##### 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 PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



For the Quarter Ended June 30, 2006



OR



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



For the Transition Period from 
to



Commission File No. 333-116852



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GEORGIA TRUST BANCSHARES, INC.

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



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|                         |  |                                        
|------------------------ |  | ---------------------------------------
|Georgia                  |  | 34-1985678                             
|(State of Incorporation) |  | (I.R.S. Employer Identification Number)



2725 Mall of Georgia
Boulevard

Buford, Georgia 30519

(Address of Principal Executive Offices)



(770) 614-7644

(Issuers Telephone Number, Including Area Code)



---



Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 in Rule 12b-2 of the Exchange
Act).    Yes ̈No  x



As of August 11, 2006, there were 1,800,000 shares of the issuers
common stock outstanding.



Transitional Small Business
Disclosure Format (check one):    Yes ̈No  x



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##### Table of Contents

GEORGIA TRUST BANCSHARES, INC.

AND SUBSIDIARY



Index



|               |  |                                                                                                                           |  |      
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------- |  | -----
|               |  |                                                                                                                           |  | Page 
|               |  |                                                                                                                          
|PART I.        |  | FINANCIAL INFORMATION                                                                                                     |  |      
|               |  |                                                                                                                          
|Item 1.        |  | Financial Statements (Unaudited)                                                                                          |  |      
|               |  |                                                                                                                          
|               |  | Consolidated Balance Sheets - June 30, 2006 and December 31, 2005                                                         |  | 1    
|               |  |                                                                                                                          
|               |  | Consolidated Statements of Operations - Three Months Ended June 30, 2006 and 2005 Six Months Ended June 30, 2006 and 2005 |  | 2    
|               |  |                                                                                                                          
|               |  | Consolidated Statements of Cash Flows  Six Months Ended June 30, 2006 and 2005                                           |  | 3    
|               |  |                                                                                                                          
|               |  | Notes to Consolidated Financial Statements                                                                                |  | 4-9  
|               |  |                                                                                                                          
|Item 2.        |  | Managements Discussion and Analysis                                                                                      |  | 10-15
|               |  |                                                                                                                          
|Item 3.        |  | Controls and Procedures                                                                                                   |  | 15   
|               |  |                                                                                                                          
|PART II.       |  | OTHER INFORMATION                                                                                                         |  |      
|               |  |                                                                                                                          
|Item 4.        |  | Submission of Matters to a Vote of Security Holders                                                                       |  | 16   
|               |  |                                                                                                                          
|Item 6.        |  | Exhibits                                                                                                                  |  | 16   
|               | 
|Signature Page |  | 17                                                                                                                       
|               | 
|Certifications |  |                                                                                                                          



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##### Table of Contents

PART I - FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS



GEORGIA TRUST BANCSHARES, INC.

AND SUBSIDIARY



Consolidated Balance Sheets

June 30, 2006 and December 31, 2005

(Unaudited)



|                                                                                                  |  |      |            |   |      |   |            |  
|------------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                                                                  |  | 2006 |            |   | 2005 |  
|ASSETS                                                                                            |  |      |            |   |      |   |            |  
|Cash and due from banks                                                                           |  | $    | 1,371,214  |   |      | $ | 543,603    |  
|Federal funds sold                                                                                |  |      | 10,032,000 |   |      |   | 18,032,000 |  
|                                                                                                  |  |     
|Loans                                                                                             |  |      | 41,565,035 |   |      |   | 22,265,528 |  
|Less allowance for loan losses                                                                    |  |      | 457,215    |   |      |   | 244,921    |  
|                                                                                                  |  |      |            |   |      |   |            |  
|Loans, net                                                                                        |  |      | 41,107,820 |   |      |   | 22,020,607 |  
|                                                                                                  |  |     
|Premises and equipment, net                                                                       |  |      | 6,690,949  |   |      |   | 3,730,220  |  
|Other assets                                                                                      |  |      | 539,449    |   |      |   | 221,300    |  
|                                                                                                  |  |      |            |   |      |   |            |  
|Total assets                                                                                      |  | $    | 59,741,432 |   |      | $ | 44,547,730 |  
|                                                                                                  |  |      |            |   |      |   |            |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                              |  |      |            |   |      |   |            |  
|                                                                                                  |  |     
|Deposits:                                                                                         |  |      |            |   |      |   |            |  
|Non-interest-bearing                                                                              |  | $    | 3,090,070  |   |      | $ | 1,174,881  |  
|Interest-bearing                                                                                  |  |      | 40,148,937 |   |      |   | 26,610,789 |  
|                                                                                                  |  |      |            |   |      |   |            |  
|Total deposits                                                                                    |  |      | 43,239,007 |   |      |   | 27,785,670 |  
|                                                                                                  |  |     
|Other liabilities                                                                                 |  |      | 176,954    |   |      |   | 23,624     |  
|                                                                                                  |  |      |            |   |      |   |            |  
|Total liabilities                                                                                 |  |      | 43,415,961 |   |      |   | 27,809,294 |  
|                                                                                                  |  |      |            |   |      |   |            |  
|Stockholders equity:                                                                             |  |      |            |   |      |   |            |  
|Preferred stock, no par value, 10,000,000 shares authorized, no shares issued and outstanding     |  |      |           |   |      |   |           |  
|Common stock, $1 par value, 10,000,000 shares authorized, 1,800,000 shares issued and outstanding |  |      | 1,800,000  |   |      |   | 1,800,000  |  
|Additional paid-in capital                                                                        |  |      | 16,411,267 |   |      |   | 16,125,939 |  
|Accumulated deficit                                                                               |  |      | (1,885,796 | ) |      |   | (1,187,503 | )
|                                                                                                  |  |      |            |   |      |   |            |  
|Total stockholders equity                                                                        |  |      | 16,325,471 |   |      |   | 16,738,436 |  
|                                                                                                  |  |      |            |   |      |   |            |  
|Total liabilities and stockholders equity                                                        |  | $    | 59,741,432 |   |      | $ | 44,547,730 |  
|                                                                                                  |  |      |            |   |      |   |            |  



See Notes to Consolidated Financial
Statements.



1



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##### Table of Contents

GEORGIA TRUST BANCSHARES, INC.

