##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549



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FORM 10-QSB



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



For the quarterly period ended March 31, 2005



| ̈ | 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



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CAPITOL CITY BANCSHARES, INC.

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



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|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|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)



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State the number of shares outstanding of each of the issuers classes of common stock, as of May 1, 2005: 2,128,352; $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)                                                                              |  |       
|                              |  |         | 
|                              |  |         |  | Consolidated Balance Sheet as of March 31, 2005                                                               |  | 3     
|                              |  |         | 
|                              |  |         |  | Consolidated Statements of Income and Comprehensive Income for the Three Months Ended March 31, 2005 and 2004 |  | 4     
|                              |  |         | 
|                              |  |         |  | Consolidated Statements of Cash Flows For The Three Months Ended March 31, 2005 and 2004                      |  | 5     
|                              |  |         | 
|                              |  |         |  | Notes to Consolidated Financial Statements                                                                    |  | 6 - 8 
|                              |  |         | 
|                              |  | Item 2. |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                         |  | 9 - 14
|                              |  |         | 
|                              |  | Item 3. |  | Controls and Procedures                                                                                       |  | 14    
|                              | 
|Part II.
Other Information    |  |        
|                              |  |         | 
|                              |  | Item 6. |  | Exhibits                                                                                                      |  | 15    
|                              |  |         | 
|                              |  |         |  | Signatures                                                                                                    |  | 16    
|                              |  |         | 
|                              |  |         |  | Certifications                                                                                                |  |       



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##### Table of Contents

PART I - FINANCIAL INFORMATION



ITEM I. FINANCIAL STATEMENTS



CAPITOL CITY BANCSHARES, INC. AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEET

March 31, 2005

(Unaudited)



|                                                                                                     |  |   |             |  
|---------------------------------------------------------------------------------------------------- |  | - | ----------- | -
|Assets                                                                                               |  |   |             |  
|                                                                                                     | 
|Cash and due from banks                                                                              |  | $ | 4,635,409   |  
|Interest-bearing deposits at other financial institutions                                            |  |   | 98,187      |  
|Federal funds sold                                                                                   |  |   | 5,005,000   |  
|Securities available for sale, at fair value                                                         |  |   | 44,132,194  |  
|Restricted equity securities, at cost                                                                |  |   | 378,400     |  
|                                                                                                     | 
|Loans, net of unearned income                                                                        |  |   | 148,523,173 |  
|Less allowance for loan losses                                                                       |  |   | 2,156,888   |  
|                                                                                                     |  |   |             |  
|Loans, net                                                                                           |  |   | 146,366,285 |  
|                                                                                                     |  |   |             |  
|Premises and equipment, net                                                                          |  |   | 6,582,673   |  
|Other assets                                                                                         |  |   | 2,854,240   |  
|                                                                                                     |  |   |             |  
|Total assets                                                                                         |  | $ | 210,052,388 |  
|                                                                                                     |  |   |             |  
|Liabilities and Stockholders Equity                                                                 |  |   |             |  
|                                                                                                     | 
|Liabilities:                                                                                         |  |   |             |  
|Deposits:                                                                                            |  |   |             |  
|Noninterest-bearing                                                                                  |  | $ | 28,558,567  |  
|Interest-bearing                                                                                     |  |   | 164,495,836 |  
|                                                                                                     |  |   |             |  
|Total deposits                                                                                       |  |   | 193,054,403 |  
|Note payable                                                                                         |  |   | 657,000     |  
|Company guaranteed trust preferred securities                                                        |  |   | 3,403,000   |  
|Other liabilities                                                                                    |  |   | 1,025,603   |  
|                                                                                                     |  |   |             |  
|Total liabilities                                                                                    |  |   | 198,140,006 |  
|                                                                                                     |  |   |             |  
|Stockholders equity                                                                                 |  |   |             |  
|Common stock, par value $1.50; 20,000,000 shares authorized; 2,128,352 shares issued and outstanding |  |   | 3,192,528   |  
|Surplus                                                                                              |  |   | 2,128,352   |  
|Retained earnings                                                                                    |  |   | 6,795,449   |  
|Accumulated other comprehensive loss                                                                 |  |   | (203,947    | )
|                                                                                                     |  |   |             |  
|Total stockholders equity                                                                           |  |   | 11,912,382  |  
|                                                                                                     |  |   |             |  
|Total liabilities and stockholders equity                                                           |  | $ | 210,052,388 |  
|                                                                                                     |  |   |             |  



