Version20U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB


[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

             For the quarterly period ended      March 31, 2004
                                             --------------------

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

             For the transition period from             to
                                            ----------     ----------

                        Commission File Number: 000-30273

                           Chestatee Bancshares, Inc.
          ------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

           Georgia                                             58-2535333
-------------------------------                            ------------------
(State or other jurisdiction of                              (IRS Employer
incorporation or organization)                             Identification No.)

                   6639 Highway 53 East, Dawsonville, Georgia
                   ------------------------------------------
                    (Address of principal executive offices)

                                 (706) 216-2265
                           ---------------------------
                           (Issuer's telephone number)

                                       N/A
          -------------------------------------------------------------

              (Former name, former address and former fiscal year,
                         if changed since last report)

Check whether the issuer (1) 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
     ---

State the number of shares outstanding of each of the issuer's classes of common
equity, as of May 1, 2004: 3,106,000; no par value.

Transitional Small Business Disclosure Format      Yes      No  X
                                                               ---
<PAGE>
                   CHESTATEE BANCSHARES, INC. AND SUBSIDIARIES

--------------------------------------------------------------------------------


                                      INDEX
                                      -----

                                                                            Page
                                                                            ----

PART I.    FINANCIAL INFORMATION

           Item 1.  Financial Statements

              Consolidated Balance Sheet - March 31, 2004....................3

              Consolidated Statements of Income and Comprehensive Income
               Three Months Ended March 31, 2004 and 2003....................4

              Consolidated Statements of Cash Flows -
               Three Months Ended March 31, 2004 and 2003....................6

              Notes to Consolidated Financial Statements.....................7

           Item 2.  Management's Discussion and Analysis of
                         Financial Condition and Results of Operations.......9

           Item 3.  Controls and Procedures.................................16


PART II.   OTHER INFORMATION

           Item 1 - Legal Proceedings.......................................17

           Item 4 - Submission of Matters to a Vote of Security Holders.....17

           Item 5 - Other Information.......................................17

           Item 6 - Exhibits and Reports on Form 8-K........................17

           Signatures.......................................................18

           Certifications...................................................19

<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM I.    FINANCIAL STATEMENTS

                   CHESTATEE BANCSHARES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                 MARCH 31, 2004
                                   (Unaudited)
           Assets
           ------

Cash and due from banks                                           $   5,330,842
Interest-bearing deposits in banks                                    2,357,456
Federal funds sold                                                    6,367,000
Securities available-for-sale, at fair value                         33,438,948
Restricted equity securities                                          1,310,000

Loans                                                               177,898,613
Less allowance for loan losses                                        3,372,463
                                                                  -------------
          Loans, net                                                174,526,150
                                                                  -------------

Premises and equipment                                                8,221,558
Other assets                                                          4,213,050
                                                                  -------------

          Total assets                                            $ 235,765,004
                                                                  =============


Liabilities and Stockholders' Equity
------------------------------------

Deposits
    Noninterest-bearing                                           $  18,872,764
    Interest-bearing                                                168,415,841
                                                                  -------------
          Total deposits                                            187,288,605
Other borrowings                                                     26,200,000
Other liabilities                                                       653,634
                                                                  -------------
          Total liabilities                                         214,142,239
                                                                  -------------

Commitments and contingencies

Stockholders' equity
    Common stock, no par value; 20,000,000 shares
      authorized; 3,106,000 shares issued and outstanding            21,367,813
    Retained earnings                                                   288,441
    Accumulated other comprehensive income                              (33,489)
                                                                  -------------
          Total stockholders' equity                                 21,622,765
                                                                  -------------

          Total liabilities and stockholders' equity              $ 235,765,004
                                                                  =============

                 See Notes to Consolidated Financial Statements.

