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

                                   FORM 10-QSB


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

           For the quarterly period ended     September 30, 2005
                                           ---------------------------

[ ]   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 November 4, 2005: 3,446,281; no par value.

Transitional Small Business Disclosure Format   Yes              No   X
                                                    -------         ---------
<PAGE>

                   CHESTATEE BANCSHARES, INC. AND SUBSIDIARIES


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

                                      INDEX
                                      -----

                                                                            Page
                                                                            ----

PART I.   FINANCIAL INFORMATION

          ITEM 1.  Financial Statements

          Consolidated Balance Sheet - September 30, 2005......................3

          Consolidated Statements of Income -
                   Three and Nine Months Ended September 30, 2005 and 2004.....4

          Consolidated Statements of Comprehensive Income -
                   Nine months Ended September 30, 2005 and 2004...............5

          Consolidated Statements of Cash Flows -
                   Nine Months Ended September 30, 2005 and 2004...............6

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

          ITEM 2.      Management's Discussion and Analysis of
                       Financial Condition and Results of Operations..........10

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


PART II.  OTHER INFORMATION

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

          ITEM 6.      Exhibits and Reports on Form 8-K.......................18

          Signatures..........................................................19

          Certifications......................................................20


<PAGE>
                         PART I - FINANCIAL INFORMATION

  ITEM 1.                     FINANCIAL STATEMENTS

                           CONSOLIDATED BALANCE SHEET
                              AT SEPTEMBER 30, 2005
                                   (Unaudited)

                     Assets
                     ------

Cash and due from banks                                           $   7,030,015
Interest-bearing deposits in banks                                    4,894,561
Federal funds sold                                                    5,793,000
Securities available-for-sale, at fair value                         28,180,943
Restricted equity securities, at cost                                 1,349,500

Loans                                                               204,555,343
Less allowance for loan losses                                        3,632,673
                                                                  -------------
          Loans, net                                                200,922,670
                                                                  -------------

Premises and equipment, net                                           7,674,946
Other assets                                                          3,486,032
                                                                  -------------

          Total assets                                            $ 259,331,667
                                                                  =============


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

Deposits
    Noninterest-bearing                                           $  22,908,452
    Interest-bearing                                                192,955,131
                                                                  -------------
          Total deposits                                            215,863,583
Other borrowings                                                     17,350,000
Other liabilities                                                     1,287,541
                                                                  -------------
          Total liabilities                                         234,501,124
                                                                  -------------

Commitments and contingencies

Stockholders' equity
    Common stock, no par value; 20,000,000 shares
      authorized; 3,446,281 shares issued and outstanding            21,634,341
    Retained earnings                                                 3,417,041
    Accumulated other comprehensive loss                               (220,839)
                                                                  -------------
          Total stockholders' equity                                 24,830,543
                                                                  -------------

          Total liabilities and stockholders' equity              $ 259,331,667
                                                                  =============

See Notes to Consolidated Financial Statements.

                                       3
<PAGE>
                   CHESTATEE BANCSHARES, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME
         THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                         Three Months                 Nine Months
                                                                            Ended                        Ended
                                                                        September 30                   September 30
                                                                 ------------   ------------   ------------    ------------
                                                                      2005           2004           2005            2004
                                                                 ------------   ------------   ------------    ------------
<S>                                                              <C>            <C>            <C>             <C>
Interest income
    Loans                                                        $  3,846,881   $  2,874,461   $ 10,575,170    $  8,428,953
    Taxable Securities                                                245,647        242,382        720,383         768,227
    Nontaxable Securities                                              13,050         10,638         43,761          25,378
    Federal funds sold                                                 90,274         38,945        405,854          82,298
    Interest-bearing deposits in banks                                 56,496         12,308        135,574          27,524
                                                                 ------------   ------------    ------------   ------------
              Total interest income                                 4,252,348      3,178,734     11,880,742       9,332,380
                                                                 ------------   ------------    ------------   ------------

Interest expense
    Deposits                                                        1,392,416        826,552      3,837,460       2,416,951
    Other borrowings                                                  112,523        152,933        370,131         444,214
                                                                 ------------   ------------    ------------   ------------
              Total interest expense                                1,504,939        979,485      4,207,591       2,861,165
                                                                 ------------   ------------    ------------   ------------

              Net interest income                                   2,747,409      2,199,249      7,673,151       6,471,215
Provision for loan losses                                              80,680         17,379        177,923         333,961
                                                                 ------------   ------------    ------------   ------------
              Net interest income after
                provision for loan losses                           2,666,729      2,181,870      7,495,228       6,137,254
                                                                 ------------   ------------    ------------   ------------