AND SUBSIDIARY



Consolidated Statements of Operations

Three Months Ended June 30, 2006 and 2005

Six Months Ended June 30, 2006 and 2006

(Unaudited)



|                                                    |  |                            |          |   |                           |   |          |      |  |   |           |   |  |   |          |  
|--------------------------------------------------- |  | -------------------------- | -------- | - | ------------------------- | - | -------- | ---- |  | - | --------- | - |  | - | -------- | -
|                                                    |  | Three Months EndedJune 30, |          |   | Six Months Ended June 30, |  
|                                                    |  | 2006                       |          |   | 2005                      |   |          | 2006 |  |   | 2005      |  
|Interest and dividend income:                       |  |                            |          |   |                           |   |          |      |  |   |           |   |  |   |          |  
|Loans, including fees                               |  | $                          | 815,521  |   |                           | $ | 79,192   |      |  | $ | 1,362,715 |   |  | $ | 79,192   |  
|Federal funds sold                                  |  |                            | 75,953   |   |                           |   | 102,148  |      |  |   | 250,012   |   |  |   | 167,086  |  
|Other                                               |  |                            |         |   |                           |   | 63       |      |  |   |          |   |  |   | 33,306   |  
|                                                    |  |                            |          |   |                           |   |          |      |  |   |           |   |  |   |          |  
|                                                    |  |                            | 891,474  |   |                           |   | 181,403  |      |  |   | 1,612,727 |   |  |   | 279,584  |  
|                                                    |  |                            |          |   |                           |   |          |      |  |   |           |   |  |   |          |  
|Interest expense:                                   |  |                            |          |   |                           |   |          |      |  |   |           |   |  |   |          |  
|Deposits                                            |  |                            | 336,028  |   |                           |   | 19,241   |      |  |   | 608,783   |   |  |   | 19,241   |  
|Other                                               |  |                            |         |   |                           |   |         |      |  |   |          |   |  |   | 2,341    |  
|                                                    |  |                            |          |   |                           |   |          |      |  |   |           |   |  |   |          |  
|                                                    |  |                            | 336,028  |   |                           |   | 19,241   |      |  |   | 608,783   |   |  |   | 21,582   |  
|                                                    |  |                            |          |   |                           |   |          |      |  |   |           |   |  |   |          |  
|Net interest income                                 |  |                            | 555,446  |   |                           |   | 162,162  |      |  |   | 1,003,944 |   |  |   | 258,002  |  
|                                                    |  |                            |          |  
|Provision for loan losses                           |  |                            | 144,708  |   |                           |   | 84,997   |      |  |   | 212,295   |   |  |   | 84,997   |  
|                                                    |  |                            |          |   |                           |   |          |      |  |   |           |   |  |   |          |  
|Net interest income after provision for loan losses |  |                            | 410,738  |   |                           |   | 77,165   |      |  |   | 791,649   |   |  |   | 173,005  |  
|                                                    |  |                            |          |   |                           |   |          |      |  |   |           |   |  |   |          |  
|Noninterest income:                                 |  |                            |          |   |                           |   |          |      |  |   |           |   |  |   |          |  
|Service charges on deposit accounts                 |  |                            | 1,323    |   |                           |   | 48       |      |  |   | 2,398     |   |  |   | 48       |  
|Other service charges, commissions and fees         |  |                            | 4,930    |   |                           |   |         |      |  |   | 7,397     |   |  |   |         |  
|Other income                                        |  |                            | 1,609    |   |                           |   | 175      |      |  |   | 2,903     |   |  |   | 175      |  
|                                                    |  |                            |          |   |                           |   |          |      |  |   |           |   |  |   |          |  
|                                                    |  |                            | 7,862    |   |                           |   | 223      |      |  |   | 12,698    |   |  |   | 223      |  
|                                                    |  |                            |          |   |                           |   |          |      |  |   |           |   |  |   |          |  
|Noninterest expense:                                |  |                            |          |   |                           |   |          |      |  |   |           |   |  |   |          |  
|Salaries and employee benefits                      |  |                            | 556,081  |   |                           |   | 232,111  |      |  |   | 1,074,829 |   |  |   | 364,706  |  
|Occupancy and equipment                             |  |                            | 84,199   |   |                           |   | 23,054   |      |  |   | 134,632   |   |  |   | 44,116   |  
|Other operating                                     |  |                            | 134,883  |   |                           |   | 114,003  |      |  |   | 293,179   |   |  |   | 153,366  |  
|                                                    |  |                            |          |   |                           |   |          |      |  |   |           |   |  |   |          |  
|                                                    |  |                            | 775,163  |   |                           |   | 369,168  |      |  |   | 1,502,640 |   |  |   | 562,188  |  
|                                                    |  |                            |          |   |                           |   |          |      |  |   |           |   |  |   |          |  
|Net loss before income taxes                        |  |                            | (356,563 | ) |                           |   | (291,780 | )    |  |   | (698,293  | ) |  |   | (388,960 | )
|                                                    |  |                            |          |  
|Income tax expense                                  |  |                            |         |   |                           |   |         |      |  |   |          |   |  |   |         |  
|                                                    |  |                            |          |   |                           |   |          |      |  |   |           |   |  |   |          |  
|Net loss                                            |  | $                          | (356,563 | ) |                           | $ | (291,780 | )    |  | $ | (698,293  | ) |  | $ | (388,960 | )
|                                                    |  |                            |          |   |                           |   |          |      |  |   |           |   |  |   |          |  
|Net loss per share of common stock                  |  |                            |          |   |                           |   |          |      |  |   |           |   |  |   |          |  
|Basic                                               |  | $                          | (0.20    | ) |                           | $ | (0.16    | )    |  | $ | (0.39     | ) |  | $ | (0.22    | )
|                                                    |  |                            |          |   |                           |   |          |      |  |   |           |   |  |   |          |  
|Diluted                                             |  | $                          | (0.20    | ) |                           | $ | (0.16    | )    |  | $ | (0.39     | ) |  | $ | (0.22    | )
|                                                    |  |                            |          |   |                           |   |          |      |  |   |           |   |  |   |          |  
|Cash dividends per share                            |  | $                          |         |   |                           | $ |         |      |  | $ |          |   |  | $ |         |  
|                                                    |  |                            |          |   |                           |   |          |      |  |   |           |   |  |   |          |  



See Notes to Consolidated Financial
Statements.



2



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##### Table of Contents

GEORGIA TRUST BANCSHARES, INC.