                                       3
<PAGE>
                   CHESTATEE BANCSHARES, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                   THREE MONTHS ENDED MARCH 31, 2004 AND 2003
                                   (Unaudited)

                                                          Three Months Ended
                                                               March 31,
                                                      ----------     ----------
                                                           2004         2003
                                                      -----------    ----------
Interest income
    Loans                                              $2,784,098    $2,642,635
    Taxable securities                                    286,794       107,058
    Federal funds sold                                      9,408        36,851
    Interest-bearing deposits in banks                     10,443         9,374
                                                       ----------    ----------
              Total interest income                     3,090,743     2,795,918
                                                       ----------    ----------
Interest expense
    Deposits                                              795,738       924,553
    Other borrowings                                      141,403        92,753
                                                       ----------    ----------
              Total interest expense                      937,141     1,017,306
                                                       ----------    ----------

              Net interest income                       2,153,602     1,778,612
Provision for loan losses                                 251,607       177,314
                                                       ----------    ----------
              Net interest income after
                provision for loan losses               1,901,995     1,601,298
                                                       ----------    ----------
Other income
      Service charges and fees                            204,464       185,987
      Other operating income                               95,544        96,758
                                                       ----------    ----------
              Total other income                          300,008       282,745
                                                       ----------    ----------
Other expenses
    Salaries and employee benefits                        902,913       815,850
    Occupancy and equipment expenses                      251,832       281,905
    Other operating expenses                              538,960       472,919
                                                       ----------    ----------
              Total other expenses                      1,693,705     1,570,674
                                                       ----------    ----------

              Net income before income taxes              508,298       313,369

Income tax expense                                        183,039       113,494
                                                       ----------    ----------

              Net income                                  325,259       199,875
                                                       ----------    ----------
                                       4
<PAGE>
Other comprehensive income (loss):
     Unrealized gains (losses) on securities
     available-for-sale arising during period,            244,996        (5,963)
     net of tax
                                                       ----------    ----------

Comprehensive income                                   $  570,255    $  193,912
                                                       ==========    ==========

Basic earnings per share                               $     0.10    $    0.07
                                                       ==========    ==========

Diluted earnings per share                             $     0.10    $    0.07
                                                       ==========    ==========

Cash dividends per share                               $      --     $     --
                                                       ==========    ==========

                 See Notes to Consolidated Financial Statements.

                                       5
<PAGE>
                   CHESTATEE BANCSHARES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   THREE MONTHS ENDED MARCH 31, 2004 AND 2003
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                             2004            2003
                                                                        ------------    ------------
<S>                                                                     <C>             <C>
OPERATING ACTIVITIES
    Net income                                                          $    325,259    $    199,875
    Adjustments to reconcile net income to net cash
        provided by operating activities:
        Depreciation                                                         133,329         172.319
        Provision for loan losses                                            251,607         177,314
        Increase in interest receivable                                      143,007         128,581
        Decrease in interest payable                                          (3,295)        (11,350)
        Other operating activities                                           438,215        (392,277)
                                                                        ------------    ------------

              Net cash provided by operating activities                    1,288,122         274,462
                                                                        ------------    ------------

INVESTING ACTIVITIES
    Net increase in interest-bearing deposits in banks                      (463,853)        (50,864)
    Net increase in federal funds sold                                      (429,000)    (14,768,000)
    Purchases of securities available-for-sale                            (1,808,984)     (5,192,880)
    Proceeds from maturities of securities available-for-sale              3,298,911      10,470,299
    Proceeds from maturities of securities held-to-maturity                     --           399,940
    Net increase in loans                                                 (9,463,411)     (7,505,898)
    Purchase of premises and equipment                                       (30,138)       (490,527)
                                                                        ------------    ------------

              Net cash used in investing activities                       (8,896,475)    (17,137,930)
                                                                        ------------    ------------

FINANCING ACTIVITIES
    Net increase in deposits                                               3,750,389      11,212,319
    Net proceeds from other borrowings                                     5,500,000       4,600,000
    Proceeds from sale of common stock                                          --         1,743,100
                                                                        ------------    ------------

              Net cash provided by financing activities                    9,250,389      17,555,419
                                                                        ------------    ------------

Net increase in cash and due from banks                                    1,642,036         691,951

