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

                                   FORM 10-QSB

   X              QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
 ----               OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the Quarterly Period Ended June 30, 2004

                                       OR

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

               For the Transition Period from _________to_________

                          Commission File no. 000-50466

                             DEKALB BANKSHARES, INC.
        (Exact name of small business issuer as specified in its charter)

                       South Carolina                          61-1444253
                (State or other jurisdiction                (I.R.S. Employer
             of incorporation or organization)            Identification No.)

                             631 West DeKalb Street
                          Camden, South Carolina 29020
                    (Address of principal executive offices)

                                 (803) 432-7575
                (Issuer's telephone number, including area code)
                ------------------------------------------------

Check  whether  the issuer  (1) has filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 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
stock as of the latest practicable date.

        609,060 shares of common stock, no par value, as of July 31, 2004


   Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]




<PAGE>


                             DEKALB BANKSHARES, INC.


                                      INDEX


<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION                                                                                      Page No.

Item 1. Financial Statements (Unaudited)

<S>                                                                                                                      <C>
         Condensed Consolidated Balance Sheets - June 30, 2004 and December 31, 2003......................................3

         Condensed Consolidated Statements of Income - Six months ended June 30, 2004 and June 30, 2003
           and Three months ended June 30, 2004 and 2003..................................................................4

         Condensed Consolidated Statements of Shareholders' Equity and Comprehensive Income -
           Six months ended June 30, 2004 and June 30, 2003...............................................................5

         Condensed Consolidated Statements of Cash Flows - Six months ended June 30, 2004 and June 30, 2003...............6

         Notes to Condensed Consolidated Financial Statements..........................................................7-10

Item 2. Management's Discussion and Analysis or Plan of Operation.....................................................10-15

Item 3. Controls and Procedures..........................................................................................15

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K.................................................................................16

         (a) Exhibits....................................................................................................17

         (b) Reports on Form 8-K.........................................................................................17
</TABLE>




                                       2
<PAGE>

                             DEKALB BANKSHARES, INC.
                      Condensed Consolidated Balance Sheets

PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements
<TABLE>
<CAPTION>
                                                                                                June 30,                December 31,
                                                                                                  2004                     2003
                                                                                                  ----                     ----
                                                                                              (Unaudited)
Assets:
   Cash and cash equivalents:
<S>                                                                                          <C>                       <C>
     Cash and due from banks ...................................................             $    583,216              $    867,695
     Federal funds sold ........................................................                1,136,000                 1,402,000
                                                                                             ------------              ------------
       Total cash and cash equivalents .........................................                1,719,216                 2,269,695
                                                                                             ------------              ------------
Time deposits with other banks .................................................                  313,494                   310,078

Securities available-for-sale ..................................................                9,446,555                 6,938,632
Nonmarketable equity securities ................................................                  343,212                   220,000
                                                                                             ------------              ------------
                                                                                                9,789,767                 7,158,632
Loans receivable ...............................................................               23,945,738                21,624,149
   Less allowance for loan losses ..............................................                 (325,208)                 (305,000)
                                                                                             ------------              ------------
       Loans, net ..............................................................               23,620,530                21,319,149
Premises and equipment, net ....................................................                1,377,486                 1,410,202
Accrued interest receivable ....................................................                  120,425                   111,817
Other assets ...................................................................                  539,445                   455,844
                                                                                             ------------              ------------

       Total assets ............................................................             $ 37,480,363              $ 33,035,417
                                                                                             ============              ============

Liabilities
Deposits:
   Noninterest-bearing transaction accounts ....................................             $  2,186,945              $  2,314,452
   Interest-bearing transaction accounts .......................................                3,285,204                 2,901,206
   Savings .....................................................................                4,403,058                 3,702,360
   Time deposits $100,000 and over .............................................               10,633,227                10,085,481
   Other time deposits .........................................................                4,826,159                 4,843,043
                                                                                             ------------              ------------
                                                                                               25,334,593                23,846,542
Advances from Federal Home Loan Bank ...........................................                4,000,000                 4,000,000
Securities sold under agreements to repurchase .................................                3,000,000                         -
Accrued interest payable .......................................................                   35,223                    37,793
Other liabilities ..............................................................                   80,707                    39,236
                                                                                             ------------              ------------
       Total liabilities .......................................................               32,450,523                27,923,571
                                                                                             ------------              ------------

Shareholders' equity
Common stock, no par value; 20,000,000 shares
   authorized, 609,060 shares issued and outstanding ...........................                5,866,807                 5,866,807
Retained earnings (deficit) ....................................................                 (687,487)                 (732,329)
Accumulated other comprehensive income (loss) ..................................                 (149,480)                  (22,632)
                                                                                             ------------              ------------
       Total shareholders' equity ..............................................                5,029,840                 5,111,846
                                                                                             ------------              ------------

       Total liabilities and shareholders' equity ..............................             $ 37,480,363              $ 33,035,417
                                                                                             ============              ============
</TABLE>



                  See notes to condensed financial statements.



