U.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, 2006
                                                 -----------------------

[ ]   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 30534
    ------------------------------------------------------------------------
                    (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 5, 2006: 3,446,281; 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, 2006........................3

         Consolidated Statement of Income Three months
                    Ended March 31, 2006 and 2005...........................4

         Consolidated Statement of Comprehensive Income Three
                  Ended March 31, 2006 and 2005.............................5

         Consolidated Statements of Cash Flows -
                  Three months Ended March 31, 2006 and 2005................6

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

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

         ITEM 3.      Controls and Procedures..............................18


PART II. OTHER INFORMATION

         ITEM 1.      Legal Proceedings....................................19

         ITEM 6.      Exhibits and Reports on Form 8-K.....................19

         Signatures........................................................20

         Certifications....................................................21


<PAGE>
           PART I - FINANCIAL INFORMATION
ITEM 1.       Financial Statements

                   CHESTATEE BANCSHARES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                 March 31, 2006

                                Assets
                                ------

Cash and due from banks                                     $   3,740,627
Interest-bearing deposits in banks                              3,867,295
Federal funds sold                                             15,948,000
Securities available-for-sale, at fair value                   25,118,078
Restricted equity securities, at cost                           1,060,900

Loans                                                         203,756,087
Less allowance for loan losses                                  4,189,259
                                                            -------------
          Loans, net                                          199,566,828
                                                            -------------

Premises and equipment, net                                     7,529,435
Other assets                                                    4,234,102
                                                            -------------

          Total assets                                      $ 261,065,265
                                                            =============

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

Deposits
    Noninterest-bearing                                     $  22,968,554
    Interest-bearing                                          199,867,654
                                                            -------------
          Total deposits                                      222,836,208
Other borrowings                                               10,750,000
Other liabilities                                               1,467,210
                                                            -------------
          Total liabilities                                   235,053,418
                                                            -------------

Commitments and contingencies

Stockholders' equity
    Common stock, no par value; 20,000,000 shares
      authorized; 3,446,281 shares issued and outstanding      24,780,746
    Retained earnings                                           1,591,518
    Accumulated other comprehensive loss                         (360,417)
                                                            -------------
          Total stockholders' equity                           26,011,847
                                                            -------------

          Total liabilities and stockholders' equity        $ 261,065,265
                                                            =============

See Notes to Consolidated Financial Statements.


                                       3
<PAGE>
                   CHESTATEE BANCSHARES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   Three Months Ended March 31, 2006 and 2005

<TABLE>
<CAPTION>
                                                                    Three Months Ended,
                                                                         March 31,
                                                                 -----------   -----------
                                                                     2006          2005
                                                                 -----------   -----------
<S>                                                              <C>           <C>
Interest income
    Loans                                                        $ 4,263,774   $ 3,256,435
    Taxable Securities                                               231,136       230,874
    Nontaxable Securities                                             13,050        16,464
    Federal funds sold                                               154,412       142,409
    Interest-bearing deposits in banks                                49,206        37,358
                                                                ------------   -----------
              Total interest income                                4,711,578     3,683,540
                                                                ------------   -----------

Interest expense
    Deposits                                                       1,666,853     1,155,067
    Other borrowings                                                  70,487       122,866
                                                                ------------   -----------
              Total interest expense                               1,737,340     1,277,933
                                                                ------------   -----------

              Net interest income                                  2,974,238     2,405,607
Provision for loan losses                                             85,845        47,568
                                                                ------------   -----------
              Net interest income after
                provision for loan losses                          2,888,393     2,358,039
                                                                ------------   -----------

Other income
      Service charges and fees                                       203,114       232,397
      Gains (Losses) on sales of securities available for sale             -       (30,224
      Other operating income                                          39,765        87,288
                                                                ------------   -----------
              Total other income                                     242,879       289,461
                                                                ------------   -----------

