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     June 30, 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 August 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 - June 30, 2004..........................3

           Consolidated Statements of Operations and Comprehensive Income
                    (Loss) Three and Six Months Ended June 30, 2004 and 2003...4

           Consolidated Statements of Cash Flows -
                    Three and Six Months Ended June 30, 2004 and 2003..........5

           Notes to Consolidated Financial Statements..........................6

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

           ITEM 3.  Controls and Procedures...................................17


PART II.   OTHER INFORMATION

           ITEM 1   Legal Proceedings.........................................18

           ITEM 4   Submission of Matters to a Vote of Security Holders.......18

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

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

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

                                       2
<PAGE>
                   CHESTATEE BANCSHARES, INC. AND SUBSIDIARIES

                         PART I - FINANCIAL INFORMATION

ITEM 1.  Financial Statements

                           CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 2004
                                   (Unaudited)

                                     Assets
                                     ------
Cash and due from banks                                           $   4,181,528
Interest-bearing deposits in banks                                      906,944
Federal funds sold                                                   12,746,000
Securities available-for-sale, at fair value                         32,222,364
Restricted equity securities                                          1,310,000

Loans                                                               177,011,042
Less allowance for loan losses                                        3,347,043
                                                                  -------------
          Loans, net                                                173,663,999
                                                                  -------------

Premises and equipment                                                8,129,393
Other assets                                                          3,683,396
                                                                  -------------

          Total assets                                            $ 236,843,624
                                                                  =============


                   Liabilities and Stockholders' Equity
                   ------------------------------------
Deposits
    Noninterest-bearing                                           $  21,854,517
    Interest-bearing                                                166,569,171
                                                                  -------------
          Total deposits                                            188,423,688
Other borrowings                                                     26,200,000
Other liabilities                                                       828,173
                                                                  -------------
          Total liabilities                                         215,451,861

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                                                   673,834
    Accumulated other comprehensive income                             (649,884)
                                                                  -------------
          Total stockholders' equity                                 21,391,763
                                                                  -------------

          Total liabilities and stockholders' equity              $ 236,843,624
                                                                  =============

                 See Notes to Consolidated Financial Statements

                                       3
<PAGE>
                   CHESTATEE BANCSHARES, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
            THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2004 AND 2003
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                       Three Months                  Six Months
                                                                          Ended                         Ended
                                                                         June 30,                      June 30,
                                                                -----------    -----------    -----------   ------------
                                                                    2004           2003           2004          2003
                                                                ----------     -----------    -----------   ------------
<S>                                                             <C>            <C>            <C>            <C>
Interest income
    Loans                                                       $ 2,770,394    $ 2,709,760    $ 5,554,492    $ 5,352,395
    Securities                                                      253,791        131,919        540,585        238,977
    Federal funds sold                                               33,945         46,970         43,353         83,821
    Interest-bearing deposits in banks                                4,773          7,674         15,216         17,048
                                                                -----------    -----------    -----------    -----------
              Total interest income                               3,062,903      2,896,323      6,153,646      5,692,241
                                                                -----------    -----------    -----------    -----------

Interest expense
    Deposits                                                        794,661        952,978      1,590,399      1,877,531
    Other borrowings                                                149,878         37,814        291,281        130,567
                                                                -----------    -----------    -----------    -----------
              Total interest expense                                944,539        990,792      1,881,680      2,008,098
                                                                -----------    -----------    -----------    -----------

              Net interest income                                 2,118,364      1,905,531      4,271,966      3,684,143
Provision for loan losses                                            64,975      1,995,730        316,582      2,173,044
                                                                -----------    -----------    -----------    -----------
              Net interest income after
                provision for loan losses                         2,053,389        (90,199)     3,955,384      1,511,099
                                                                -----------    -----------    -----------    -----------

Other income
      Service charges and fees                                      199,083        221,246        403,547        407,233
      Other operating income                                         89,272        254,720        184,816        351,478
                                                                -----------    -----------    -----------    -----------
              Total other income                                    288,355        475,966        588,363        758,711
                                                                -----------    -----------    -----------    -----------

Other expenses
    Salaries and employee benefits                                  886,326        696,240      1,789,239      1,512,090
    Occupancy and equipment expenses                                250,150        233,480        501,982        515,385
    Other operating expenses                                        600,688        564,283      1,139,648      1,037,202
                                                                -----------    -----------    -----------    -----------
              Total other expenses                                1,737,164      1,494,003      3,430,869      3,064,677
                                                                -----------    -----------    -----------    -----------

