UNITED STATES 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, 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 Number: 000-50522

Community
Banks of Georgia, Inc.(Exact name of small business issuer as specified in its charter)

|Georgia                  |  | 20-0485183                           | 
|------------------------ |  | ------------------------------------ | 
|                        
|(State of Incorporation) |  | (I.R.S. Employer Identification No.) | 

|                                         | 
|---------------------------------------- | 
|
|15 Mountainside Drive                    | 
|Jasper, Georgia                          | 
|                                        
|(Address of principal executive offices) | 

706-253-9600(Telephone Number)

Indicate
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 preceding 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  XX   
NO  ___

State
the number of shares outstanding of each of the issuers classes of common
equity, as of the latest practicable date: Common stock, par value $5 per share:
970,000 shares outstanding as of November 1, 2004

Transitional
small business disclosure format (check one):

YES  ___   
NO  XX

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COMMUNITY BANKS OF GEORGIA, INC.

INDEX

|              |                                                                                  | Page
      No.
|------------- | -------------------------------------------------------------------------------- | --------------
|PART
      I  | FINANCIAL
      INFORMATION                                                      |               
|Item
      1  | Consolidated
      Financial Statements                                         
|              | Consolidated
      Balance Sheets (unaudited) at September 30, 2004             
|              | and
      December 31, 2003                                                      | 3             
|              | Consolidated
      Statements of Operations (unaudited) for the Three Months and
|              | Nine
      Months Ended September 30, 2004 and 2003                              | 4             
|              | Consolidated
      Statements of Comprehensive Income (unaudited) for the        |               
|              | Three
      Months and Nine Months Ended September 30, 2004 and 2003             | 5             
|              | Consolidated
      Statements of Cash Flows (unaudited) for the Nine            
|              | Months
      Ended September 30, 2004 and 2003                                   | 6             
|              | Notes
      to Consolidated Financial Statements (unaudited)                     | 7             
|Item
      2  | Management's
      Discussion and Analysis of Financial Condition and           
|              | Results
      of Operations                                                      | 9-11          
|Item
      3  | Controls
      and Procedures                                                    | 11            
|PART
      II | OTHER
      INFORMATION                                                         
|Item
      1  | Legal
      Proceedings                                                          | 12            
|Item
      2  | Changes
      in Securities and Purchases of Equity Securities                   | 12            
|Item
      3  | Defaults
      Upon Senior Securities                                            | 12            
|Item
      4  | Submission
      of Matters to a Vote of Security Holders                        | 12            
|Item
      5  | Other
      Information                                                          | 12            
|Item
      6  | Exhibits                                                                         | 12            

This
Form 10-QSB contains forward-looking statements. These statements are subject to
risks and uncertainties that could cause actual results to differ materially
from those anticipated in the forward-looking statements. Factors that may cause
these differences include, but are not limited to, changes in interest rate
environment, managements business strategy, national, regional and local
market conditions and legislative and regulatory conditions.

Readers
should not place undue reliance on forward-looking statements, which reflect our
view only as of the date of this Form 10-QSB. We undertake no obligation to
publicly revise these forward-looking statements to reflect subsequent events or
circumstances. Readers should also carefully review the other documents we file
from time to time with the Securities and Exchange Commission.

-2-

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PART I.
FINANCIAL INFORMATIONItem 1.  CONSOLIDATED FINANCIAL STATEMENTS

COMMUNITY BANKS OF GEORGIA, INC.