Other expenses
    Salaries and employee benefits                                 1,179,250     1,013,455
    Occupancy and equipment expenses                                 250,901       230,811
    Other operating expenses                                         569,988       578,550
                                                                ------------   -----------
              Total other expenses                                 2,000,139     1,822,816
                                                                ------------   -----------

              Net income before income taxes                       1,131,133       824,684

Income tax expense                                                   412,020       288,764
                                                                ------------   -----------

              Net income                                             719,113       535,920
                                                                ------------   -----------



Basic earnings per share                                         $      0.21   $      0.16
                                                                 ===========   ===========

Diluted earnings per share                                       $      0.20   $      0.15
                                                                 ===========   ===========

Cash dividends per share                                         $        -    $         -
                                                                 ==========    ===========
</TABLE>

See Notes to Consolidated Financial Statements.

                                       4
<PAGE>
                   CHESTATEE BANCSHARES, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                   Three Months Ended March 31, 2006 and 2005

<TABLE>
<CAPTION>
                                                                         Three Months Ended,
                                                                              March 31,
                                                                        ---------   ---------
                                                                           2006        2005
                                                                        ---------   ---------

<S>                                                                     <C>         <C>
Net income                                                              $ 719,113   $ 535,920

Other comprehensive income (loss):
        Unrealized holding gains (losses) on securities
           available-for-sale arising during the three month period,
           net of tax                                                       3,262    (139,736)

       Reclassification adjustment for losses realized in net income,
           net of tax benefits                                                  -      19,646
                                                                        ---------   ---------

Other comprehensive income (loss)                                           3,262    (120,090)
                                                                        ---------   ---------

Comprehensive income                                                    $ 722,375   $ 415,830
                                                                        =========   =========
</TABLE>

See Notes to Consolidated Financial Statements.

                                       5
<PAGE>
                   CHESTATEE BANCSHARES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   Three Months Ended March 31, 2006 and 2005

<TABLE>
<CAPTION>
                                                                        Three Months Ended,
                                                                             March 31,
                                                                      2006               2005
                                                                 ------------       -------------
<S>                                                              <C>                <C>
OPERATING ACTIVITIES
    Net income                                                   $     719,113      $     535,920
    Adjustments to reconcile net income to net cash
        provided by operating activities:
        Depreciation                                                   136,483            132,944
        Provision for loan losses                                       85,845             47,568
        Amortization and accretion                                      45,360             47,848
        Stock-based compensation expense                                23,595                  -
        Decrease in interest receivable                                142,560            182,678
        Increase in interest payable                                     7,022             57,461
        Net other operating activities                                  83,651             15,323
                                                                 --------------    ---------------

              Net cash provided by operating activities              1,243,629          1,019,742
                                                                 --------------    ---------------

INVESTING ACTIVITIES
    Net decrease in interest-bearing deposits in banks                  76,710          1,150,787
    Net increase in federal funds sold                              (5,860,000)       (22,568,000)
    Purchases of securities available-for-sale                               -         (4,094,543)
    Proceeds from maturities of securities available-for-sale        1,302,920          1,145,560
    Proceeds from sales of securities available-for-sale                     -          1,995,251
    (Purchase) sale of restricted equity securities                     (8,400)           158,600
    Net (increase) decrease in loans                                (3,098,831)         1,679,606
    Purchase of premises and equipment                                 (80,290)           (97,314)
                                                                 --------------    ---------------

              Net cash used in investing activities                 (7,667,891)       (20,630,053)
                                                                 --------------    ---------------

FINANCING ACTIVITIES
    Net increase in deposits                                         6,853,582         24,178,986
    Payments on other borrowings                                    (1,500,000)        (4,600,000)
                                                                 --------------    ---------------
              Net cash provided by financing activities              5,353,582         19,578,986
                                                                 --------------    ---------------

Net decrease in cash and due from banks                             (1,070,680)           (31,325)

Cash and due from banks, beginning of period                         4,811,307          3,419,928
                                                                 --------------    ---------------

Cash and due from banks, end of period                           $   3,740,627      $   3,388,603
                                                                 ==============    ===============


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
    Cash paid for:
          Interest                                               $   1,730,318      $   1,220,472

          Income taxes                                           $     162,304      $     138,925

    Principal balances of loans transferred to other real estate $           -      $           -

    Financed sales of other real estate owned                    $           -      $           -
</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, 2006 are not
         necessarily indicative of the results to be expected for the full year.