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



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##### Table of Contents

CAPITOL CITY BANCSHARES, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

THREE MONTHS ENDED MARCH 31,
2005 AND 2004

(Unaudited)



|                                                                                             |  |                              |           |   |      |   |          
|-------------------------------------------------------------------------------------------- |  | ---------------------------- | --------- | - | ---- | - | ---------
|                                                                                             |  | Three Months Ended March 31,
|                                                                                             |  | 2005                         |           |   | 2004
|Interest income:                                                                             |  |                              |           |   |      |   |          
|Loans, including fees                                                                        |  | $                            | 2,888,631 |   |      | $ | 1,911,216
|Securities:                                                                                  |  |                              |           |   |      |   |          
|Taxable                                                                                      |  |                              | 260,342   |   |      |   | 161,294  
|Nontaxable                                                                                   |  |                              | 116,415   |   |      |   | 134,277  
|Federal funds sold                                                                           |  |                              | 38,578    |   |      |   | 4,329    
|                                                                                             |  |                              |           |   |      |   |          
|Total interest income                                                                        |  |                              | 3,303,966 |   |      |   | 2,211,116
|                                                                                             |  |                              |           |   |      |   |          
|Interest expense:                                                                            |  |                              |           |   |      |   |          
|Deposits                                                                                     |  |                              | 1,317,545 |   |      |   | 624,933  
|Other borrowings                                                                             |  |                              | 60,429    |   |      |   | 48,667   
|                                                                                             |  |                              |           |   |      |   |          
|Total interest expense                                                                       |  |                              | 1,377,974 |   |      |   | 673,600  
|                                                                                             |  |                              |           |   |      |   |          
|Net interest income                                                                          |  |                              | 1,925,992 |   |      |   | 1,537,516
|Provision for loan losses                                                                    |  |                              | 54,000    |   |      |   |         
|                                                                                             |  |                              |           |   |      |   |          
|Net interest income after provision for loan losses                                          |  |                              | 1,871,992 |   |      |   | 1,537,516
|                                                                                             |  |                              |           |   |      |   |          
|Other income:                                                                                |  |                              |           |   |      |   |          
|Service charges on deposit accounts                                                          |  |                              | 471,915   |   |      |   | 516,891  
|Other fees and commissions                                                                   |  |                              | 10,968    |   |      |   | 708      
|Mortgage origination income                                                                  |  |                              | 42,124    |   |      |   | 15,524   
|Other operating income                                                                       |  |                              | 97,690    |   |      |   | 51,307   
|                                                                                             |  |                              |           |   |      |   |          
|Total other income                                                                           |  |                              | 622,697   |   |      |   | 584,430  
|                                                                                             |  |                              |           |   |      |   |          
|Other expenses:                                                                              |  |                              |           |   |      |   |          
|Salaries and employee benefits                                                               |  |                              | 776,175   |   |      |   | 670,512  
|Occupancy and equipment expenses, net                                                        |  |                              | 227,374   |   |      |   | 206,182  
|Other operating expenses                                                                     |  |                              | 832,031   |   |      |   | 652,685  
|                                                                                             |  |                              |           |   |      |   |          
|Total other expenses                                                                         |  |                              | 1,835,580 |   |      |   | 1,529,379
|                                                                                             |  |                              |           |   |      |   |          
|Income before income taxes                                                                   |  |                              | 659,109   |   |      |   | 592,567  
|Income tax expense                                                                           |  |                              | 211,488   |   |      |   | 160,902  
|                                                                                             |  |                              |           |   |      |   |          
|Net income                                                                                   |  |                              | 447,621   |   |      |   | 431,665  
|                                                                                             |  |                              |           |   |      |   |          
|Other comprehensive income (loss)                                                            |  |                              |           |   |      |   |          
|Unrealized gains (losses) on securities available for sale arising during period, net of tax |  |                              | (387,258  | ) |      |   | 176,149  
|                                                                                             |  |                              |           |   |      |   |          
|Comprehensive income                                                                         |  | $                            | 60,363    |   |      | $ | 607,814  
|                                                                                             |  |                              |           |   |      |   |          
|Basic earnings per common share                                                              |  | $                            | 0.21      |   |      | $ | 0.20     
|                                                                                             |  |                              |           |   |      |   |          
|Diluted earnings per common share                                                            |  | $                            | 0.20      |   |      | $ | 0.19     
|                                                                                             |  |                              |           |   |      |   |          
|Cash dividends declared per share of common stock                                            |  | $                            |          |   |      | $ | 0.05     
|                                                                                             |  |                              |           |   |      |   |          