                                       3
<PAGE>

                             DEKALB BANKSHARES, INC.
                   Condensed Consolidated Statements of Income
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                Six Months Ended                Three Months Ended
                                                                                     June 30,                       June 30,
                                                                                     --------                       --------
                                                                              2004             2003           2004             2003
                                                                              ----             ----           ----             ----
Interest income:
<S>                                                                         <C>             <C>             <C>             <C>
   Loans, including fees ...........................................        $711,171        $646,799        $368,367        $335,595
   Investment securities, taxable ..................................         167,064          70,748          82,153          29,563
   FHLB interest and dividends .....................................           4,440           7,185           2,286           6,402
   Federal funds sold ..............................................           9,140           7,297           4,836           3,870
   Time deposits with other banks ..................................           3,615           2,663           1,616           1,288
                                                                            --------        --------        --------        --------
       Total .......................................................         895,430         734,692         459,258         376,718
                                                                            --------        --------        --------        --------

Interest expense:
   Time deposits $100,000 and over .................................          89,958          62,658          45,815          27,117
   Other deposits ..................................................          82,147         107,768          41,136          57,493
   Other interest expense ..........................................          82,585          44,623          43,560          21,490
                                                                            --------        --------        --------        --------
       Total .......................................................         254,690         215,049         130,511         106,100
                                                                            --------        --------        --------        --------

Net interest income ................................................         640,740         519,643         328,747         270,618
Provision for loan losses ..........................................          39,000          51,000          21,500          23,500
                                                                            --------        --------        --------        --------
Net interest income after provision for
   loan losses .....................................................         601,740         468,643         307,247         247,118
                                                                            --------        --------        --------        --------

Other operating income:
   Service charges on deposit accounts .............................          73,834          54,504          41,919          28,429
   Gain on sales of securities available for sale ..................               -          24,019               -               -
   Residential mortgage origination fees ...........................          42,649          67,850          24,317          43,108
   Other service charges, commissions and fees .....................          14,364          12,399           7,304           7,288
                                                                            --------        --------        --------        --------
       Total .......................................................         130,847         158,772          73,540          78,825
                                                                            --------        --------        --------        --------

Other operating expenses:
   Salaries and employee benefits ..................................         343,901         314,792         182,072         144,701
   Occupancy expense ...............................................          40,789          38,838          20,030          20,007
   Furniture and equipment expense .................................          23,028          24,048          11,547          11,854
   Other operating expenses ........................................         253,607         239,954         125,645         126,654
                                                                            --------        --------        --------        --------
       Total .......................................................         661,325         617,632         339,294         303,216
                                                                            --------        --------        --------        --------

Income before income taxes .........................................          71,262           9,783          41,493          22,727
Income tax expense .................................................          26,420           3,778          15,158           8,523
                                                                            --------        --------        --------        --------

Net income .........................................................        $ 44,842        $  6,005        $ 26,335        $ 14,204
                                                                            ========        ========        ========        ========

Earnings per share
Basic earnings per share ...........................................        $    .07        $    .01        $    .04        $    .02
Diluted earnings per share .........................................        $    .07        $    .01        $    .04        $    .02
</TABLE>

                  See notes to condensed financial statements.

                                       4
<PAGE>

                             DEKALB BANKSHARES, INC.
            Condensed Consolidated Statements of Shareholders' Equity
                            and Comprehensive Income
                For the Six months ended June 30, 2004 and 2003
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                       Accumulated
                                                         Common Stock                  Retained          Other
                                                         ------------                  Earnings      Comprehensive
                                                      Shares           Amount          (Deficit)         Income            Total
                                                      ------           ------          ---------         ------            -----
<S>                                               <C>              <C>               <C>               <C>              <C>
Balance, December 31, 2002 ................          609,060       $ 5,866,807       $  (782,412)      $    51,066      $ 5,135,461

Net income for the period .................                                                6,005                              6,005

Other comprehensive
   income, net of tax $(11,090) ...........                                                                (18,883)         (18,883)
                                                                                                                        -----------

Comprehensive Income ......................                                                                                 (12,878)
                                                 ------------      -----------       -----------       -----------      -----------

Balance, June 30, 2003 ....................          609,060       $ 5,866,807       $  (776,407)      $    32,183      $ 5,122,583
                                                 ===========       ===========       ===========       ===========      ===========

Balance, December 31, 2003 ................          609,060         5,866,807          (732,329)          (22,632)     $ 5,111,846

Net income for the period .................                                               44,842                             44,842

Other comprehensive
   income, net of tax $74,498 .............                                                               (126,848)        (126,848)
                                                                                                                        -----------

Comprehensive Income ......................                                                                                 (82,006)
                                                 -----------       -----------       -----------       -----------      -----------

Balance, June 30, 2004 .....................         609,060       $ 5,866,807       $  (687,487)      $  (149,480)     $ 5,029,840
                                                 ===========       ===========       ===========       ===========      ===========
</TABLE>


                  See notes to condensed financial statements.



                                       5
<PAGE>


                             DEKALB BANKSHARES, INC.
                 Condensed Consolidated Statements of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                          Six Months Ended
                                                                                                               June 30,
                                                                                                               --------
                                                                                                      2004                2003
                                                                                                      ----                ----
Cash flows from operating activities:
<S>                                                                                              <C>                    <C>
   Net income ........................................................................           $    44,842            $     6,005
   Adjustments to reconcile net income to net cash provided
   by operating activities:
     Provision for loan losses .......................................................                39,000                 51,000
     Depreciation and amortization expense ...........................................                55,340                 63,341
     Gain on sale of securities ......................................................                     -                (24,019)
     Accretion and premium amortization ..............................................                 8,230                  8,794
     Deferred income tax provision (benefit) .........................................               (50,410)                 2,349
     (Increase) decrease in interest receivable ......................................                (8,608)                 3,075
     Decrease in interest payable ....................................................                (2,570)                (4,111)
     Increase in other assets ........................................................               (33,191)                (8,289)
     Increase (decrease) in other liabilities ........................................                41,471                (14,041)
                                                                                                 -----------            -----------
       Net cash provided by operating activities .....................................                94,104                 84,104
                                                                                                 -----------            -----------