Other income
      Service charges and fees                                        216,727        178,424        691,592         581,971
      Gains (Losses) on sales of securities available for sale             --             --        (51,712)             --
      Other operating income                                           51,886         68,005        225,208         252,821
                                                                 ------------   ------------    ------------   ------------
              Total other income                                      268,613        246,429        865,088         834,792
                                                                 ------------   ------------    ------------   ------------

Other expenses
    Salaries and employee benefits                                    980,678        882,733      2,980,867       2,671,972
    Occupancy and equipment expenses                                  261,804        255,369        761,694         757,351
    Other operating expenses                                          598,610        544,414      1,750,194       1,684,062
                                                                 ------------   ------------    ------------   ------------
              Total other expenses                                  1,841,092      1,682,516      5,492,755       5,113,385
                                                                 ------------   ------------    ------------   ------------

              Net income before income taxes                        1,094,250        745,783      2,867,561       1,858,661

Income tax expense                                                    391,167        261,286      1,014,731         663,512
                                                                 ------------   ------------    ------------   ------------

              Net income                                              703,083        484,497      1,852,830       1,195,149
                                                                 ------------   ------------    ------------   ------------



Basic earnings per share                                         $       0.20   $       0.14    $       0.54   $       0.35
                                                                 ============   ============    ============   ============

Diluted earnings per share                                       $       0.20   $       0.14    $       0.53   $       0.34
                                                                 ============   ============    ============   ============

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

See Notes to Consolidated Financial Statements.

                                       4
<PAGE>
                   CHESTATEE BANCSHARES, INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                  NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

<TABLE>
<CAPTION>
                                                                              Three Months                Nine Months
                                                                                 Ended                       Ended
                                                                              September 30                September 30
                                                                        -----------   ----------    -----------    ------------
                                                                             2005        2004          2005            2004
                                                                        -----------   ----------    -----------    -----------

<S>                                                                     <C>           <C>           <C>            <C>
Net income                                                              $   703,083   $   484,497   $ 1,852,830    $ 1,195,149

Other comprehensive income (loss):
        Unrealized holding gains (losses) on securities
           available-for-sale arising during the nine month period,
           net of tax                                                        13,534       464,507       (74,976)        93,109

       Reclassification adjustment for losses realized in net income,
           net of tax benefits of $18,099                                        --            --        33,613            --
                                                                        -----------   -----------   -----------    -----------

Other comprehensive income (loss)                                            13,534       464,507       (41,363)        93,109
                                                                        -----------   -----------   -----------    -----------

Comprehensive income                                                    $   716,617   $   949,004   $ 1,811,467    $ 1,288,258
                                                                        ===========   ===========   ===========    ===========
</TABLE>

See Notes to Consolidated Financial Statements.

                                       5
<PAGE>
                   CHESTATEE BANCSHARES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                         2005           2004
                                                                     -----------    ------------
<S>                                                                 <C>             <C>
OPERATING ACTIVITIES
    Net income                                                      $  1,852,830    $  1,195,149
    Adjustments to reconcile net income to net cash
        provided by operating activities:
        Depreciation                                                     403,368         398,778
        Provision for loan losses                                        177,923         333,961
        Loss on sales of securities                                       51,712            --
        Decrease in interest receivable                                  121,311          62,274
        Increase in interest payable                                      80,148          48,641
        Other operating activities                                       118,437       1,946,651
                                                                    ------------    ------------

              Net cash provided by operating activities                2,805,729       3,985,454
                                                                    ------------    ------------

INVESTING ACTIVITIES
    Net decrease (increase) in interest-bearing deposits in banks      1,455,741      (2,456,458)
    Net increase in federal funds sold                                (1,702,000)     (6,236,000)
    Purchases of securities available-for-sale                        (6,866,516)     (6,085,578)
    Proceeds from maturities of securities available-for-sale          4,718,763       9,444,474
    Proceeds from sales of securities available-for-sale               3,950,357              --
    Net increase in loans                                             (7,277,305)    (15,714,510)
    Proceeds from sales of premises and equipment                          3,161          37,711
    Purchase of premises and equipment                                  (177,585)       (132,741)
                                                                    ------------    ------------

              Net cash used in investing activities                   (5,895,384)    (21,143,102)
                                                                    ------------    ------------