              Net income before income taxes                        604,580     (1,108,236)     1,112,878       (794,867)

Income tax expense                                                  219,187       (398,614)       402,226       (285,120)
                                                                -----------    -----------    -----------    -----------

              Net income                                            385,393       (709,622)       710,652       (509,747)
                                                                -----------    -----------    -----------    -----------

Other comprehensive income (loss):
     Unrealized gains (losses) on securities
         available-for-sale arising during period, net of tax      (616,395)         5,009       (371,398)          (953)
                                                                 -----------    -----------    ----------    -----------


Comprehensive income (loss)                                     $  (231,002)   $  (704,613)   $   339,254    $  (510,700)
                                                                ===========    ===========    ===========    ===========


Basic earnings per share                                        $      0.12    $     (0.23)   $      0.23    $     (0.17)
                                                                ===========    ===========    ===========    ===========

Diluted earnings per share                                      $      0.12    $     (0.23)   $      0.23    $     (0.17)
                                                                ===========    ===========    ===========    ===========

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

                See Notes to Consolidated Financial Statements.

                                      4
<PAGE>
                   CHESTATEE BANCSHARES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     SIX MONTHS ENDED JUNE 30, 2004 AND 2003
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                        2004            2003
                                                                    ------------    ------------
<S>                                                                 <C>             <C>
OPERATING ACTIVITIES
    Net income                                                      $    710,652    $    199,875
    Adjustments to reconcile net income to net cash
        provided by operating activities:
        Depreciation                                                     265,637         172,319
        Provision for loan losses                                        316,582         177,314
        Decrease in interest receivable                                   83,055         128,581
        Increase (decrease) in interest payable                           15,358         (11,350)
        Other operating activities                                     1,557,504        (392,277)
                                                                    ------------     -----------

              Net cash provided by operating activities                2,948,788         274,462
                                                                    ------------     -----------

INVESTING ACTIVITIES
    Net (increase) decrease in interest-bearing deposits in banks        986,659         (50,864)
    Net increase in federal funds sold                                (6,808,000)    (14,768,000)
    Purchases of securities available-for-sale                        (5,494,702)     (5,192,880)
    Proceeds from maturities of securities available-for-sale          7,211,021      10,470,299
    Proceeds from maturities of securities held-to-maturity                 --           399,940
    Net increase in loans                                             (8,666,235)     (7,505,898)
    Purchase of premises and equipment                                   (70,281)       (490,527)
                                                                    ------------     -----------

              Net cash used in investing activities                  (12,841,538)    (17,137,930)
                                                                    ------------     -----------

FINANCING ACTIVITIES
    Net increase in deposits                                           4,885,472      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               10,385,472      17,555,419
                                                                    ------------     -----------

Net increase in cash and due from banks                                  492,722         691,951

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

Cash and due from banks, end of period                              $  4,181,528    $  4,208,070
                                                                    ============    ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
    Cash paid for:
          Interest                                                  $    929,181    $  1,028,656

          Income taxes                                              $    270,000    $    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.

                                        5
<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 June 30, 2004 are not
         necessarily indicative of the results to be expected for the full year.


NOTE 2.  STOCK COMPENSATION PLANS

         At June 30, 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 (loss), 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 (loss) and earnings (losses) 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.

                                                     Three Months Ended June 30,
                                                     --------------------------
                                                       2004             2003
                                                     --------        ----------

    Net income (loss), as reported                    $  385         $ (709,622)
    Deduct: Total stock-based employee compensation
          expense determined under fair value based
          method for all awards                          --                 --
                                                      -------         ----------
    Pro forma net income (loss)                       $   385          (709,622)
                                                      =======         ==========
    Earnings (losses) per share:
       Basic - as reported                            $   .12         $    (.23)
                                                      =======         ==========
       Basic - pro forma                              $   .12         $    (.23)
                                                      =======         ==========
       Diluted - as reported                          $   .12         $    (.23)
                                                      =======         ==========
       Diluted - pro forma                            $   .12         $    (.23)
                                                      =======         ==========

                                       6
 <PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                     Six Months Ended June 30,
                                                                    ---------------------------
                                                                       2004            2003
                                                                    -----------    ------------

<S>                                                                 <C>            <C>
     Net income (loss), as reported                                 $ 710,652      $  (509,747)
     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 (loss)                                    $ 689,300      $  (532,618)
                                                                    ===========    ============
     Earnings (losses) per share:
        Basic - as reported                                         $     .23      $      (.17)
                                                                    ===========    ============
        Basic - pro forma                                           $     .22      $      (.18)
                                                                    ===========    ============
        Diluted - as reported                                       $     .23      $      (.17)
                                                                    ===========    ============
        Diluted - pro forma                                         $     .22      $      (.18)
                                                                   ===========    ============
</TABLE>