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



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CAPITOL CITY BANCSHARES, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2005 AND 2004

(Unaudited)



|                                                                                  |  |                              |             |   |      |   |             |  
|--------------------------------------------------------------------------------- |  | ---------------------------- | ----------- | - | ---- | - | ----------- | -
|                                                                                  |  | Three Months Ended March 31, |            
|                                                                                  |  | 2005                         |             |   | 2004 |  
|OPERATING ACTIVITIES                                                              |  |                              |             |   |      |   |             |  
|Net income                                                                        |  | $                            | 447,621     |   |      | $ | 431,665     |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                              |             |   |      |   |             |  
|Depreciation and amortization                                                     |  |                              | 122,153     |   |      |   | 105,241     |  
|Provision for loan losses                                                         |  |                              | 54,000      |   |      |   |            |  
|Loss on sale of other real estate                                                 |  |                              | 43,123      |   |      |   |            |  
|Net other operating activities                                                    |  |                              | (427,063    | ) |      |   | 170,068     |  
|                                                                                  |  |                              |             |   |      |   |             |  
|Net cash provided by operating activities                                         |  |                              | 239,834     |   |      |   | 706,974     |  
|                                                                                  |  |                              |             |   |      |   |             |  
|INVESTING ACTIVITIES                                                              |  |                              |             |   |      |   |             |  
|Purchases of securities available for sale                                        |  |                              | (11,320,365 | ) |      |   | (2,002,012  | )
|Proceeds from maturities of securities available for sale                         |  |                              | 1,306,409   |   |      |   | 2,712,814   |  
|(Purchase) redemption of restricted equity securities                             |  |                              | (103,900    | ) |      |   | 10,000      |  
|Net increase in interest-bearing deposits                                         |  |                              | (1,262      | ) |      |   | (13,244     | )
|Net increase in federal funds sold                                                |  |                              | (949,000    | ) |      |   | (3,199,000  | )
|Net increase in loans                                                             |  |                              | (8,653,985  | ) |      |   | (7,309,980  | )
|Purchase of premises and equipment                                                |  |                              | (193,701    | ) |      |   | (417,114    | )
|Proceeds from sale of other real estate                                           |  |                              | 48,377      |   |      |   |            |  
|                                                                                  |  |                              |             |   |      |   |             |  
|Net cash used in investing activities                                             |  |                              | (19,867,427 | ) |      |   | (10,218,536 | )
|                                                                                  |  |                              |             |   |      |   |             |  
|FINANCING ACTIVITIES                                                              |  |                              |             |   |      |   |             |  
|Net increase in deposits                                                          |  |                              | 19,442,259  |   |      |   | 13,892,658  |  
|Net decrease in securities sold under repurchase agreements                       |  |                              |            |   |      |   | (3,209,000  | )
|Payment of dividends                                                              |  |                              |            |   |      |   | (106,418    | )
|                                                                                  |  |                              |             |   |      |   |             |  
|Net cash provided by financing activities                                         |  |                              | 19,442,259  |   |      |   | 10,577,240  |  
|                                                                                  |  |                              |             |   |      |   |             |  
|Net increase (decrease) in cash and due from banks                                |  |                              | (185,334    | ) |      |   | 1,065,678   |  
|                                                                                  |  |                             
|Cash and due from banks, beginning of period                                      |  |                              | 4,820,743   |   |      |   | 3,556,349   |  
|                                                                                  |  |                              |             |   |      |   |             |  
|Cash and due from banks, end of period                                            |  | $                            | 4,635,409   |   |      | $ | 4,622,027   |  
|                                                                                  |  |                              |             |   |      |   |             |  