Consolidated Balance Sheets

|Assets                                                              | September 30,2004 | December 31,2003
|------------------------------------------------------------------- | ----------------- | ----------------
|
|Cash and due from banks, including reserve requirements of $189,000 |                   |                 
|and $124,000, respectively                                          |                   |                 
|Federal funds sold                                                  |                   |                 
|                                                                    |                   |                 
|Cash and cash equivalents                                           |                   |                 
|Investment securities available for sale                            |                   |                 
|Other investments                                                   |                   |                 
|Loans, net                                                          |                   |                 
|Premises and equipment, net                                         |                   |                 
|Accrued interest receivable and other assets                        |                   |                 
|Bank owned life insurance                                           |                   |                 
|                                                                    |                   |                 
|Total assets                                                        |                   |                 
|                                                                    |                   |                 
|Liabilities and Shareholders' Equity                                |                   |                 
|Liabilities:                                                        |                   |                 
|Deposits:                                                           |                   |                 
|Demand                                                              |                   |                 
|Interest bearing demand and money market                            |                   |                 
|Savings                                                             |                   |                 
|Time                                                                |                   |                 
|Time over $100,000                                                  |                   |                 
|                                                                    |                   |                 
|Total deposits                                                      |                   |                 
|Federal Home Loan Bank advance                                      |                   |                 
|Accrued interest payable and other liabilities                      |                   |                 
|                                                                    |                   |                 
|Total liabilities                                                   |                   |                 
|                                                                    |                   |                 
|Commitments                                                         |                   |                 
|Shareholders' equity:                                               |                   |                 
|Common stock, $5 par value; authorized                              |                   |                 
|10,000,000 shares; issued and outstanding 970,000 shares            |                   |                 
|Additional paid-in capital                                          |                   |                 
|Retained earnings                                                   |                   |                 
|Accumulated comprehensive income                                    |                   |                 
|                                                                    |                   |                 
|Total shareholders' equity                                          |                   |                 
|                                                                    |                   |                 
|                                                                    |                   |                 
|                                                                    |                   |                 

See
accompanying notes to unaudited consolidated financial statements

-3-

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COMMUNITY BANKS OF GEORGIA, INC.

Consolidated Statements of Operations

For the Three Months and Nine Months Ended September 30, 2004 and 2003
(Unaudited)

|                                                          | ThreeMonthsEnded | ThreeMonthsEnded | NineMonthsEnded | NineMonthsEnded | 
|--------------------------------------------------------- | ---------------- | ---------------- | --------------- | --------------- | 
|
|Interest income:                                          |                  |                  |                 |                 | 
|Loans                                                     |                  |                  | $               | 1,893,914       | 
|Investment securities                                     |                  |                  |                 | 308,490         | 
|Federal funds sold                                        |                  |                  |                 | 5,028           | 
|                                                          |                  |                  |                 |                 | 
|Total interest income                                     |                  |                  |                 | 2,207,432       | 
|                                                          |                  |                  |                 |                 | 
|Interest expense:                                         |                  |                 
|Deposits                                                  |                  |                  |                 | 733,723         | 
|Borrowings                                                |                  |                  |                 | 13,715          | 
|                                                          |                  |                  |                 |                 | 
|Total interest expense                                    |                  |                  |                 | 747,438         | 
|                                                          |                  |                  |                 |                 | 
|Net interest income                                       |                  |                  |                 | 1,459,994       | 
|Provision for loan losses                                 |                  |                  |                 | 105,000         | 
|                                                          |                  |                  |                 |                 | 
|Net interest  income after  provision  for loan losses    |                  |                  |                 | 1,354,994       | 
|                                                          |                  |                  |                 |                 | 
|                                                          |                  |                  |                 |                 | 
|Other income:                                             |                  |                 
|Service charges on deposit accounts                       |                  |                  |                 | 89,121          | 
|Mortgage origination fees                                 |                  |                  |                 | 11,758          | 
|Other operating income                                    |                  |                  |                 | 38,492          | 
|Gain on sale of securities                                |                  |                  |                 | --              | 
|                                                          |                  |                  |                 |                 | 
|Total other income                                        |                  |                  |                 | 139,371         | 
|                                                          |                  |                  |                 |                 | 
|Other expense:                                            |                  |                 
|Salaries and other personnel expense                      |                  |                  |                 | 365,299         | 
|Net occupancy and equipment expense                       |                  |                  |                 | 93,080          | 
|Other operating expense                                   |                  |                  |                 | 282,991         | 
|                                                          |                  |                  |                 |                 | 
|Total other expense                                       |                  |                  |                 | 741,370         | 
|                                                          |                  |                  |                 |                 | 
|Income before provision for income taxes                  |                  |                  |                 | 752,995         | 
|Income tax expense                                        |                  |                  |                 | 277,529         | 
|                                                          |                  |                  |                 |                 | 
|Net earnings                                              |                  |                  | $               | 475,466         | 
|                                                          |                  |                  |                 |                 | 
|Earnings per common share:                                |                  |                 
|Basic earnings  per share (based on average outstanding   |                  |                  |                 |                 | 
|shares of  970,000, 970,000, 970,000 and 944,529,         |                  |                 
|respectively)                                             |                  |                  | $               | .49             | 
|                                                          |                  |                  |                 |                 | 
|Dulited earnings  per share (based on average outstanding |                  |                 
|shares of  1,035,000, 1.009,000, 1,035,000 and 983,529,   |                  |                  |                 |                 | 
|respectively)                                             |                  |                  | $               | .46             | 
|                                                          |                  |                  |                 |                 | 

See accompanying notes to unaudited consolidated
financial statements.

