SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549

                                    FORM 10-Q

(Mark  One)

 X   Quarterly  Report  under Section 13 or 15(d) of the Securities Exchange Act
---  of  1934
     For  the  quarterly  period  ended  June  30,  2004.
                                         ---------------

                                       or

     Transition  Report under Section 13 or 15(d) of the Securities Exchange Act
---  of  1934
     For  the  transition  period  from  _______________  to  ________________.

                          Commission File No.  0-23980
                                               -------

                       Georgia Bank Financial Corporation
                       ----------------------------------
             (Exact name of registrant as specified in its charter)

              Georgia                               58-2005097
              -------                               ----------
     (State  of  Incorporation)       (I.R.S.  Employer  Identification  No.)

                    3530 Wheeler Road, Augusta, Georgia 30909
                    -----------------------------------------
                    (Address of principal executive offices)

                                 (706) 738-6990
                                 --------------
                (Issuer's telephone number, including area code)

                                 Not Applicable
                                 --------------
    (Former name, former address and former fiscal year, if changed since last
                                     report)

     Indicate  by  check  whether  the  registrant:  (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  whether  the  registrant  is  an accelerated filer (as
defined  in  Rule  12b-2  of  the  Exchange  Act).   Yes  X  No
                                                         ---    ---

                      APPLICABLE ONLY TO CORPORATE ISSUERS

     State  the  number of shares outstanding of each of the issuer's classes of
common  stock,  as  of  the  latest  practicable  date:

     5,247,204 shares of common stock, $3.00 par value per share, outstanding as
of  June  30,  2004.


<PAGE>
<TABLE>
<CAPTION>
                           GEORGIA BANK FINANCIAL CORPORATION
                                        FORM 10-Q
                                          INDEX


                                                                                    Page
<S>      <C>      <C>                                                               <C>
Part I            Financial Information
         Item 1.  Financial Statements (Unaudited)

                  Consolidated Balance Sheets as of June 30, 2004 and
                    December 31, 2003                                                  3

                  Consolidated Statements of Income for the three and six months
                    ended June 30, 2004 and June 30, 2003                              4

                  Consolidated Statements of Cash Flows for the
                    six months ended June 30, 2004 and June 30, 2003                   6

                  Notes to Consolidated Financial Statements                           8

         Item 2.  Management's Discussion and Analysis of                             11
                  Financial Condition and Results of Operations

         Item 3.  Quantitative and Qualitative Disclosures about Market Risk          23

         Item 4.  Controls and Procedures                                             23

Part II           Other Information
         Item 1.  Legal Proceedings                                                    *
         Item 2.  Changes in Securities, Uses of Proceeds and Issuer Purchases of      *
                    Equity Securities
         Item 3.  Defaults Upon Senior Securities                                      *
         Item 4.  Submission of Matters to a Vote of Security-Holders                 24
         Item 5.  Other Information                                                    *
         Item 6.  Exhibits and Reports on Form 8-K                                    25

Signature                                                                             26
</TABLE>

* No information submitted under this caption


                                        1
<PAGE>


                                     PART I
                              FINANCIAL INFORMATION




                                        2
<PAGE>
<TABLE>
<CAPTION>
                GEORGIA BANK FINANCIAL CORPORATION AND SUBSIDIARY
                           Consolidated Balance Sheets

                        ASSETS                       June 30,
                                                       2004        December 31,
                                                    (Unaudited)        2003
                                                   -------------  --------------
<S>                                                <C>            <C>
Cash and due from banks                            $ 15,097,115   $  15,704,566
Federal funds sold                                   11,743,000               -
Interest-bearing deposits in other banks                 17,380          17,318
                                                   -------------  --------------
    Cash and cash equivalents                        26,857,495      15,721,884

Investment securities
  Available-for-sale                                155,846,245     151,394,463
  Held-to-maturity, at cost (fair values of
    $4,965,735 and $5,750,099, respectively)          4,772,749       5,437,519

Loans held for sale                                  20,431,195      14,047,080

Loans                                               441,348,938     418,632,111
  Less allowance for loan losses                     (7,302,393)     (7,277,589)
                                                   -------------  --------------
    Loans, net                                      434,046,545     411,354,522

Premises and equipment, net                          16,859,252      14,250,543
Accrued interest receivable                           3,555,963       3,784,888
Intangible assets, net                                  139,883         139,883
Bank-owned life insurance                            11,223,719      10,971,633
Other assets                                          4,889,156       3,530,542
                                                   -------------  --------------

                                                   $678,622,202   $ 630,632,957
                                                   =============  ==============

       LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits
    Noninterest-bearing                            $ 81,723,440   $  68,033,102
    Interest-bearing
      NOW accounts                                   74,848,327      72,386,405
      Savings                                       219,197,189     194,366,425
      Money management accounts                      26,529,133      22,137,192
      Time deposits over $100,000                   105,498,003      97,631,749
      Other time deposits                            30,909,172      29,396,929
                                                   -------------  --------------
                                                    538,705,264     483,951,802

Federal funds purchased and securities sold
  under repurchase agreements                        40,766,879      56,968,754
Advances from Federal Home Loan Bank                 40,000,000      30,000,000
Other borrowed funds                                    900,000         800,000
Accrued interest and other liabilities                4,388,740       5,223,354
                                                   -------------  --------------
          Total liabilities                         624,760,883     576,943,910
                                                   -------------  --------------

Stockholders' equity
  Common Stock, $3.00 par value; 10,000,000
    shares authorized; 5,284,746 shares issued;
    5,247,204 shares outstanding                     15,854,238      15,854,238
  Additional paid-in capital                         34,337,584      34,337,584
  Retained earnings                                   5,799,619       3,001,079
  Treasury stock, at cost 37,542 shares                (507,360)       (507,360)
  Accumulated other comprehensive (loss) income      (1,622,762)      1,003,506
                                                   -------------  --------------
          Total stockholders' equity                 53,861,319      53,689,047
                                                   -------------  --------------

                                                   $678,622,202   $ 630,632,957
                                                   =============  ==============
</TABLE>


                                        3
<PAGE>
<TABLE>
<CAPTION>
                         GEORGIA BANK FINANCIAL CORPORATION AND SUBSIDIARY
                                 Consolidated Statements of Income
                                            (Unaudited)

                                                   Three Months Ended         Six Months Ended
                                                        June 30,                   June 30,
                                                ------------------------  -------------------------
                                                   2004         2003          2004         2003
                                                -----------  -----------  ------------  -----------
<S>                                             <C>          <C>          <C>           <C>
Interest income:
  Loans, including fees                         $6,791,048   $6,487,762   $13,431,392   $12,745,210
  Investment securities                          1,712,465    1,560,293     3,419,308     3,181,665
  Federal funds sold                                 9,006       26,764        17,230        59,870
  Interest-bearing deposits in other banks              14        2,304            43         3,580
                                                -----------  -----------  ------------  -----------
          Total interest income                  8,512,533    8,077,123    16,867,973    15,990,325
                                                -----------  -----------  ------------  -----------

Interest expense:
  Deposits                                       1,674,482    1,939,858     3,314,020     3,920,017
  Federal funds purchased and securities sold
    under repurchase agreements                    134,421      164,927       311,809       332,499
  Other borrowings                                 445,930      447,920       878,037       891,006
                                                -----------  -----------  ------------  -----------
          Total interest expense                 2,254,833    2,552,705     4,503,866     5,143,522
                                                -----------  -----------  ------------  -----------