NOTE 3.  EARNINGS (LOSSES) PER SHARE

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

                                                   Three Months Ended June 30,
                                                   ---------------------------
                                                       2004           2003
                                                   ------------   -----------

Basic Earnings (Losses) Per Share:
   Weighted average common shares outstanding         3,106,000     3,100,000
                                                   ============   ===========

   Net income (loss)                               $    385,393   $  (709,622)
                                                   ============   ===========

   Basic earnings (losses)  per share              $        .12   $      (.23)
                                                   ============   ===========

Diluted Earnings (Losses) Per Share:

   Weighted average common shares outstanding         3,106,000     3,100,000
   Net effect of the assumed exercise of stock
      options based on the treasury stock method
      using average market prices for the year             --            --
                                                   ------------   -----------
   Total weighted average common shares and
      common stock equivalents outstanding            3,106,000     3,100,000
                                                   ============   ===========

   Net income (loss)                               $    385,393   $  (709,622)
                                                   ============   ===========

   Diluted earnings (losses) per share             $        .12   $      (.23)
                                                   ============   ===========

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

                                                    Six Months Ended June 30,
                                                   ---------------------------
                                                       2004           2003
                                                   -------------   -----------

Basic Earnings (Losses) Per Share:
   Weighted average common shares outstanding          3,106,000     3,019,105
                                                   =============   ===========

   Net income (loss)                               $     710,652   $  (509,747)
                                                   =============   ===========

   Basic earnings (losses)  per share              $         .23   $      (.17)
                                                   =============   ===========

Diluted Earnings (Losses) Per Share:
   Weighted average common shares outstanding          3,106,000     3,019,105
   Net effect of the assumed exercise of stock
      options based on the treasury stock method
      using average market prices for the year                            --
                                                   -------------   -----------
   Total weighted average common shares and
      common stock equivalents outstanding             3,106,000     3,019,105
                                                   =============   ===========

   Net income (loss)                               $     710,652   $  (509,747)
                                                   =============   ===========

   Diluted earnings  (losses) per share            $         .23   $      (.17)
                                                   =============   ===========


NOTE 4.  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 5.  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
June 30, 2004, our liquidity, as determined under guidelines established by
regulatory authorities and internal policy, was satisfactory.

At June 30, 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            9.23%        9.06%          4.00%
     Risk-based capital ratios:
        Core capital                   11.25        11.05           4.00
        Total capital                  12.51        12.31           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:


                                              June 30, 2004
                                          ----------------------
                                          (Dollars in thousands)

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

    Commitments to extend credit          $          35,738
    Letters of credit                                 1,715
                                          -------------------
                                          $          37,453
                                          ===================

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:

                                               June 30,      December 31,
                                                 2004           2003
                                            -------------   --------------
                                                (Dollars in Thousands)
                                            ------------------------------

Cash and due from banks                     $      4,182    $       3,689
Interest-bearing deposits in banks                   907            1,894
Federal funds sold                                12,746            5,938
Securities                                        33,532           35,845
Loans, net                                       173,664          165,314
Premises and equipment                             8,129            8,325
Other assets                                       3,684            4,967
                                            -------------   --------------
                                            $    236,844    $     225,972
                                            =============   ==============

Deposits                                    $    188,424    $     183,538
Other borrowings                                  26,200           20,700
Other liabilities                                    828              681
Stockholders' equity                              21,392           21,053
                                            -------------   --------------
                                            $    236,844    $     225,972
                                            =============   ==============

Our total assets grew by 5% for the six months ended June 30, 2004. Deposit
growth of $4.9 million and proceeds from Federal Home Loan Bank debt of $5.5
million was primarily invested in loans, securities and fed funds. Our ratio of
gross loans to deposits and other borrowings was 82.5% at June 30, 2004 and at
December 31, 2003. Our total equity increased by $339,000, consisting of
year-to-date net income of $711,000 and a decrease in unrealized losses on
securities available-for-sale, net of tax of $372,000.