Cash and due from banks, beginning of period                               3,688,806       3,516,119
                                                                        ------------    ------------


Cash and due from banks, end of period                                  $  5,330,842    $  4,208,070
                                                                        ============    ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
    Cash paid for:

          Interest                                                      $    940,436    $  1,028,656

          Income taxes                                                  $       --      $    479,426
    Principal balances of loans transferred to other real estate        $       --              --

    Financed sales of other real estate owned                           $     70,029    $       --
</TABLE>

                 See Notes to Consolidated Financial Statements

                                       6
<PAGE>
                   CHESTATEE BANCSHARES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE 1.   BASIS OF PRESENTATION

          The consolidated financial information included herein is unaudited;
          however, such information reflects all adjustments (consisting solely
          of normal recurring adjustments) which are, in the opinion of
          management, necessary for a fair statement of results for the interim
          period.

          The results of operations for the period ended March 31, 2004 are not
          necessarily indicative of the results to be expected for the full
          year.


NOTE 2.   STOCK COMPENSATION PLANS

          At March 31, 2004, the Company has two stock-based employee
          compensation plans. The Company accounts for those plans under the
          recognition and measurement principles of APB Opinion No. 25,
          Accounting for Stock Issued to Employees, and related Interpretations.
          No stock-based employee compensation cost is reflected in net income,
          as all options granted under those plans had an exercise price equal
          to the market value of the underlying stock on the date of grant. The
          Company also has remaining options outstanding that were granted to
          certain executive officers under employee agreements. The following
          table illustrates the effect on net income and earnings per share if
          the Company had applied the fair value recognition provisions of SFAS
          Statement No. 123, Accounting for Stock-Based Compensation, to
          stock-based employee compensation.

<TABLE>
<CAPTION>
                                                                Three Months Ended March 31,
                                                                ----------------------------
                                                                   2004              2003
                                                                ----------        ----------

<S>                                                             <C>               <C>
      Net income, as reported                                   $  325,259        $  199,875
      Deduct: Total stock-based employee compensation
            expense determined under fair value based
            method for all awards, net of related tax effects       21,352            22,871
                                                                ----------        ----------
      Pro forma net income                                      $  303,907        $  177,004
                                                                ==========        ==========
      Earnings per share:
         Basic - as reported                                    $      .10        $      .07
                                                                ==========        ==========
         Basic - pro forma                                      $      .10        $      .06
                                                                ==========        ==========
         Diluted - as reported                                  $      .10        $      .07
                                                                ==========        ==========
         Diluted - pro forma                                    $      .09        $      .06
                                                                ==========        ==========
</TABLE>

                                       7
<PAGE>
                   CHESTATEE BANCSHARES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE 3.   STOCK OFFERINGS

          As of March 24, 2003, the Company completed an offering of its common
          stock, selling 250,000 shares (75,690 shares in 2002 and 174,310
          shares in 2003) at a price of $10.00 per share.


NOTE 4.   CURRENT ACCOUNTING DEVELOPMENTS

          There are no recent accounting pronouncements that have had, or are
          expected to have, a material effect on the Company's financial
          statements.



                                       8
<PAGE>
Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations

The following is management's discussion and analysis of certain significant
factors which have affected the financial position and operating results of
Chestatee Bancshares, Inc. and its bank subsidiary, Chestatee State Bank, and
its nonbank subsidiaries, Chestatee Financial Services, Inc. and Chestatee
Residential Mortgage, Inc., during the period included in the accompanying
consolidated financial statements.

Forward Looking Statements

Certain of the statements made herein under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations" ("MD&A") are
forward-looking statements for purposes of the Securities Act of 1933, as
amended (the "Securities Act"), and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from future results,
performance or achievements expressed or implied by such forward-looking
statements. Such forward looking statements include statements using the words
such as "may," "will," "anticipate," "should," "would," "believe,"
"contemplate," "expect," "estimate," "continue," "may," "intend," or other
similar words and expressions of the future. Our actual results may differ
significantly from the results we discuss in these forward-looking statements.