AND SUBSIDIARY



Consolidated Statements of Cash Flows

Six Months Ended June 30, 2006 and 2005

(Unaudited)



|                                                                            |  |      |             |   |      |   |            |  
|--------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ---------- | -
|                                                                            |  | 2006 |             |   | 2005 |  
|Cash flow from operating activities:                                        |  |      |             |   |      |   |            |  
|Net loss                                                                    |  | $    | (698,293    | ) |      | $ | (388,960   | )
|Adjustments to reconcile net loss to net cash used by operating activities: |  |      |             |   |      |   |            |  
|Depreciation                                                                |  |      | 65,835      |   |      |   | 9,489      |  
|Provision for loan losses                                                   |  |      | 212,295     |   |      |   | 84,997     |  
|Stock option and warrant expense                                            |  |      | 285,328     |   |      |   |           |  
|Increase in accrued interest receivable                                     |  |      | (114,208    | ) |      |   | (32,315    | )
|Increase in other assets                                                    |  |      | (203,941    | ) |      |   |           |  
|Increase in accrued interest payable                                        |  |      | 22,987      |   |      |   | 3,859      |  
|Increase in other liabilities                                               |  |      | 130,343     |   |      |   |           |  
|Net other operating activities                                              |  |      |            |   |      |   | (118,117   | )
|                                                                            |  |      |             |   |      |   |            |  
|Net cash flow used by operating activities                                  |  |      | (299,654    | ) |      |   | (441,047   | )
|                                                                            |  |      |             |   |      |   |            |  
|Cash flow from investing activities:                                        |  |      |             |   |      |   |            |  
|Increase in loans                                                           |  |      | (19,299,507 | ) |      |   | (7,726,992 | )
|Purchases of premises and equipment, net of earnest money deposits          |  |      | (3,026,565  | ) |      |   | (1,522,451 | )
|                                                                            |  |      |             |   |      |   |            |  
|Net cash flow used by investing activities                                  |  |      | (22,326,072 | ) |      |   | (9,249,443 | )
|                                                                            |  |      |             |   |      |   |            |  
|Cash flow from financing activities:                                        |  |      |             |   |      |   |            |  
|Proceeds from issuance of stock, net                                        |  |      |            |   |      |   | 17,925,839 |  
|Increase in deposits, net                                                   |  |      | 15,453,337  |   |      |   | 6,966,847  |  
|Payments on line of credit                                                  |  |      |            |   |      |   | (600,000   | )
|Proceeds from line of credit                                                |  |      |            |   |      |   | 106,000    |  
|                                                                            |  |      |             |   |      |   |            |  
|Net cash flow provided by financing activities                              |  |      | 15,453,337  |   |      |   | 24,398,686 |  
|                                                                            |  |      |             |   |      |   |            |  
|Net increase (decrease) in cash and cash equivalents                        |  |      | (7,172,389  | ) |      |   | 14,708,196 |  
|Cash and cash equivalents at beginning of period                            |  |      | 18,575,603  |   |      |   | 5,554      |  
|                                                                            |  |      |             |   |      |   |            |  
|Cash and cash equivalents at end of period                                  |  | $    | 11,403,214  |   |      | $ | 14,713,750 |  
|                                                                            |  |      |             |   |      |   |            |  
|Supplemental Disclosures of Cash Flow Information                           |  |      |             |   |      |   |            |  
|                                                                            |  |     
|Cash paid during the period for:                                            |  |      |             |   |      |   |            |  
|                                                                            |  |     
|Interest                                                                    |  | $    | 585,796     |   |      | $ | 17,723     |  



See Notes to Consolidated Financial
Statements.



3



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##### Table of Contents

PART I

FINANCIAL INFORMATION



Item 1. Financial Statements



GEORGIA TRUST BANCSHARES, INC. AND SUBSIDIARY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Basis of Presentation:



The financial information contained herein is unaudited. Accordingly, the information does not include all the information and footnotes
required by generally accepted accounting principles for complete financial statements, 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.



Operating results for the
six-month period ended June 30, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006. These statements should be read in conjunction with the financial statements and footnotes
thereto included in the annual report for the year ended December 31, 2005.



Organization and Nature of Business



Georgia Trust Bancshares,
Inc. (the Company) was incorporated to organize and serve as the holding company for Georgia Trust Bank (the Bank), a state bank organized in Gwinnett County, Georgia. On May 12, 2004, an application was filed for
approval of the organization of the Bank with the Georgia Department of Banking and Finance (the DBF) and with the Federal Deposit Insurance Corporation (the FDIC) for insurance of the Banks deposits. Subsequent to
obtaining approval of the FDIC application, the Company filed an application with the Board of Governors of the Federal Reserve System and the DBF to become a bank holding company. This application was approved on December 30, 2004, which
subsequently allowed the Company to acquire all of the capital stock of the Bank in 2005.



The Company was a development stage company in prior periods as defined by Statement of Financial Accounting Standards No. 7, Accounting and Reporting by Development Stage Enterprises, as it devoted
substantially all its efforts to establishing a new business. The Company commenced operations on May 16, 2005 and became an operating company during the period ended June 30, 2005.



Significant Accounting Policies



Basis of Accounting. The accounting and reporting policies of the Company conform to
accounting principles generally accepted in the United States of America. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, shareholders
equity and net loss. Actual results may differ significantly from those estimates. The Company uses the accrual basis of accounting by recognizing revenues when they are earned and expenses in the period incurred, without regard to the time of
receipt or payment of cash.



Organization and Stock Offering Costs.Organization costs have been expensed as incurred in accordance with U.S. generally accepted accounting principles. Stock offering costs were charged to capital surplus upon completion of the Companys stock offering.



Cash and Cash Equivalents. Cash refers to cash that is held at an unrelated financial
institution. Cash equivalents refer to financial instruments that are almost as liquid as cash, such as federal funds sold. At June 30, 2006, cash and cash equivalents amounted to $11,403,214.



Property and Equipment. Furniture and equipment are stated at cost, net of accumulated
depreciation. Land is carried at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Maintenance and repairs are charged to operations, while major improvements are capitalized. Upon
retirement, sale or other disposition of property and equipment, the cost and accumulated depreciation are eliminated from the accounts and gain or loss is included in operations. The Company had no capitalized lease obligations at June 30,
2006.



4



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Significant Accounting Policies



Income Taxes. Deferred
tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In the event the future tax consequences of the difference between the financial reporting bases and the tax bases of the assets
and liabilities result in deferred tax assets, an evaluation of the probability of being able to realize the future benefits indicated by such asset is required. A valuation allowance is provided for the portion of the deferred tax asset when it is
more likely than not that some portion or all of the deferred tax asset will not be realized.