Cash flows from investing activities:
   Net increase in loans made to customers ...........................................            (2,340,381)            (3,669,361)
   Purchases of securities available-for-sale ........................................            (4,814,984)            (1,025,938)
   Sale, calls or maturities of securities available-for-sale ........................             1,074,498              1,456,539
   Payments received on mortgage backed securities ...................................             1,097,485                487,726
   Sale (Purchase) of Federal Home Loan Bank stock ...................................                20,000                (50,000)
   Purchase of The Bankers Bank stock ................................................              (143,212)                     -
   Purchases of premises and equipment ...............................................               (22,624)                     -
   Maturities (purchases) of time deposits with other banks ..........................                (3,416)                 3,267
                                                                                                 -----------            -----------
       Net cash used by investing activities .........................................            (5,132,634)            (2,797,767)
                                                                                                 -----------            -----------

Cash flows from financing activities:
   Net increase in demand deposits, interest-bearing
     transaction accounts and savings accounts .......................................               957,189                440,400
   Net increase in certificates of deposit and other time deposits ...................               530,862              1,344,776
   Increase in securities sold under agreements to repurchase ........................             3,000,000                      -
   Increase in advances from the Federal Home Loan Bank ..............................                     -              1,000,000
                                                                                                 -----------            -----------
         Net cash provided by financing activities ...................................            (4,488,051)             2,785,176
                                                                                                 -----------            -----------

Net increase (decrease) in cash and cash equivalents .................................              (550,479)                71,513

Cash and cash equivalents, beginning .................................................             2,269,695              2,758,871
                                                                                                 -----------            -----------

Cash and cash equivalents, end .......................................................           $ 1,719,216            $ 2,830,384
                                                                                                 ===========            ===========

Cash paid during the period for:
   Interest ..........................................................................           $   257,260            $   219,160
                                                                                                 ===========            ===========
</TABLE>


                  See notes to condensed financial statements.



                                       6
<PAGE>

                             DEKALB BANKSHARES, INC.
                     Notes to Condensed Financial Statements
                                   (Unaudited)

Note 1 - Basis of Presentation

The accompanying  financial statements have been prepared in accordance with the
requirements  for  interim  financial  statements  and,  accordingly,  they  are
consolidated and omit  disclosures,  which would  substantially  duplicate those
contained in our Annual Report on Form 10-KSB.  The  financial  statements as of
June 30,  2004 and for the  interim  periods  ended  June 30,  2004 and 2003 are
unaudited  and, in our opinion,  include all  adjustments  (consisting of normal
recurring  adjustments)  considered  necessary  for  a  fair  presentation.  The
financial information as of December 31, 2003, has been derived from the audited
financial  statements  as of that date.  For further  information,  refer to the
financial statements and the notes included in DeKalb Bankshares,  Inc.'s Annual
Report on Form 10-KSB filed with the Securities and Exchange Commission.


Note 2 - Recently Issued Accounting Pronouncements

The following is a summary of recent  authoritative  pronouncements  that affect
accounting, reporting, and disclosure of financial information by the Company:

In March 2004, the FASB issued an exposure draft on "Share-Based  Payment".  The
proposed  Statement  addresses  the  accounting  for  transactions  in  which an
enterprise  receives employee services in exchange for a) equity  instruments of
the  enterprise  or b)  liabilities  that are  based  on the  fair  value of the
enterprise's  equity  instruments or that may be settled by the issuance of such
equity  instruments.  This  proposed  Statement  would  eliminate the ability to
account  for  share-based  compensation  transactions  using APB Opinion No. 25,
"Accounting for Stock Issued to Employees",  and generally would require instead
that such transactions be accounted for using a  fair-value-based  method.  This
Statement, if approved, will be effective for awards that are granted, modified,
or settled in fiscal  years  beginning  after a)  December  15,  2004 for public
entities  and  nonpublic  entities  that  used the  fair-value-based  method  of
accounting under the original provisions of Statement 123 for recognition or pro
forma  disclosure  purposes  and b) December  15,  2005 for all other  nonpublic
entities.  Earlier application is encouraged provided that financial  statements
for those earlier years have not yet been issued.  Retrospective  application of
this Statement is not permitted.  The adoption of this  Statement,  if approved,
could  have  an  impact  on the  Company's  financial  position  or  results  of
operations.

Other  accounting  standards  that have been  issued or  proposed by the FASB or
other standards-setting  bodies that do not require adoption until a future date
are not  expected  to  have a  material  impact  on the  consolidated  financial
statements upon adoption.