          Net interest income                    6,257,700    5,524,418    12,364,107    10,846,803

Provision for loan losses                          131,197      431,805       519,920       906,555
                                                -----------  -----------  ------------  -----------

          Net interest income after provision
            for loan losses                      6,126,503    5,092,613    11,844,187     9,940,248
                                                ------------------------  -------------------------

Noninterest income:
  Service charges and fees on deposits           1,227,462    1,139,770     2,286,369     2,222,419
  Gain on sale of loans                          1,628,426    2,531,502     2,905,106     4,319,232
  Investment securities (losses) gains, net        (85,293)     (17,420)       (4,542)       28,772
  Retail investment income                         108,983       82,452       204,538       173,389
  Trust service fees                               135,831       79,776       258,070       149,635
  Increase in cash surrender value of
    bank-owned life insurance                      126,823       38,012       252,086        72,924
  Miscellaneous income                             112,612       93,992       211,944       191,304
                                                -----------  -----------  ------------  -----------
          Total noninterest income               3,254,844    3,948,084     6,113,571     7,157,675
                                                -----------  -----------  ------------  -----------

Noninterest expense:
  Salaries                                       3,120,656    3,236,655     5,633,780     5,992,428
  Employee benefits                                730,100      681,519     1,496,955     1,309,934
  Occupancy expenses                               642,195      596,657     1,261,359     1,178,003
  Other operating expenses                       1,654,695    1,472,096     3,354,625     2,743,559
                                                -----------  -----------  ------------  -----------
          Total noninterest expense              6,147,646    5,986,927    11,746,719    11,223,924
                                                -----------  -----------  ------------  -----------

          Income before income taxes             3,233,701    3,053,770     6,211,039     5,873,999

Income tax expense                               1,076,978    1,076,796     2,048,226     2,044,838
                                                -----------  -----------  ------------  -----------

          Net income                            $2,156,723   $1,976,974   $ 4,162,813   $ 3,829,161
                                                ===========  ===========  ============  ===========

                                                                                        (Continued)
</TABLE>


                                        4
<PAGE>
<TABLE>
<CAPTION>
                     GEORGIA BANK FINANCIAL CORPORATION AND SUBSIDIARY
                             Consolidated Statements of Income
                                        (Unaudited)


                                              Three Months Ended       Six Months Ended
                                                   June 30,                June 30,
                                            ----------------------  ----------------------
                                               2004        2003        2004        2003
                                            ----------  ----------  ----------  ----------
<S>                                         <C>         <C>         <C>         <C>

Basic net income per share                  $     0.41  $     0.38  $     0.79  $     0.73
                                            ==========  ==========  ==========  ==========

Diluted net income per share                $     0.41  $     0.37  $     0.78  $     0.72
                                            ==========  ==========  ==========  ==========

Weighted average common shares outstanding   5,247,204   5,247,204   5,247,204   5,247,204
                                            ==========  ==========  ==========  ==========

Weighted average number of common and
common equivalent shares outstanding         5,323,482   5,356,982   5,323,786   5,355,340
                                            ==========  ==========  ==========  ==========
</TABLE>


                                        5
<PAGE>
<TABLE>
<CAPTION>
                          GEORGIA BANK FINANCIAL CORPORATION AND SUBSIDIARY
                                Consolidated Statements of Cash Flows
                                             (Unaudited)

                                                                         Six Months Ended June 30,
                                                                      -------------------------------
                                                                           2004            2003
                                                                      --------------  ---------------
<S>                                                                   <C>             <C>
Cash flows from operating activities:
Net income                                                            $   4,162,813   $    3,829,161
  Adjustments to reconcile net income to net cash
    used in operating activities
      Depreciation and amortization                                         646,054          647,613
      Provision for loan losses                                             519,920          906,555
      Net investment securities losses (gains)                                4,542          (28,772)
      Net amortization of premium on investment
        securities                                                          186,162          403,743
      Increase in CSV of bank owned life insurance                         (252,086)         (72,924)
      (Gain) loss on disposal of premises and equipment                      (1,867)             768
      Loss on the sale of other real estate                                  22,233                -
      Gain on sale of loans                                              (2,905,106)      (4,319,232)
      Real estate loans originated for sale                            (148,063,638)    (192,127,990)
      Proceeds from sales of real estate loans                          144,584,629      190,059,190
      Decrease (increase) in accrued interest receivable                    228,925          (15,372)
      (Increase) decrease in other assets                                    (5,688)         145,826
      (Decrease) increase in accrued interest and other liabilities        (834,614)          87,346
                                                                      --------------  ---------------
          Net cash used in operating activities                          (1,707,721)        (484,088)
                                                                      --------------  ---------------

Cash flows from investing activities:
      Proceeds from sales of available for sale securities               15,930,455       23,937,827
      Proceeds from maturities of available for sale securities          25,926,243       36,996,656
      Proceeds from maturities of held to maturity securities               668,000          500,000
      Purchase of available for sale securities                         (50,231,608)     (54,470,813)
      Purchase of Federal Home Loan Bank stock                             (250,000)               -
      Net increase in loans                                             (23,461,164)     (18,495,011)
      Purchase of Bank-owned life insurance                                       -       (3,000,000)
      Purchases of premises and equipment                                (3,303,103)        (413,022)
      Proceeds from sale of other real estate                               226,988                -
      Proceeds from sale of premises and equipment                           50,207            9,987
                                                                      --------------  ---------------
          Net cash used in investing activities                         (34,443,982)     (14,934,376)
                                                                      --------------  ---------------

Cash flows from financing activities:
      Net increase in deposits                                           54,753,462       36,580,103
      Net decrease in federal funds purchased and
          securities sold under repurchase agreements                   (16,201,875)      (3,999,079)
      Advances from Federal Home Loan Bank                               10,000,000                -
      Proceeds from other borrowed funds                                    100,000                -
      Payment of cash dividends                                          (1,364,273)               -
                                                                      --------------  ---------------
          Net cash provided by financing activities                      47,287,314       32,581,024
                                                                      --------------  ---------------

                                                                                          (Continued)
</TABLE>


                                        6
<PAGE>
<TABLE>
<CAPTION>
                     GEORGIA BANK FINANCIAL CORPORATION AND SUBSIDIARY
                           Consolidated Statements of Cash Flows
                                        (Unaudited)

                                                                Six Months Ended June 30,
                                                              -----------------------------
                                                                  2004            2003
                                                              -------------  --------------
<S>                                                           <C>            <C>

          Net increase in cash and cash equivalents              11,135,611      17,162,560

Cash and cash equivalents at beginning of period                 15,721,884      17,150,691

                                                              -------------  --------------
Cash and cash equivalents at end of period                    $  26,857,495  $   34,313,251
                                                              =============  ==============

Supplemental disclosures of cash paid during the period for:
        Interest                                              $   4,764,509  $    5,139,755
                                                              =============  ==============
        Income taxes                                          $   2,200,000  $    2,128,000
                                                              =============  ==============

Supplemental information on noncash investing activities:
        Loans transferred to other real estate                $     249,221  $      116,793
                                                              =============  ==============

See accompanying notes to consolidated financial statements.
</TABLE>


                                        7
<PAGE>
                GEORGIA BANK FINANCIAL CORPORATION AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                                  June 30, 2004

Note 1 - Basis of Presentation

The  accompanying  consolidated  financial  statements  include  the accounts of
Georgia Bank Financial Corporation and its wholly-owned subsidiary, Georgia Bank
&  Trust  Company  (the  "Company"  or  the  "Bank").  Significant  intercompany
transactions  and  accounts  are  eliminated  in  consolidation.