         Stock Dividend and Per Share Amounts

         Earnings per share for the periods ended March 31, 2005 have been
         restated to reflect the 10% stock dividend declared in 2005.

NOTE 2.  STOCK COMPENSATION PLANS

         At March 31, 2006, the Company has two stock-based compensation plans
         which include certain employees and directors. Prior to January 1,
         2006, the Company accounted for these plans under the recognition and
         measurement provisions of APB Opinion No. 25, Accounting for Stock
         Issued to Employees, and related interpretations, as permitted by FASB
         Statement No. 123, Accounting for Stock-Based Compensation. No
         stock-based employee compensation cost was recognized in the Statement
         of Operations for the three months ended March 31, 2005, as all options
         granted under the plan had an exercise price equal to the market value
         of the underlying common stock on the date of grant. Effective January
         1, 2006, the Company adopted the fair value recognition provisions of
         FASB Statement No. 123(R), Share-Based Payment, using the
         modified-prospective-transition method. Under that transition method,
         compensation cost recognized includes: (a) compensation cost for all
         share-based payments granted prior to, but not yet vested as of January
         1, 2006, based on the grant date fair value estimated in accordance
         with the original provisions of Statement 123, and (b) compensation
         cost for all share-based payments granted subsequent to January 1,
         2006, based on the grant-date fair value estimated in accordance with
         the provisions of Statement 123(R). Results for prior periods have not
         been restated.

         As a result of adopting Statement 123(R) on January 1, 2006, the
         Company's income before income taxes and net income for the three
         months ended March 31, 2006, are $23,595 lower than if it had continued
         to account for the share-based compensation under Opinion 25. Basic and
         diluted earnings per share for the three months ended March 31, 2006,
         would have been $.22 and $.21, respectively, if the Company had not
         adopted Statement 123(R), compared to the reported basic and diluted
         earnings per share of $.21 and $.20, respectively.


                                       7
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 2.  STOCK COMPENSATION PLANS (Continued)

         The following table illustrates the effect on net income and earnings
         per share if the Company had applied the fair value recognition
         provisions of Statement 123 to options granted under the Company's
         stock option plans for all periods presented. For the purposes of this
         pro forma disclosure, the value of the options is estimated using the
         Black-Scholes-Merton option-pricing formula and amortized to expense
         over the options' vesting periods.

                                                            For the Three
                                                            Months Ended
                                                              March 31,
                                                                2005
                                                             ---------
         Net income, as reported                             $ 535,920
         Deduct: Total stock-based employee compensation
               expense determined under fair value based
               method for all awards                            26,954
                                                             ---------
         Pro forma net income                                $ 508,966
                                                             =========
         Earnings per share:
            Basic - as reported                              $     .16
                                                             =========
            Basic - pro forma                                $     .15
                                                             =========
            Diluted - as reported                            $     .16
                                                             =========
            Diluted - pro forma                              $     .15
                                                             =========

         The Company's reserved a total of 400,000 options for grant to the
         Company's officers and directors under these two plans. Options are
         granted at the fair value of the Company's common stock at the date of
         grant and expire ten years from the date of grant.

         The Company also has outstanding options related to previous employee
         agreements with certain of its executive officers whereby stock options
         are earned based upon the performance of the Company. Options earned
         under these agreements are priced at the Company's book value as of
         year-end and expire ten years from the date the options are earned.

