      |   |         |  
|Balance of allowance for loan losses at beginning of period                   |  | $                           | 3,349   |   |      | $ | 3,317   |  
|                                                                              |  |                             |         |   |      |   |         |  
|Loans charged off                                                             |  |                             |         |   |      |   |         |  
|Commercial                                                                    |  |                             | (325    | ) |      |   | (2      | )
|Real estate                                                                   |  |                             |         |   |      |   |        |  
|Installment                                                                   |  |                             | (146    | ) |      |   | (21     | )
|                                                                              |  |                             |         |   |      |   |         |  
|                                                                              |  |                             | (471    | ) |      |   | (23     | )
|                                                                              |  |                             |         |   |      |   |         |  
|Loans recovered                                                               |  |                             |         |   |      |   |         |  
|Commercial                                                                    |  |                             | 411     |   |      |   | 13      |  
|Real estate                                                                   |  |                             |        |   |      |   |        |  
|Installment                                                                   |  |                             | 14      |   |      |   | 12      |  
|                                                                              |  |                             |         |   |      |   |         |  
|                                                                              |  |                             | 425     |   |      |   | 25      |  
|                                                                              |  |                             |         |   |      |   |         |  
|Net (charge-offs) recoveries                                                  |  |                             | (46     | ) |      |   | 2       |  
|                                                                              |  |                             |         |   |      |   |         |  
|Additions to allowance charged to operating expense during period             |  |                             | 260     |   |      |   |        |  
|                                                                              |  |                             |         |   |      |   |         |  
|Balance of allowance for loan losses at end of period                         |  | $                           | 3,563   |   |      | $ | 3,319   |  
|                                                                              |  |                             |         |   |      |   |         |  
|Ratio of net loans charged-off during the period to average loans outstanding |  |                             | 0.02    | % |      |   |        | %
|                                                                              |  |                             |         |   |      |   |         |  

Other Income. Other income decreased by $37,000, or 6.69% for the quarter ended
March 31, 2008 compared to the same period in 2007. The most significant component of other income is service charges on deposit accounts which accounts for 83% and 85% of total other income for March 31, 2008 and 2007, 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 increased by $196,000, or 9.21% for the three months ended March 31,
2008 as compared to the same period in 2007. The increase consists of increases of $109,000 in salaries and employee benefits and $93,000 in other operating expenses, offset by a decrease of $6,000 in occupancy and equipment expenses. At
March 31, 2008, the number of full-time equivalent employees was 95 compared to 87 for the same period in 2007. The most significant increase in other operating expenses was legal expenses which increased $71,000 compared to March 31,
2007. Legal expenses at March 31, 2007 were lower due to a refund of fees from an attorney totaling approximately $57,000.



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The mortgage company originates loans which are table funded through independent investors. The net loss
for the three months ended March 31, 2008 was $4,000, as compared to a loss of $11,000 for the three months ended March 31, 2007.

Income Taxes. Income tax expense decreased by $230,000 for the three months ended March 31, 2008 as compared to 2007. The effective tax rate for 2008 and 2007 was 33% and 34%, respectively. The effective tax rate is less than
the statutory tax rate due to nontaxable interest income on securities.

Net Income. Net income decreased by $445,000 for the three
months ended March 31, 2008 as compared to the same period in 2007. The decrease in net income for the three months ended March 31, 2008 compared to the same period in 2007 is mainly due to the decreases in net interest income resulting
from an increase in yields on interest-bearing liabilities and additional provision for loan losses.



|ITEM 4. | 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.



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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-K (filed with the Commission on March 31, 2008) 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
|------- | ---------------------------------------------------

None.



|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 Registrants 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).                                                                                                                                                                                                                                              



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|       |  |                                                                                                                                                                                                                            
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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: May 15, 2008 |  | /s/ George G. Andrews                                                                                   
|                   |  | George G. Andrews                                                                                       
|                   |  | CEO, President and Director                                                                             
|                   | 
|Date: May 15, 2008 |  | /s/ Tatina Brooks                                                                                       
|                   |  | Tatina Brooks                                                                                           
|                   |  | Senior Vice President of Accounting and Financial Reporting (Principal Financial and Accounting Officer)



20