The accompanying notes are an
integral part of these 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-KSB for the year
ended December 31, 2004.



The results of operations for the
three month period ended March 31, 2005 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, 2005 and
2004.



|                                                                                                                                     |  |                              |           |      |   |          
|------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------- | --------- | ---- | - | ---------
|                                                                                                                                     |  | Three Months Ended March 31,
|                                                                                                                                     |  | 2005                         |           | 2004
|Net income                                                                                                                           |  | $                            | 447,621   |      | $ | 431,665  
|                                                                                                                                     |  |                              |           |      |   |          
|Weighted average common shares outstanding                                                                                           |  |                              | 2,128,352 |      |   | 2,128,352
|Net effect of the assumed exercise of stock options based on the treasury stock method using the average market price for the
period |  |                              | 155,015   |      |   | 136,488  
|                                                                                                                                     |  |                              |           |      |   |          
|Total weighted average common shares and common stock equivalents outstanding                                                        |  |                              | 2,283,367 |      |   | 2,264,840
|                                                                                                                                     |  |                              |           |      |   |          
|Diluted earnings per common share                                                                                                    |  | $                            | 0.20      |      | $ | 0.19     
|                                                                                                                                     |  |                              |           |      |   |          



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



NOTE 3. STOCK
COMPENSATION PLAN



At March 31, 2005, the Company has a
stock-based compensation plan. The Company accounts for this plan under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based compensation cost
is reflected in net income, as all options granted under this plan had an exercise price equal to the market value of the underlying stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the
Company had applied the fair value recognition provisions of SFAS Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.



|                                                                                                                                            |  |                             |         |      |   |        
|------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | ---- | - | -------
|                                                                                                                                            |  | Three Months EndedMarch 31,
|                                                                                                                                            |  | 2005                        |         | 2004
|Net income, as reported                                                                                                                     |  | $                           | 447,621 |      | $ | 431,665
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                             |        |      |   |       
|                                                                                                                                            |  |                             |         |      |   |        
|Pro forma net income                                                                                                                        |  | $                           | 447,621 |      | $ | 431,665
|                                                                                                                                            |  |                             |         |      |   |        
|Earnings per share:                                                                                                                         |  |                             |         |      |   |        
|Basic - as reported                                                                                                                         |  | $                           | .21     |      | $ | .20    
|                                                                                                                                            |  |                             |         |      |   |        
|Basic - pro forma                                                                                                                           |  | $                           | .21     |      | $ | .20    
|                                                                                                                                            |  |                             |         |      |   |        
|Diluted - as reported                                                                                                                       |  | $                           | .20     |      | $ | .19    
|                                                                                                                                            |  |                             |         |      |   |        
|Diluted - pro forma                                                                                                                         |  | $                           | .20     |      | $ | .19    
|                                                                                                                                            |  |                             |         |      |   |        



As of March 31, 2005
and 2004, all outstanding options were fully vested and there were no options granted during the three month periods ended March 31, 2005 and 2004. Therefore, there was no pro forma effect on net income for the three months ended March 31, 2005 and
2004.



