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U.S. 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, 2007



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

For the transition period from  to

Commission File Number: 000-25227



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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 ofincorporation or organization) |  | (I.R.S. EmployerIdentification 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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Check whether the
issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈

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

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

Transitional Small Business Disclosure Format    Yes ̈No  x



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##### Table of Contents

INDEX



|         |  |                       |  |                                                                                                               |  |        
|-------- |  | --------------------- |  | ------------------------------------------------------------------------------------------------------------- |  | -------
|         |  |                       |  |                                                                                                               |  | Page   
|Part I.  |  | Financial Information |  | 3                                                                                                            
|         |  |                       | 
|         |  | Item 1.               |  | Financial Statements (unaudited)                                                                              |  | 3      
|         |  |                       | 
|         |  |                       |  | Consolidated Balance Sheet as of March 31, 2007                                                               |  | 3      
|         |  |                       | 
|         |  |                       |  | Consolidated Statements of Income and Comprehensive Income for the Three Months Ended March 31, 2007 and 2006 |  | 4      
|         |  |                       | 
|         |  |                       |  | Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2007 and 2006                      |  | 5      
|         |  |                       | 
|         |  |                       |  | Notes to Consolidated Financial Statements                                                                    |  | 6 - 9  
|         |  |                       | 
|         |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                         |  | 10 - 15
|         |  |                       | 
|         |  | Item 3.               |  | Controls and Procedures                                                                                       |  | 15     
|         |  |                      
|Part II. |  | Other Information     |  | 16                                                                                                           
|         |  |                       | 
|         |  | Item 1.               |  | Legal Proceedings                                                                                             |  | 16     
|         |  |                       | 
|         |  | Item 2.               |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                   |  | 16     
|         |  |                       | 
|         |  | Item 3.               |  | Defaults Upon Senior Securities                                                                               |  | 16     
|         |  |                       | 
|         |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders                                                           |  | 16     
|         |  |                       | 
|         |  | Item 5.               |  | Other Information                                                                                             |  | 16     
|         |  |                       | 
|         |  | Item 6.               |  | Exhibits                                                                                                      |  | 16-17  
|         |  |                      
|         |  | Signatures            |  | 18                                                                                                           



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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, 2007

(Unaudited)



|                                                                                                                      |  |   |             |  
|--------------------------------------------------------------------------------------------------------------------- |  | - | ----------- | -
|Assets                                                                                                                |  |   |             |  
|                                                                                                                      | 
|Cash and due from banks                                                                                               |  | $ | 4,137,824   |  
|Interest-bearing deposits at other financial institutions                                                             |  |   | 41,704      |  
|Federal funds sold                                                                                                    |  |   | 3,886,000   |  
|Securities available for sale, at fair value                                                                          |  |   | 61,181,654  |  
|Restricted equity securities, at cost                                                                                 |  |   | 481,000     |  
|                                                                                                                      | 
|Loans, net of unearned income                                                                                         |  |   | 177,995,651 |  
|Less allowance for loan losses                                                                                        |  |   | 3,318,639   |  
|                                                                                                                      |  |   |             |  
|Loans, net                                                                                                            |  |   | 174,677,012 |  
|                                                                                                                      |  |   |             |  
|Premises and equipment, net                                                                                           |  |   | 9,249,163   |  
|Other real estate owned                                                                                               |  |   | 445,050     |  
|Other assets                                                                                                          |  |   | 4,985,547   |  
|                                                                                                                      |  |   |             |  
|Total assets                                                                                                          |  | $ | 259,084,954 |  
|                                                                                                                      |  |   |             |  
|Liabilities and Stockholders Equity                                                                                  |  |   |             |  
|                                                                                                                      | 
|Liabilities:                                                                                                          |  |   |             |  
|Deposits:                                                                                                             |  |   |             |  
|Noninterest-bearing                                                                                                   |  | $ | 33,297,220  |  
|Interest-bearing                                                                                                      |  |   | 200,544,921 |  
|                                                                                                                      |  |   |             |  
|Total deposits                                                                                                        |  |   | 233,842,141 |  
|Note payable                                                                                                          |  |   | 622,000     |  
|Securities sold under repurchase agreements                                                                           |  |   | 2,000,000   |  
|Company guaranteed trust preferred securities                                                                         |  |   | 3,403,000   |  
|Other liabilities                                                                                                     |  |   | 1,950,622   |  
|                                                                                                                      |  |   |             |  
|Total liabilities                                                                                                     |  |   | 241,817,763 |  
|                                                                                                                      |  |   |             |  
|Stockholders equity                                                                                                  |  |   |             |  
|Series A non-cumulative, non voting preferred stock, par value $100, 10,000 shares authorized, issued and outstanding |  |   | 1,000,000   |  
|Common stock, par value $1.50; 20,000,000 shares authorized; 2,188,352 shares issued and outstanding                  |  |   | 3,282,528   |  
|Surplus                                                                                                               |  |   | 2,358,164   |  
|Retained earnings                                                                                                     |  |   | 10,904,446  |  
|Accumulated other comprehensive loss                                                                                  |  |   | (277,947    | )
|                                                                                                                      |  |   |             |  
|Total stockholders equity                                                                                            |  |   | 17,267,191  |  
|                                                                                                                      |  |   |             |  
|Total liabilities and stockholders equity                                                                            |  | $ | 259,084,954 |  
|                                                                                                                      |  |   |             |  