Note 3 - Earnings Per Share

A reconciliation  of the numerators and denominators used to calculate basic and
diluted  earnings  per share for the six month  periods  ended June 30, 2004 and
2003, and the three month periods ended June 30, 2004 and 2003 are as follows:

<TABLE>
<CAPTION>
                                                                                               Six Months Ended June 30, 2004
                                                                                               ------------------------------
                                                                                     Income               Shares           Per Share
                                                                                  (Numerator)         (Denominator)          Amount
                                                                                  -----------         -------------          ------

Basic earnings per share
<S>                                                                                 <C>                   <C>                 <C>
  Income available to common shareholders ...........................               $44,842               609,060             $.07
                                                                                                                              ====
Effect of dilutive securities
  Stock options .....................................................                     -                     -
                                                                                    -------               -------
Diluted earnings per share
  Income available to common shareholders
    plus assumed conversions ........................................               $44,482               609,060             $.07
                                                                                    =======               =======             ====
</TABLE>



                                       7
<PAGE>



                             DEKALB BANKSHARES, INC.
                     Notes to Condensed Financial Statements
                                   (Unaudited)

Note 3 - Earnings Per Share - continued

<TABLE>
<CAPTION>
                                                                                             Six Months Ended June 30, 2003
                                                                                             ------------------------------
                                                                                     Income               Shares           Per Share
                                                                                   (Numerator)         (Denominator)         Amount
                                                                                   -----------         -------------         ------
Basic earnings per share
<S>                                                                                 <C>                   <C>                 <C>
  Income available to common shareholders ...........................               $ 6,005               609,060             $.01
                                                                                                                              ====
Effect of dilutive securities
  Stock options .....................................................                     -                     -
                                                                                    -------               --------
Diluted earnings per share
  Income available to common shareholders
   plus assumed conversions .........................................               $ 6,005               609,060             $.01
                                                                                    =======               =======             ====
</TABLE>

<TABLE>
<CAPTION>
                                                                                            Three Months Ended June 30, 2004
                                                                                            --------------------------------
                                                                                    Income                Shares           Per Share
                                                                                  (Numerator)          (Denominator)        Amount
                                                                                  -----------          -------------        ------
Basic earnings per share
<S>                                                                                 <C>                   <C>                <C>
  Income available to common shareholders ...........................               $26,335               609,060            $.04
                                                                                                                             ====
Effect of dilutive securities
  Stock options .....................................................                     -                     -
                                                                                    -------               -------
Diluted earnings per share
  Income available to common shareholders
   plus assumed conversions .........................................               $26,335               609,060            $.04
                                                                                    =======               =======            ====
</TABLE>


<TABLE>
<CAPTION>
                                                                                              Three Months Ended June 30, 2003
                                                                                              --------------------------------
                                                                                     Income               Shares          Per Share
                                                                                   (Numerator)         (Denominator)        Amount
                                                                                   -----------         -------------        ------

Basic earnings per share
<S>                                                                                 <C>                   <C>                <C>
  Income available to common shareholders ...........................               $14,204               609,060            $.02
                                                                                                                             ====
Effect of dilutive securities
  Stock options .....................................................                     -                     -
                                                                                    -------               -------
Diluted earnings per share
  Income available to common shareholders
   plus assumed conversions .........................................               $14,204               609,060            $.02
                                                                                    =======               =======            ====
</TABLE>

Note 4 - Comprehensive Income

Comprehensive  income includes net income and other comprehensive  income, which
is defined as nonowner related  transactions in equity. The following table sets
forth the amounts of other  comprehensive  income  included in equity along with
the  related tax effect for the six month  periods  ended June 30, 2004 and 2003
and for the three month periods ended June 30, 2004 and 2003:


                                       8
<PAGE>

                             DEKALB BANKSHARES, INC.
                     Notes to Condensed Financial Statements
                                   (Unaudited)

Note 4 - Comprehensive Income- continued

<TABLE>
<CAPTION>
                                                                                      Pre-Tax           (Expense)        Net-of-tax
                                                                                       Amount             Benefit          Amount
                                                                                       ------             -------          ------
For the Six-Months Ended June 30, 2004:

Unrealized gains (losses) on securities:
<S>                                                                                  <C>                <C>               <C>
   Unrealized holding gains (losses) arising during the period .............         $(201,347)         $  74,499         $(126,848)
   Plus: reclassification adjustment for gains (losses)
   realized in net income ..................................................                 -                  -                 -
                                                                                     ---------          ---------         ---------
   Net unrealized gains (losses) on securities .............................          (201,347)            74,499          (126,848)
                                                                                     ---------          ---------         ---------
Other comprehensive income (loss) ..........................................         $(201,347)         $  74,499         $(126,848)
                                                                                     =========          =========         =========

<CAPTION>
                                                                                        Pre-Tax           (Expense)      Net-of-tax
                                                                                         Amount            Benefit          Amount
                                                                                         ------            -------          ------
For the Six-Months Ended June 30, 2003

Unrealized gains (losses) on securities:
<S>                                                                                     <C>               <C>              <C>
   Unrealized holding gains (losses) arising during the period ................         $ (5,954)         $  2,203         $ (3,751)
   Plus: reclassification adjustment for gains (losses)
   realized in net income .....................................................          (24,019)            8,887          (15,132)
                                                                                        --------          --------         --------
   Net unrealized gains (losses) on securities ................................          (29,973)           11,090          (18,883)
                                                                                        --------          --------         --------
Other comprehensive income (loss) .............................................         $(29,973)         $ 11,090         $(18,883)
                                                                                        ========          ========         ========

<CAPTION>
                                                                                        Pre-Tax           (Expense)      Net-of-tax
                                                                                         Amount            Benefit          Amount
                                                                                         ------            -------          ------
For the Three Months Ended June 30, 2004

Unrealized  gains  (losses)  on securities:
<S>                                                                                  <C>                <C>               <C>
   Unrealized holding gains (losses) arising during the period .............         $(283,010)         $ 104,714         $(178,296)
   Plus: reclassification adjustment for gains (losses)
   realized in net income ..................................................                 -                  -                 -
                                                                                     ---------          ---------         ---------
     Net unrealized gains (losses) on securities ...........................          (283,010)           104,714          (178,296)
                                                                                     ---------          ---------         ---------
Other comprehensive income (loss) ..........................................         $(283,010)         $ 104,714         $(178,296)
                                                                                     =========          =========         =========