                                       12
<PAGE>
Results of Operations For The Three and Six Months Ended June 30, 2004 and 2003

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

                            Three Months Ended
                                June 30,
                           --------------------
                             2004       2003
                           -------    -------
                          (Dollars in Thousands)
                          ----------------------

Interest income             $ 3,063   $ 2,896

Interest expense                945       990
                            -------   -------

Net interest income           2,118     1,906

Provision for loan losses        65     1,996

Other income                    288       476

Other expense                 1,737     1,494
                            -------   -------

Pretax income (loss)            604    (1,108)

Income taxes (benefit)          219      (398)
                            -------   -------

Net income (loss)           $   385   $  (710)
                            =======   =======



                            Six Months Ended
                                June 30,
                           --------------------
                             2004       2003
                           -------    -------
                          (Dollars in Thousands)
                          ----------------------

Interest income             $ 6,154   $ 5,692

Interest expense              1,882     2,008
                            -------   -------

Net interest income           4,272     3,684

Provision for loan losses       317     2,173

Other income                    588       759

Other expense                 3,430     3,065
                            -------   -------

Pretax income (loss)          1,113      (795)

Income taxes (benefit)          402      (285)
                            -------   -------

Net income (loss)           $   711   $  (510)
                            =======   =======

                                       13
<PAGE>
Our net interest income has increased by $213,000 and $588,000 for the three
months and six months ended June 30, 2004, respectively, as compared to the same
periods in 2003. Our net interest margin was 3.88% during the six months ended
June 30, 2004 as compared to 4.12% for the six months ended June 30, 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 and investment securities
outstanding. The decrease in net interest margin is largely due to fixed rate
loans that have matured and repriced to a lower rate over the past twelve months
and increased competition in our local market. Yields earned on loans have
decreased to 6.38 % in the first six months of 2004 as compared to 7.14% in the
first six months of 2003. The cost of funds has decreased as well, as deposits
have been able to be repriced as they have matured. Our cost of funds decreased
to 1.96 % in the first six months of 2004 as compared to 2.67% in the first six
months of 2003.

The provision for loan losses was $65,000 and $317,000 for the three months and
six months ended June 30, 2004, respectively. These provisions are a decrease
from the comparable periods in 2003 by $1,931,000 and $1,856,000, respectively.
The amounts provided in 2003 were elevated due to loans to four commercial
borrowers which were deemed to present increased risk due to the impact of
adverse economic conditions and increased competition in their markets.

Nonaccrual loans of $1,038,000 at June 30, 2004 consist of $306,000 of
commercial loans, $662,000 of real estate loans and $70,000 of other consumer
loans. Loans past due ninety days or more and still accruing interest of
$256,000 at June 30, 2004 consists of real estate loans of $228,000 and other
consumer loans of $28,000. 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 $3,347,000 in the
allowance for loan losses at June 30, 2004, or 1.89% 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.


                                       14
<PAGE>
Information with respect to nonaccrual, past due, restructured, and potential
problem loans at June 30, 2004 and 2003 is as follows:

<TABLE>
<CAPTION>
                                                                             June 30,
                                                                      ----------------------
                                                                       2004          2003
                                                                      ----------------------
                                                                      (Dollars in Thousands)
                                                                      ----------------------

<S>                                                                   <C>         <C>
Nonaccrual loans                                                      $  1,038    $   835
Loans contractually past due ninety days or more as to interest
   Or principal payments and still accruing                               256       2,120
Restructured loans                                                                    -
Potential problem loans                                                 1,294       2,735
Interest income that would have been recorded on nonaccrual
   and restructured loans under original terms                            126          32
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.


                                       15
<PAGE>
Information regarding certain loans and allowance for loan loss data through
June 30, 2004 and 2003 is as follows:

<TABLE>
<CAPTION>
                                                                     Six Months Ended
                                                                         June 30,
                                                                    -------------------
                                                                      2004       2003
                                                                    --------   --------
                                                                   (Dollars in Thousands)
                                                                    --------------------
<S>                                                                 <C>        <C>
Average amount of loans outstanding                                 $174,004   $150,310
                                                                    ========   ========

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

Loans charged off
   Commercial and financial                                               26       --
   Real estate mortgage                                                   49       --
   Installment                                                            77         39
                                                                    --------   --------
                                                                         152         39
                                                                    --------   --------
Loans recovered
   Commercial and financial                                                1       --
   Real estate mortgage                                                    1       --
   Installment                                                            17          7
                                                                    --------   --------
                                                                          19          7
                                                                    --------   --------

Net charge-offs                                                          133         32
                                                                    --------   --------

Additions to allowance charged to operating expense during period        317      2,173
                                                                    --------   --------

Balance of allowance for loan losses at end of period               $  3,347   $  4,267
                                                                    ========   ========

Ratio of net loans charged off during the period to
   average loans outstanding                                             .08%       .02%
                                                                    ========   ========
</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.