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, 2007 AND 2006

(Unaudited)



|                                                                                             |      |                             |           |  |   |           |  
|-------------------------------------------------------------------------------------------- | ---- | --------------------------- | --------- |  | - | --------- | -
|                                                                                             |      | Three Months EndedMarch 31, |          
|                                                                                             | 2007 |                             | 2006      | 
|Interest income:                                                                             |      |                             |           |  |   |           |  
|Loans, including fees                                                                        |      | $                           | 4,208,364 |  | $ | 3,944,981 |  
|Securities:                                                                                  |      |                             |           |  |   |           |  
|Taxable                                                                                      |      |                             | 514,167   |  |   | 436,422   |  
|Nontaxable                                                                                   |      |                             | 89,655    |  |   | 106,996   |  
|Federal funds sold                                                                           |      |                             | 69,067    |  |   | 40,722    |  
|                                                                                             |      |                             |           |  |   |           |  
|Total interest income                                                                        |      |                             | 4,881,253 |  |   | 4,529,121 |  
|                                                                                             |      |                             |           |  |   |           |  
|Interest expense:                                                                            |      |                             |           |  |   |           |  
|Deposits                                                                                     |      |                             | 2,309,674 |  |   | 1,892,633 |  
|Other borrowings                                                                             |      |                             | 86,573    |  |   | 128,721   |  
|                                                                                             |      |                             |           |  |   |           |  
|Total interest expense                                                                       |      |                             | 2,396,247 |  |   | 2,021,354 |  
|                                                                                             |      |                             |           |  |   |           |  
|Net interest income                                                                          |      |                             | 2,485,006 |  |   | 2,507,767 |  
|Provision for loan losses                                                                    |      |                             |          |  |   | 124,100   |  
|                                                                                             |      |                             |           |  |   |           |  
|Net interest income after provision for loan losses                                          |      |                             | 2,485,006 |  |   | 2,383,667 |  
|                                                                                             |      |                             |           |  |   |           |  
|Other income:                                                                                |      |                             |           |  |   |           |  
|Service charges on deposit accounts                                                          |      |                             | 476,335   |  |   | 461,443   |  
|Other fees and commissions                                                                   |      |                             | 5,016     |  |   | 16,604    |  
|Mortgage origination income                                                                  |      |                             | 8,642     |  |   | 31,680    |  
|Other operating income                                                                       |      |                             | 68,768    |  |   | 45,018    |  
|                                                                                             |      |                             |           |  |   |           |  
|Total other income                                                                           |      |                             | 558,761   |  |   | 554,745   |  
|                                                                                             |      |                             |           |  |   |           |  
|Other expenses:                                                                              |      |                             |           |  |   |           |  
|Salaries and employee benefits                                                               |      |                             | 946,257   |  |   | 953,844   |  
|Occupancy and equipment expenses, net                                                        |      |                             | 288,047   |  |   | 260,115   |  
|Other operating expenses                                                                     |      |                             | 898,126   |  |   | 1,052,495 |  
|                                                                                             |      |                             |           |  |   |           |  
|Total other expenses                                                                         |      |                             | 2,132,430 |  |   | 2,266,454 |  
|                                                                                             |      |                             |           |  |   |           |  
|Income before income taxes                                                                   |      |                             | 911,337   |  |   | 671,958   |  
|Income tax expense                                                                           |      |                             | 308,321   |  |   | 202,501   |  
|                                                                                             |      |                             |           |  |   |           |  
|Net income                                                                                   |      |                             | 603,016   |  |   | 469,457   |  
|                                                                                             |      |                             |           |  |   |           |  
|Other comprehensive income (loss)                                                            |      |                             |           |  |   |           |  
|Unrealized gains (losses) on securities available for sale arising during period, net of tax |      |                             | 110,877   |  |   | (120,256  | )
|                                                                                             |      |                             |           |  |   |           |  
|Comprehensive income                                                                         |      | $                           | 713,893   |  | $ | 349,201   |  
|                                                                                             |      |                             |           |  |   |           |  
|Basic earnings per common share                                                              |      | $                           | 0.28      |  | $ | 0.22      |  
|                                                                                             |      |                             |           |  |   |           |  
|Diluted earnings per common share                                                            |      | $                           | 0.25      |  | $ | 0.20      |  
|                                                                                             |      |                             |           |  |   |           |  
|Cash dividends declared per share of common stock                                            |      | $                           |          |  | $ |          |  
|                                                                                             |      |                             |           |  |   |           |  