<CAPTION>
                                                                                        Pre-Tax           (Expense)       Net-of-tax
                                                                                        Amount             Benefit           Amount
                                                                                        ------             -------           ------
For the Three Months Ended June 30, 2003

Unrealized gains (losses) on securities:
<S>                                                                                       <C>                <C>                <C>
   Unrealized holding gains (losses) arising during the period ...............            $ 31               $(11)              $ 20
   Plus: reclassification adjustment for gains (losses)
   realized in net income ....................................................               -                  -                  -
                                                                                          ----               ----               ----
     Net unrealized gains (losses) on securities .............................              31                (11)                20
                                                                                          ----               ----               ----
Other comprehensive income ...................................................            $ 31               $(11)              $ 20
                                                                                          ====               ====               ====
</TABLE>

                                       9
<PAGE>


                             DEKALB BANKSHARES, INC.
                     Notes to Condensed Financial Statements
                                   (Unaudited)

Note 4 - Comprehensive Income- continued

Accumulated other comprehensive income consists solely of the unrealized gain on
securities available-for-sale, net of the deferred tax effects.


Item 2. Management's Discussion and Analysis or Plan of Operation

The  following is a discussion  of our  financial  condition as of June 30, 2004
compared to December 31, 2003,  and the results of operations  for the three and
six  months  ended June 30,  2004 and 2003.  This  discussion  should be read in
conjunction with our consolidated  financial  statements and accompanying  notes
appearing in this report and in  conjunction  with the financial  statements and
related  notes and  disclosures  in our 2003 Annual  Report on Form 10-KSB filed
with  the   Securities   and   Exchange   Commission.   This   report   contains
"forward-looking  statements"  relating to, without limitation,  future economic
performance,  plans and  objectives of  management  for future  operations,  and
projections of revenues and other financial items that are based on our beliefs,
as well as assumptions  made by and information  currently  available to us. The
words  "expect,"  "estimate,"  "anticipate,"  "plan," and  "believe," as well as
similar expressions,  are intended to identify forward-looking  statements.  Our
actual  results  may  differ  materially  from  the  results  discussed  in  the
forward-looking  statements,  and the our operating  performance each quarter is
subject to various risks and  uncertainties  that are discussed in detail in our
filings with the Securities and Exchange Commission.

Results of Operations

Net Interest Income
For the six months ended June 30, 2004, net interest income, the major component
of our net income was  $640,740,  compared to $519,643  for the six months ended
June 30,  2003,  an increase of  $121,097.  For the three  months ended June 30,
2004, net interest  income was $328,747  compared to $270,618 for the comparable
period of 2003. The improvements in the 2004 periods were primarily attributable
to increased  volume as we continued  to build our loan  portfolio.  The average
rate realized on interest earning assets decreased from 6.07% for the six months
ended  June 30,  2003 to 5.27% for the 2004  period.  The  average  rate paid on
interest  bearing  liabilities  decreased  from 2.21% to 1.77%  during this same
period.  The net interest  spread and net interest  margin were 3.50% and 3.77%,
respectively,  for the six month period  ended June 30, 2004,  compared to 3.86%
and 4.29% for the six months  ended June 30, 2003.  The net interest  spread and
net  interest  margin  were 3.53% and 3.79%,  respectively,  for the three month
period  ended June 30,  2004,  compared to 3.97% and 4.35% for the three  months
ended June 30, 2003.


Provision and Allowance for Loan Losses

The  provision  for loan  losses is the  charge to  operating  earnings  that in
management's  judgment is necessary to maintain the allowance for loan losses at
an  adequate  level.  For the six  months  ended  June 30,  2004 and  2003,  the
provision was $39,000 and $51,000, respectively. For the three months ended June
30, 2004 and 2003,  the  provision  for loans  losses was  $21,500 and  $23,500,
respectively.  There were $154,725 in  nonperforming  loans at June 30, 2004 and
$151,509  in  nonperforming  loans at June 30,  2003.  There  were  $173,824  in
classified  loans as of June 30, 2004  compared to $151,509 as of June 30, 2003.
Based on  present  information,  we believe  the  allowance  for loan  losses is
adequate  at  June  30,  2004 to  meet  probable  losses  inherent  in the  loan
portfolio.  The  allowance  for loan losses was 1.36% of total loans at June 30,
2004. There are risks inherent in making all loans, including risks with respect
to the  period of time over  which  loans may be repaid,  risks  resulting  from
changes in economic  and  industry  conditions,  risks  inherent in dealing with
individual borrowers, and, in the case of a collateralized loan, risks resulting
from  uncertainties  about the future  value of the  collateral.  We maintain an
allowance for loan losses based on, among other things,  historical  experience,
including  management's  experience  at other  institutions,  an  evaluation  of
economic  conditions,  and regular reviews of  delinquencies  and loan portfolio
quality. Our judgment about the adequacy of the allowance is based upon a number
of assumptions about future events, which we believe to be reasonable, but which
may not prove to be accurate.  Thus,  there is a risk that charge-offs in future
periods  could  exceed  the  allowance  for  loan  losses  or  that  substantial
additional  increases  in the  allowance  for loan  losses  could  be  required.
Additions  to the  allowance  for loan losses  would result in a decrease of the
Bank's net income and, possibly, its capital.