                                       16
<PAGE>
Other income has decreased by $188,000 and $170,000 for the three months and six
months ended June 30, 2004, respectively, as compared to the same period in
2003. These decreases are due primarily to decreased mortgage origination fees
of $57,000 and a decrease in gain on sale of loans of $138,000.

Other expenses increased by $243,000 and $366,000 for the three months and six
months ended June 30, 2004, respectively, as compared to the same period in
2003. Salaries and employee benefits increased by $277,000, equipment and
occupancy expenses decreased by $13,000, and other operating expenses increased
by $102,000. Salaries and employee benefits have increased due to increased
benefits expenses and annual salary increases. The increase of $102,000 in other
operating expenses was not due to an increase in a particular area but rather a
general increase in most other operating expense categories.

We have recorded income tax expense of $219,000 and $402,000 for the three
months and six months ended June 30, 2004, respectively. The rate of tax as a
percentage of pretax income was 36%.

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.

                                       17
<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.

          (a)  The annual meeting of the stockholders of the Company was held on
               May 11, 2004. There were no shares represented at the meeting in
               person and 1,758,037 represented by proxy, for a total of
               1,758,037 shares, representing 56.5% of the total issued and
               outstanding shares of the Company. Based upon the Report of the
               Inspector, and pursuant to Section 2.5 of the Company's Bylaws, a
               quorum was deemed present at the meeting.

          (b)  The following directors were nominated to serve until the annual
               meeting of the Company in the 2005 calendar year:

                           J. Philip Hester, Sr.      B. Todd Howard
                           Ralph Millard Bowen        David E. Johnson
                           Marcus C. Byrd, Jr.        W. Alan McRae
                           Glennon C. Grogan          Kim Mills
                           James H. Grogan            Russell M. Wallace
                           Andrew M. Head

               Of the 1,758,037 represented, 1,752,067 shares were voted in
               favor of the election of the nominees (except 1,751,967 shares
               were voted in favor of Mr. Howard) to serve a one year term as
               members of the Board of Directors of the Company expiring in
               2004, 5,970 shares were voted against all nominees (except 6,070
               shares were voted against Mr. Howard) to serve as members of the
               Board of Directors of the Company expiring in 2005; and no shares
               abstained. The number of shares voting in favor of the nominees
               represented 99.7% of the total number of shares represented at
               the meeting and entitled to vote upon the proposal. Consequently,
               the nominees were approved by the shareholders of the Company.

                                       18
<PAGE>
          (c)  In addition to the election of directors, the Company also
               considered approval of Mauldin & Jenkins, LLC as the Company's
               independent public accountants for the year ended December 31,
               2004.Of the 1,758,037 represented at the meeting, 1,756,037
               shares were voted in favor of the ratification of Mauldin &
               Jenkins, LLC as the independent public accountants for fiscal
               year 2004, no shares were voted against the ratification of
               Mauldin & Jenkins, LLC as the independent public accountants for
               fiscal year 2004; and 2,000 shares abstained. The number of
               shares voting in favor of the ratification of Mauldin & Jenkins,
               LLC as the independent public accountants for fiscal year 2004
               represented 99.9% of the total number of shares represented at
               the Meeting and entitled to vote upon the proposal. Mauldin &
               Jenkins, LLC was therefore ratified as the independent public
               accountants for fiscal year 2004.

          (d)  Finally, the shareholders considered an amendment to the Bylaws
               moving the annual meeting of shareholders to the second Tuesday
               of May each year. Of the 1,758,037 represented at the meeting,
               1,756,037 shares were voted in favor of the ratification and
               amendment to the Bylaws. No shares were voted against the
               ratification to the amendment and 2,000 shares abstained. The
               number of shares voting in favor of the ratification of the
               amendment to the Bylaws represented 99.9% of the total number of
               shares represented at the meeting entitled to vote on the
               proposal and represented 56.5% of the total outstanding shares of
               the Company. Thus, the amendment to the Bylaws was ratified.

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.


                                       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: August 13, 2004          BY: /s/ J. Philip Hester, Sr.
      ---------------              -------------------------
                                   J. Philip Hester, Sr., President and C.E.O.
                                   (Principal Executive Officer)


DATE: August 13, 2004          BY: /s/ Deborah F. McLeod
      ---------------              -------------------------
                                   Deborah F. McLeod, C.F.O. and Treasurer
                                   (Principal Financial and Accounting Officer)


                                       20