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, 2007 AND 2006

(Unaudited)



|                                                                                  |      |                             |             |      |  |   |            |  
|--------------------------------------------------------------------------------- | ---- | --------------------------- | ----------- | ---- |  | - | ---------- | -
|                                                                                  |      | Three Months EndedMarch 31, |            
|                                                                                  | 2007 |                             |             | 2006 | 
|OPERATING ACTIVITIES                                                              |      |                             |             |      |  |   |            |  
|Net income                                                                        |      | $                           | 603,016     |      |  | $ | 469,457    |  
|Adjustments to reconcile net income to net cash provided by operating activities: |      |                             |             |      |  |   |            |  
|Depreciation                                                                      |      |                             | 123,847     |      |  |   | 121,250    |  
|Provision for loan losses                                                         |      |                             |            |      |  |   | 124,100    |  
|Loss on sale of other real estate owned                                           |      |                             | 2,257       |      |  |   |           |  
|Net other operating activities                                                    |      |                             | 76,899      |      |  |   | 221,356    |  
|                                                                                  |      |                             |             |      |  |   |            |  
|Net cash provided by operating activities                                         |      |                             | 806,019     |      |  |   | 936,163    |  
|                                                                                  |      |                             |             |      |  |   |            |  
|INVESTING ACTIVITIES                                                              |      |                             |             |      |  |   |            |  
|Purchases of securities available for sale                                        |      |                             | (13,180,325 | )    |  |   | (4,951,154 | )
|Proceeds from maturities of securities available for sale                         |      |                             | 3,016,913   |      |  |   | 2,471,508  |  
|Net increase in interest-bearing deposits                                         |      |                             | (7,477      | )    |  |   | (9,921     | )
|Net increase in federal funds sold                                                |      |                             | (2,294,000  | )    |  |   | (1,556,000 | )
|Net decrease in loans                                                             |      |                             | 3,095,574   |      |  |   | 148,020    |  
|Purchase of premises and equipment                                                |      |                             | (257,164    | )    |  |   | (139,603   | )
|Proceeds from sale of other real estate owned                                     |      |                             | 674,663     |      |  |   |           |  
|                                                                                  |      |                             |             |      |  |   |            |  
|Net cash used in investing activities                                             |      |                             | (8,951,816  | )    |  |   | (4,037,150 | )
|                                                                                  |      |                             |             |      |  |   |            |  
|FINANCING ACTIVITIES                                                              |      |                             |             |      |  |   |            |  
|Net increase in deposits                                                          |      |                             | 6,991,373   |      |  |   | 5,127,578  |  
|Net decrease in securities sold under repurchase agreements                       |      |                             |            |      |  |   | (1,000,000 | )
|Proceeds from exercise of stock options                                           |      |                             |            |      |  |   | 50,000     |  
|Issuance of preferred stock                                                       |      |                             | 1,000,000   |      |  |   |           |  
|                                                                                  |      |                             |             |      |  |   |            |  
|Net cash provided by financing activities                                         |      |                             | 7,991,373   |      |  |   | 4,177,578  |  
|                                                                                  |      |                             |             |      |  |   |            |  
|Net increase (decrease) in cash and due from banks                                |      |                             | (154,424    | )    |  |   | 1,076,591  |  
|Cash and due from banks, beginning of period                                      |      |                             | 4,292,248   |      |  |   | 3,253,013  |  
|                                                                                  |      |                             |             |      |  |   |            |  
|Cash and due from banks, end of period                                            |      | $                           | 4,137,824   |      |  | $ | 4,329,604  |  
|                                                                                  |      |                             |             |      |  |   |            |  
|SUPPLEMENTAL DISCLOSURES                                                          |      |                             |             |      |  |   |            |  
|Cash paid for:                                                                    |      |                             |             |      |  |   |            |  
|Interest                                                                          |      | $                           | 2,431,227   |      |  | $ | 2,008,970  |  
|Income taxes                                                                      |      | $                           |            |      |  | $ |           |  
|                                                                                  |      |                            
|NONCASH TRANSACTIONS                                                              |      |                             |             |      |  |   |            |  
|Principal balances of loans transferred to other real estate owned                |      | $                           | 216,911     |      |  | $ |           |  