The  financial  statements  for the three and six months ended June 30, 2004 and
2003  are unaudited and have been prepared pursuant to the rules and regulations
of  the  Securities  and  Exchange Commission.  Certain information and footnote
disclosures  normally  included  in  financial statements prepared in accordance
with  accounting  principles  generally accepted in the United States of America
have  been  condensed  or  omitted pursuant to such rules and regulations. These
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and footnotes included in the Company's annual
report  on  Form  10-K  for  the  year  ended  December  31,  2003.

In  the  opinion  of management, all adjustments necessary to present fairly the
financial  position and the results of operations and cash flows for the interim
periods  have  been made. All such adjustments are of a normal recurring nature.
The  results  of operations for the three and six months ended June 30, 2004 are
not  necessarily  indicative  of the results of operations which the Company may
achieve  for  the  entire  year.

Note 2 - Recent Accounting Pronouncements

The  Emerging Issues Task Force on November 13, 2003 issued EITF Issue No. 03-1,
The  Meaning  of  Other-Than-Temporary Impairment and Its Application of Certain
Investments.  This  new  guidance  is  to  be  applied  in  other-than-temporary
impairment  evaluations  performed in reporting periods beginning after June 15,
2004.  Disclosures are effective in annual financial statements for fiscal years
ending  after  December  15,  2003,  for  investments  accounted  for under FASB
Statements  No.  115,  Accounting  for  Certain  Investments  in Debt and Equity
Securities,  and  No.  124,  Accounting  for  Certain  Investments  Held  by
Not-for-Profit  Organizations.  The  disclosure  requirements  for  all  other
investments are effective in annual financial statements for fiscal years ending
after  June  15,  2004. The Company does not expect the adoption of EITF 03-1 to
have  a  significant  impact  on  its  consolidated  financial  statements.

On  March  31,  2004,  the  FASB  issued  an  Exposure  Draft titled Share-Based
Payments,  an  amendment  of  FASB  Statements  No.  123  and 95, that addresses
accounting  for  equity  based compensation arrangements. The proposed statement
would eliminate the ability to account for share-based compensation transactions
using  APB  No.  25,  Accounting  for  Stock  Issued  to


                                        8
<PAGE>
Employees and replace some of the existing requirements under FASB Statement No.
123,  Accounting  for  Stock-Based  Compensation".  The proposed statement would
require  that  such  arrangements  are  accounted for using the fair-value-based
method  of  accounting  and  the  related  cost  expensed over the corresponding
service  period.  It  is  anticipated that the final statement will be issued in
the  fourth  quarter of 2004 and may be effective for the first quarter of 2005.
The Company provides proforma disclosures related to stock-based compensation in
Note  4.

Note 3 - Comprehensive Income

Other  comprehensive income for the Company consists of net unrealized gains and
losses  on  investment securities available for sale. Total comprehensive income
(loss)  for  the  three  months ended June 30, 2004 was $(1,189,000) compared to
$2,228,000 for the three months ended June 30, 2003.  Total comprehensive income
for the six months ended June 30, 2004 was $1,537,000 compared to $4,498,000 for
the  six  months  ended  June  30,  2003.

Note 4 - Stock-based Compensation

The  Company  applies  APB  Opinion  No.  25,  Accounting  for  Stock  Issued to
Employees, and related interpretations in accounting for its stock option plans.
Accordingly  compensation  cost is measured as the excess, if any, of the quoted
market  price  of  the  Company's  stock at the date of grant over the amount an
employee  must  pay to acquire the stock.  Had compensation cost been determined
based  upon the fair value of the options at the grant dates consistent with the
method  recommended  by  SFAS  No.  123, the Company's net income and income per
share,  on  a  pro forma basis, for the three and six months ended June 30, 2004
and  2003  is  indicated  below.

<TABLE>
<CAPTION>
                                        Three Months Ended         Six Months Ended
                                             June 30,                  June 30,
                                     ------------------------  ------------------------
                                        2004         2003         2004         2003
                                     -----------  -----------  -----------  -----------
<S>                                  <C>          <C>          <C>          <C>
Net income                           $2,156,723   $1,976,974   $4,162,813   $3,829,161
Deduct: Total stock-based
    Compensation expense determined
    under fair value based method,
    net of related tax effect           (51,969)     (36,534)    (103,938)     (69,729)
                                     -----------  -----------  -----------  -----------
Pro Forma                            $2,104,754   $1,940,440   $4,058,875   $3,759,432
                                     ===========  ===========  ===========  ===========

Basic net income per share:
    As reported                      $     0.41   $     0.38   $      .79   $      .73
    Pro forma                        $     0.40   $     0.37   $      .77   $      .72

Diluted net income per share:
    As reported                      $     0.41   $     0.37   $      .78   $      .72
    Pro forma                        $     0.40   $     0.36   $      .76   $      .70
</TABLE>

Note 4 - Cash Dividend Declared

On  April  15, 2004, the Company declared a quarterly cash dividend of $0.13 per
share  on  outstanding  shares.  The  dividend  was  paid  on  May  21,  2004 to
shareholders  of  record  as  of  May  3,  2004.


                                        9
<PAGE>
On  July  21,  2004, the Company declared a quarterly cash dividend of $0.13 per
share  on  outstanding  shares.  The  dividend  is payable on August 11, 2004 to
shareholders  of  record  as  of  July  28,  2004.


                                       10
<PAGE>
Item  2.  Management's  Discussion  and  Analysis  of  Financial  Condition  and
          Results of Operations

Overview
--------

The  Bank  was  organized by a group of local citizens and commenced business on
August  28,  1989. It began operations with one branch. Today, the Bank operates
six  full service branches and one drive through branch in Richmond and Columbia
counties  in  Augusta,  Martinez,  and  Evans,  Georgia. The Bank operates three
mortgage  origination  offices  in  Augusta,  Georgia,  Savannah,  Georgia,  and
Nashville,  Tennessee.  The  Savannah,  Georgia  office also offers construction
lending  services.  Bank and mortgage operations are located in Augusta, Georgia
in  two  operations  campuses  located  in close proximity to the main office in
Augusta,  Georgia.  Trust and retail investment services are located in the main
office.  The  Bank  is  Augusta's  largest  community  banking  company.

Richmond  and  Columbia  counties  have a diversified economy based primarily on
government,  transportation,  public  utilities, health care, manufacturing, and
wholesale and retail trade. Augusta is one of the leading medical centers in the
Southeast.  The  2002  population  of  the  Augusta-Richmond  County,  GA-SC
metropolitan  area  was  337,032,  the  second  largest  in  Georgia.