                                       8
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 2.  STOCK COMPENSATION PLANS (Continued)

         Other pertinent information related to the options follows:

<TABLE>
<CAPTION>
                                                  --------------------    ------------------------
                                                    March 31, 2006            March 31, 2005
                                                  --------------------    ------------------------
                                                             Weighted-                   Weighted-
                                                              Average                     Average
                                                              Exercise                    Exercise
                                                  Shares       Price       Shares          Price
                                                  --------   ---------     -------       ---------

         <S>                                      <C>        <C>           <C>              <C>
         Under option, beginning of period        428,800    $  8.05       426,800          8.00
            Granted                                   - -        - -           - -           - -
            Exercised                                 - -        - -           - -           - -
            Cancelled                                 - -                      - -           - -
                                                  -------                  -------
         Under option, end of period              428,800    $  8.05       426,800          8.00
                                                  =======                  =======

         Exercisable, end of period               337,137       7.77       285,634          7.46
                                                  =======                  =======
         Weighted-average fair value of options
            granted during the period                $- -                    $ - -
</TABLE>



 Information pertaining to options outstanding at March 31, 2006 is as follows:

<TABLE>
<CAPTION>
                               Options Outstanding                      Options Exercisable
                   ---------------------------------------------     --------------------------
                                     Weighted-
                                      Average         Weighted-                       Weighted-
                                     Remaining         Average                        Average
   Range of           Number        Contractual       Exercise          Number        Exercise
Exercise Prices    Outstanding          Life           Price         Exercisable       Price
---------------    -----------      -----------      -----------     ------------     ---------

<S>                 <C>              <C>              <C>             <C>              <C>
 $4.32 - $4.57         17,600        4.50 years       $  4.45           17,600         $ 4.32
$7.27 - $10.00        411,200        7.32 years          8.21          319,537           7.27
                   -----------                                       ---------
                      428,800        7.20 years          8.05          337,137           7.77
                   ===========                                       =========
</TABLE>


                                       9
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 3.  EARNINGS PER SHARE

         Presented below is a summary of the components used to calculate basic
         and diluted earnings per common share.

                                                 Three Months Ended March 31,
                                                   ------------   ----------
                                                       2006         2005
                                                   ------------   ----------

Basic Earnings Per Share:
   Weighted average common shares outstanding         3,446,281    3,435,281
                                                   ============   ==========

   Net income                                      $    719,113   $  535,920
                                                   ============   ==========

   Basic earnings per share                        $        .21   $      .16
                                                   ============   ==========

Diluted Earnings Per Share:

   Weighted average common shares outstanding         3,446,281    3,435,281

   Net effect of the assumed exercise of stock
      options based on the treasury stock method
      using average market prices for the year           97,230       54,534
                                                   ------------   ----------
   Total weighted average common shares and
      common stock equivalents outstanding           3, 543,511    3,489,815
                                                   ============   ==========

   Net income                                      $    719,113   $  535,920
                                                   ============   ==========

   Diluted earnings per share                      $        .20   $      .15
                                                   ============   ==========


                                       10
<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 non-bank 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, 2005
as filed on our annual report on Form 10-KSB.

                                       11
<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, 2006, our liquidity, as determined under guidelines established by
regulatory authorities and internal policy, was satisfactory.

At March 31, 2006, 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          10.23 %        9.71 %       4.00 %
     Risk-based capital ratios:
        Core capital                  11.30         10.73         4.00
        Total capital                 12.56         11.99         8.00

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

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:

                                       12
<PAGE>

                                                  March 31, 2006
                                              ----------------------
                                              (Dollars in thousands)

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

    Commitments to extend credit                  $       63,481
    Letters of credit                                      1,050
                                                  --------------
                                                  $       64,531
                                                  ==============

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.