                                       10
<PAGE>

                             DEKALB BANKSHARES, INC.

Item 2. Management's Discussion And Analysis or Plan of Operation - continued

Noninterest Income

Total noninterest income for the six months ended June 30, 2004 was $130,847,  a
decrease of $27,925,  compared  to  $158,772  for the six months  ended June 30,
2003.  There were no gains on sales of  securities  during the six months  ended
June 30,  2004 as  compared  to  $24,019  for the  same  period  in 2003.  Total
noninterest  income for the quarter ended June 30, 2004 was $73,540  compared to
$78,825 for the comparable  period of 2003.  Service charges on deposit accounts
increased  from  $28,429 for the three months ended June 30, 2003 to $41,919 for
the three  months  ended June 30,  2004.  Service  charges  on deposit  accounts
increased from $54,504 for the six months ended June 30, 2003 to $73,834 for the
six months ended June 30, 2004. The increase during these comparable  periods is
due to an in increase in deposit accounts. Residential mortgage origination fees
decreased  from  $43,108 for the three months ended June 30, 2003 to $24,317 for
the comparable 2004 period.  Residential mortgage origination fees were down due
to a smaller  amount of new loan  originations  during the six months ended June
30, 2004 when compared to the six months ended June 30, 2003.


Noninterest Expense

Total  noninterest  expense  for the first six months of 2004 was  $661,325,  an
increase of $43,693,  when  compared to the six months ended June 30, 2003.  For
the quarter ended June 30, 2004,  noninterest expense was $339,294,  an increase
of $36,078 over the comparable period of 2003.

The primary  component of  noninterest  expense is salaries and benefits,  which
were  $343,901  and  $314,792  for the six months  ended June 30, 2004 and 2003,
respectively. Salaries and benefit expense totaled $182,072 and $144,701 for the
three months ended June 30, 2004 and 2003, respectively. Other operating expense
increased  from  $239,954 for the six months ended June 30, 2003 to $253,607 for
the six months ended June 30, 2004, due to the overall growth in the Bank. Other
operating  expenses  for the three  month  periods  ended June 30, 2004 and 2003
totaled $125,645 and $126,654 respectively.


Net Income

Net income for the six months  ended June 30, 2004 totaled  $44,842  compared to
$6,005  for  the  comparable  2003  period.  The  net  earnings  are  after  the
recognition  of an income tax  expense of $26,420  and $3,778 for the six months
ended June 30, 2004 and 2003,  respectively.  The net  earnings  for the quarter
ended June 30, 2004 were $26,335  compared to $14,204 for the quarter ended June
30, 2003.  The net earnings were after the  recognition of income tax expense in
the amount of $15,158  and $8,523 for the three  months  ended June 30, 2004 and
2003, respectively.


Assets and Liabilities

During the first six  months of 2004,  total  assets  increased  $4,444,946,  or
13.46%,  when  compared to December 31, 2003.  The primary  growth in assets was
composed of an increase  in  securities  available  for sale of  $2,507,923,  or
36.14%.  Loans receivable  increased by $2,321,589 when compared to December 31,
2003. Deposits increased  $1,488,051 during the first six months of 2004. During
the first  quarter of 2004,  we entered  into a leveraged  transaction  with The
Bankers  Bank to borrow  funds  through  securities  sold  under  agreements  to
repurchase   totaling   $3,000,000.   We  then   invested   these   funds  in  a
mortgage-backed security.


Investment Securities

Investment  securities  totaled  $9,789,767  as of June 30,  2004,  compared  to
$7,158,632  at  December  31,  2003.  All  investments  in  the  portfolio  were
designated as  available-for-sale  except for nonmarketable  equity  securities,
consisting  of stock in the  Federal  Home Loan Bank of Atlanta,  which  totaled
$200,000,  and stock in The Bankers Bank,  which totaled $143,212 as of June 30,
2004.  As  discussed  earlier we  purchased a  $3,000,000  security as part of a
leveraged transaction during the first quarter of 2004.



                                       11
<PAGE>


                             DEKALB BANKSHARES, INC.

Item 2. Management's Discussion And Analysis or Plan of Operation - continued

Loans

Gross loans increased  $2,321,589 during the six months ended June 30, 2004. The
largest  increase in loans was in real  estate  mortgage  loans which  increased
$918,816 to  $9,768,623  as of June 30,  2004.  Balances  within the major loans
receivable categories as of June 30, 2004 and December 31, 2003 are as follows:

                                                     June 30,       December 31,
                                                       2004            2003
                                                       ----            ----
Mortgage loans on real estate:

   Real estate 1- 4 family .................       $ 9,768,623       $ 8,849,807
   Commercial ..............................         7,187,270         7,038,179
   Construction ............................         1,610,353         1,162,574
   Second mortgages ........................           102,744           105,743
   Equity lines of credit ..................         1,583,076         1,359,870
                                                   -----------       -----------
       Total mortgage loans ................        20,252,066        18,516,173
Commercial and industrial ..................         2,741,641         1,831,844
Consumer and other .........................           952,030         1,276,132
                                                   -----------       -----------
       Total gross loans ...................       $23,945,738       $21,624,149
                                                   ===========       ===========

Risk Elements in the Loan Portfolio

The following is a summary of the risk elements in the loan portfolio:

                                                           June 30,     June 30,
                                                             2004         2003
                                                             ----         ----
Loans: Non-accrual ...................................     $154,725     $134,156
Accruing loans more than 90 days past due ............     $      -     $ 17,353
Loans identified by internal review mechanism:
   Criticized ........................................     $ 19,098     $      -
   Classified ........................................     $173,823     $151,509