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.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



NOTE 4.
CONTINGENCIES (Continued)



As of March 31, 2005, Capitol City
Bancshares, Inc. is in litigation regarding a lawsuit that has been brought against the Company for matters relating to the conversion of a customers cashiers checks. This case is currently in discovery and management and its legal counsel are
defending this case vigorously. The maximum exposure to liability relating to an adverse decision in this cash approximately is $89,000.



As of March 31, 2005, the Company is in litigation with another financial institution group (the Plaintiff) with a similar name. The suit
alleges the Company infringed on the Plaintiffs federally registered trademarks. The Plaintiff seeks both damages and injunctive relief against the Company. The Company has asserted several defenses against the Plaintiffs claims and has
also asserted a counterclaim against the Plaintiff seeking injunctive relief and damages for the Plaintiffs trademark usage within the Companys trade area. The Company is pursuing its defenses and counterclaims. Management is unable to
reasonably estimate the amount of liability which may be incurred if an adverse decision is rendered because it is dependent upon the interpretation by the court as to which party infringed on the other partys trademark.



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CAPITOL CITY BANCSHARES, INC. AND SUBSIDIARIES



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.



FINANCIAL CONDITION



Total assets increased during the first quarter of 2005 by $19.4 million from $190.7 million to $210.1 million, or 10.14% for the quarter. The growth was funded by
increases in total deposits, which increased by $19.4 million, or 11.20%. The increase in total assets for the quarter ended March 31, 2005 consisted primarily of an increase of $8.6 million in total loans, an increase of $9.4 million in securities
available for sale, an increase of $949,000 in federal funds sold. The loan to deposit ratio at March 31, 2005 was 77% compared to 81% at December 31, 2004.



Stockholders equity increased by $60,000 for the quarter ended March 31, 2005. This net increase consisted of net income of $448,000 and a net increase in
accumulated other comprehensive losses of $388,000.



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.



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At March 31, 2005, the Banks liquidity ratio of 28.12% 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, 2005, the Companys and 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, 2005 are as follows:



|                          |  |         |   |  |       |   |  |                               |  
|------------------------- |  | ------- | - |  | ----- | - |  | ----------------------------- | -
|                          |  | Company |   |  | Bank  |   |  | Regulatory MinimumRequirement |  
|Leverage Capital Ratio    |  | 7.66    | % |  | 7.79  | % |  | 4.00                          | %
|Risk-Based Capital Ratios |  |         |   |  |       |   |  |                               |  
|Core Capital              |  | 9.46    | % |  | 9.61  | % |  | 4.00                          | %
|Total Capital             |  | 10.71   | % |  | 10.86 | % |  | 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 March 31, 2005 are as follows:



|                                    |  |               |           
|----------------------------------- |  | ------------- | ----------
|                                    |  | March 31,2005
|Commitments to extend credit        |  | $             | 16,922,000
|Financial standby letters of credit |  |               | 1,982,000 
|                                    |  |               |           
|                                    |  | $             | 18,904,000
|                                    |  |               |           



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RESULTS OF OPERATIONS



Three Months Ended March 31, 2005 and 2004



Net Interest Income. Net interest income increased by $388,000 or by 25.27% for the quarter ended March 31, 2005 compared to the same period in 2004. The increase
in net interest income for the quarter ended March 31, 2005 is primarily attributable to the increase in interest earning assets of $60.0 million as compared to March 31, 2004 combined with the spread maintained between rates earned on interest
earning assets and rates paid on interest bearing liabilities. Total loans increased during this period by $47.7 million, or 47.35%, and provide greater yields to the Company than any of the other interest earning assets. During this same period,
total deposits increased by $60.5 million, or 45.69%, which included an increase of $59.0 million in interest-bearing deposits and an increase of $1.5 million in non-interest bearing deposits.