The  Bank's  services  include  lending,  residential and commercial real estate
loans,  construction  and  development loans, and commercial and consumer loans.
The  Bank  also  offers  a  variety  of  deposit  programs,  including
noninterest-bearing  demand,  interest  checking, money management, savings, and
time  deposits.  Combined  Richmond and Columbia counties, the Bank had 15.2% of
all deposits and was the second largest depository institution at June 30, 2003,
as  cited  from  the Federal Deposit Insurance Corporation's website. Securities
sold  under  repurchase agreements are also offered. Additional services include
trust,  retail  investment, and mortgage. As a matter of practice, most mortgage
loans  are sold in the secondary market; however, some mortgage loans are placed
in  the  portfolio based on marketing and balance sheet considerations. The Bank
continues  to  concentrate  on  increasing  its market share through various new
deposit  and  loan  products and other financial services and by focusing on the
customer  relationship  management philosophy. The Bank is committed to building
life-long  relationships  with  its  customers, employees, shareholders, and the
communities  it  serves.

The  Bank's  primary  source of income is from its lending activities.  In 2003,
the Bank's second largest source of income was from gain on sale of loans in the
secondary  market.  As  mortgage  interest  rates began to rise during the first
quarter  of  2004,  this  source  of  income  has  decreased,  while loan income
increased  due  to  higher loan volume.  The Bank also generates income from its
investment  activities  and  service  charges  and  fees  on deposits.  The Bank
continues  to  concentrate  on increasing trust service fees.  Other significant
contributors  to  income  include retail investment income and increases in cash
surrender  value  of  bank-owned  life  insurance.

The  Bank  has experienced steady growth.  Over the past five years, assets grew
from $342.1 million at December 31, 1999 to $630.6 million at December 31, 2003.
At  June  30,  2004,  assets


                                       11
<PAGE>
were  $678.6  million.  From  year  end  1999  to year end 2003, loans increased
$193.6  million,  and deposits increased $200.8 million.  From December 31, 2003
to  June  30,  2004,  loans increased $29.1 million and deposits increased $57.8
million.  Also,  from  1999  to  2003,  return  on average equity increased from
13.48% to 15.62% and return on average assets increased from 1.21% to 1.31%.  At
June  30,  2004, return on average assets was 1.28% and return on average equity
was 15.10%.  Net income for the year ended 1999 was $4.0 million compared to net
income  of  $7.9  million at year end 2003.  Net income for the six months ended
June  30,  2004  was  $4.2 million.  The Company has reached a level of maturity
evidenced  by long-term financial performance and stability that resulted in the
January  23,  2004 declaration of its first quarterly cash dividend of $0.13 per
share.  Subsequently,  on April 15, 2004 and July 21, 2004, the Company declared
its  second  and  third  quarterly  cash  dividends  of  $0.13  per  share.

The  Bank meets its liquidity needs by managing cash and due from banks, federal
funds  purchased  and  sold,  maturity  of  investment securities, paydowns from
mortgage-backed  securities,  and  draws  on  lines  of  credit.  Additionally,
liquidity  can  be managed through structuring deposit and loan maturities.  The
Bank  funds loan and investment growth with core deposits, securities sold under
repurchase  agreements  and  wholesale borrowings.  During inflationary periods,
interest  rates  generally  increase.  When  interest  rates rise, variable rate
loans  and  investments  produce  higher  earnings,  however,  deposit and other
borrowings interest expense and operating expenses also rise.  The Bank monitors
its  interest  rate  risk  in  a ramp up and down annually 200 basis points (2%)
scenario  and  a  shock  up  and down 200 (2%) basis points scenario.   The Bank
monitors  operating  expenses  through  responsibility  center  budgeting.

Forward-Looking Statements
--------------------------

Georgia  Bank Financial Corporation (the "Company") may, from time-to-time, make
written  or  oral  forward-looking statements, including statements contained in
the  Company's  filings  with  the  Securities  and  Exchange  Commission  (the
"Commission")  and  its  reports  to  shareholders.  Statements  made  in  such
documents,  other  than  those  concerning  historical  information,  should  be
considered  forward-looking and subject to various risks and uncertainties. Such
forward-looking  statements  are  made based upon management's belief as well as
assumptions made by, and information currently available to, management pursuant
to  "safe  harbor" provisions of the Private Securities Litigation Reform Act of
1995.  The  Company's  actual  results  may  differ  materially from the results
anticipated in forward-looking statements due to a variety of factors, including
governmental  monetary  and  fiscal  policies, deposit levels, loan demand, loan
collateral  values,  securities  portfolio  values,  and  interest  rate  risk
management;  the  effects  of  competition  in  the  banking business from other
commercial  banks,  savings  and  loan  associations,  mortgage  banking  firms,
consumer finance companies, credit unions, securities brokerage firms, insurance
companies,  money market mutual funds and other financial institutions operating
in  the  Company's  market  area and elsewhere, including institutions operating
through the Internet; changes in governmental regulation relating to the banking
industry,  including regulations relating to branching and acquisitions; failure
of  assumptions  underlying  the  establishment  of  reserves  for  loan losses,
including  the  value  of  collateral  underlying  delinquent  loans,  and other
factors.  The  Company cautions that such factors are not exclusive. The Company
does not undertake to update any forward-looking statement that may be made from
time  to  time  by,  or  on  behalf  of,  the  Company.


                                       12
<PAGE>
Critical Accounting Estimates
-----------------------------

The  accounting  and  financial  reporting  policies  of  the Company conform to
accounting  principles generally accepted in the United States of America and to
general  practices  within  the banking industry.  Of these policies, management
has  identified  the  allowance  for loan losses as a critical accounting policy
that requires difficult subjective judgment and is important to the presentation
of  the  financial  condition  and  results  of  operations  of  the  Company.

The allowance for loan losses is established through a provision for loan losses
charged  to  expense,  which  affects the Company's earnings directly. Loans are
charged  against the allowance for loan losses when management believes that the
collectibility  of the principal is unlikely. Subsequent recoveries are added to
the  allowance.  The  allowance  is  an  amount that management believes will be
adequate  to absorb losses on existing loans that become uncollectible, based on
evaluations  of  the  collectibility  of  loans.  The  evaluations  take  into
consideration  such  factors  as  changes  in  the nature and volume of the loan
portfolio,  historical loss rates, overall portfolio quality, review of specific
problem  loans,  and  current  economic  conditions and trends that may affect a
borrower's  ability  to  repay.

The Company segments its allowance for loan losses into the following four major
categories:  1)  identified  losses  for impaired loans; 2) general reserves for
Classified/Watch loans; 3) general reserves for loans with satisfactory ratings;
4) general reserves based on economic and market risk qualitative factors.  Risk
ratings are initially assigned in accordance with the Bank's loan and collection
policy.  An organizationally independent department reviews grade assignments on
an ongoing basis.  Management reviews current information and events regarding a
borrower's  financial  condition  and  strengths,  cash flows available for debt
repayment,  the  related collateral supporting the loan and the effects of known
and  expected  economic conditions.  When the evaluation reflects a greater than
normal  risk associated with the individual loan, management classifies the loan
accordingly.  If  the  loan is determined to be impaired, management allocates a
portion  of  the  allowance for loan losses for that loan based upon the present
value  of  future cash flows discounted at the loan's effective interest rate or
the  fair  value  of  the  collateral  as  the  measure  for  the  amount of the
impairment.  Cash  receipts  for  accruing  loans  are  applied to principal and
interest  under the contractual terms of the loan agreement, where cash receipts
on  impaired  and  nonaccrual  loans  for which the accrual of interest has been
discontinued  are  applied  first  to  principal  and  then  to interest income.
Impaired  and  Classified/Watch  loans are aggressively monitored.  The reserves
for  loans rated satisfactory are further subdivided into various types of loans
as  defined  by call report codes.  Qualitative factors are based upon economic,
market  and  industry  conditions  that  are specific to the Company's local two
county  markets.  These  qualitative  factors  include,  but are not limited to,
national  and local economic conditions, bankruptcy trends, unemployment trends,
loan  concentrations,  dependency  upon government installations and facilities,
and  competitive  factors  in  the  local  market.  These  allocations  for  the
qualitative  factors  are  included  in the various individual components of the
allowance for loan losses.  The qualitative factors are subjective in nature and
require considerable judgment on the part of the Company's management.  However,
it  is  the  Company's opinion that these factors represent uncertainties in the
Bank's business environment that must be factored into the Company's analysis of
the  allowance  for  loan  losses.  The  Company  is


                                       13
<PAGE>
committed  to  developing  more  historical  data  in  the  future to reduce the
dependence  on  these  qualitative  factors.