-4-

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COMMUNITY BANKS OF GEORGIA, INC.

Consolidated Statements of Comprehensive Income

For the Three
Months and Nine Months Ended September 30, 2004 and 2003(Unaudited)

|                                                         | Three MonthsEnded | Three MonthsEnded | Nine MonthsEnded | Nine MonthsEnded
|-------------------------------------------------------- | ----------------- | ----------------- | ---------------- | ----------------
|
|                                                         |                   |                   |                  |                 
|Net earnings                                             |                   |                   | $                | 475,466         
|                                                         |                   |                   |                  |                 
|Other comprehensive income (loss), net of tax:           |                   |                  
|                                                         |                   |                   |                  |                 
|Unrealized (loss) gain on securities available-for-sale, |                   |                   |                  |                 
|net of tax of $270,696, $94,746, $30,040,                |                   |                  
|and  $85,800, respectively                               |                   |                   |                  | 441,659         
|                                                         |                   |                   |                  |                 
|Realized gains on securities available-for-sale,         |                   |                  
|net of tax $0, $0, $0, and $28,618,  respectively        |                   |                   |                  | --              
|                                                         |                   |                   |                  |                 
|Total other comprehensive income (loss),                 |                   |                  
|net of tax                                               |                   |                   |                  | 441,659         
|                                                         |                   |                   |                  |                 
|Comprehensive income (loss)                              |                   |                   | $                | 917,125         
|                                                         |                   |                   |                  |                 

See accompanying notes to unaudited
consolidated financial statements.

-5-

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COMMUNITY BANKS OF GEORGIA, INC.

Consolidated
Statements of Cash Flows

For the Nine
Months Ended September 30, 2004 and 2003(Unaudited)

|                                                                       |  | 
|---------------------------------------------------------------------- |  | 
|
|Cash flows from operating activities:                                  |  | 
|Net earnings                                                           |  | 
|Adjustments to reconcile net earnings to net                           |  | 
|cash provided by operating activities:                                 |  | 
|Provision for loan losses                                              |  | 
|Depreciation, amortization and accretion                               |  | 
|Gain on sale of securities                                             |  | 
|Change in:                                                             |  | 
|Accrued interest receivable and other assets                           |  | 
|Accrued interest payable and other liabilities                         |  | 
|                                                                       |  | 
|Net cash provided by operating activities                              |  | 
|                                                                       |  | 
|Cash flows from investing activities:                                  |  | 
|Proceeds from calls, maturities, and                                   |  | 
|paydowns of securities available for sale                              |  | 
|Proceeds from sale of securities available for sale                    |  | 
|Purchases of other investments                                         |  | 
|Purchases of investment securities available for sale                  |  | 
|Change in loans                                                        |  | 
|Purchases of premises and equipment                                    |  | 
|Purchase of bank owned life insurance                                  |  | 
|                                                                       |  | 
|Net cash used by investing activities                                  |  | 
|                                                                       |  | 
|Cash flows from financing activities:                                  |  | 
|Net change in deposits                                                 |  | 
|Net change in borrowings                                               |  | 
|Proceeds from sale of stock, net of offering costs of $38,055 in 2003  |  | 
|                                                                       |  | 
|Net cash provided by financing activities                              |  | 
|                                                                       |  | 
|Net increase (decrease) in cash and cash equivalents                   |  | 
|Cash and cash equivalents at beginning of the period                   |  | 
|                                                                       |  | 
|Cash and cash equivalents at end of period                             |  | 
|                                                                       |  | 
|Supplemental schedule of noncash investing activities:                 |  | 
|Change in unrealized gain on securities available for sale, net of tax |  | 
|Supplemental disclosure of cash flow information:                      |  | 
|Interest paid                                                          |  | 
|Taxes paid                                                             |  | 

See
accompanying notes to unaudited consolidated financial statements.

