U. S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20529

                                   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, 2002
                                            ----------------------

[ ]  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, 2002: 2,850,000; 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, 2002..........................3

           Consolidated Statements of Operations and Comprehensive Income
            (Loss) - Three Months Ended June 30, 2002 and 2001 and Six
            Months Ended June 30, 2002 and 2001................................4

           Consolidated Statements of Cash Flows -
            Six Months Ended June 30, 2002 and 2001............................5

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

         Item 2.  Management's Discussion and Analysis of
                       Financial Condition and Results of Operations...........7


PART II. OTHER INFORMATION

         Item 1 - Legal Proceedings...........................................15

         Item 2 - Changes in Securities and Use of Proceeds...................15

         Item 4 - Submission of Matters to a Vote of Security Holders......16-17

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

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


<PAGE>
                         PART I - FINANCIAL INFORMATION


ITEM 1.     FINANCIAL STATEMENTS


                   CHESTATEE BANCSHARES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET
                                  June 30, 2002
                                   (Unaudited)

<TABLE>
<CAPTION>
                     Assets

<S>                                                         <C>
Cash and due from banks                                       $   3,777,222
Interest-bearing deposits in banks                                1,337,488
Federal funds sold                                                9,957,000
Securities available-for-sale                                    10,049,325
Securities held-to-maturity, fair value of $410,500                 399,784
Restricted equity securities                                        642,500

Loans                                                           135,754,774
Less allowance for loan losses                                    1,506,964
                                                                -----------
          Loans, net                                            134,247,810
                                                                -----------

Premises and equipment                                            5,330,082
Other assets                                                      2,490,292
                                                                -----------

          Total assets                                        $ 168,231,503
                                                              =============


                   Liabilities and Stockholders' Equity

Deposits
    Noninterest-bearing                                       $  14,473,915
    Interest-bearing                                            121,149,358
                                                              -------------
          Total deposits                                        135,623,273
Other borrowings                                                 12,850,000
Other liabilities                                                   625,489
                                                              -------------
          Total liabilities                                     149,098,762
                                                              -------------

Commitments and contingencies

Stockholders' equity
    Common stock, no par value; 20,000,000 shares
      authorized; 2,850,000 shares issued and outstanding        18,894,783
    Retained earnings                                               193,672
    Accumulated other comprehensive income                           44,286
                                                              -------------
          Total stockholders' equity                             19,132,741
                                                              -------------

          Total liabilities and stockholders' equity          $ 168,231,503
                                                              =============
</TABLE>

See Notes to Consolidated Financial Statements.

                                       3
<PAGE>
                   CHESTATEE BANCSHARES, INC. AND SUBSIDIARIES

      CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
                  THREE MONTHS ENDED JUNE 30, 2002 AND 2001 AND
                     SIX MONTHS ENDED JUNE 30, 2002 AND 2001
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                             Three Months Ended           Six Months Ended
                                                                  June 30,                    June 30,
                                                         -------------------------    -------------------------

                                                              2002         2001           2002          2001
                                                         -----------   -----------    -----------   -----------
<S>                                                      <C>           <C>            <C>           <C>
Interest income
    Loans                                                $ 2,447,724   $ 1,983,600    $ 4,724,458   $ 3,887,806
    Taxable securities                                       104,297        35,000        135,483        80,372
    Federal funds sold                                        20,926        48,601         85,699       116,302
    Interest-bearing deposits in banks                        15,469         4,139         27,922         5,796
                                                         -----------   -----------    -----------   -----------
              Total interest income                        2,588,416     2,071,340      4,973,562     4,090,276
                                                         -----------   -----------    -----------   -----------

Interest expense
    Deposits                                               1,006,701     1,086,880      2,058,119     2,087,785
    Other borrowings                                          26,326          --          115,314         1,004
                                                         -----------   -----------    -----------   -----------
              Total interest expense                       1,033,027     1,086,880      2,173,433     2,088,789
                                                         -----------   -----------    -----------   -----------

              Net interest income                          1,555,389       984,460      2,800,129     2,001,487
Provision for loan losses                                    205,701        75,850        339,830       171,855
                                                         -----------   -----------    -----------   -----------
              Net interest income after
                provision for loan losses                  1,349,688       908,610      2,460,299     1,829,632
                                                         -----------   -----------    -----------   -----------