Performance Overview - Net Income
---------------------------------

The  Company's  net  income for the second quarter of 2004 was $2,157,000, which
was  an increase of $180,000 (9.1%) compared to net income of $1,977,000 for the
second  quarter  of 2003.  Diluted net income per share was $0.41 for the second
quarter  of  2004  compared to $0.37 for the second quarter of 2003.  Net income
for  the first six months of 2004 was $4,163,000, an increase of $334,000 (8.7%)
compared  with  net  income of $3,829,000 for the first six months of 2003.  The
increase  in  net  income  for  the  three and six months ended June 30, 2004 as
compared  with  the  three  and  six months ended June 30, 2003, was primarily a
result  of  increases  in  net  interest  income and a decrease in the loan loss
provision,  somewhat  offset  by  a  decrease  in  gain on sales of loans in the
secondary  market  and  an  increase  in  noninterest  expense.  Despite a lower
interest  rate  environment  in 2004, loan interest income increased due to loan
volume.  Additionally,  the  lower  rates,  coupled with a decrease in the prime
savings  account  rate,  resulted in lower interest expense on deposits, despite
the  increase in deposit volume.  The decrease in the loan loss provision is due
to  improvement  in  the levels of Classified Watch rated debt.  Gain on sale of
mortgage loans in the secondary market decreased due to higher mortgage rates in
2004  as  compared  to the first quarter of 2003 which resulted in a decrease in
refinancing activity in 2004.  This also resulted in lower mortgage commissions.
The  increase  in  employee  benefit  expense  is  primarily due to increases in
deferred compensation expense, 401K contributions, and state unemployment taxes.
Other  operating  expenses  increased  primarily  due  to  loan  costs, where we
recorded  a  $150,000  loss  on a fraudulent mortgage loan sold in the secondary
market.  Other  increases  include  processing  fees  due to new retail checking
accounts,  somewhat  offset  by  a decrease in overdraft protection expense, and
increases  in  professional fees to assist the Company in compliance with FDICIA
as  well  as  increased  trust advisory fees and state tax training credit fees.

Total  assets  of  $678.6 million at June 30, 2004 reflects an increase of $48.0
million  (7.6%)  from  year-end 2003. This increase is primarily attributable to
higher  loan  balances  since  December 2003.  Total loans at June 30, 2004 were
$461.8  million  which  represented  an  increase  of  $29.1 million (6.7%) from
December  31,  2003.  Since  December  31, 2003, investment securities increased
$3.8  million  (2.4%),  Federal  Funds  Sold  increased  $11.7 million (100.0%),
premises  and  equipment  increased  $2.6  million  (18.3%),  and  other  assets
increased  $1.4  million  (38.5%).  These  increases were funded by increases in
total  deposits  of  $54.8  million (11.3%), increases in Federal Home Loan Bank
advances of $10.0 million (33.3%), decreases in securities sold under repurchase
agreements  of $16.2 million (28.4%). Accumulated comprehensive income decreased
$2.6  million  (261.7%)  since  December  31,  2003.

The  annualized  return  on average assets for the Company was 1.28% for the six
months  ended  June  30,  2004, compared to 1.31% for the same period last year.
While  total  assets have increased $71.6 million since second quarter 2003, net
income has only increased $334,000 due to the lower interest rates, the decrease
in  gain on sale of mortgage loans, and the increase in other operating expenses
resulting  in  a  lower  return  on  assets.  The  annualized  return on average


                                       14
<PAGE>
stockholders'  equity was 15.10% for the six months ended June 30, 2004 compared
to  15.76%  for  the  comparable  period  in  2003.  The  decrease  is primarily
attributable  to  the  continued  increase  in  stockholders'  equity.

Net Interest Income
-------------------

Net  interest  income increased $733,000 (13.3%) over the second quarter of 2003
and $1.5 million (14.0%) during the first six months of 2004 over the comparable
period  in  2003.  Interest  income  on  loans increased $303,000 (4.7%) for the
second  quarter 2004 over the second quarter 2003, and $686,000 (5.4%) primarily
due  for the six months ended June 30, 2004 over the comparable six-month period
in  2003  primarily  due  to  increased loan volume.  Investment interest income
increased  $152,000  (9.8%)  for the second quarter 2004 over the second quarter
2003,  and  $238,000  (7.5%)  for  the  six  months ended June 30, 2004 over the
comparable  six-month  period in 2003.  Interest income on investment securities
also  increased  due  to  volume,  despite  the  lower  interest  rates.
Interest-earning  assets  were  $634.2  million at June 30, 2004, an increase of
$64.9  million (11.4%) over June 30, 2003 and $44.6 million (7.6%) over December
31,  2003.  Despite  increases  in deposit volumes, interest expense on deposits
decreased  $265,000  (13.7%)  for  the  second  quarter  of 2004 over the second
quarter of 2003 and $606,000 (15.5%) for the six months ended June 30, 2004 over
the  comparable  six-month  period  in  2003, due to lower interest rates during
2004.

The  Company's  net  interest margin for the three and six months ended June 30,
2004  was  3.97%  and  4.01%,  respectively, compared to 3.85% and 3.86% for the
three  and  six  months  ended  June  30,  2003,  respectively.

Noninterest Income
------------------

Noninterest  income  decreased  $694,000  (17.6%)  during the three-month period
ended  June  30, 2004 compared to the three-month period ended June 30, 2003 and
$1,044,000  (14.6%)  during the six-month period ended June 30, 2004 compared to
the  six-month  period  ended June 30, 2003.  This decrease was primarily due to
the  decrease  in  gains  from  the  origination  and  sale  of mortgages in the
secondary  market which decreased $903,000 (35.7%) during the three-month period
ended  June  30, 2004 compared to the three-month period ended June 30, 2003 and
$1,414,000  (32.7%)  during the six-month period ended June 30, 2004 compared to
the six-month period ended June 30, 2003. The decrease in gains is the result of
lower  volumes  of  loans  sold which are influenced by the higher interest rate
environment during 2004.  This decrease was somewhat offset by increases in cash
surrender value of bank owned life insurance due to additional purchases in June
and  July  of  2003,  trust  service  fees  due to increased volume, and service
charges  and fees on deposits, primarily due to an increase in NSF fees somewhat
offset  by a reduction in service charges due primarily to lower commercial cash
processing  fees.