-6-

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COMMUNITY BANKS OF GEORGIA, INC.Notes to
Consolidated financial statements(Unaudited)

|(1) |  | Basis
of  PresentationThe
accounting principles followed and the methods of applying these principles
conform with accounting principles generally accepted in the United States of
America (GAAP) and with general practices within the banking industry. In
preparing consolidated financial statements in conformity with GAAP, management
is required to make estimates and assumptions that affect the reported amounts
in the consolidated financial statements. Actual results could differ
significantly from those estimates. Material estimates common to the banking
industry that are particularly susceptible to significant change in the near
term include, but are not limited to, the determinations of the allowance for
loan losses, the valuation of investment securities available-for-sale, the
valuation of real estate acquired in connection with or in lieu of foreclosure
on loans, and valuation allowances associated with deferred tax assets, the
recognition of which are based on future taxable income.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
accompanying unaudited consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of  America
for interim financial information and with the instructions to Form  10-QSB. Accordingly,
they do not include all the information and footnotes  required by GAAP for complete
consolidated financial statements. In the opinion  of management, all adjustments
(consisting of normal recurring accruals)  considered necessary for a fair presentation
have been included. Operating  results for the nine-month period ended September 30, 2004
are not necessarily  indicative of the results that may be expected for the year ended
December 31,  2004. For further information, refer to the consolidated financial
statements  and footnotes thereto included in our Form 10-KSB for the fiscal year ended
December 31, 2003 as filed with the Securities and Exchange Commission.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Net
Earnings Per ShareBasic  earnings per share are based on the weighted average number
of common shares  outstanding during the period while the effects of potential common
shares  outstanding during the period are included in diluted earnings per share. The
presentation of earnings per share is required on the face of the statement of
operations with and without the dilutive effects of potential common stock  issuances
from instruments such as options, convertible securities, and  warrants.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                     |  |   |           |  |                  | 
|---------------------------------------------------- |  | - | --------- |  | ---------------- | 
|
|                                                     |  |   |           |  |                  | 
|Basic
      earnings per share                       |  | $ | 475,466   |  | 970,000          | 
|Effect
      of dilutive securities - stock warrants |  |   | --        |  | 65,000           | 
|                                                     |  |   |           |  |                  | 
|Diluted
      earnings per share                     |  |   |           |  |                  | 
|                                                     |  | $ | 475,466   |  | 1,035,000        | 
|                                                     |  |   |           |  |                  | 
|
|
|                                                     |  |   |           |  |                  | 
|Basic
      earnings per share                       |  | $ | 292,745   |  | 970,000          | 
|Effect
      of dilutive securities - stock warrants |  |   | --        |  | 39,000           | 
|                                                     |  |   |           |  |                  | 
|Diluted
      earnings per share                     |  | $ | 292,745   |  | 1,009,000        | 
|                                                     |  |   |           |  |                  | 
|
|
|                                                     |  |   |           |  |                  | 
|Basic
      earnings per share                       |  | $ | 1,410,058 |  | 970,000          | 
|Effect
      of dilutive securities - stock warrants |  |   | --        |  | 65,000           | 
|                                                     |  |   |           |  |                  | 
|Diluted
      earnings per share                     |  | $ | 1,410,058 |  | 1,035,0
      00 | 
|                                                     |  |   |           |  |                  | 
|
|
|                                                     |  |   |           |  |                  | 
|Basic
      earnings per share                       |  | $ | 802,590   |  | 944,529          | 
|Effect
      of dilutive securities - stock warrants |  |   | --        |  | 39,000           | 
|                                                     |  |   |           |  |                  | 
|Diluted
      earnings per share                     |  | $ | 802,590   |  | 983,529          | 
|                                                     |  |   |           |  |                  | 

-7-

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(3)         Off
Balance Sheet Arrangements

| | In
the normal course of business, we enter into certain off-balance sheet  transactions that
are connected with meeting the financing needs of our  customers. These off-balance sheet
arrangements consist of letters of credit and  commitments to extend credit. The Companys
unfunded commitments remain  consistent as a percentage of total outstanding loans. For
further information,  please refer to our Annual Report on Form 10-KSB for the year ended
December 31,  2003.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-8-

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|Item 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
|------- |  | -------------------------------------------------------------------------------------

Financial Condition

Total
assets at September 30, 2004 were $148.0 million representing a $28.6 million
(23.9%) increase from December 31, 2003. Deposits increased $24.8 million
(23.5%) from December 31, 2003, while loans, net of the allowance, increased
$25.1 million (27.9%).

The
allowance for loan losses at September 30, 2004 totaled $1.4 million,
representing 1.20% of total loans compared to the December 31, 2003 total of
$1.2 million, which represented 1.3% of total loans. Cash and cash equivalents
decreased $1.3 million from December 31, 2003.