Stock Compensation Plans. At June 30, 2006, the Company had two stock-based employee compensation plans. The Company accounts for these plans in accordance with FASB statement No. 123 (revised 2004),
Share-Based Payment, SFAS 123(R). SFAS 123(R) applied to all companies as of the beginning of the first interim period which began after December 15, 2005. Accordingly, the stock-based employee compensation cost reflected in the net
loss for the six months ended June 30, 2006 is $285,328. The Company has elected the modified prospective transition method as allowed by SFAS 123(R). The Company uses the Binomial option pricing model to calculate its stock based compensation
costs for options and warrants granted prior to December 31, 2005. The Black-Scholes option pricing model has been used for options granted during 2006. The use of the Black-Scholes method is due to the Companys belief the Black-Scholes
option pricing model will produce accurate valuations given the basic nature of the options granted. The fair values of the option grants have been calculated based upon the following range of assumptions:



|                    |  |                
|------------------- |  | ---------------
|Dividend Yield      |  | 0.00%          
|Expected Term       |  | 7.5- 9.35 years
|Expected Volatility |  | 19.62% - 28.47%
|Risk Free Weight    |  | 4.24% - 4.91%  
|Forfeitures         |  | 5.00%          



The Company uses the stock prices of a
peer bank to compute the expected volatility of its stock. The risk free rate assumption is based upon the yield of a treasury security whose maturity period equals the option period. The dividend yield assumption is based upon that of the Company.
The forfeiture rate is based on estimated employee turnover, and has been applied to employee stock options only.



At June 30, 2006, there was $1,223,035 of unrecognized compensation cost related to stock-based payments, which is expected to be recognized over a weighted-average
period of 2.27 years.



5



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Significant Accounting Policies



Stock Compensation Plans.The following tables summarize stock option activity for the periods ended June 30, 2006 and December 31, 2005.



|                                                                 |  |               |   |                   |                               |       |        |        |                               |   |      
|---------------------------------------------------------------- |  | ------------- | - | ----------------- | ----------------------------- | ----- | ------ | ------ | ----------------------------- | - | -----
|                                                                 |  | June 30, 2006 |   | December 31, 2005
|                                                                 |  | Number        |   |                   | Weighted-AverageExercisePrice |       | Number |        | Weighted-AverageExercisePrice
|Balance, beginning of period                                     |  | 58,500        |   |                   | $                             | 10.00 |        |       |                               | $ |     
|Granted                                                          |  | 24,500        |   |                   |                               | 10.00 |        | 58,500 |                               |   | 10.00
|Exercised                                                        |  |              |   |                   |                               |       |        |        |                               |   |      
|Forfeited/Expired                                                |  | (5,000        | ) |                   |                               | 10.00 |        |        |                               |   |      
|                                                                 |  |               |   |                   |                               |       |        |        |                               |   |      
|Balance, end of period                                           |  | 78,000        |   |                   | $                             | 10.00 |        | 58,500 |                               | $ | 10.00
|                                                                 |  |               |   |                   |                               |       |        |        |                               |   |      
|Exercisable, end of period                                       |  | 10,700        |   |                   | $                             |      |        |       |                               | $ |     
|                                                                 |  |               |   |                   |                               |       |        |        |                               |   |      
|Weighted-average fair value of options granted during the period |  |               |   |                   | $                             | 3.74  |        |        |                               | $ | 4.27 



Information pertaining to options outstanding at June 30, 2006 is as follows:



|                         |  |                     |  |                                          |  |                                |       |                   |        |                                |   |      
|------------------------ |  | ------------------- |  | ---------------------------------------- |  | ------------------------------ | ----- | ----------------- | ------ | ------------------------------ | - | -----
|                         |  | Options Outstanding |  | Options Exercisable                     
|Range of exercise prices |  | NumberOutstanding   |  | Weighted-averageremainingcontractuallife |  | Weighted-averageexercise price |       | Numberexercisable |        | Weighted-averageexercise price
|$10.00                   |  | 78,000              |  | 9.67 years                               |  | $                              | 10.00 |                   | 10,700 |                                | $ | 10.00
|                         |  |                     |  |                                          |  |                                |       |                   |        |                                |   |      
|                         |  | 78,000              |  |                                          |  |                                |       |                   | 10,700 |                                |   |      
|                         |  |                     |  |                                          |  |                                |       |                   |        |                                |   |      



6



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Significant Accounting Policies



Stock Compensation Plans. Information pertaining to options outstanding at December 31, 2005 is as follows:



|                         |  |                     |  |                                          |  |                                |       |                   |   |                                |   |     
|------------------------ |  | ------------------- |  | ---------------------------------------- |  | ------------------------------ | ----- | ----------------- | - | ------------------------------ | - | ----
|                         |  | Options Outstanding |  | Options Exercisable                     
|Range of exercise prices |  | NumberOutstanding   |  | Weighted-averageremainingcontractuallife |  | Weighted-averageexercise price |       | Numberexercisable |   | Weighted-averageexercise price
|$10.00                   |  | 58,500              |  | 9.38 years                               |  | $                              | 10.00 |                   |  |                                | $ | 0.00
|                         |  |                     |  |                                          |  |                                |       |                   |   |                                |   |     
|                         |  | 58,500              |  |                                          |  |                                |       |                   |  |                                |   |     
|                         |  |                     |  |                                          |  |                                |       |                   |   |                                |   |     



The Company has also issued stock
warrants to the Companys organizers in an effort to compensate them for their efforts and financial risks undertaken. These warrants will vest over a three year period beginning with the date the Company began operations and are exercisable in
whole or in part during the ten year period beginning with the date the Company began operations. These plans are more fully described in the Companys annual report on form 10-KSB dated December 31, 2005. These plans are also accounted
for under SFAS 123(R).



Other information
related to the warrants is as follows:



|                                          |  |               |  |                               |       |        |         |                               |   |      
|----------------------------------------- |  | ------------- |  | ----------------------------- | ----- | ------ | ------- | ----------------------------- | - | -----
|                                          |  | June 30, 2006 |  | December 31, 2005            
|                                          |  | Number        |  | Weighted-averageexerciseprice |       | Number |         | Weighted-averageexerciseprice
|Warrants outstanding, beginning of period |  | 368,000       |  | $                             | 10.00 |        |        |                               | $ |     
|Granted                                   |  |              |  |                               |       |        | 368,000 |                               |   | 10.00
|Exercised                                 |  |              |  |                               |       |        |        |                               |   |      
|Forfeited                                 |  |              |  |                               |       |        |        |                               |   |      
|                                          |  |               |  |                               |       |        |         |                               |   |      
|Warrants outstanding, end of period       |  | 368,000       |  | $                             | 10.00 |        | 368,000 |                               | $ | 10.00
|                                          |  |               |  |                               |       |        |         |                               |   |      
|Exercisable, end of period                |  | 122,667       |  | $                             |      |        |        |                               | $ |     
|                                          |  |               |  |                               |       |        |         |                               |   |      



Shares available for future stock
option grants to employees under existing plans was 192,000 at June 30, 2006. At June 30, 2006, the aggregate intrinsic value of options and warrants outstanding was $0, and the aggregate intrinsic value of options and warrants exercisable
was $0. Total intrinsic value of options and warrants exercised was $0 for the six months ended June 30, 2006.