Other income
      Service charges and fees                               133,653        96,096        261,830       179,528
      Other operating income                                  90,207        27,548        150,096        64,134
                                                         -----------   -----------    -----------   -----------
              Total other income                             223,860       123,644        411,926       243,662
                                                         -----------   -----------    -----------   -----------

Other expenses
    Salaries and employee benefits                           634,273       470,503      1,287,281       916,913
    Occupancy and equipment expenses                         187,939       125,353        351,015       243,692
    Other operating expenses                                 497,710       425,175        926,132       782,449
                                                         -----------   -----------    -----------   -----------
              Total other expenses                         1,319,922     1,021,031      2,564,428     1,943,054
                                                         -----------   -----------    -----------   -----------

              Net income before income taxes                 253,626        11,223        307,797       130,240

Income tax expense                                           105,260        22,090        124,345        65,661
                                                         -----------   -----------    -----------   -----------

              Net income (loss)                              148,366       (10,867)       183,452        64,579
                                                         -----------   -----------    -----------   -----------

Other comprehensive income:
     Unrealized gains on securities available-for-sale
         arising during period, net of tax                    73,515         1,416         40,895         4,035
                                                         -----------   -----------    -----------   -----------


Comprehensive income (loss)                              $   221,881   $    (9,451)   $   224,347   $    68,614
                                                         ===========   ===========    ===========   ===========

Basic and diluted earnings (losses)  per share           $      0.06   $     (0.01)   $      0.08   $      0.03
                                                         ===========   ===========    ===========   ===========

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, 2002 AND 2001
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                  2002            2001
                                                                             -------------   -------------
OPERATING ACTIVITIES
<S>                                                                          <C>             <C>
    Net income                                                               $    183,452    $     64,579
    Adjustments to reconcile net income to net cash
        provided by (used in) operating activities:
        Depreciation                                                              170,878          93,054
        Provision for loan losses                                                 339,830         171,855
        Increase in interest receivable                                          (212,604)        (27,199)
        Decrease in interest payable                                              (24,011)        (24,851)
        Net other operating activities                                            203,105        (286,720)
                                                                             -------------   -------------
              Net cash provided by (used in) operating activities                 660,650          (9,282)
                                                                             -------------   -------------

INVESTING ACTIVITIES
    Net increase in interest-bearing deposits in banks                            (37,558)     (1,268,865)
    Net (increase) decrease in federal funds sold                               5,361,000      (4,092,000)
    Purchase of securities available-for-sale                                 (10,978,340)     (1,571,000)
    Proceeds from maturities of securities available-for-sale                   1,500,000       1,446,587
    Proceeds from maturities of securities held-to-maturity                          --           999,844
    Net increase in loans                                                     (23,430,006)    (22,799,526)
    Purchase of premises and equipment                                           (441,997)       (582,121)
                                                                             -------------   -------------

              Net cash used in investing activities                           (28,026,901)    (27,867,081)
                                                                             -------------  --------------

FINANCING ACTIVITIES
    Net increase in deposits                                                   22,001,602      24,570,273
    Proceeds from other borrowings                                                   --            20,000
    Repayment of other borrowings                                                    --           (70,000)
    Proceeds from sale of common stock                                          5,750,000            --
    Stock issue costs                                                             (87,581)           --
                                                                             -------------  --------------

              Net cash provided by financing activities                        27,664,021      24,520,273
                                                                             -------------  --------------

Net increase (decrease) in cash and due from banks                                297,770      (3,356,090)

Cash and due from banks, beginning of period                                    3,479,452       5,031,994
                                                                             -------------   -------------

Cash and due from banks, end of period                                       $  3,777,222    $  1,675,904
                                                                             =============   =============


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid (received) for:
         Interest                                                            $  2,197,444    $  2,113,640

         Income taxes                                                        $    (82,576)   $    288,394

    Principal balances of loans transferred to other real estate owned       $    782,867    $    --

    Financed sales of  other real estate owned                               $    447,000    $    --
</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 three and six month periods
                  ended June 30, 2002 are not necessarily indicative of the
                  results to be expected for the full year.


NOTE 2.  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.


                                       6

<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 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, 2001
as filed on our annual report on Form 10-KSB.

                                       7
<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 on an ongoing basis. State and Federal regulatory
authorities also monitor our liquidity on a periodic basis. As of June 30, 2002,
our liquidity, as determined under guidelines established by regulatory
authorities and internal policy, was satisfactory.