                                       13
<PAGE>
Financial Condition

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

                                                March 31,    December 31,
                                                  2006          2005
                                             -------------   -----------
                                                (Dollars in Thousands)
                                             ---------------------------

Cash and due from banks                      $      3,741    $    4,811
Interest-bearing deposits in banks                  3,867         3,944
Federal funds sold                                 15,948        10,088
Securities                                         26,179        27,514
Loans, net                                        199,567       196,554
Premises and equipment                              7,529         7,585
Other assets                                        4,234         4,343
                                             -------------   -----------
                                             $    261,065    $  254,839
                                             =============   ===========

Deposits                                     $    222,836    $  215,983
Other borrowings                                   10,750        12,250
Other liabilities                                   1,467         1,340
Stockholders' equity                               26,012        25,266
                                             -------------   -----------
                                             $    261,065    $  254,839
                                             =============   ===========

Our total assets grew by 2.4% for the three months ended March 31, 2006. Deposit
growth of $6.9 million was used to reduce other borrowings by $1.5 million and
invested in loans and fed funds. Our ratio of gross loans to deposits and other
borrowings was 87% at March 31, 2006 and 88% at December 31, 2005. Our total
equity increased by $0.7 million due to year-to-date net income of $719,113.

                                       14
<PAGE>
Results of Operations For The Three Months Ended March 31, 2006 and 2005

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

                                          Three Months Ended
                                              March 31,
                                      -------------------------
                                         2006          2005
                                      ----------    -----------
                                       (Dollars in Thousands)
                                      -------------------------

Interest income                       $    4,711    $    3,684

Interest expense                           1,737         1,278
                                      -----------   -----------

Net interest income                        2,974         2,406

Provision for loan losses                     86            48

Other income                                 243           289

Other expense                              2,000         1,822
                                      -----------   -----------

Pretax income                              1,131           825

Income taxes                                 412           289
                                      -----------   -----------

Net income                            $      719    $      536
                                      ===========   ===========


Our net interest income increased by $568,000 for the three months ended March
31, 2006, respectively, as compared to the same period in 2005. Our net interest
margin was 4.90% during the three months ended March 31, 2006 as compared to
3.88% for the three months ended March 30, 2005 and 4.20 % for the entire year
of 2005. The increase in net interest income is due primarily to the increased
volume of average loans outstanding and increases in the Prime Lending Rate.
Yields earned on loans have increased to 8.59% in the first three months of 2006
as compared to 6.90% in the first three months of 2005. Our cost of funds
increased to 3.05% in the first three months of 2006 as compared to 2.16% in the
first three months of 2005. The increase in cost of funds also reflects the
impact of interest rate increases over the past twelve months.

The provision for loan losses was $86,000 for the three months ended March 31,
2006. The provision for the three months ended March 31, 2006 increased $48,000
over the same period in 2005. The increase in provision expense is due primarily
to loan growth.

                                       15
<PAGE>
Nonaccrual loans of $2,227,000 at March 31, 2006 consist of $1,871,000 of
commercial loans, $339,000 of real estate loans, and $67,000 of consumer loans.
Loans past due ninety days or more and still accruing interest of $58,000 at
March 31, 2006 consists of $39,000 of consumer loans and $19,000 of credit card
loans. These loans were identified through our loan evaluation process and have
been properly considered in the determination of the allowance for loan losses.
Management believes that the $4,189,000 in the allowance for loan losses at
March 31, 2006, or 2.06% of total net outstanding loans, is adequate to absorb
known risks in the portfolio. Approximately $600,000 of the $4.2 million
allowance for loan losses at March 31, 2006 is set aside as a specific reserve
for a $1.4 million credit that is in the process of being restructured. The
credit is participated among several banks. The restructuring will result in
write-downs for all banks involved in the credit. It is estimated that Chestatee
State Bank will take approximately $400,000 in write downs. The loan balance of
$1.4 million is included in the balance of nonaccrual loans. Management does not
anticipate additional provision expense in order to cover this write down.
However, no assurance can be given 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, 2006 and 2005 is as follows:

<TABLE>
<CAPTION>
                                                                                March 31,
                                                                         ------------------------
                                                                           2006          2005
                                                                         ------------------------
                                                                         (Dollars in Thousands)
                                                                         ------------------------

<S>                                                                      <C>             <C>
Nonaccrual loans                                                         $  2,277        $  648
Loans contractually past due ninety days or more as to interest
   or principal payments and still accruing                                    58             7
Restructured loans                                                                            -
Potential problem loans                                                         -
                                                                                              -
Interest income that would have been recorded on nonaccrual
   and restructured loans under original terms                                 85            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.