7



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Significant Accounting Policies



Losses Per Share.SFAS
No. 128, Earnings Per Share, establishes standards for computing and presenting basic and diluted earnings per share. In this regard, the Company is required to report earnings per common share with and without the dilutive effects of
potential common stock issuances from instruments such as options, convertible securities and warrants on the face of the statements of operations. Earnings per common share are based on the weighted average number of common shares outstanding
during the period while the effects of potential common shares outstanding during the period are included in diluted earnings per share. Additionally, the Company must reconcile the amounts used in the computation of both basic earnings per
share and diluted earnings per share. Presented below is a summary of the components used to calculate basic and diluted earnings per common share. For the six months ended June 30, 2005, losses per share are computed dividing
net loss by the number of shares issued in the Companys stock offering, or 1,800,000 shares.



|                                                                                                                                             |  |                           |           |   |      |   |           |  
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | --------- | - | ---- | - | --------- | -
|                                                                                                                                             |  | Six Months Ended June 30, |          
|                                                                                                                                             |  | 2006                      |           |   | 2005 |  
|Basic losses per share:                                                                                                                      |  |                           |           |   |      |   |           |  
|Weighted average common shares outstanding                                                                                                   |  |                           | 1,800,000 |   |      |   | 1,800,000 |  
|                                                                                                                                             |  |                           |           |   |      |   |           |  
|Net loss                                                                                                                                     |  | $                         | (698,293  | ) |      | $ | (388,960  | )
|                                                                                                                                             |  |                           |           |   |      |   |           |  
|Basic losses per share                                                                                                                       |  | $                         | (0.39     | ) |      | $ | (0.22     | )
|                                                                                                                                             |  |                           |           |   |      |   |           |  
|Diluted losses per share:                                                                                                                    |  |                           |           |   |      |   |           |  
|Weighted average common shares outstanding                                                                                                   |  |                           | 1,800,000 |   |      |   | 1,800,000 |  
|Net effect of the assumed exercise of stock options and warrants based on the treasury stock method using average market prices for the
year |  |                           |          |   |      |   |          |  
|                                                                                                                                             |  |                           |           |   |      |   |           |  
|Total weighted average common shares and common stock equivalents outstanding                                                                |  |                           | 1,800,000 |   |      |   | 1,800,000 |  
|                                                                                                                                             |  |                           |           |   |      |   |           |  
|Net loss                                                                                                                                     |  | $                         | (698,293  | ) |      | $ | (388,960  | )
|                                                                                                                                             |  |                           |           |   |      |   |           |  
|Diluted losses per share                                                                                                                     |  | $                         | (0.39     | ) |      | $ | (0.22     | )
|                                                                                                                                             |  |                           |           |   |      |   |           |  



Recent Accounting Pronouncements



In December 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting (SFAS) No. 123R (revised 2004), Share-Based Payment, which revises SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees. This statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. This statement does not address the accounting for
employee share ownership plans, which are subject to AICPA Statement of Position 93-6, Employers Accounting for Stock Ownership Plans. This statement requires an entity to recognize the cost of employee services received in share-based
payment transactions and measure the cost on a grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to provide service in exchange for the award. The provisions of SFAS 123R (revised
2004) are effective for financial statements issued for the first interim period beginning after December 31, 2005. Accordingly, during the six months ended June 30, 2006, the Company recognized $285,328 in expense associated with vesting
stock options and warrants.



8



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Recent
Accounting Pronouncements



In May 2005, the FASB issued Statement
No. 154, (SFAS No. 154) Accounting Changes and Error Corrections - A Replacement of APB Opinion No. 20 and FASB Statement No. 3. This new standard replaces APB Opinion No. 20, Accounting Changes, and FASB
Statement No. 3, Reporting Accounting Changes in Interim Financial Statements. Among other changes, SFAS No. 154 requires that a voluntary change in an accounting principle be applied retrospectively with all prior period financial
statements presented on the new accounting principle, unless it is impracticable to do so. SFAS No. 154 also provides that (1) a change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for as a change in
estimate (prospectively) that was effected by a change in an accounting principle, and (2) correction of errors in previously issued financial statements should be termed a restatement. The new standard is effective for accounting
changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of this standard did not have a material effect on the Companys consolidated financial statements.



In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid
Financial Instruments - an amendment of FASB Statements No. 133 and 140. SFAS No. 155 simplifies accounting for certain hybrid instruments currently governed by SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, by allowing fair value remeasurement of hybrid instruments that contain an embedded derivative that otherwise would require bifurcation. SFAS No. 155 also eliminates the guidance in SFAS No. 133 Implementation Issue No. D1,
Application of Statement 133 to Beneficial Interests in Securitized Financial Assets, which provides such beneficial interests are not subject to SFAS No. 133. SFAS No. 155 amends SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities - a Replacement of FASB Statement No. 125, by eliminating the restriction on passive derivative instruments that a qualifying special-purpose entity may hold. SFAS
No. 155 is effective for all financial instruments acquired or issued after the beginning of an entitys first fiscal year that begins after September 15, 2006. The Company does not expect the adoption of this statement to have a
material impact on our financial condition, results of operations or cash flows.



In March 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 156, Accounting for Servicing of Financial Assets- an amendment of FASB Statement No. 140. SFAS No. 156 requires an entity to recognize a
servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in specific situations. Additionally, the servicing asset or servicing liability shall be initially
measured at fair value; however, an entity may elect the amortization method or fair value method for subsequent balance sheet reporting periods. SFAS No. 156 is effective as of an entitys first fiscal year
beginning after September 15, 2006. Early adoption is permitted as of the beginning of an entitys fiscal year, provided the entity has not yet issued financial statements, including interim financial statements, for any period of that
fiscal year. The Company does not expect the adoption of this statement to have a material impact on our financial condition, results of operations or cash flows.



9



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##### Table of Contents

Item 2. Managements Discussion and Analysis or Plan of Operation



The following is managements discussion and analysis of certain significant factors which have affected the financial position and operating results of Georgia Trust Bancshares, Inc., a Georgia corporation (the
Company, we, us, or our) and its wholly owned bank subsidiary, Georgia Trust Bank (the Bank), during the period included in the accompanying consolidated financial statements.