At June 30, 2002, 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         12.22 %           12.14 %            4.00 %
    Risk-based capital ratios:
       Core capital                 13.52             13.44              4.00
       Total capital                14.59             14.51              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
offering 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 issue 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.

                                       8
<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 issue 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,
                                                            2002
                                                       ---------------

             Commitments to extend credit              $  22,790,000
             Letters of credit                                    -
                                                       ---------------
                                                       $  22,790,000
                                                       ===============

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.


                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]



                                       9
<PAGE>
Financial Condition

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

                                                        June 30,    December 31,
                                                          2002          2001
                                                     -----------     -----------
                                                        (Dollars in Thousands)
                                                     ---------------------------

Cash and due from banks                              $    3,777      $    3,479
Interest-bearing deposits in banks                        1,338           1,300
Federal funds sold                                        9,957          15,318
Securities                                               11,092           1,548
Loans, net                                              134,248         111,493
Premises and equipment                                    5,330           5,059
Other assets                                              2,490           1,938
                                                     -----------     -----------
                                                     $  168,232      $  140,135
                                                     ===========     ===========

Deposits                                             $  135,624      $  113,622
Other borrowings                                         12,850          12,850
Other liabilities                                           625             480
Stockholders' equity                                     19,133          13,183
                                                     -----------     -----------
                                                     $  168,232      $  140,135
                                                     ===========     ===========


Our total assets grew by 20% for the first six months of 2002. Deposit growth of
$22 million was primarily invested in loans. Our ratio of loans to deposits and
other borrowings has increased to 91% at June 30, 2002 from 89% at December 31,
2001, indicating continued strong loan demand in our primary market area of
Dawson County, Georgia and surrounding counties. Our total equity increased by
$5,954,000, consisting of year-to-date net income of $183,000, proceeds from the
sale of common stock of $5,730,000, and increased unrealized gains on securities
available-for-sale, net of tax, of $41,000.


                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       10
<PAGE>
Results of Operations For The Three Months Ended June 30, 2002 and 2001 and for
the Six Months Ended June 30, 2002 and 2001

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

                                                 Three Months Ended
                                                       June 30,
                                            ---------------------------
                                               2002             2001
                                            ---------        ----------
                                                 (Dollars in Thousands)
                                            ---------------------------
Interest income                             $  2,588          $  2,071
Interest expense                               1,033             1,087
                                            ---------         ---------
Net interest income                            1,555               984
Provision for loan losses                        206                76
Other income                                     224               124
Other expense                                  1,320             1,021
                                            ---------         ---------
Pretax income                                    253                11
Income tax expense                               105                22
                                            ---------         ---------
Net income (loss)                           $    148          $    (11)
                                            =========         =========


                                                 Six Months Ended
                                                     June 30,
                                            ---------------------------
                                               2002             2001
                                            ---------         ---------
                                               (Dollars in Thousands)
                                            ---------------------------
Interest income                             $  4,973          $  4,090
Interest expense                               2,173             2,089
                                            ---------         ---------
Net interest income                            2,800             2,001
Provision for loan losses                        340               172
Other income                                     412               244
Other expense                                  2,565             1,943
                                            ---------         ---------
Pretax income                                    307               130
Income tax expense                               124                65
                                            ---------         ---------
Net income                                  $    183          $     65
                                            =========         =========


Our net interest income has increased by $571,000 and $799,000 for the second
quarter and first six months of 2002, respectively, as compared to the same
periods in 2001. Our net interest margin decreased to 3.93% during the first six
months of 2002 as compared to 4.71% for the first six months of 2001 and 4.27%
for the entire year of 2001. The increase in net interest income is due
primarily to the increased volume of average loans outstanding. The decrease in
net interest margin is due to the decrease in yields earned on loans that have
decreased to 7.65% in the first six months of 2002 as compared to 10.03% in the
first six months of 2001. 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 3.93% in the first six months of 2002 as compared to 5.72% in the first six
months of 2001.