                                       16
<PAGE>
Information regarding certain loans and allowance for loan loss data through
March 31, 2006 and 2005 is as follows:

<TABLE>
<CAPTION>
                                                                         Three Months Ended
                                                                              March 30,
                                                                        --------------------
                                                                           2006      2005
                                                                        --------   ---------
                                                                       (Dollars in Thousands)
                                                                        --------------------
<S>                                                                     <C>         <C>
Average amount of loans outstanding                                     $201,317    $191,320
                                                                        ========    ========

Balance of allowance for loan losses at beginning of period                4,111       3,620
                                                                        --------    --------

Loans charged off
   Commercial and financial                                                    5           -
   Real estate mortgage                                                        -           -
   Installment                                                                 3          61
                                                                        --------    --------
                                                                               8          61
                                                                        --------    --------
Loans recovered
   Commercial and financial                                                    -           -
   Real estate mortgage                                                        -           -
   Installment                                                                 -           6
                                                                        --------    --------
                                                                               -           6
                                                                        --------    --------

Net charge-offs                                                                8          55
                                                                        --------    --------

Additions to allowance charged to operating expense during the period         86          48
                                                                        --------    --------

Balance of allowance for loan losses at end of period                   $  4,189    $  3,613
                                                                        ========    ========

Ratio of net loans charged off during the period to
   average loans outstanding                                                 .00%        .03%
                                                                        ========    ========
</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 determined
based on our experience specifically and the historical experience of the
banking industry generally. Loan classifications are then subject to periodic
review by the responsible lending officers and by senior management based upon
their judgment, our loan loss experience, current economic conditions that may
affect the borrower's ability to repay, lender requirements, the underlying
collateral value of the loans and other appropriate information. Management
relies predominantly on this ongoing review of the loan portfolio to assess the
risk characteristics of the portfolio in the aggregate and to determine
adjustments, if any, to our allowance for loan losses. Based upon this ongoing
review, we may identify loans that could be impaired. A loan is considered
impaired when it is probable that we will be unable to collect all principal and
interest due in accordance with the contractual terms of the loan agreement.
When we identify a loan as impaired, the allowance for loan losses is increased
if we determine that the amount of impairment is in excess of the allowance
determined under our loan classification program. We maintain an allowance for
loan losses of no less than 1.0% of outstanding loans at all times.

Other income decreased by $46,000 for the three months ended March 31, 2006,
respectively, as compared to the same period in 2005. Decreases in other income
were related to decreased mortgage origination fees and service charges.

Other expenses increased by $177,000 for the three months ended March 31, 2006,
as compared to the same period in 2005. Salaries and employee benefits increased
by $166,000, equipment and occupancy

                                       17
<PAGE>
expenses increased by $20,000, and other operating expenses decreased by $9,000.
Salaries and employee benefits have increased due to increased benefits
expenses, the expense associated with the stock option plans discussed in Note 2
to the financial statements and annual salary increases. The decrease of $9,000
in other operating expenses was due to general decreases throughout the other
operating expense categories.

We have recorded income tax expense of $412,020 for the three months ended March
31, 2006. The rate of tax as a percentage of pretax income was 36.4%.

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

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

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




                                       18
<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 Services or Chestatee Residential
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

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 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  ursuant to Section 906 of the  Sarbanes-Oxley Act of 2002

(b)     Reports on Form 8-K.

None.




                                       19
<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 11, 2006              BY: /s/ J. Philip Hester, Sr.
      ------------                  -------------------------
                                    J. Philip Hester, Sr., President and C.E.O.
                                    (Principal Executive Officer)


DATE: May 11, 2006              BY: /s/ Deborah F. McLeod
      ------------                  ----------------------
                                    Deborah F. McLeod, C.F.O. and Treasurer
                                    (Principal Financial and Accounting Officer)





                                       20