Activity in the Allowance for Loan Losses is as follows:

                                                        June 30,       June 30,
                                                         2004           2003
                                                         ----           ----
Balance, January 1, ..............................   $   305,000    $   245,000
Provision for loan losses for the period .........        39,000         51,000
Net loans (charged-off) recovered for the period..       (18,792)             -
                                                     -----------    -----------

Balance, end of period ...........................   $   325,208    $   296,000
                                                     ===========    ===========

Gross loans outstanding, end of period ...........   $23,945,737    $20,289,156
                                                     ===========    ===========

Allowance for loan losses to loans outstanding ...          1.36%          1.46%

Deposits

Total  deposits  increased  $1,488,051,  or 6.24%,  from  December  31,  2003 to
$25,334,593  at June 30, 2004.  The largest  increase  was in savings  accounts,
which increased $700,698,  or 18.93%, to $4,403,058 at June 30, 2004.  Expressed
in  percentages,  noninterest-bearing  deposits  decreased  5.5%  and all  other
interest-bearing deposits increased 7.50%.

                                       12
<PAGE>


                             DEKALB BANKSHARES, INC.

Item 2. Management's Discussion And Analysis or Plan of Operation - continued

Balances  within the major  deposit  categories as of June 30, 2004 and December
31, 2003 are as follows:

                                                       June 30,     December 31,
                                                         2004            2003
                                                         ----            ----
Noninterest-bearing transaction accounts .......     $ 2,186,945     $ 2,314,452
Interest-bearing transaction accounts ..........       3,285,204       2,901,206
Savings ........................................       4,403,058       3,702,360
Time deposits $100,000 and over ................      10,633,227      10,085,481
Other time deposits ............................       4,826,159       4,843,043
                                                     -----------     -----------
       Total deposits ..........................     $25,334,593     $23,846,542
                                                     ===========     ===========

Advances from the Federal Home Loan Bank

Advances  from the Federal Home Loan Bank totaled  $4,000,000  at June 30, 2004,
and  December  31, 2003.  One of the  advances  totaling  $500,000 is a ten year
convertible advance with a one year call. It currently has a fixed interest rate
of 3.23% and matures on September 6, 2011.  Another  advance of  $1,000,000  was
entered into on July 23, 2002 with an interest rate of 3.87% and a maturity date
of July 23, 2012. This advance has a "knockout"  provision beginning on July 23,
2003,  that allows the Federal  Home Loan Bank of Atlanta to convert the advance
to an adjustable  rate advance if the 3 Month LIBOR rate exceeds 7.00%.  Another
advance  totaling  $400,000 has an adjustable  interest rate of 1.47% as of June
30, 2004. We also borrowed $2,100,000 under the daily rate credit program with a
rate of 1.70% as of June 30, 2004 that is subject to change daily.

Securities Sold Under Agreements to Repurchase

We obtained  securities  sold under  agreements to  repurchase  during the first
quarter of 2004 totaling $3,000,000. The agreement has an interest rate of 2.95%
and matures January 20, 2007.

Liquidity

Our Company meets its liquidity  needs through cash and short-term  investments,
and scheduled maturities of loans on the asset side and through pricing policies
on the liability  side for  interest-bearing  deposit  accounts.  As of June 30,
2004, our Company's  primary  sources of liquidity  included  federal funds sold
totaling $1,136,000 and securities  available-for-sale  totaling $9,446,555. The
Company also has lines of credit available with correspondent  banks to purchase
federal funds  totaling  $1,400,000  at June 30, 2004. In addition,  the Company
also has  borrowing  capacity  available  through the Federal Home Loan Bank. At
June 30, 2004, the Company's  ability to borrow funds from the Federal Home Loan
Bank totaled $7,495,200, of which the Company had borrowed $4,000,000 as of June
30, 2004.

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 notes to the  consolidated  financial  statements at December 31, 2003 as
filed in our Annual Report on Form on Form 10-KSB.  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
portions of this discussion and the discussion in our 2003 Annual Report on Form
10-KSB that  addresses our  allowance  for loan losses for a description  of our
processes and methodology for determining our allowance for loan losses.


                                       13
<PAGE>


                             DEKALB BANKSHARES, INC.

Item 2. Management's Discussion And Analysis or Plan of Operation - continued

Capital Resources

Total  shareholders'  equity  decreased  $82,006 to $5,029,840 at June 30, 2004.
This is the  result  of net  earnings  for the  period  of  $44,842,  which  was
partially offset by a negative adjustment of $126,848 for the unrealized gain on
securities available for sale.

The Company and the Bank are subject to various regulatory capital  requirements
administered by the federal banking agencies.  Quantitative measures established
by regulation to ensure capital  adequacy  require the Bank to maintain  minimum
ratios  of  Tier  1  and  total   capital   as  a   percentage   of  assets  and
off-balance-sheet exposures,  adjusted for risk weights ranging from 0% to 100%.
Tier 1 capital of the Bank consists of common  stockholders'  equity,  excluding
the  unrealized  gain or loss on  securities  available-for-sale,  minus certain
intangible  assets.  Tier 2 capital  consists of the  allowance  for loan losses
subject to certain  limitations.  Total  capital for purposes of  computing  the
capital ratios consists of the sum of Tier 1 and Tier 2 capital.  The regulatory
minimum requirements are 4% for Tier 1 and 8% for total risk-based capital.