                                       11
<PAGE>
The provision for loan losses was $206,000 and $340,000 for the second quarter
and first six months of 2002, respectively. These provisions are an increase
from the comparable periods in 2001 by $130,000 and $168,000, respectively. The
amounts provided are due to loan growth, increased net loan charge-offs,
increased nonaccrual, past due and potential problem loans and to our assessment
of the inherent risk in the portfolio. Nonaccrual loans of $207,000 at June 30,
2002 consist of commercial loans. Loans past due ninety days or more and still
accruing interest of $730,000 at June 30, 2002 consists of commercial loans of
$201,000, real estate loans of $497,000 and other consumer loans of $32,000.
Potential problem loans consist of one commercial loan. 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 $1,507,000 in the allowance for loan losses at June 30, 2002 is adequate to
absorb known risks in the portfolio. No assurance can be given, however, that
increased loan volume and adverse economic conditions or other circumstances
will not result in increased losses in our loan portfolio.

Information with respect to nonaccrual, past due and restructured loans is as
follows:

<TABLE>
<CAPTION>
                                                                                  June 30,
                                                                         -------------------------
                                                                           2002              2001
                                                                         -------------------------
                                                                           (Dollars in Thousands)
                                                                         -------------------------

<S>                                                                      <C>               <C>
Nonaccrual loans                                                         $  207            $  325
Loans contractually past due ninety days or more as to interest
   or principal payments and still accruing                                 730               165
Restructured loans                                                            0                 0
Potential problem loans                                                   1,200               823
Interest income that would have been recorded on nonaccrual
   And restructured loans under original terms                               28                10
Interest income that was recorded on nonaccrual and restructured loans        0                 0
</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. Unless the
loan is both well-secured and in the process of collection, the loan is placed
on non-accrual status 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.

                                       12
<PAGE>
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.
These classified loans do not represent material credits about which management
is aware of any information which causes management to have serious doubts as to
the ability of such borrowers to comply with the loan repayment terms.

Information regarding certain loans and allowance for loan loss data is as
follows:

<TABLE>
<CAPTION>
                                                                           Six Months Ended
                                                                               June 30,
                                                                    ----------------------------
                                                                       2002               2001
                                                                    --------           ---------
                                                                      (Dollars in Thousands)
                                                                    --------            --------

<S>                                                                 <C>                 <C>
Average amount of loans outstanding                                 $123,496            $ 77,520
                                                                    ========            ========

Balance of allowance for loan losses at beginning of period         $  1,252            $    737
                                                                    --------            --------

Loans charged off
   Commercial and financial                                         $   --              $   --
   Real estate mortgage                                                 --                  --
   Installment                                                            86                  10
                                                                    --------            --------
                                                                          86                  10
                                                                    --------            --------

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

Net charge-offs                                                           85                  10
                                                                    --------            --------

Additions to allowance charged to operating expense during period        340                 172
                                                                    --------            --------

Balance of allowance for loan losses at end of period               $  1,507            $    899
                                                                    ========            ========

Ratio of net loans charged off during the period to
   average loans outstanding                                             .07%                .01%
                                                                    ========            ========
</TABLE>

                                       13
<PAGE>
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 has increased by $100,000 and $168,000 for the second quarter and
first six months of 2002 as compared to the same periods in 2001. Overall,
service charges on deposit accounts have increased by $82,000 and mortgage
origination fees have increased by $80,000.

Other expenses have increased by $299,000 and $622,000 for the second quarter
and first six months of 2002 as compared to the same periods in 2001. Salaries
and employee benefits have increased due to an increase in the number of full
time equivalent employees to 60 at June 30, 2002 from 47 at June 30, 2001 and to
normal salary increases. The increase in the number of employees is due to the
adding of a new branch in 2001 and to our overall growth. The increases in
equipment and occupancy and other operating expenses are due to our overall
growth.

We have recorded income tax expense of $105,000 and $124,000 for the second
quarter and first six months of 2002. The amounts provided are higher than the
federal statutory rate due to state income taxes.

In 2001, we began offering investment and financial services through Chestatee
Financial Services, Inc. and residential mortgage services through Chestatee
Residential Mortgage Services, Inc. Net income from these activities amounted to
$38,000 and $64,000 for the second quarter and first six months of 2002,
respectively.

We are not aware of any known trends, events or uncertainties, other than the
effect of events as described above, that will have or are reasonably likely to
have a material effect on our 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.

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<PAGE>
                           PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS.

Our subsidiary, Chestatee State Bank, brought an action on March 5, 2001 in the
Superior Court for Dawson County against Terri Reece and Woody Reece to recover
amounts due following default on two promissory notes. We sought to recover the
balance due of $64,755, plus interest and attorneys' fees.

The Reeces, husband and wife, filed an answer on April 9, 2001 denying owing any
money to us. In addition, the Reeces filed a counterclaim against us for
deliberate and intentional infliction of emotional distress for a sum not less
than $1 million and for unstipulated punitive damages.