The net interest margin decreased to 4.18% at March 31, 2005 from 5.03% for the three months
ended March 31, 2004. The yield on interest-earning assets decreased to 7.18%, or 5 basis points, from March 31, 2004 to March 31, 2005. The rate paid on interest-bearing liabilities increased to 3.45% or 87 basis points for the same period. The
increase in the rate paid on interest-bearing liabilities is due to the increase of $33.5 million in brokered certificates of deposit from March 31, 2004 to March 31, 2005. Brokered deposits typically demand higher rates which has directly impacted
our net interest margin. However, these deposits are used to fund out increasing loan demand.



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 $54,000 was made during the three month period ending
March 31, 2005. No provision was made during the three month period ending March 31, 2004. The allowance for loan loss as a percentage of total loans was 1.45%, 1.56% and 1.68% at March 31, 2005, December 31, 2004 and March 31, 2004, respectively.
Total nonaccrual loans increased by $1.3 million, net charge-offs increased by $79,000, and loans past due ninety days or more and still accruing remained the same as compared to the same period in 2004. At December 31, 2004, nonaccrual loans and
past due loans ninety days or more and still accruing were $5.0 million and $5,000, respectively. Any anticipated losses related to the majority of these problem loans were identified at December 31, 2004 and there were no significant changes in our
evaluation at March 31, 2005. Management believes the allowance for loan loss at March 31, 2005 is adequate to absorb any foreseeable losses in the loan portfolio.



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At March 31, 2005 and 2004, nonaccrual, past due, and restructured loans were as follows:



|                                                                                                         |  |                        |       |               |   |      
|-------------------------------------------------------------------------------------------------------- |  | ---------------------- | ----- | ------------- | - | -----
|                                                                                                         |  | March 31,2005          |       | March 31,2004
|                                                                                                         |  | (Dollars in thousands)
|Total nonaccruing loans                                                                                  |  | $                      | 5,040 |               | $ | 3,720
|Loans contractually past due ninety days or more as to interest or principal payments and still accruing |  |                        | 40    |               |   | 40   
|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, 2005 and 2004
is as follows:



|                                                                              |  |                             |         |   |      |   |        |  
|----------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------ | -
|                                                                              |  | Three Months EndedMarch 31, |        
|                                                                              |  | 2005                        |         |   | 2004 |  
|                                                                              |  | (Dollars in thousands)      |        
|Average amount of loans outstanding                                           |  | $                           | 140,790 |   |      | $ | 93,010 |  
|                                                                              |  |                             |         |   |      |   |        |  
|Balance of allowance for loan losses at beginning of period                   |  | $                           | 2,186   |   |      | $ | 1,701  |  
|                                                                              |  |                             |         |   |      |   |        |  
|Loans charged off                                                             |  |                             |         |   |      |   |        |  
|Commercial                                                                    |  |                             | (46     | ) |      |   |       |  
|Real estate                                                                   |  |                             |        |   |      |   |       |  
|Installment                                                                   |  |                             | (58     | ) |      |   | (23    | )
|                                                                              |  |                             |         |   |      |   |        |  
|                                                                              |  |                             | (104    | ) |      |   | (23    | )
|                                                                              |  |                             |         |   |      |   |        |  
|Loans recovered                                                               |  |                             |         |   |      |   |        |  
|Commercial                                                                    |  |                             | 6       |   |      |   |       |  
|Real estate                                                                   |  |                             | 1       |   |      |   | 7      |  
|Installment                                                                   |  |                             | 14      |   |      |   | 12     |  
|                                                                              |  |                             |         |   |      |   |        |  
|                                                                              |  |                             | 21      |   |      |   | 19     |  
|                                                                              |  |                             |         |   |      |   |        |  
|Net charge-offs                                                               |  |                             | (83     | ) |      |   | (4     | )
|                                                                              |  |                             |         |   |      |   |        |  
|Additions to allowance charged to operating expense during period             |  |                             | 54      |   |      |   |       |  
|                                                                              |  |                             |         |   |      |   |        |  
|Balance of allowance for loan losses at end of period                         |  |                             | 2,157   |   |      |   | 1,697  |  
|                                                                              |  |                             |         |   |      |   |        |  
|Ratio of net loans charged-off during the period to average loans outstanding |  |                             | .06     | % |      |   |       | %
|                                                                              |  |                             |         |   |      |   |        |  