We are also  required to maintain  capital at a minimum  level based on adjusted
quarterly  average  assets,  which is known as the leverage  ratio.  The Federal
Reserve  applies its guidelines on a bank only basis for bank holding  companies
with less than $150 million in consolidated assets. Only the strongest banks are
allowed to  maintain  capital at the minimum  requirement  of 3%. All others are
subject to maintaining ratios 1% to 2% above the minimum.

The following  table  summarizes  the Company's  risk-based  capital at June 30,
2004:

Shareholders' equity ..........................................   $  5,022,885
Less: unrealized losses on available-for-sale securities ......       (149,480)
                                                                  ------------
Tier 1 capital ................................................      5,172,365
Plus: allowance for loan loss includable in Tier 2 capital(1) .        304,000
                                                                  ------------
Total risk-based capital ......................................   $  5,476,365
                                                                  ============

Risk-weighted assets ..........................................   $ 24,321,000
                                                                  ============

Risk-based capital ratios
   Tier 1 capital (to risk-weighted assets) ...................          21.27%
   Total risk-based capital (to risk-weighted assets) .........          22.52%
   Tier 1 capital (to total average assets) ...................          13.89%

(1) Limited to 1.25% of risk-weighted assets

Off-Balance Sheet Risk

Through its operations,  the Company has made contractual  commitments to extend
credit in the ordinary course of its business activities.  These commitments are
legally   binding   agreements  to  lend  money  to  the  Bank's   customers  at
predetermined  interest rates for a specified  period of time. At June 30, 2004,
the Company had issued  commitments  to extend credit of $4,418,363  and standby
letters of credit of $150,000  through  various  types of lending  arrangements.
Approximately  $2,347,000  of these  commitments  to extend  credit had variable
rates.








                                       14
<PAGE>

                             DEKALB BANKSHARES, INC.

Item 2. Management's Discussion And Analysis or Plan of Operation - continued

The  following  table sets forth the  length of time until  maturity  for unused
commitments to extend credit and standby letters of credit at June 30, 2004.

<TABLE>
<CAPTION>
                                                              After One     After Three
                                                Within         Through        Through                        Greater
                                                   One           Three         Twelve         Within            Than
(Dollars in thousands)                           Month          Months         Months        One Year        One Year         Total
                                                 -----          ------         ------        --------        --------         -----
<S>                                         <C>             <C>            <C>             <C>            <C>            <C>
Unused commitments
   to extend credit ......................  $        -      $       531    $       504     $     1035     $     3,383    $     4,418
Standby letters of  credit ...............           -                -            118            118              32            150
                                            ----------      -----------    -----------     ----------     -----------    -----------
     Total ...............................  $        -      $       531    $       622     $    1,153     $     3,415    $     4,568
                                            ==========      ===========    ===========     ==========     ===========    ===========
</TABLE>
Based on historical  experience,  many of the  commitments and letters of credit
will expire unfunded.  Accordingly,  the amounts shown in the table above do not
necessarily reflect the Company's need for funds in the periods shown.

The Company evaluates each customer's credit worthiness on a case-by-case basis.
The amount of  collateral  obtained,  if deemed  necessary  by the Company  upon
extension  of  credit,  is  based  on its  credit  evaluation  of the  borrower.
Collateral  varies but may include  accounts  receivable,  inventory,  property,
plant and equipment, commercial and residential real estate.

Item 3.  Controls and Procedures

Based  on  the  evaluation  required  by  17  C.F.R.  Section  240.13a-15(b)  or
240.15d-15(b) of the Company's disclosure controls and procedures (as defined in
17  C.F.R.  Sections  240.13a-15(e)  and  240.15d-15(e)),  the  Company's  chief
executive  officer and chief financial  officer concluded that the effectiveness
of such  controls and  procedures,  as of the end of the period  covered by this
quarterly report, was adequate.

No disclosure is required under 17 C.F.R. Section 228.308(c).




                                       15
<PAGE>

                             DEKALB BANKSHARES, INC.

Part II - Other Information

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibit 31 - Certification  of Chief Executive  Officer and Chief Financial
     Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

     Exhibit 32 - Certification  of Chief Executive  Officer and Chief Financial
     Officer  pursuant to Section 906 of the  Sarbanes-Oxley  Act of 2002.  This
     exhibit  is not  "filed"  for  purposes  of  Section  18 of the  Securities
     Exchange  Act of 1934 but is instead  furnished  as provided by  applicable
     rules of the Securities and Exchange Commission.

(b)  Reports on Form 8-K - No reports on Form 8-K were filed  during the quarter
ended June 30, 2004




                                       16
<PAGE>

                             DEKALB BANKSHARES, INC.


                                    SIGNATURE

In accordance with the requirements of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



                                      s/William C. Bochette, III
                                  By: -----------------------------------------
                                      William C. Bochette, III
                                      Chief Executive Officer, President, and
                                      Chief Financial Officer

Date:  August 10, 2004






                                       17
<PAGE>

                             DEKALB BANKSHARES, INC.

Exhibit Index

31   Certification  of Chief  Executive  Officer  and  Chief  Financial  Officer
     pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32   Certification  of Chief  Executive  Officer  and  Chief  Financial  Officer
     pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002. This exhibit is
     not "filed" for  purposes of Section 18 of the  Securities  Exchange Act of
     1934 but is  instead  furnished  as  provided  by  applicable  rules of the
     Securities and Exchange Commission.



                                       18