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, 2006.

The results of operations for the three month period ended March 31, 2007 are not necessarily indicative of the results to be expected for the full year.

NOTE 2. EARNINGS PER COMMON SHARE

Presented below is a
summary of the components used to calculate basic and diluted earnings per common share for the three months ended March 31, 2007 and 2006.



|                                                                                                                                     |      |                             |           |  |   |          
|------------------------------------------------------------------------------------------------------------------------------------ | ---- | --------------------------- | --------- |  | - | ---------
|                                                                                                                                     |      | Three Months EndedMarch 31,
|                                                                                                                                     | 2007 |                             | 2006     
|Net income                                                                                                                           |      | $                           | 603,016   |  | $ | 469,457  
|                                                                                                                                     |      |                             |           |  |   |          
|Weighted average common shares outstanding                                                                                           |      |                             | 2,188,352 |  |   | 2,175,019
|Net effect of the assumed exercise of stock options based on the treasury stock method using the average market price for the
period |      |                             | 216,934   |  |   | 230,045  
|                                                                                                                                     |      |                             |           |  |   |          
|Total weighted average common shares and common stock equivalents outstanding                                                        |      |                             | 2,405,286 |  |   | 2,405,064
|                                                                                                                                     |      |                             |           |  |   |          
|Diluted earnings per common share                                                                                                    |      | $                           | 0.25      |  | $ | 0.20     
|                                                                                                                                     |      |                             |           |  |   |          



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 3. STOCK BASED COMPENSATION

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

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

The following table represents stock option activity for the three months ended March 31, 2007:



|                                        |  |                 |  |                              |      |                                          |        
|--------------------------------------- |  | --------------- |  | ---------------------------- | ---- | ---------------------------------------- | -------
|                                        |  | Numberof Shares |  | WeightedAverageExercisePrice |      | Weighted Average Remaining Contract Life
|Options outstanding beginning of period |  | 418,000         |  | $                            | 2.67 |                                          |        
|Options granted                         |  |                |  |                              |     |                                          |        
|Options exercised                       |  |                |  |                              |     |                                          |        
|                                        |  |                 |  |                              |      |                                          |        
|Options outstanding end of period       |  | 418,000         |  |                              | 2.67 |                                          | 2.8 Yrs
|                                        |  |                 |  |                              |      |                                          |        
|Outstanding exercisable end of period   |  | 418,000         |  |                              | 2.67 |                                          | 2.8 Yrs
|                                        |  |                 |  |                              |      |                                          |        

The range of option prices for options outstanding and exercisable at March 31, 2007 was $2.50
to $3.75.

Shares available for future stock options grants to employees and directors under existing plans were 158,400 at March 31,
2007. At March 31, 2007, the aggregate intrinsic value of options outstanding and exercisable was $3.1 million.