There
were no related party loans or other loans which were considered nonperforming
at September 30, 2004.

Results of
Operations

Overall
Year to Date. Our results for the nine months ended September 30, 2004, when
compared to the nine months ended September 30, 2003, reflected the continued
growth of our earning assets resulting in increased net interest income. Total
revenues, which are comprised of interest income and noninterest income, for the
nine months ended September 30, 2004 were $6.6 million, compared to total
revenues for the nine months ended September 30, 2003 of $4.9 million. The
provision for loan losses was $245,000 for the first nine months of 2004
compared to $508,000 in the first nine months of 2003. Noninterest expenses were
$2.1 million for the nine months ended September 30, 2004, compared to $1.7
million for the nine months ended September 30, 2003. On a pre-tax basis net
earnings for the nine months ended September 30, 2004 were $2.3 million compared
to $1.3 million for the same period in 2003. Net income for the nine months
ended September 30, 2004 was $1.4 million compared to $803,000 for the nine
months ended September 30, 2003.

Net
Interest Income. For the nine months ended September 30, 2004, we reported
net interest income of $4.2 milion, a 40.0% increase over the $3.0 million
reported for the period ended September 30, 2003. This increase in net interest
income is largely attributable to the growth of our in interest earning assets,
primarily loans, as well as the increase in our net interest spread.

For
the nine months ended September 30, 2004, our yield on earning assets was 6.36%
while the cost of funding sources was 2.31%. While the net interest spread was
4.05%, net interest margin, which considers the effect of non-interest bearing
deposits and capital, was 4.30%, slightly ahead of the year to date plan. For
the nine months ended September 30, 2003, our yield on earning assets was 6.16%
while the cost of funding sources was 2.60%. While net interest spread was
3.56%, net interest margin was 4.64%. The increase in our net interest spread is
attributable to maturity of interest bearing time deposits and their repricing
at a lower rate. The decrease in net interest margin is attributable to further
leveraging the increased capital from the stock offering. Our overall results of
operations are materially consistent with the year to date planned/budgeted
operations.

Provision
for Loan Losses. We provided $245,000 to the allowance for loan losses for
the nine months ended September 30, 2004, compared to $508,000 for the
corresponding period in 2003, to provide for estimated future losses that may
arise in our growing loan portfolio. The decrease is attributable to the
elimination of a specific reserve for an impaired loan that was paid off during
this year as well as an expected decrease in related loan growth.

Noninterest
Income.  Noninterest income consists  predominately of service charges on deposit
accounts,  mortgage  origination  fees, and other miscellaneous revenues and fees.

For
the nine months ended September 30, 2004, our noninterest income was $394,000, a
decrease of $5,000, or 1.25%, when compared to the nine months ended September
30, 2003. Our decrease in noninterest income is primarily the result of no gains
on sales of investment securities, and a decrease in mortgage origination fees,
as a result of decreased mortgage activity. This decrease was offset by
increased service charges on a growing transaction account deposit base, as well
as income from bank owned life insurance. Noninterest income comprised 6.0% of
our total revenues for the first nine months of 2004 compared to 8.1% for the
same period in 2003.

Noninterest
expense. Noninterest expense consists of salaries and employee benefits,
equipment and occupancy expenses, and other operating expenses. For the nine
months ended September 30, 2004, we incurred $2.1 million in

-9-

---

noninterest
expenses compared to $1.7 million for the nine months ended September 30, 2003.  Our
primary component of noninterest expense is salaries and employee benefits,  which is
also the primary component of the increase in noninterest expense. This  24.5% increase
from September 30, 2003 to September 30, 2004 is primarily  related to growth in
personnel to support our continued growth. In addition to  the increase in salaries and
employee benefits, we also incurred additional  occupancy expenses related to
depreciation of the main office, and additional  outside professional service fees, which
is included in other operating expense.

Income
tax expense increased for the nine month period ending September 30, 2004,
compared to the same period in 2003 from 36.4% to 37.5%, as tax exempt income
expressed as a percentage of pre-tax earnings decreased. For the three months
ended September 30, 2004, income tax expense expressed as a percentage of
pre-tax earnings was 36.9% compared to 36.1% for the same period in 2003.