Noninterest Expense
-------------------

Noninterest  expense  totaled  $6,147,000  for  the  second  quarter of 2004, an
increase  of  $160,000  (2.7%)  over  the  second  quarter  of  2003 and totaled
$11,747,000  for  the  six  months  ended  June


                                       15
<PAGE>
30,  2004,  an  increase  of $523,000 (4.7%) over the comparable period in 2003.
Salary  expense  of $3,121,000 and $5,634,000 for the three and six months ended
June  30,  2004, respectively, decreased $116,000 (3.6%) over the second quarter
of  2003  and  $359,000  (6.0%)  over  the  six months ended June 30, 2003.  The
decrease  is  primarily attributable to the decrease in mortgage commissions and
salaries  directly  related  to  the  secondary mortgage market volume, somewhat
offset  by  increases  in  overall  company  growth  and  increases in incentive
compensation.  Employee  benefits  increased $48,000 (7.1%) for the three months
ended  June  30,  2004  compared  to  the  three months ended June 30, 2003, and
$187,000  (14.3%)  for the six months ended June 30, 2004 as compared to the six
months  ended  June  30,  2003.  This  increase  is  primarily  attributable  to
increases  in  long-term  compensation  expense,  401K  contributions, and state
unemployment taxes due to a statewide increase in the tax rate.  Other operating
expenses increased $183,000 (12.4%) over the second quarter of 2003 and $611,000
(22.3%)  during the first six months of 2004 over the comparable period in 2003.
The increase is primarily attributable to loan costs due to a loss recorded on a
fraudulent  mortgage  loan sold in the secondary market, increases in processing
fees  due  to  new  retail  checking  accounts, somewhat offset by a decrease in
overdraft  protection  expense, and increases in professional fees to assist the
Company  in  compliance with FDICIA as well as increased trust advisory fees and
state  tax  training  credit  fees.

Income Taxes
------------

Income  tax expense for the second quarter of 2004 totaled $1,077,000, which was
virtually  the  same as from the second quarter of 2003.  Income tax expense for
the  six months ended June 30, 2004 totaled $2,048,000 for an effective tax rate
of  32.98%  compared  to  34.81%  for  the  six months ended June 30, 2003.  The
decrease  in  the  effective  tax rate for the six months ended June 30, 2004 is
primarily  due  to  the  increase  in  cash  surrender  value of bank-owned life
insurance  and  an  increase  in state business license expense and training tax
credits  which  resulted  in  a  reduction  of  income  tax  expense  for  2004.

Asset Quality
-------------

Table  1  which  follows  shows  the  current  and  prior  period  amounts  of
non-performing assets. Non-performing assets were $3.2 million at June 30, 2004,
compared to $3.0 million at December 31, 2003 and $3.0 million at June 30, 2003.
The  ratio  of  non-performing  assets  to total loans and other real estate was
0.56% at June 30, 2004, compared to 0.70% at December 31, 2003 and 0.69% at June
30,  2003.  The  control and monitoring of non-performing assets continues to be
management's  priority.

At  June 30, 2004, December 31, 2003 and June 30, 2003, the Company had no loans
90  days  past  due  and  still  accruing.

Allowance for Loan Losses
-------------------------

The  allowance  for loan losses represents a reserve for probable loan losses in
the  loan portfolio.  The adequacy of the allowance for loan losses is evaluated
periodically  based  on  a  review  of  all


                                       16
<PAGE>
significant loans, with particular emphasis on impaired, non-accruing, past due,
and  other  loans  that  management  believes  require  special  attention.  The
determination  of  the  allowance  for  loan  losses  is  considered  a critical
accounting  policy  of  the  Company.  See  "Critical  Accounting  Policies."

When  reviewing  the allowance for loan losses, it is important to understand to
whom  the  Company  lends.  At June 30, 2004, the loan portfolio is comprised of
77.56%  real  estate  loans,  of  which  23.02%  constitutes  construction  and
acquisition  and development loans. Commercial, financial and agricultural loans
comprise  12.52%,  and  consumer  loans  comprise  9.92%  of  the  portfolio.

While the Company has 77.56% of its loan portfolio secured by real estate loans,
this  percentage is not significantly higher than in previous years.  Commercial
real  estate  comprises  30.61%  of  the  loan  portfolio and is primarily owner
occupied  properties  where  the operations of the commercial entity provide the
necessary cash flow to service the debt.  For this portion of real estate loans,
repayment  is  not  dependent upon liquidation of the real estate.  Construction
and  development (23.02%) has been an increasingly important portion of the real
estate  loan  portfolio.  The  Company  carefully  monitors  the  loans  in this
category  since  the  repayment  of  these loans is generally dependent upon the
liquidation  of  the  real estate and is impacted by national and local economic
conditions.  The residential category, 19.50% of the portfolio, represents those
loans  that the Company chooses to maintain in its portfolio rather than selling
into  the  secondary  market  for  marketing  and  competitive  reasons.  The
residential held for sale category, 4.42% of the portfolio, comprises loans that
are in the process of being sold into the secondary market.  The credit has been
approved  by  the  investor and the interest rate locked so the Company takes no
credit  or  interest  rate  risk  with  respect  to  these  loans.

The  Company  has  no  large  loan  concentrations  to  individual  borrowers or
industries.  Unsecured  loans  at  June  30,  2004  were  $9.2  million.  While
management  uses  available  information  to  recognize  losses on loans, future
additions  to  the  allowance  may  be  necessary  based  on changes in economic
conditions.  In  addition,  various  regulatory agencies, as an integral part of
their  examination process, periodically review the Company's allowance for loan
losses.  Such  agencies  may  require  the Company to recognize additions to the
allowance  based  on  their judgments about information available to them at the
time  of  their  examination.

The Company segments its allowance for loan losses into the following four major
categories:  1)  identified  losses  for impaired loans; 2) general reserves for
Classified/Watch loans; 3) general reserves for loans with satisfactory ratings;
4) general reserves based on economic and market risk qualitative factors.  Risk
ratings are initially assigned in accordance with the Bank's loan and collection
policy.  An organizationally independent department reviews grade assignments on
an ongoing basis.  Management reviews current information and events regarding a
borrower's  financial  condition  and  strengths,  cash flows available for debt
repayment,  the  related collateral supporting the loan and the effects of known
and  expected  economic conditions.  When the evaluation reflects a greater than
normal  risk associated with the individual loan, management classifies the loan
accordingly.  If  the  loan is determined to be impaired, management allocates a
portion  of  the  allowance for loan losses for that loan based upon the present
value  of  future  cash


                                       17
<PAGE>
flows  discounted at the loan's effective interest rate or the fair value of the
collateral  as  the  measure  for  the  amount  of  the  impairment.

Additions to the allowance for loan losses are made periodically to maintain the
allowance  at an appropriate level based upon management's analysis of potential
risk in the loan portfolio.  Loans determined to be uncollectible are charged to
the  allowance  for  loan  losses  and  subsequent  recoveries  are added to the
allowance.  A  provision  for  losses  in  the amount of $131,000 was charged to
expense for the quarter ended June 30, 2004 compared to $432,000 for the quarter
ended  June  30,  2003,  and  $520,000  for  the  six months ended June 30, 2004
compared  to  $907,000  for  the  six  months  ended  June 30, 2003.  This lower
provision  for  the  three and six months ended June 30, 2004 as compared to the
three  and six months ended June 30, 2003 is due to improvement in the levels of
Classified  Watch  rated  debt.