FINANCING ACTIVITIES
    Net increase in deposits                                          15,469,742      11,558,981
    Proceeds from other borrowings                                            --       5,500,000
    Payments on other borrowings                                      (8,850,000)             --
    Proceeds from the exercise of stock options                           80,000              --
                                                                    ------------    ------------
              Net cash provided by financing activities                6,699,742      17,058,981
                                                                    ------------    ------------

Net increase (decrease) in cash and due from banks                     3,610,087         (98,667)

Cash and due from banks, beginning of period                           3,419,928       3,688,806
                                                                    ------------    ------------

Cash and due from banks, end of period                              $  7,030,015    $  3,590,139
                                                                    ============    ============


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
    Cash paid for:
          Interest                                                  $  4,127,443    $  2,812,524

          Income taxes                                              $  1,163,452    $    270,000

    Principal balances of loans transferred to other real estate    $         --    $    473,059

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

See Notes to Consolidated Financial Statements.

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

NOTE 1.  BASIS OF PRESENTATION

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

         The results of operations  for the period ended  September 30, 2005 are
         not  necessarily  indicative of the results to be expected for the full
         year.

         Stock Dividend and Per Share Amounts

         Earnings per share for the periods  ended  September 30, 2004 have been
         restated to reflect the 10% stock dividend declared in 2005.

NOTE 2.  STOCK COMPENSATION PLANS

         At  September  30,  2005,  the  Company  has two  stock-based  employee
         compensation  plans.  The  Company  accounts  for those plans under the
         recognition  and   measurement   principles  of  APB  Opinion  No.  25,
         Accounting for Stock Issued to Employees,  and related Interpretations.
         No stock-based  employee  compensation cost is reflected in net income,
         as all options granted under those plans had an exercise price equal to
         the  market  value of the  underlying  stock on the date of grant.  The
         Company also has  remaining  options  outstanding  that were granted to
         certain  executive  officers under employee  agreements.  The following
         table  illustrates  the effect on net income and  earnings per share if
         the Company had applied the fair value  recognition  provisions of SFAS
         Statement  No.  123,  Accounting  for  Stock-Based   Compensation,   to
         stock-based employee compensation.

<TABLE>
<CAPTION>
                                                         Three Months Ended September 30,
                                                        ---------------------------------
                                                           2005                  2004
                                                        ---------            ----------
<S>                                                     <C>                  <C>
     Net income, as reported                            $ 703,083            $  484,497
     Deduct: Total stock-based employee compensation
           expense determined under fair value based
           method for all awards                           89,317                 6,930
                                                        ---------            ----------
     Pro forma net income                               $ 613,766            $  477,567
                                                        =========            ==========
     Earnings per share:
        Basic - as reported                             $     .20            $      .14
                                                        =========            ==========
        Basic - pro forma                               $     .19            $      .14
                                                        =========            ==========
        Diluted - as reported                           $     .20            $      .14
                                                        =========            ==========
        Diluted - pro forma                             $     .18            $      .14
                                                        =========            ==========
</TABLE>

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

<TABLE>
<CAPTION>
                                                         Nine Months Ended September 30,
                                                         -------------------------------
                                                              2005               2004
                                                         ------------        -----------
<S>                                                      <C>                 <C>
     Net income, as reported                             $  1,852,830        $ 1,195,149
     Deduct: Total stock-based employee compensation
           expense determined under fair value based
           method for all awards                              120,062             21,352
                                                         ------------        -----------
     Pro forma net income                                $  1,732,768        $ 1,173,797
                                                         ============        ===========
     Earnings per share:
        Basic - as reported                              $        .54        $       .35
                                                         ============        ===========
        Basic - pro forma                                $        .51        $       .35
                                                         ============        ===========
        Diluted - as reported                            $        .53        $       .34
                                                         ============        ===========
        Diluted - pro forma                              $        .50        $       .34
                                                         ============        ===========
</TABLE>

NOTE 3.  EARNINGS PER SHARE

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

<TABLE>
<CAPTION>
                                                       Three Months Ended September 30,
                                                       --------------------------------
                                                           2005                 2004
                                                       -----------          -----------
<S>                                                      <C>                  <C>
    Basic Earnings Per Share:
       Weighted average common shares outstanding        3,444,009            3,416,600
                                                       ===========          ===========

       Net income                                      $   703,083          $   484,497
                                                       ===========          ===========

       Basic earnings per share                        $       .20          $       .14
                                                       ===========          ===========

    Diluted Earnings Per Share:

       Weighted average common shares outstanding        3,444,009            3,416,600

       Net effect of the assumed exercise of stock
          options based on the treasury stock method
          using average market prices for the year          66,516               54,534
                                                       -----------          -----------
       Total weighted average common shares and
          common stock equivalents outstanding           3,510,525            3,471,134
                                                       ===========          ===========

       Net income                                      $   703,083          $   484,497
                                                       ===========          ===========

       Diluted earnings per share                      $       .20          $       .14
                                                       ===========          ===========
</TABLE>

                                       8
<PAGE>
                   CHESTATEE BANCSHARES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                       Nine Months Ended September 30,
                                                       -------------------------------
                                                           2005                2004
                                                       -----------         -----------
<S>                                                    <C>                 <C>
    Basic Earnings Per Share:
       Weighted average common shares outstanding        3,438,222           3,416,600
                                                       ===========         ===========

       Net income                                      $ 1,852,830         $ 1,195,149
                                                       ===========         ===========

       Basic earnings per share                        $       .54         $       .35
                                                       ===========         ===========

    Diluted Earnings Per Share:


       Weighted average common shares outstanding        3,438,222           3,416,600

       Net effect of the assumed exercise of stock
          options based on the treasury stock method
          using average market prices for the year          68,090              54,534

                                                       -----------         -----------
       Total weighted average common shares and
          common stock equivalents outstanding           3,506,313           3,471,134
                                                       ===========         ===========

       Net income                                      $ 1,852,830         $ 1,195,149
                                                       ===========         ===========

       Diluted earnings per share                      $       .53         $       .34
                                                       ===========         ===========
</TABLE>

NOTE 4.  CURRENT ACCOUNTING DEVELOPMENTS

         There are  recent  accounting  pronouncements  that  have  had,  or are
         expected  to  have,  a  material  effect  on  the  Company's  financial
         statements.  In December 2004, the Financial Accounting Standards Board
         (FASB) issued Statement No. 123R,  Share-Based  Payment,  a revision of
         FASB Statement No. 123, Accounting for Stock-Based  Compensation.  This
         Statement supersedes APB Opinion No. 25, Accounting for Stock Issued to
         Employees,  and its related  implementation  guidance.  This  Statement
         establishes  standards for the accounting for  transactions in which an
         entity exchanges its equity instruments for goods or services.  It also
         addresses  transactions  in  which  an  entity  incurs  liabilities  in
         exchange for goods or services  that are based on the fair value of the
         entity's  equity  instruments or that may be settled by the issuance of
         those  equity   instruments.   This  Statement   focuses  primarily  on
         accounting  for  transactions  in  which  an  entity  obtains  employee
         services in share-based  payment  transactions  such as the issuance of
         stock  options  in  exchange  for  employee  services.  This  Statement
         requires  a public  entity to  measure  the cost of  employee  services
         received in exchange  for an award of equity  instruments  based on the
         grant-date fair value of the award (with limited exceptions). That cost
         will be recognized over the period during which an employee is required
         to provide  service in exchange for the award - the  requisite  service
         period  (usually  the  vesting  period).  The  Company  has  elected to
         continue  with the  accounting  methodology  of  Opinion  No.  25 until
         periods beginning after December 31, 2005.

                                       9
<PAGE>
                   CHESTATEE BANCSHARES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

Forward Looking Statements

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

These forward-looking statements involve risks and uncertainties and may not be
realized due to a variety of factors, including, without limitation: the effects
of future economic conditions; governmental monetary and fiscal policies, as
well as legislative and regulatory changes; the risks of changes in interest
rates on the level and composition of deposits, loan demand, and the values of
loan collateral, securities, and other interest-sensitive assets and
liabilities; interest rate risks; the effects of competition from other
commercial banks, thrifts, mortgage banking firms, consumer finance companies,
credit unions, securities brokerage firms, insurance companies, money market and
other mutual funds and other financial institutions operating in our market area
and elsewhere, including institutions operating regionally, nationally, and
internationally, together with such competitors offering banking products and
services by mail, telephone, computer, and the Internet.

Critical Accounting Policies

We have adopted various accounting policies which govern the application of
accounting principles generally accepted in the United States in the preparation
of our financial statements. Our significant accounting policies are described
in the footnotes to the consolidated financial statements at December 31, 2004
as filed on our annual report on Form 10-KSB.

                                       10
<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
September 30, 2005, our liquidity, as determined under guidelines established by
regulatory authorities and internal policy, was satisfactory.