Capital

The
following tables present our regulatory capital position at September 30, 2004:

|Risk-Based Capital Ratios                                | 
|-------------------------------------------------------- | 
|
|                                                         | 
|Tier 1 Tangible Capital, Actual                          | 
|Tier 1 Tangible Capital,  Minimum Requirement            | 
|                                                         | 
|Additional                                               | 
|Total Capital, Actual                                    | 
|Total Capital, Minimum Requirement                       | 
|                                                         | 
|Additional                                               | 
|                                                         | 
|Leverage Ratio                                           | 
|Tier 1 Tangible Capital to adjusted total assets, Actual | 
|Leverage, Minimum Requirement                            | 
|                                                         | 
|Additional                                               | 
|                                                         | 

Liquidity

We
must maintain, on a daily basis, sufficient funds to cover the withdrawals from
depositors accounts and to supply new borrowers with funds. To meet these
obligations, we keep cash on hand, maintain account balances with our
correspondent banks, and purchase and sell federal funds and other short-term
investments.

Asset
and liability maturities are monitored in an attempt to meet liquidity needs. It
is our policy to monitor our liquidity to meet regulatory requirements and their
local funding requirements. Management believes the current level of liquidity
is adequate to meet our needs.

Our
primary sources of liquidity are a stable base of deposits, scheduled repayments
on loans, and interest and maturity of investments. We have classified all
securities as available-for-sale. If necessary, we have the ability to sell a
portion of our investment securities to manage our interest rate sensitivity gap
or liquidity. We may also use cash and due from banks and federal funds sold to
meet liquidity needs.

We
maintain relationships with correspondent banks that can provide funds to us on
short notice if needed. Presently, we have an arrangement with The Bankers Bank
for short term unsecured advances up to $3,900,000.

Cash
and cash equivalents decreased $2.0 million from December 31, 2003. Cash inflows
from financing activities totaled $26.8 million, attributable to net deposit
increases during 2004 of $24.8 million along with a new $2,000,000 advance from
the Federal Home Loan Bank of Atlanta.

-10-

---

During
2004, cash provided by operating activities approximated $2.0 million. Investing
activities used $30.1 million of cash during 2004, of which investment security
purchases totaled $5.9 million and loans to customers, net of repayments,
totaled $25.3 million. Maturities of investment securities provided $1.8 million
of cash.

Item 3.

CONTROLS AND
PROCEDURES

Our
management, including our Chief Executive Officer and Chief Financial Officer,
supervised and participated in an evaluation of our disclosure controls and
procedures (as defined by Exchange Act Rule 13a-15). Based on such evaluation,
and as of September 30, 2004, our Chief Executive Officer and Chief Financial
Officer have concluded that our disclosure controls and procedures were
effective in accumulating and communicating information to management, including
the Chief Executive Officer and Chief Financial Officer, required to be included
in the reports that are filed or submitted by us as appropriate to allow timely
decisions regarding required disclosures of that information under the
Securities and Exchange Commissions rules and forms and that our
disclosure controls and procedures are designed to ensure that such information
is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commissions rules and forms.
There have been no significant changes in our internal controls or, to
managements knowledge, in other factors that could significantly affect
those internal controls subsequent to the date of their evaluation, and there
have been no corrective actions with respect to significant deficiencies or
material weaknesses.

-11-

---

COMMUNITY
BANKS OF GEORGIA, INC.

PART
II. OTHER INFORMATION

|Item 1. | LEGAL PROCEEDINGS None
|------- | ----------------------

|Item 2. | CHANGES IN SECURITIES AND PURCHASES OF EQUITY SECURITIES  None
|------- | --------------------------------------------------------------

|Item 3. | DEFAULTS UPON SENIOR SECURITIES  None
|------- | -------------------------------------

|Item 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None
|------- | --------------------------------------------------------

|Item 5. | OTHER INFORMATION  None
|------- | -----------------------

|Item 6. | EXHIBITS
|------- | --------

| |      | 
| | ---- | 
|
| |      | 
| | 31.1 | 
| | 31.2 | 
| | 32.1 | 
| |      | 
| | 32.2 | 
| |      | 

-12-

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COMMUNITY BANKS OF GEORGIA, INC.

SIGNATURES

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

COMMUNITY BANKS OF GEORGIA, INC.

| | By:/s/ John Trammell       John Trammell, President/CEO       (Principal Executive Officer)
| | -------------------------------------------------------------------------------------------

| | Date: November 12, 2004
| | -----------------------

| | By:/s/ Frank Eubanks
       Frank Eubanks, CFO        (Principal Financial and Accounting Officer)
| | --------------------------------------------------------------------------------------------------

| | Date: November 12, 2004
| | -----------------------

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