These forward-looking statements involve risks and uncertainties and may not be
realized due to a variety of factors, including, without limitation: the effects
of future economic conditions; governmental monetary and fiscal policies, as
well as legislative and regulatory changes; the risks of 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; interest rate risks; the effects of 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, including institutions operating regionally, nationally, and
internationally, together with such competitors offering banking products and
services by mail, telephone, computer, and the Internet.

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. Our significant accounting policies are described
in the footnotes to the consolidated financial statements at December 31, 2003
as filed on our annual report on Form 10-KSB.

                                       9
<PAGE>
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.

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 that
addresses our allowance for loan losses for a description of our processes and
methodology for determining our allowance for loan losses.

Liquidity and Capital Resources

We monitor our liquidity resources on an ongoing basis. Our liquidity is also
monitored on a periodic basis by State and Federal regulatory authorities. As of
March 31, 2004, our liquidity, as determined under guidelines established by
regulatory authorities and internal policy, was satisfactory.

At March 31, 2004, our capital ratios were adequate based on regulatory minimum
capital requirements. The minimum capital requirements and the actual capital
ratios on a consolidated and bank-only basis are as follows:

                                           Actual
                              -------------------------------
                                                                    Minimum
                                                                  Regulatory
                              Consolidated         Bank           Requirement
                              ---------------- --------------  -----------------

 Leverage capital ratios            9.39 %           9.24 %           4.00 %
 Risk-based capital ratios:
    Core capital                   10.92            10.74             4.00
    Total capital                  12.17            12.00             8.00

These ratios may decline as asset growth continues, but are expected to exceed
the minimum regulatory requirements. Future earnings and proceeds from our stock
offerings will assist in keeping these ratios at satisfactory levels.

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.

                                       10
<PAGE>
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. A summary of our commitments is as follows:


                                                           March 31, 2004
                                                       ----------------------
                                                       (dollars in thousands)

                                                       ----------------------

        Commitments to extend credit                   $               37,046
        Letters of credit                                               1,209
                                                       ----------------------
                                                       $               38,255
                                                       ======================

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Since many
of the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The
amount of collateral obtained, if deemed necessary by us upon extension of
credit, is based on our credit evaluation of the customer.

Standby letters of credit are conditional commitments issued by us to guarantee
the performance of a customer to a third party. Those letters of credit are
primarily issued to support public and private borrowing arrangements. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loans to customers. Collateral is required in
instances which we deem necessary.

                                       11
<PAGE>
Financial Condition

Following is a summary of our balance sheets for the periods indicated:

                                             March 31,     December 31,
                                               2004            2003
                                          ------------     ------------
                                              (Dollars in Thousands)
                                          -----------------------------

Cash and due from banks                   $     5,331       $     3,689
Interest-bearing deposits in banks              2,357             1,894
Federal funds sold                              6,367             5,938
Securities                                     34,749            35,845
Loans, net                                    174,526           165,314
Premises and equipment                          8,222             8,325
Other assets                                    4,213             4,967
                                          ------------      ------------
                                          $   235,765       $   225,972
                                          ============      ============

Deposits                                  $   187,289       $   183,538
Other borrowings                               26,200            20,700
Other liabilities                                 653               681
Stockholders' equity                           21,623            21,053
                                          ------------      ------------
                                          $   235,765       $   225,972
                                          ============      ============

Our total assets grew by $9.8 million for the first quarter of 2004. Deposit
growth of $3.8 million and proceeds from Federal Home Loan Bank debt of $5.5
million was primarily invested in loans. Our ratio of gross loans to deposits
and other borrowings has decreased to 83.3% at March 31, 2004 from 82.5% at
December 31, 2003, as loan growth outpaced deposit growth during the first
quarter. Our total equity increased by approximately $570,000, consisting of
year-to-date net income of $325,000, and a decrease in unrealized losses on
securities available-for-sale, net of tax, of $245,000.