At September 30, 2005, 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        9.65 %          9.41 %          4.00 %
     Risk-based capital ratios:
        Core capital               11.20           10.92            4.00
        Total capital              12.43           12.14            8.00

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

Off-Balance Sheet Risk

We are a party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of our customers. These
financial instruments include commitments to extend credit and standby letters
of credit. Such commitments involve, to varying degrees, elements of credit risk
and interest rate risk in excess of the amount recognized in the balance sheets.

                                       11
<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:

                                              September 30, 2005
                                            ---------------------
                                            (Dollars in thousands)

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

    Commitments to extend credit            $             39,878
    Letters of credit                                        977
                                            ---------------------
                                            $             40,855
                                            =====================

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.



                                       12
<PAGE>
Financial Condition

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

                                             September 30,   December 31,
                                                  2005           2004
                                            --------------   ------------
                                                 (Dollars in Thousands)
                                            -----------------------------

Cash and due from banks                     $        7,030    $     3,420
Interest-bearing deposits in banks                   4,895          6,350
Federal funds sold                                   5,793          4,091
Securities                                          28,181         31,470
Loans, net                                         200,923        193,823
Premises and equipment                               7,675          7,904
Other assets                                         4,835          3,590
                                            ---------------   ------------
                                            $      259,332    $   250,648
                                            ===============   ============

Deposits                                    $      215,864    $   200,394
Other borrowings                                    17,350         26,200
Other liabilities                                    1,287          1,115
Stockholders' equity                                24,831         22,939
                                            ---------------   ------------
                                            $      259,332    $   250,648
                                            ===============   ============

Our total assets grew by 3.5% for the nine months ended September 30, 2005.
Deposit growth of $15.5 million was used to reduce other borrowings by $8.9
million and invested in loans and fed funds. Our ratio of gross loans to
deposits and other borrowings was 87.7% at September 30, 2005 and 87.1% at
December 31, 2004. Our total equity increased by $1.9 million due to
year-to-date net income of $1.9 million.



                                       13
<PAGE>
Results of Operations For The Three Months Ended September 30, 2005 and 2004

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

                                             Three Months Ended
                                                September 30,
                                 -------------------------------------------
                                          2005                    2004
                                 --------------------    -------------------
                                           (Dollars in Thousands)
                                 -------------------------------------------

Interest income                  $              4,252   $              3,178

Interest expense                                1,505                    979
                                 --------------------   --------------------

Net interest income                             2,747                  2,199

Provision for loan losses                          81                     17

Other income                                      269                    246

Other expense                                   1,841                  1,682
                                 --------------------   --------------------

Pretax income                                   1,094                    746

Income taxes                                      391                    261
                                 --------------------   --------------------

Net income                       $                703   $                485
                                 ====================   ====================


                                              Nine Months Ended
                                                September 30,
                                 -------------------------------------------
                                          2005                    2004
                                 --------------------    -------------------
                                           (Dollars in Thousands)
                                 -------------------------------------------

Interest income                  $             11,881    $             9,332

Interest expense                                4,208                  2,861
                                 --------------------   --------------------

Net interest income                             7,673                  6,471

Provision for loan losses                         178                    334

Other income                                      865                    835

Other expense                                   5,492                  5,113
                                 --------------------   --------------------

Pretax income                                   2,868                  1,859

Income taxes                                    1,015                    664
                                 --------------------   --------------------

Net income                       $              1,853   $              1,195
                                 ====================   ====================


                                       14
<PAGE>
Our net interest income increased by $548,000 and $1,202,000 for the three
months and nine months ended September 30, 2005, respectively, as compared to
the same period in 2004. Our net interest margin was 4.07% during the nine
months ended September 30, 2005 as compared to 3.88% for the nine months ended
September 30, 2004 and 3.90 % for the entire year of 2004. The increase in net
interest income is due primarily to the increased volume of average loans and
investment securities outstanding coupled with increases in the Prime Lending
Rate. Yields earned on loans have increased to 7.22% in the first nine months of
2005 as compared to 6.42% in the first nine months of 2004. Our cost of funds
increased to 2.35% in the first nine months of 2005 as compared to 1.79% in the
first nine months of 2004. The increase in cost of funds also reflects the
impact of interest rate increases over the past twelve months.

The provision for loan losses was $81,000 and $178,000 for the three months and
nine months ended September 30, 2005. The provision for the nine months ended
September 30, 2005 decreased $156,000 over the same period in 2004. The
reduction in provision expense is reflective of improved asset quality.