Cautionary Notice Regarding Forward-Looking Statements



Some of the statements included in this Report, including matters discussed under the
caption Managements Discussion and Analysis or Plan of Operation are forward-looking statements. Forward-looking statements include statements about the competitiveness of the banking industry, potential regulatory
obligations, potential economic growth in the primary service area of the Bank, future asset growth and capital ratios, the allowance for loan losses, the business strategies of the Company and other statements that are not historical facts. The
words anticipate, estimate, project, intend, expect, believe, forecast and similar expressions are also intended to identify the forward-looking statements, but some
of these statements may use other phrasing. These forward-looking statements are not guarantees of future performance and are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance or
achievements to differ materially from those expressed or implied by these forward-looking statements. These factors include, among other things: (i) we lack an operating history from which to base an estimate of our future financial
performance; (ii) we may be unable to implement key elements of our business strategy; (iii) we may be unable to retain key personnel; (iv) we may be impacted by general economic conditions and governmental monetary and fiscal
policies; (v) we may face increased competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds and
other financial institutions operating in our market area and elsewhere; (vi) there may be a lack of sustained growth in the economies of Gwinnett and Cobb Counties, Georgia; (vii) we may experience rapid fluctuations in interest rates;
(viii) we face risks related to changes in interest rates on the level and composition of deposits, loan demand and the values of loan collateral, securities, and other interest-sensitive assets and liabilities; and (ix) we may experience
changes in the legislative and regulatory environment.



Many of these factors
are beyond our ability to control or predict, and readers are cautioned not to put undue reliance on such forward-looking statements. We disclaim any obligation to update or revise publicly or otherwise any forward-looking statements to reflect
subsequent events, new information or future circumstances, except as required by law.



General



The Company was incorporated on May 20, 2004 to
serve as a holding company for the Bank. On October 7, 2004, we began an initial public offering of a minimum of 1,060,000 shares and a maximum of 1,500,000 shares of our common stock. We subsequently amended the terms of the offering to
provide for a maximum offering of 1,800,000 shares of our common stock. On March 11, 2005, we completed our offering raising $18,000,000 by issuing 1,800,000 shares of our common stock in the offering. We used $12.5 million of the net proceeds
from the offering to provide initial capital for the Bank. The Bank commenced operations at its main office location on May 16, 2005. We commenced operations at our branch office located in Cobb County, Georgia on September 26, 2005.



Financial Condition



At June 30, 2006, our total assets were $59,741,432, compared with total assets of
$44,547,730 at December 31, 2005, an increase of 34.11%. Total deposits at June 30, 2006 totaled $43,239,007, compared with total deposits of $27,785,670 at December 31, 2005. Net loans increased $19,087,213 during the first six
months of 2006 to $41,107,820 at June 30, 2005, and federal funds sold totaled $10,032,000 a decrease of $8,000,000 from December 31, 2005. Our ratio of net loans to deposits was 95.07% at June 30, 2006. We believe a high ratio of net
loans to deposits is typical for de novo banks in their first years of operations as we have invested a significant portion of our initial capital base in loans.



10



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##### Table of Contents

The majority of our loans are secured by real estate. Balances within the major loan categories as of June 30, 2006
and December 31, 2005 were as follows (dollars in thousands):



|                           |  |               |        |   |                   |        |   |        |   |        |            |  |        |  
|-------------------------- |  | ------------- | ------ | - | ----------------- | ------ | - | ------ | - | ------ | ---------- |  | ------ | -
|                           |  | June 30, 2006 |        |   | December 31, 2005 |       
|                           |  | Amount        |        |   | % of Total        |        |   | Amount |   |        | % of Total | 
|Commercial                 |  | $             | 8,132  |   |                   | 19.50  | % |        | $ | 1,720  |            |  | 7.69   | %
|Real estate - mortgage     |  |               | 20,058 |   |                   | 48.11  | % |        |   | 15,017 |            |  | 67.15  | %
|Real estate - construction |  |               | 11,914 |   |                   | 28.57  | % |        |   | 5,520  |            |  | 24.69  | %
|Consumer and other         |  |               | 1,591  |   |                   | 3.82   | % |        |   | 106    |            |  | 0.47   | %
|                           |  |               |        |   |                   |        |   |        |   |        |            |  |        |  
|Gross loans                |  |               | 41,695 |   |                   | 100.00 | % |        |   | 22,363 |            |  | 100.00 | %
|                           |  |               |        |  
|Less deferred loan fees    |  |               | (130   | ) |                   |        |   |        |   | (98    | )          |  |        |  
|Allowance for loan losses  |  |               | (457   | ) |                   |        |   |        |   | (245   | )          |  |        |  
|                           |  |               |        |   |                   |        |   |        |   |        |            |  |        |  
|Net loans                  |  | $             | 41,108 |   |                   |        |   |        | $ | 22,020 |            |  |        |  
|                           |  |               |        |   |                   |        |   |        |   |        |            |  |        |  



We expect to continue to fund loan
growth from our deposit growth. We will also hold funds in federal funds sold and may purchase investment securities as conditions warrant and as we identify opportunities appropriate to our overall asset and liability strategies and goals. We
expect continued growth in assets and liabilities during the remainder of 2006.



Our total equity decreased by $412,965 from December 31, 2005 to June 30, 2006, consisting of year-to-date net losses of $698,293, offset partially by additions to the surplus relating to stock compensation of $285,328.



Results of Operations



The results of operations are determined by our ability to effectively manage net interest
income, control non-interest expenses, generate non-interest income and minimize loan losses. In order for us to become profitable, we must increase the amount of earning assets so that net interest income along with non-interest income will be
sufficient to cover normal operating expenses incurred in a banking operation and the Banks provision for loan losses.



As stated above, our banking operations commenced on May 16, 2005 Therefore, for the three- and six-month periods ended June 30, 2005, we had only limited
banking activities. As a result comparisons to the periods ended June 30, 2006 and 2005 may not be as beneficial to securityholders as they may be in future periods when the comparisons reflect full periods of operations.



Net Interest Income.Our net interest income was $555,446 and $1,003,944,
respectively, for the three and six months ended June 30, 2006, compared with $162,162 and $258,002, respectively, for the same periods in 2005. As stated above, we commenced operations on May 16, 2005, which accounts for the majority in
the increase in 2006 compared to 2005. Our net interest margin for the six months ended June 30, 2006 was 4.80%. The net interest margin is computed by dividing net interest income, on an annualized basis, by average earning assets. Average
earning assets were $41,830,270 for the six months ended June 30, 2006. The average earning assets were funded by non-interest bearing funds consisting of funds from our initial stock offering, non-interest bearing demand deposits, and interest
bearing demand deposits and certificates of deposit.