At June 30, 2004 the ratio of allowance for loan losses to total loans was 1.58%
compared  to  1.69% at December 31, 2003 and 1.68% at June 30, 2003.  Management
considers  the  current  allowance  for  loan  losses appropriate based upon its
analysis  of  the  potential  risk  in  the  portfolio, although there can be no
assurance  that  the  assumptions  underlying  such analysis will continue to be
correct.

Liquidity and Capital Resources
-------------------------------

The  Company's  liquidity  remains  adequate  to meet operating and loan funding
requirements.  The  loan to deposit ratio at June 30, 2004 was 85.7% compared to
89.4% at December 31, 2003 and 88.3% at June 30, 2003.  The decrease in the loan
to  deposit  ratio  from  December  31,  2003  and  June  30,  2003 reflects the
significant increase in deposits during the first six months of 2004.   Deposits
at  June  30,  2004  and  December  31,  2003  include $35.0 million of brokered
certificates  of  deposit.  The  Company  has  also utilized borrowings from the
Federal Home Loan Bank.  The Company maintains a line of credit with the Federal
Home  Loan Bank approximating 10% of the Bank's total assets.  Federal Home Loan
Bank  advances  are  collateralized  by  eligible  first  mortgage  loans,  and
commercial  real  estate  loans.  These borrowings totaled $40.0 million at June
30,  2004.  The  Company  maintains  repurchase  lines  of  credit with SunTrust
Robinson  Humphrey,  Atlanta, Georgia, for advances up to $20.0 million and with
The  Bankers  Bank, Atlanta, Georgia, for advances up to $10.0 million.  At June
30,  2004,  there were no repurchase agreements with SunTrust Robinson Humphrey,
Atlanta,  Georgia  or  the  Bankers  Bank,  Atlanta, Georgia.  The Company has a
federal  funds  purchased accommodation with The Bankers Bank, Atlanta, Georgia,
for  advances  up  to $16.3 million and with SunTrust Bank, Atlanta, Georgia for
advances up to $10.0 million.  Additionally, liquidity needs can be satisfied by
the  structuring  of the maturities of investment securities and the pricing and
maturities  on  loans  and deposits offered to customers.  The Company also uses
securities  sold  under  repurchase  agreements to fund growth.  Securities sold
under  repurchase  agreements  were  $40.8  million  at  June  30,  2004.

Shareholders'  equity to total assets was 7.9% at June 30, 2004 compared to 8.4%
at  June 30, 2003 and 8.5% at December 31, 2003.  The capital of the Company and
the  Bank  exceeded  all  required  regulatory guidelines at June 30, 2004.  The
Company's  Tier  1 risk-based, total risk-based and leverage capital ratios were
10.38%,  11.63%,  and  8.28%,  respectively,  at  June  30,


                                       18
<PAGE>
2004.  Table  2  which follows reflects the current regulatory capital levels in
more  detail,  including  comparisons  to  the  regulatory  minimums.

Management  is  not  aware  of  any  events or uncertainties that are reasonably
likely  to  have a material effect on the Company's liquidity, capital resources
or  operations.

Commitments and Contractual Obligations
---------------------------------------

The Bank is a party to lines of credit with off-balance sheet risk in the normal
course  of  business  to  meet  the  financing needs of its customers.  Lines of
credit are unfunded commitments to extend credit.  These instruments involve, in
varying  degrees,  exposure  to  credit  and interest rate risk in excess of the
amounts  recognized  in the financial statements.  The Bank's exposure to credit
loss  in  the  event  of  nonperformance  by  the  other  party to the financial
instrument  for  unfunded  commitments to extend credit and letters of credit is
represented  by the contractual amount of those instruments.  The Bank evaluates
construction  and acquisition and development loans for the percentage completed
before  extending  additional credit.  The Bank follows the same credit policies
in  making  commitments  and  conditional  obligations as it does for on-balance
sheet  instruments.

Unfunded commitments to extend credit where contract amounts represent potential
credit  risk  totaled  $114.6  million  at June 30, 2004.  These commitments are
primarily  at  variable  interest  rates.

The  Company's  commitments  are  funded  through  internal  funding  sources of
scheduled  repayments of loans and sales and maturities of investment securities
available  for  sale  or external funding sources through acceptance of deposits
from  customers  or  borrowings  from  other  financial  institutions.

The  following table is a summary of the Company's commitments to extend credit,
commitments  under  contractual  leases  as  well  as  the  Company' contractual
obligations,  consisting  of deposits, FHLB advances, which are subject to early
termination  options,  and  borrowed  funds by contractual maturity date for the
next  five  years.

<TABLE>
<CAPTION>
        Commitments and          Due in   Due in   Due in   Due in   Due in
    Contractual Obligations      1 Year   2 Years  3 Years  4 Years  5 Years
    (Dollars in thousands)
------------------------------  --------  -------  -------  -------  -------
<S>                             <C>       <C>      <C>      <C>      <C>
Lines of credit                 $114,643        -        -        -        -
Lease agreements                     114       90       77       23        -
Deposits                         229,358  114,490   79,141   33,816   32,175
Securities sold under
  repurchase agreements           40,767        -        -        -        -
FHLB advances                          -    5,000    5,000        -        -
Other borrowings                     900        -        -        -        -
                                --------  -------  -------  -------  -------
  Total commitments and
      contractual obligations    385,782  119,580   84,218   33,839   32,175
                                ========  =======  =======  =======  =======
</TABLE>


                                       19
<PAGE>
Although management regularly monitors the balance of outstanding commitments to
fund  loans  to  ensure  funding  availability should the need arise, management
believes  that  the  risk  of  all customers fully drawing on all these lines of
credit  at  the  same  time  is  remote.

Effects of Inflation and Changing Prices
----------------------------------------

Inflation  generally  increases  the cost of funds and operating overhead and to
the  extent  loans  and  other  assets  bear  variable rates, the yields on such
assets.  Unlike  most  industrial  companies,  virtually  all  of the assets and
liabilities  of  a  financial  institution are monetary in nature.  As a result,
interest  rates generally have a more significant impact on the performance of a
financial institution than the effects of general levels of inflation.  Although
interest  rates  do  not  necessarily move in the same direction and to the same
extent  as  the  prices  of goods and services, increases in inflation generally
have  resulted in increased interest rates.  In addition, inflation can increase
a  financial  institution's  cost  of  goods and services purchased, the cost of
salaries  and  benefits,  occupancy  expense  and  similar items.  Inflation and
related  increases  in  interest  rates  generally  decrease the market value of
investments  and  loans  held  and may adversely affect liquidity, earnings, and
stockholders'  equity.  Mortgage  originations  and refinancings tend to slow as
interest  rates  increase,  and  can  reduce  the  Company's  earnings from such
activities  and  the  income  from the sale of residential mortgage loans in the
secondary  market.