Nonaccrual loans of $654,000 at September 30, 2005 consist of $472,000 of
commercial loans, $157,000 of real estate loans, and $25,000 of consumer loans.
Loans past due ninety days or more and still accruing interest of $47,000 at
September 30, 2005 consists of $40,000 of consumer loans and $7,000 of credit
card loans. These loans were identified through our loan evaluation process and
have been properly considered in the determination of the allowance for loan
losses. Management believes that the $3,633,000 in the allowance for loan losses
at September 30, 2005, or 1.78% of total net outstanding loans, is adequate to
absorb known risks in the portfolio. No assurance can be given, however, that
increased loan volume, and adverse economic conditions or other circumstances
will not result in increased losses in our loan portfolio.

Information with respect to nonaccrual, past due, restructured, and potential
problem loans at September 30, 2005 and 2004 is as follows:

<TABLE>
<CAPTION>
                                                                            September 30,
                                                                       -----------------------
                                                                           2005          2004
                                                                       -----------------------
                                                                       (Dollars in Thousands)
                                                                       -----------------------
<S>                                                                    <C>           <C>
Nonaccrual loans                                                       $    654      $   1,038
Loans contractually past due ninety days or more as to interest
   or principal payments and still accruing                                  47            256
Restructured loans                                                                         -
Potential problem loans                                                   1,423          1,294
Interest income that would have been recorded on nonaccrual
   and restructured loans under original terms                               48            126
Interest income that was recorded on nonaccrual and
   restructured loans                                                         -              -
</TABLE>


                                       15
<PAGE>
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. Management is currently
monitoring one credit that will require restructuring and may require a
write-down of principal. Multiple lenders are involved in the credit and details
of a possible restructuring of the credit are in discussion. Given current
conversations, management's best estimate of this situation's impact on net
income is $75,000 to $250,000 and therefore $214,000 has been included in the
reserve for loan losses for this loan.

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.

Information regarding certain loans and allowance for loan loss data through
September 30, 2005 and 2004 is as follows:

<TABLE>
<CAPTION>
                                                                             Nine Months Ended
                                                                         September 30,
                                                                    ----------------------
                                                                      2005          2004
                                                                    --------      --------
                                                                     (Dollars in Thousands)
                                                                    -----------------------
<S>                                                                 <C>            <C>
Average amount of loans outstanding                                 $200,929       $174,004
                                                                    ========       ========

Balance of allowance for loan losses at beginning of period            3,620          3,163
                                                                    --------       --------

Loans charged off
   Commercial and financial                                               56             26
   Real estate mortgage                                                   38             49
   Installment                                                           112             77
                                                                    --------       --------
                                                                         206            152
                                                                    --------       --------
Loans recovered
   Commercial and financial                                               --              1
   Real estate mortgage                                                    7              1
   Installment                                                            33             17
                                                                    --------       --------
                                                                          40             19
                                                                    --------       --------

Net charge-offs                                                          166            133
                                                                    --------       --------

Additions to allowance charged to operating expense during period        178            317
                                                                    --------       --------

Balance of allowance for loan losses at end of period               $  3,632       $  3,347
                                                                    ========       ========

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

                                       16
<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 increased by $23,000 and $30,000 for the three months and nine
months ended September 30, 2005, respectively, as compared to the same period in
2004. The increases in other income are due to increased service charges and
fees which were partially offset by increased losses on sales of securities
available for sale.

Other expenses increased by $159,000 and $379,000 for the three months and nine
months ended September 30, 2005, respectively, as compared to the same period in
2004. Salaries and employee benefits increased by $309,000, equipment and
occupancy expenses increased by $4,000, and other operating expenses increased
by $66,000. Salaries and employee benefits have increased due to increased
benefits expenses and annual salary increases. The increase of $66,000 in other
operating expenses was due to general increases throughout the other operating
expense categories.

We have recorded income tax expense of $1,015,000 for the nine months ended
September 30, 2005. The rate of tax as a percentage of pretax income was 35.4%.

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

                                       17
<PAGE>
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.


                           PART II - OTHER INFORMATION

ITEM 1.  Legal Proceedings

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

ITEM 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.


                                       18
<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: November 14, 2005     BY: /s/ J. Philip Hester, Sr.
      -----------------         ------------------------------------------------
                                    J. Philip Hester, Sr., President and C.E.O.
                                    (Principal Executive Officer)


DATE: November 14, 2005     BY: /s/ Deborah F. McLeod
      -----------------         ------------------------------------------------
                                    Deborah F. McLeod, C.F.O. and Treasurer
                                    (Principal Financial and Accounting Officer)




                                       19