Chestatee State Bank filed a motion for summary judgment seeking recovery on the
notes and dismissal of the counterclaim. The motion was granted on April 11,
2002. Notice of appeal was filed by counsel for the Reeces on April 29, 2002.
The appeal is pending.


ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

The Company offered on a best efforts basis 350,000 shares of its common stock
pursuant to a registration statement on Form SB-2 (Commission No. 333-81442)
declared effective February 7, 2002. We disclose the following information in
connection with the offering pursuant to Rule 463 of the Securities Act of 1933,
as amended:

     (a)  The offering was closed May 21, 2002 upon the sale of all of the
          350,000 shares of common stock.

     (b)  The Company engaged no underwriters and all shares were offered and
          sold through the efforts of certain executive officers of the Company.

     (c)  The no par value common stock of the Company is the title of the only
          class of securities registered under the registration statement.

     (d)  The Company registered 350,000 shares of its common stock at an
          aggregate offering price of $3.5 million, and sold 350,000 shares at
          an aggregate offering price of $3.5 million as of the close of the
          offering on May 21, 2002.

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<PAGE>
     (e)  From February 7, 2002 until June 30, 2002, the effective date of the
          registration statement until the end of the reporting period, the
          amount of expenses incurred by the Company in connection with the
          issuance and distribution common stock is, based upon reasonable
          estimates, as follows:

               Underwriting discounts and commissions....................$  0
               Finders' fees.............................................$  0
               Expenses paid to or for underwriters......................$  0
               Other expenses............................................$22,900

               Total expenses............................................$22,900

          There were no selling shareholders and no expenses incurred on behalf
          of any selling shareholders. None of the expenses of the offering
          constitute direct or indirect payments to directors, officers or
          general partners, or associates thereof, persons owning 10% or more of
          any class of securities or any affiliates of the Company.

     (f)  The net proceeds to the Company of the offering after deducting the
          expenses listed above is $3,477,100.

     (g)  From February 7, 2002 through June 30, 2002, the Company has applied
          the following amounts of its net proceeds from the offering:

               Working capital for growth and expansion of the Bank...$3,477,100
               Investment in short term securities by the Bank........$  0
               General corporate purposes of the Company..............$  0
               General corporate purposes of the Bank.................$  0

          None of the uses of the proceeds of the offering constitute direct or
          indirect payments to directors, officers or general partners, or
          associates thereof, persons owning 10% or more of any class of
          securities or any affiliates of the Company.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     (a)  The annual meeting of the stockholders of the Company was held on
          April 23, 2002.

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<PAGE>
     (b)  The following directors were nominated to serve until the annual
          meeting of the Company in the 2003 calendar year:

               J. Philip Hester, Sr.            Bruce T. 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                   J. Wyman Walden

     (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, 2002.

          The shares represented at the meeting included no shares represented
          in person and 1,258,482 represented by proxy, reflecting 55.3% of the
          shares issued and outstanding as of the record date. The shares
          represented at the meeting were voted as follows:

                                 Item (b)                   Item (c)
                                # of Shares               # of Shares
                                -----------               -----------

              For                1,258,482                 1,258,482
              Against                   --                        --
              Abstain                   --                        --
                                 ---------                 ---------
                                 1,258,482                 1,258,482
                                 =========                 =========

          Thus, both proposals for consideration were duly approved by the
          shareholders.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

     (a)  Exhibits.

          99.1   Certification of Principal Executive Officer Regarding Facts
          and Circumstances Relating to Exchange Act Filings

          99.2   Certification of Principal Financial Officer Regarding Facts
          and Circumstances Relating to Exchange Act Filings

     (b)  Reports on Form 8-K.

                         None.

                                       17
<PAGE>
                                   SIGNATURES


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

                           CHESTATEE BANCSHARES, INC.
                                  (Registrant)



DATE: August 13, 2002      BY: /s/ J. Philip Hester, Sr.
      ---------------          -------------------------------------------------
                                   J. Philip Hester, Sr., President and C.E.O.
                                   (Principal Executive Officer)


DATE: August 13, 2002      BY: /s/ Deborah F. McLeod
      ---------------          -------------------------------------------------
                                    Deborah F. McLeod, C.F.O. and Treasurer
                                    (Principal Financial and Accounting Officer)


                                       18