                                       12
<PAGE>
Results of Operations For The Three Months Ended March 31, 2004 and 2003

Following is a summary of our operations for the periods indicated:

                                                  Three Months Ended
                                                       March 31,
                                                -----------------------
                                                   2004         2003
                                                ---------     ---------
                                                (Dollars in Thousands)
                                                -----------------------

Interest income                                 $   3,091     $   2,796

Interest expense                                      937         1,017
                                                ----------    ---------

Net interest income                                 2,154         1,779

Provision for loan losses                             252           177

Other income                                          300           282

Other expense                                       1,694         1,571
                                                ----------    ---------

Pretax income                                         508           313

Income taxes                                          183           113
                                                ----------    ---------

Net income                                      $     325     $     200
                                                ==========    =========

Our net interest income has increased by $375,000 during the first quarter of
2004 as compared to the same period in 2003. Our net interest margin was 4.01%
during the first quarter of 2004 as compared to 4.14% during the first quarter
of 2003 and to 3.74% for the entire year of 2003. The increase in net interest
income is due primarily to the increased volume of average loans outstanding.
The increase in net interest margin from December 31, 2003 is largely due to a
lower cost of funds. Yields earned on loans have decreased to 6.43% in the first
quarter of 2004 as compared to 7.28% in the first quarter of 2003. The cost of
funds decreased as deposits have been able to be repriced. Our cost of funds
decreased to 1.98% in the first quarter of 2004 as compared to 2.81% in the
first quarter of 2003.

The provision for loan losses increased by $75,000 in the first quarter of 2004
as compared to the same period in 2003. The amounts provided are due to loan
growth, increased net loan charge-offs, increased nonaccrual, past due and
potential problem loans and to our assessment of the inherent risk in the
portfolio. Nonaccrual loans of $1.3 million at March 31, 2004 consist of
$384,000 of commercial loans, $849,000 of real estate loans and $76,000 of other
consumer loans. Loans past due ninety days or more and still accruing interest
of $425,000 at March 31, 2004 consists of real estate loans of $284,000,
commercial loans of $19,000 and other consumer loans of $122,000. Potential
problem loans consist of loans to one commercial borrower. These loans were

                                       13
<PAGE>

identified through our loan evaluation process and have been properly considered
in the determination of the allowance for loan losses. Management believes that
the approximately $3.4 million in the allowance for loan losses at March 31,
2004, or 1.9% 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.

Information with respect to nonaccrual, past due, restructured, and potential
problem loans at March 31, 2004 and 2003 is as follows:

<TABLE>
<CAPTION>
                                                                         March 31,
                                                                 -----------------------
                                                                   2004            2003
                                                                 -----------------------
                                                                  (Dollars in Thousands)
                                                                 -----------------------
<S>                                                               <C>             <C>
Nonaccrual loans                                                  $1,309          $  309
Loans contractually past due ninety days or more as to interest
   or principal payments and still accruing                          425             100
Restructured loans                                                  --              --
Potential problem loans                                            1,213           1,909
Interest income that would have been recorded on nonaccrual
   and restructured loans under original terms                       116              25
Interest income that was recorded on nonaccrual and                 --              --
   restructured loans
</TABLE>

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 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.

                                       14
<PAGE>
Information regarding certain loans and allowance for loan loss data through
March 31, 2004 and 2003 is as follows:

<TABLE>
<CAPTION>
                                                                     Three Months Ended
                                                                         March 31,
                                                                   ---------------------
                                                                      2004       2003
                                                                   ---------   ---------
                                                                   (Dollars in Thousands)
                                                                   ---------------------
<S>                                                                 <C>         <C>
Average amount of loans outstanding                                 $172,993    $147,303
                                                                    ========    ========

Balance of allowance for loan losses at beginning of period         $  3,163    $  2,126
                                                                    --------    --------

Loans charged off
   Commercial and financial                                               27        --
   Real estate mortgage                                                 --          --
   Installment                                                            21           8
                                                                    --------    --------
                                                                          48           8
                                                                    --------    --------