Provision for Loan
Losses.The provision for loan losses for the three and six months ended June 30, 2006 was $144,708 and $212,295, respectively. The amounts provided are due to our loan growth and our assessment of the inherent risk in the loan portfolio.
Management believes the $457,215 in the allowance for loan losses at June 30, 2006, or 1.10% of total net outstanding loans, is adequate to absorb known risks in the portfolio. No assurance can be given, however, that increased loan volume, and
adverse economic conditions or other circumstances will not result in increased losses in our loan portfolio.



11



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##### Table of Contents

Information with respect to nonaccrual, past due, restructured, and potential problem loans at June 30, 2006 is as
follows:



|                                                                                                         |  |   |  
|-------------------------------------------------------------------------------------------------------- |  | - | -
|Nonaccrual loans                                                                                         |  | $ | 
|Loans contractually past due ninety days or more as to interest or principal payments and still accruing |  |   | 
|Restructured loans                                                                                       |  |   | 
|Potential problem loans                                                                                  |  |   | 
|Interest income that would have been recorded on nonaccrual and restructured loans under original terms  |  |   | 
|Interest income that was recorded on nonaccrual and restructured loans                                   |  |   | 



Potential problem loans are defined as
loans about which we have serious doubts as to the ability of the borrower to comply with the present loan repayment terms and which may cause the loan to be placed on nonaccrual status, to become past due more than ninety days, or to be
restructured.



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 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.



Loans which may be 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. Management is not aware of any information that causes it to
have serious doubts as to the ability of borrowers to comply with the loan repayment terms.



Information regarding certain loans and allowance for loan loss data through June 30, 2006 is as follows (dollars in thousands):



|                                                                          |  |   |        |  
|------------------------------------------------------------------------- |  | - | ------ | -
|Average amount of loans outstanding                                       |  | $ | 30,295 |  
|                                                                          |  |   |        |  
|Balance of allowance for loan losses at beginning of period               |  | $ | 245    |  
|                                                                          |  |   |        |  
|Loans charged off                                                         |  |   |        |  
|Commercial                                                                |  |   |       |  
|Real estate                                                               |  |   |       |  
|Consumer                                                                  |  |   |       |  
|                                                                          |  |   |        |  
|                                                                          |  |   |       |  
|                                                                          |  |   |        |  
|Loans recovered                                                           |  |   |        |  
|Commercial                                                                |  |   |       |  
|Real estate                                                               |  |   |       |  
|Consumer                                                                  |  |   |       |  
|                                                                          |  |   |        |  
|                                                                          |  |   |       |  
|                                                                          |  |   |        |  
|Net charge-offs/recoveries                                                |  |   |       |  
|                                                                          |  |   |        |  
|Additions to allowance charged to operating expense during period         |  |   | 212    |  
|                                                                          |  |   |        |  
|Balance of allowance for loan losses at end of period                     |  | $ | 457    |  
|                                                                          |  |   |        |  
|Ratio of net loans charged off during period to average loans outstanding |  |   |       | %
|                                                                          |  |   |        |  



Allowance for Loan Losses. The
allowance for loan losses is maintained at a level that is deemed appropriate by management to adequately cover all known and inherent risks in the loan portfolio. Managements evaluation of the



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##### Table of Contents

loan portfolio includes a loan classification program. Under the program, as each loan is made, we assign a loan grade.
Each loan grade is assigned an allowance percentage determined based on our experience specifically and the historical experience of the banking industry generally. Loan classifications are then subject to periodic review by the responsible lending
officers and by senior management based upon their judgment, current economic conditions that may affect the borrowers ability to repay, lender requirements, the underlying collateral value of the loans and other appropriate information.
Management relies predominantly on this ongoing review of the loan portfolio to assess the risk characteristics of the portfolio in the aggregate and to determine adjustments, if any, to our allowance for loan losses. Based upon this ongoing review,
we may identify loans that could be impaired. A loan is considered impaired when it is probable that we will be unable to collect all principal and interest due in accordance with the contractual terms of the loan agreement. When we identify a loan
as impaired, the allowance for loan losses is increased if we determine that the amount of impairment is in excess of the allowance determined under our loan classification program. We plan to maintain an allowance for loan losses of no less than
1.10% of outstanding loans until more historical data is available.



Other
Noninterest Income. Other noninterest income was $7,862 and $12,698, respectively, for the three- and six-month periods ended June 30, 2006, compared with $223 for the same periods in 2005. Other noninterest income consisted primarily of
service charges on deposit accounts of $1,323 and $2,398, respectively, and other service charges, commissions and fees of $4,930 and $7,397, respectively, for the three and six months ended June 30, 2006.



Other Noninterest Expenses. Other noninterest expenses for the six months ended
June 30, 2006 totaled $1,502,640, an increase of $940,452 compared to the same period in 2005. These expenses consist of salaries and employee benefits of $1,074,829, occupancy and equipment expenses of $134,632, and other operating expenses of
$293,179. Salaries and employee benefits are due to related costs of 24 full time employees as of June 30, 2006 and to other annual salary costs and employee benefits. The equipment and occupancy expenses are due the depreciation of our banking
facilities and other occupancy expenses. Other operating expenses consist primarily of supplies, postage, professional services, and data processing fees. Other noninterest expenses for the three months ended June 30, 2006 were $775,163
compared to $369,168 for the three months ended June 30, 2005, an increase of $405,995 or 110%.



Income Tax Expense.We have not recorded income tax expense for the three months ended June 30, 2006 due to cumulative operating losses recorded to date.



Off-Balance Sheet Risk



We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our
customers. These financial instruments include commitments to extend credit and standby letters of credit. Such commitments involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amount recognized in the balance
sheets.



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 and conditional obligations
as we do for on-balance sheet instruments. As of June 30, 2006 we had commitments to extended credit in the amount of $10,335,000. As of June 30, 2006 we had commitments to extend credit under standby letters of credit of $107,000.