                                       20
<PAGE>
<TABLE>
<CAPTION>
TABLE 1
-------

                   GEORGIA BANK FINANCIAL CORPORATION AND SUBSIDIARY
                              CONSOLIDATED FINANCIAL DATA
                                (Dollars in Thousands)
                                      (Unaudited)

                                              Six Months Ended June 30,
                                          ---------------------------------
PROFITABILITY                                2004                   2003
-------------                             ----------             ----------
<S>                            <C>        <C>         <C>        <C>         <C>
Return on average assets *                     1.28%                  1.31%

Return on average equity *                    15.10%                 15.76%

ALLOWANCE FOR LOAN LOSSES
-------------------------

Beginning balance, January 1,             $   7,278              $   6,534
Provision charged to expense                    520                    907
Recoveries                                      335                    310
Loans charged off                              (831)                  (676)
                                          ----------             ----------
Ending balance, June 30,                  $   7,302              $   7,075
                                          ==========             ==========

NON-PERFORMING ASSETS          June 30, 2004          December 31, 2003      June 30, 2003
---------------------          -------------          -----------------      -------------

Non-accrual loans              $   3,230              $   3,045              $   2,917
Other real estate owned                5                      0                    117
                               ---------              ---------              ---------
Total non-performing assets    $   3,235              $   3,045              $   3,034
                               =========              =========              =========
</TABLE>

*  Annualized


                                       21
<PAGE>
<TABLE>
<CAPTION>
TABLE 2
-------

                       Georgia Bank Financial Corporation
                                       and
                           Georgia Bank & Trust Company
                         Regulatory Capital Requirements
                                  June 30, 2004
                             (Dollars in Thousands)

                             Actual            Required            Excess
                        Amount   Percent   Amount   Percent   Amount   Percent
                        -----------------  -----------------  -----------------
<S>                     <C>      <C>       <C>      <C>       <C>      <C>
Georgia Bank Financial
Corporation
Risk-based capital:
  Tier 1 capital        $55,344    10.38%  $21,320     4.00%  $34,024     6.38%
  Total capital          62,014    11.63%   42,641     8.00%   19,373     3.63%
Tier 1 leverage ratio    55,344     8.28%   26,749     4.00%   28,595     4.28%


Georgia Bank & Trust
Company
Risk-based capital:
  Tier 1 capital        $52,038     9.79%  $21,257     4.00%  $30,781     5.79%
  Total capital          58,689    11.04%   42,514     8.00%   16,175     3.04%
Tier 1 leverage ratio    52,038     7.80%   26,685     4.00%   25,353     3.80%
</TABLE>


                                       22
<PAGE>
Item 3.  Quantitative and Qualitative Disclosures About Market Risk

As  of  June  30,  2004,  there were no substantial changes in the interest rate
sensitivity  analysis or the sensitivity of market value of portfolio equity for
various  changes  in  interest  rates  calculated  as of December 31, 2003.  The
foregoing  disclosures  related to the market risk of the Company should be read
in  conjunction  with  the  Company's audited consolidated financial statements,
related  notes  and  management's discussion and analysis of financial condition
and  results  of operations for the year ended December 31, 2003 included in the
Company's  2003  Annual  Report  on  Form  10-K,  Item  7A.

Item 4. Controls and Procedures

As  of  the end of the period covered by this report, the Company carried out an
evaluation,  under  the  supervision and with the participation of the Company's
management,  including  the  Company's  President  and  Chief  Executive Officer
(principal  executive  officer)  and  its  Executive  Vice  President  and Chief
Operating  Officer  (principal  financial  officer), of the effectiveness of the
design  and  operation  of  the  Company's  disclosure  controls  and procedures
pursuant to Exchange Act Rule 13a-15.  Based upon that evaluation, such officers
concluded that the Company's disclosure controls and procedures are effective in
timely  alerting them to material information relating to the Company (including
its  consolidated subsidiaries) that is required to be included in the Company's
periodic  filings  with the Securities and Exchange Commission.  There have been
no  significant  changes in the Company's internal controls or, to the Company's
knowledge,  in  other  factors  that  could  significantly affect those internal
controls  subsequent  to  the  date  the Company carried out its evaluation, and
there  have  been no corrective actions with respect to significant deficiencies
or  material  weaknesses.


                                       23
<PAGE>
                                     Part II
                                OTHER INFORMATION


Item 1. Legal Proceedings

          There  are  no material pending legal proceedings to which the Company
          or  any  of  its  subsidiaries  is  a  party  or of which any of their
          property  is  subject.

Item 2. Changes in Securities

          On  April  15, 2004, the Company announced the commencement of a stock
          repurchase  program,  pursuant  to  which  it will, from time to time,
          repurchase  up  to 100,000 shares of its outstanding stock. There were
          no  shares  repurchased  under  this existing stock repurchase plan or
          otherwise,  and  no  stock repurchase programs were terminated, during
          the  second  quarter  of  2004.

Item 3. Defaults Upon Senior Securities

          Not  applicable

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

          (a)  The  Annual Meeting of Shareholders was held on April 14, 2004 at
               the  Company's  office  located  at  3530  Wheeler Road, Augusta,
               Georgia.

          (b)  The  following  directors were elected for a term of one year and
               until  a  successor  is  duly  qualified  and  elected:

                    William J. Badger
                    R. Daniel Blanton
                    Warren Daniel
                    Edward G. Meybohm
                    Robert W. Pollard, Jr.
                    Randolph R. Smith
                    Ronald L. Thigpen
                    John W. Trulock, Jr.

          (c)  The  following  matters  were  voted  on  at  the  meeting as was
               previously  identified  in  the Proxy materials forwarded to each
               shareholder:


                                       24
<PAGE>
          1.   Proposal to elect the nine individuals nominated by management as
               Directors.

               Votes were cast as follows:

<TABLE>
<CAPTION>
          Director                 For        Withhold
          -----------------------  ---------  --------
<S>                                <C>        <C>
          William J. Badger        4,450,674        12
          R. Daniel Blanton        4,415,580    35,106
          Warren Daniel            4,450,362       324
          Edward G. Meybohm        4,450,674    35,106
          Robert W. Pollard, Jr.   4,450,686         0
          Randolph R. Smith, M.D.  4,450,686         0
          Ronald L. Thigpen        4,415,580    35,106
          John W. Trulock, Jr.     4,450,686         0
</TABLE>

Item 5. Other Information

          None

Item 6. Exhibits and Reports on Form 8-K.

     (a)  Exhibits

          31.1 Certification of Chief Executive Officer Pursuant to Section 302
               of the Sarbanes-Oxley Act of 2002.

          31.2 Certification of Chief Financial Officer Pursuant to Section 302
               of the Sarbanes-Oxley Act of 2002.

          32.1 Certification of Chief Executive Officer and Chief Financial
               Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
               2002.

     (b)  Reports  on  Form  8-K

          Form 8-K filed on April 21, 2004, reporting the April 15, 2004
          declaration  of  a  quarterly  cash  dividend  of  $.13  per  share to
          shareholders  of  record  as  of May 3, 2004 and is payable on May 21,
          2004.

          Form 8-K furnished under Item 9 on April 27, 2004 reporting earnings
          for  the  first  quarter  of  2004.


                                       25
<PAGE>
                       GEORGIA BANK FINANCIAL CORPORATION
                              Form 10-Q Signatures

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                     GEORGIA BANK FINANCIAL CORPORATION



Date:  August 6, 2004                By:   /s/ Ronald L. Thigpen
     ----------------------             ----------------------------------------

                                     Ronald L. Thigpen
                                     Executive Vice President, Chief Operating
                                     Officer (Duly Authorized Officer of
                                     Registrant and Principal Financial Officer)


                                       26
<PAGE>