Loans recovered
   Commercial and financial                                                1        --
   Real estate mortgage                                                    1        --
   Installment                                                             4        --
                                                                    --------    --------
                                                                           6        --
                                                                    --------    --------

Net charge-offs                                                           42           8
                                                                    --------    --------

Additions to allowance charged to operating expense during period        252         177
                                                                    --------    --------

Balance of allowance for loan losses at end of period               $  3,373    $  2,295
                                                                    ========    ========

Ratio of net loans charged off during the period to
   average loans outstanding                                             .02%        .01%
                                                                    ========    ========
</TABLE>

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 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 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,
our loan loss experience, current economic conditions that may affect the
borrowers' 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

                                       15
<PAGE>
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 maintain an allowance for loan losses of no less
than 1.0% of outstanding loans at all times.

Other income has increased in the first quarter of 2004 as compared to the same
period in 2003 by $17,000, due primarily to increased service charges on deposit
accounts.

Other expenses increased in the first quarter of 2004 as compared to the same
period in 2003 by $123,000, due to increased salaries and employee benefits of
$87,000, increased other operating expenses of $66,000, and a decrease in
occupancy and equipment expenses of $30,000. Salaries and employee benefits have
increased due to an increase in the number of full time equivalent employees to
68 at March 31, 2004 from 65 at March 31, 2003 and to other annual salary
increases. The increase in the number of employees is due to hiring additional
officers to staff a new branch which opened in May, 2003 and to our overall
growth.

We have recorded income tax expense of $183,000 in the first quarter of 2004 as
compared to $113,000 in the first quarter of 2003. The rate of tax as a
percentage of pretax income was 36% and 36%, respectively.

We are not aware of any known trends, events or uncertainties, other than the
effect of events as described above, that will have or that are reasonably
likely to have a material effect on its liquidity, capital resources or
operations. We are also not aware of any current recommendations by the
regulatory authorities which, if they were implemented, would have such an
effect.

ITEM 3.  Controls and Procedures

Based upon an evaluation of our disclosure controls and procedures within ninety
days prior to the filing of this quarterly report pursuant to Rule 13a-14 of the
Exchange Act, under the supervision and with the participation of management,
our President and Chief Financial Officer have concluded that the Company's
disclosure controls and procedures are effective in timely alerting them to
material information relating to the Company required to be included in the
Company's Exchange Act filings. There have been no significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation.

                                       16
<PAGE>
                           PART II - OTHER INFORMATION


ITEM 1.  Legal Proceedings

Management is not aware of any material pending legal proceedings to which the
Company, the Bank, Chestatee Financial or Chestatee Mortgage are a party or to
which any of their property is subject, other than ordinary routine legal
proceedings incidental to our business.

ITEM 4.  Submission Of Matters To A Vote Of Security Holders

No matters were submitted to a vote of the shareholders of the Company as of
March 31, 2004.

ITEM 5.  Other Information

None.

ITEM 6.  Exhibits And Reports On Form 8-K

(a)      Exhibits.

         Number    Description

         31.1      Rules 13a-14(a) and 15d-14(a) Certifications for CEO
         31.2      Rules 13a-14(a) and 15d-14(a) Certifications for CFO
         32        Certifications of CEO and CFO Pursuant to 18 U.S.C. Section
                   1350, as Adopted Pursuant to Section 906 of the Sarbanes-
                   Oxley Act of 2002

(b)      Reports on Form 8-K.

              None.

                                       17
<PAGE>
                                   SIGNATURES


In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                           CHESTATEE BANCSHARES, INC.
                                  (Registrant)



DATE: May 10, 2004               BY: /s/ J. Philip Hester, Sr.
      ------------                   -------------------------
                                     J. Philip Hester, Sr., President and C.E.O.
                                     (Principal Executive Officer)


DATE: May 10, 2004               BY: /s/ Deborah F. McLeod
      ------------                   ---------------------
                                     Deborah F. McLeod, C.F.O. and Treasurer
                                     Principal Financial and Accounting Officer)


                                       18