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##### Table of Contents

NOTE 4. CONTINGENCIES

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

NOTE 5. RECENT ACCOUNTING PRONOUNCEMENTS

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

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



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NOTE 5. RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

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



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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 2007 by $9.0 million from $250.1 million to $259.1 million, or 3.60% for the quarter. The growth was funded by increases in total deposits, which increased by $7.0 million, or 3.08%. The
increase in total assets for the quarter ended March 31, 2007 consisted primarily of an increase of $10.3 million in securities available for sale, an increase of $2.3 million in federal funds sold, offset by a decrease in net loans of $3.3
million. The loan to deposit ratio at March 31, 2007 was 76% compared to 80% at December 31, 2006.

Stockholders equity increased by $1.7
million for the quarter ended March 31, 2007. This net increase consisted of net income of $603,000, a net decrease in accumulated other comprehensive losses of $111,000, and issuance of preferred stock of $1 million.

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, 2007, the
Banks liquidity ratio of 19.86% 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, 2007, the Banks capital
ratios were considered well capitalized based on regulatory minimum capital requirements. The minimum capital requirements and the actual capital ratios for the Company and Bank at March 31, 2007 are as follows:



|                          |  |         |   |  |       |   |  |                              |  
|------------------------- |  | ------- | - |  | ----- | - |  | ---------------------------- | -
|                          |  | Company |   |  | Bank  |   |  | RegulatoryMinimumRequirement |  
|Leverage Capital Ratio    |  | 8.22    | % |  | 8.36  | % |  | 4.00                         | %
|Risk-Based Capital Ratios |  |         |   |  |       |   |  |                              |  
|Core Capital              |  | 9.53    | % |  | 9.70  | % |  | 4.00                         | %
|Total Capital             |  | 10.78   | % |  | 10.95 | % |  | 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, 2007 are as follows:



|                                    |  |               |           
|----------------------------------- |  | ------------- | ----------
|                                    |  | March 31,2007
|Commitments to extend credit        |  | $             | 14,460,000
|Financial standby letters of credit |  |               | 2,724,000 
|Other standby letters of credit     |  |               | 434,000   
|                                    |  |               |           
|                                    |  | $             | 17,618,000
|                                    |  |               |           

RESULTS OF OPERATIONS

Three Months Ended March 31, 2007 and 2006

Net Interest Income. Net interest income decreased by $23,000 or by .91% for the
quarter ended March 31, 2007 compared to the same period in 2006. 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 4.33% at March 31, 2007 as compared to 4.53% at March 31, 2006 and 4.69% for the year ended December 31, 2006.

The yield on interest-earning assets increased from 8.18% to 8.51%, or 33 basis points, from March 31, 2006 to March 31, 2007. The rate paid on interest-bearing liabilities increased from 4.23% to 4.75% or 52 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. No provision was made
during the three month period ending March 31, 2007 as compared to a provision of $124,000 made during the three month period ending March 31, 2006. The allowance for loan loss as a percentage of total loans was 1.86%, 1.83% and 1.67% at
March 31, 2007, December 31, 2006 and March 31, 2006, respectively. Total nonaccrual loans increased by $821,000, net charge-offs decreased by $8,000, and loans past due ninety days or more and still accruing decreased by $48,000
for



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the three months ended March 31, 2007 as compared to the same period in 2006. Due to collateral values of the underlying collateral, we do not
anticipate significant additional losses related to identified impaired loans. Management believes the allowance for loan loss at March 31, 2007 is adequate to absorb any foreseeable losses in the loan portfolio.

At March 31, 2007 and 2006, nonaccrual, past due, and restructured loans were as follows:



|                                                                                                         |  |                        |       |               |   |      
|-------------------------------------------------------------------------------------------------------- |  | ---------------------- | ----- | ------------- | - | -----
|                                                                                                         |  | March 31,2007          |       | March 31,2006
|                                                                                                         |  | (Dollars in thousands)
|Total nonaccruing loans                                                                                  |  | $                      | 5,741 |               | $ | 4,920
|Loans contractually past due ninety days or more as to interest or principal payments and still accruing |  |                        | 154   |               |   | 202  
|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, 2007 and
2006 is as follows:



|                                                                              |  |                             |         |   |      |   |         |  
|----------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                              |  | Three Months EndedMarch 31, |        
|                                                                              |  | 2007                        |         |   | 2006 |  
|                                                                              |  | (Dollars in thousands)      |        
|Average amount of loans outstanding                                           |  | $                           | 179,265 |   |      | $ | 168,954 |  
|                                                                              |  |                             |         |   |      |   |         |  
|Balance of allowance for loan losses at beginning of period                   |  | $                           | 3,317   |   |      | $ | 2,763   |  
|                                                                              |  |                             |         |   |      |   |         |  
|Loans charged off                                                             |  |                             |         |   |      |   |         |  
|Commercial                                                                    |  |                             | (2      | ) |      |   | (5      | )
|Real estate                                                                   |  |                             |        |   |      |   |        |  
|Installment                                                                   |  |                             | (21     | ) |      |   | (10     | )
|                                                                              |  |                             |         |   |      |   |         |  
|                                                                              |  |                             | (23     | ) |      |   | (15     | )
|                                                                              |  |                             |         |   |      |   |         |  
|Loans recovered                                                               |  |                             |         |   |      |   |         |  
|Commercial                                                                    |  |                             | 13      |   |      |   | 1       |  
|Real estate                                                                   |  |                             |        |   |      |   | 4       |  
|Installment                                                                   |  |                             | 12      |   |      |   | 4       |  
|                                                                              |  |                             |         |   |      |   |         |  
|                                                                              |  |                             | 25      |   |      |   | 9       |  
|                                                                              |  |                             |         |   |      |   |         |  
|Net (charge-offs) recoveries                                                  |  |                             | 2       |   |      |   | (6      | )
|                                                                              |  |                             |         |   |      |   |         |  
|Additions to allowance charged to operating expense during period             |  |                             |        |   |      |   | 124     |  
|                                                                              |  |                             |         |   |      |   |         |  
|Balance of allowance for loan losses at end of period                         |  | $                           | 3,319   |   |      | $ | 2,881   |  
|                                                                              |  |                             |         |   |      |   |         |  
|Ratio of net loans charged-off during the period to average loans outstanding |  |                             |        | % |      |   |        | %
|                                                                              |  |                             |         |   |      |   |         |  

Other Income. Other income increased by $4,000, or .72% for the quarter ended March 31, 2007 compared
to the same period in 2006. The most significant component of other income is service charges on deposit accounts which accounts for 85% and 83% of total other income for March 31, 2007 and 2006, respectively. Service charges on deposit
accounts include monthly service charges, non-sufficient funds (NSF) charges, and other miscellaneous maintenance fees. The amount of service charges fluctuates with the volume of transaction accounts and the volume of NSF activity.

Other Expenses. Other expenses decreased by $134,000, or 5.91% for the three months ended March 31, 2007 as compared to the same period in
2006. The decrease consists of decreases of $8,000 in salaries and employee benefits and $154,000 in other operating expenses, offset by an increase of $28,000 in occupancy and equipment expenses. At March 31, 2007 and 2006, the number of
full-time equivalent employees was 87. The most significant decrease in other expenses was legal expenses which decreased $296,000 compared to March 31, 2006. Legal expenses in 2006 included expenses incurred related to litigation involving a
dispute with another financial institution over the legal name of our bank



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subsidiary as well as a lawsuit that was filed by the Commissioner of Insurance for the State of Georgia against multiple defendants, including the Company.
As of March 31, 2007, both of these lawsuits have been settled.

The mortgage company originates loans which are table funded through independent
investors. The net loss for the three months ended March 31, 2007 was $11,000, as compared to a loss of $18,000 for the three months ended March 31, 2006.

Income Taxes. Income tax expense increased by $106,000 for the three months ended March 31, 2007 as compared to 2006. The effective tax rate for 2007 and 2006 was 34% and 30%, 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 $134,000 for the
three months ended March 31, 2007 as compared to the same period in 2006 The increase in net income for the three months ended March 31, 2007 compared to the same period in 2006 is mainly due to the decrease in other expenses and lower
provision for loan losses.



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

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

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



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##### Table of Contents

PART II - OTHER INFORMATION



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

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



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------

None.



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

None.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------

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, 2007 |  | /s/ George G. Andrews                          
|                   |  | George G. Andrews                              
|                   |  | President, Chief Executive Officer and Director
|                   | 
|Date: May 15, 2007 |  | /s/ Tatina Brooks                              
|                   |  | Tatina Brooks                                  
|                   |  | Senior Vice President of Accounting and        
|                   |  | Financial Reporting (Principal Financial and   
|                   |  | Accounting Officer)                            



18