Liquidity and Capital Resources



Liquidity management involves monitoring our sources and uses of funds in order to meet our
day-to-day cash flow requirements while maximizing profits. Liquidity represents the ability of a company to convert assets into cash or cash equivalents without significant loss and to raise additional funds by increasing liabilities. Liquidity
management is made more complicated because different balance sheet components are subject to varying degrees of management control. For example, the timing of maturities of the investment portfolio is fairly predictable and subject to a high degree
of control at the time investment decisions are made. However, net deposit inflows and outflows are far less predictable and are not subject to nearly the same degree of control. We must maintain adequate liquidity to respond to short-term deposit
withdrawals, maturities of short-term borrowings, loan demand and payment of operating expenses.



13



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##### Table of Contents

We meet our liquidity needs through scheduled maturities of loans and investments and through pricing policies to attract
interest-bearing deposits. Liquidity is measured by the net liquid assets to net deposits and short term liabilities ratio, which was 25.35% as of June 30, 2006, compared to 66.80% as of Dec. 31, 2005. We expect this ratio to decline as loans
increase.



We also have lines of credit available with correspondent banks to
purchase federal funds for periods from one to seven days. At June 30, 2006, unused lines of credit totaled approximately $5,200,000.



The minimum capital requirements to be considered well capitalized under prompt corrective action provisions and the actual capital ratios for the Bank as of
June 30, 2006 are as follows:



|                           |  |                   |   |  |                       |  
|-------------------------- |  | ----------------- | - |  | --------------------- | -
|                           |  | Georgia TrustBank |   |  | RegulatoryRequirement |  
|Leverage capital ratio     |  | 24.91             | % |  | 5.00                  | %
|Risk-based capital ratios: |  |                   |   |  |                       |  
|Core capital               |  | 24.37             | % |  | 6.00                  | %
|Total capital              |  | 25.32             | % |  | 10.00                 | %



These
ratios will decline as asset growth continues, but are expected to exceed the minimum regulatory requirements.



During the first half of 2006, we completed construction of our permanent main office in Gwinnett County and occupied it during April 2006. The total costs of constructing our main office were $2,294,379 and we do not
expect any additional material costs relating to the construction of our permanent main office. In addition, during the second quarter of 2006 we completed the construction of our permanent branch office in Cobb County and occupied it in June 2006.
Total construction costs for our permanent branch office was $1,855,493.



Other
than as discussed above, we know of no trends, demands, commitments, events or uncertainties that should result in, or are reasonably likely to result in, our liquidity increasing or decreasing in any material way in the foreseeable future.



Regulatory Matters



From time to time, various bills are introduced in the United States Congress with respect
to the regulation of financial institutions. Certain of these proposals, if adopted, could significantly change the regulation of banks and the financial services industry. We cannot predict whether any of these proposals will be adopted or, if
adopted, how these proposals would affect us.



We are not aware of any current
recommendation by our regulatory authorities which, if implemented, would have a material effect on our liquidity, capital resources, or results of operations.



Critical Accounting Policies



We have adopted various accounting policies which govern the application of accounting principles generally accepted in the United States in the preparation of our
financial statements. Certain accounting policies involve significant judgments and assumptions by us which have a material impact on the carrying value of certain assets and liabilities. We consider these accounting policies to be critical
accounting policies. The judgments and assumptions we use are based on historical experience and other factors, which we believe to be reasonable under the circumstances. Because of the nature of the judgments and assumptions we make, actual results
could differ from these judgments and estimates which could have a material impact on our carrying values of assets and liabilities and our results of operations.



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We believe the allowance for loan losses is a critical accounting policy that requires the most significant judgments and
estimates used in preparation of our consolidated financial statements. Refer to the portion of this discussion under the heading Allowance for Loan Losses that addresses our allowance for loan losses for a description of our processes
and methodology for determining our allowance for loan losses.



Item 3. Controls and Procedures



As of
June 30, 2006, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures
as defined in Exchange Act Rule 13a-15(e). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our current disclosure controls and procedures are effective as of June 30, 2006. There have been
no significant changes in our internal controls over financial reporting during the first fiscal quarter ended June 30, 2006 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial
reporting.



The design of any system of controls and procedures is based in
part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.



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PART II



OTHER INFORMATION



Item 4. Submission of Matters to a Vote of Security Holders



Our 2006 Annual Meeting of Shareholders was held on June 15, 2006. The only matter submitted to security holders at the Annual Meeting was the
election of three Class II directors for a three-year term.



Our board of directors is divided into three classes with each class to be as nearly equal in number as possible. The three classes of directors have staggered terms, so that the terms of only approximately one-third of the board members
expire at each annual meeting of shareholders. The current Class I directors are Charles D. Robinson, William E. Smith and James J. Tidwell. The current Class II directors are Ronald D. Adamson, L. Myron Cantrell and Michael L. Jordan. The current
Class III directors are J. Michael Allen, Marvin O. Tibbetts, III and Michael E. Townsend. The current terms of the Class II directors expired at our Annual Meeting. Each of the three current Class II directors was nominated for election and stood
for election at the Annual Meeting for a three-year term. Votes for the election of the Class II directors were as follows:



|                  |  |           |  |                |  |                
|----------------- |  | --------- |  | -------------- |  | ---------------
|Nominee           |  | Votes For |  | Votes Withheld |  | Votes Abstained
|Ronald D. Adamson |  | 1,112,658 |  | 683,342        |  | 4,000          
|L. Myron Cantrell |  | 1,112,658 |  | 683,342        |  | 4,000          
|Michael L. Jordan |  | 1,112,658 |  | 683,342        |  | 4,000          



The terms of the Class
III and Class I directors will expire at the 2007 and 2008 Annual Meeting of Shareholders, respectively.



Item 6. Exhibits



|               |  |                                                        
|-------------- |  | -------------------------------------------------------
|Exhibit Number |  | Description                                            
|31.1           |  | Rule 13a-14(a) Certification of Chief Executive Officer
|               | 
|31.2           |  | Rule 13a-14(a) Certification of Chief Financial Officer
|               | 
|32.1           |  | Section 1350 Certifications                            



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SIGNATURES



In accordance with
the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, in the City of Buford, State of Georgia, on August 11, 2006.



GEORGIA TRUST BANCSHARES, INC./s/ J. Michael AllenJ. Michael Allen President and Chief Executive
Officer (Principal Executive Officer)/s/ J. Dave DeVennyJ. Dave DeVennySenior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)




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EXHIBIT INDEX



|               |  |                                                        
|-------------- |  | -------------------------------------------------------
|Exhibit Number |  | Description                                            
|31.1           |  | Rule 13a-14(a) Certification of Chief Executive Officer
|               | 
|31.2           |  | Rule 13a-14(a) Certification of Chief Financial Officer
|               | 
|32.1           |  | Section 1350 Certifications