Other Income. Other income
increased by $38,000, or 6.55% for the quarter ended March 31, 2005 compared to the same period in 2004. Service charges on deposit accounts include monthly service charges and non-sufficient funds (NSF) charges, and NSF charges account
for 69% of the service charges on deposit accounts for the three months ended March 31, 2005. The amount of service charges fluctuates with the volume of transaction accounts and the volume of NSF activity.



Other Expenses. Other expenses increased by $306,000, or 20.02% for the three months
ended March 31, 2005 as compared to the same period in 2004. The increase consists of increases of $106,000 in salaries and employee benefits, $21,000 in occupancy and equipment expenses, and $179,000 in other operating expenses. The increase in
salaries and employee benefits represents normal increases in salaries and benefits. At March 31, 2005, the number of full-time equivalent employees was 65 compared to 64 at March 31, 2004. The increase in other operating expenses is not directly
attributable to any one item, but represents increases in general expenses related to the continued growth of the Bank.



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The mortgage company was formed in 2002 and currently originates loans which are table funded through independent
investors. The net loss for the three months ended March 31, 2005 was $7,000, as compared to a loss of $18,000 for the three months ended March 31, 2004.



Income Taxes. Income tax expense increased by $51,000 for the three months ended March 31, 2005 as compared to 2004. The effective tax rate for 2005 and 2004 was
32% and 27%, 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 $16,000 for the three months ended March 31, 2005 as compared to the same period in 2004. The minimal increase in net income
compared to the increase in net interest income for the three months ended March 31, 2005 as compared to the same period in 2004 is due to increases in the provision for loan losses and other expenses which totaled $360,000.



ITEM 3. CONTROLS AND PROCEDURES



Within ninety
days prior to the date of filing of this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and the Chief Financial Officer, of the design and operation of our disclosure controls
and procedures. Based on this evaluation, our Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures are effective for gathering, analyzing and disclosing the information that we are required to
disclose in the reports we file under the Securities Exchange Act of 1934, within the time periods specified in the SECs rules and forms. Our Chief Executive Officer and the Chief Financial Officer also concluded that our disclosure controls
and procedures are effective in timely alerting them to material information relating to our company required to be included in our periodic SEC filings. In connection with the new rules, we are in the process of further reviewing and documenting
our disclosure controls and procedures, including our internal controls and procedures for financial reporting, and may from time to time make changes designed to enhance their effectiveness and to ensure that our systems evolve with our business.



There have been no significant changes in our internal controls or in other
factors that could significantly affect internal controls subsequent to the date of this evaluation.



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PART II - Other Information



|        |  |          |  |           |  |                                                         
|------- |  | -------- |  | --------- |  | --------------------------------------------------------
|Item 6. |  | Exhibits
|        |  |         
|        |  | (a)      |  | Exhibits.
|        |  |          | 
|        |  |          |  | 31.1      |  | Section 302 Certification of Principal Executive Officer
|        |  |          | 
|        |  |          |  | 31.2      |  | Section 302 Certification of Principal Financial Officer
|        |  |          | 
|        |  |          |  | 32.1      |  | Section 906 Certification of Principal Executive Officer
|        |  |          | 
|        |  |          |  | 32.2      |  | Section 906 Certification of Principal Financial 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 16, 2005 |  | /s/ George G. Andrews                                        
|                   |  | George G. Andrews                                            
|                   |  | President and Director                                       
|                   | 
|Date: May 16, 2005 |  | /s/ Kevin M. Sharpe                                          
|                   |  | Kevin M. Sharpe                                              
|                   |  | Vice President and Principal Financial and Accounting
Officer



16