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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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Quarterly Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

For the quarter ended March 31, 2006

Commission file number 000-25128



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LOGO

MAIN STREET BANKS, INC.

(Exact name of registrant as specified in its charter)



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|                         |  |                                     
|------------------------ |  | ------------------------------------
|Georgia                  |  | 58-2104977                          
|(State of Incorporation) |  | (I.R.S. Employer Identification No.)



|                                         |  |           
|---------------------------------------- |  | ----------
|3500 Lenox Road, Atlanta, GA             |  | 30326     
|(Address of principal executive offices) |  | (Zip Code)

770-786-3441

(Registrants telephone number)



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Indicate by check mark whether the registrant (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  x    No ̈

Indicate by check whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

Large accelerated
filer ̈Accelerated filer  x    Non-accelerated filer ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act.):    Yes ̈No  x

As of April 30, 2006, registrant had outstanding 21,566,179 shares of common stock.



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##### Table of Contents

SPECIAL CAUTIONARY NOTICE

REGARDING FORWARD-LOOKING STATEMENTS

Certain of the statements made herein
under the caption Managements Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere are forward-looking statements within the meaning of, and subject to the protections of,
Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act).

Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates,
intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, many of which may be beyond our control, and which may cause the actual results, performance or achievements of the Company to be materially
different from expected results, performance or achievements expressed or implied by such forward-looking statements.

All statements other
than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as may, will, anticipate,
assume, should, indicate, would, believe, contemplate, expect, estimate, continue, plan, point to,
project, predict, could, intend, target, potential, and other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety
of factors, including, without limitation:



| |  |  | future local and national economic or business and real estate market conditions;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | governmental monetary and fiscal policies, as well as legislative and regulatory changes, including banking, securities and tax laws and regulations;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the risks of changes in interest rates, composition and costs of deposits, loan demand, and the values of loan collateral, securities, and interest sensitive assets and liabilities;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | credit risks of borrowers;
| | - |  | --------------------------



| |  |  | the effects of competition from a wide variety of local, regional, national, and other providers of financial, investment, and insurance services;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the failure of assumptions underlying the establishment of allowances for loan losses and other estimates;
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | the risks of mergers and acquisitions, including, without limitation, the related costs, including integrating operations and personnel as part of these transactions and the failure
to achieve expected gains, revenue growth and/or expense savings from such transactions;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in accounting rules, policies and practices;
| | - |  | ----------------------------------------------------



| |  |  | changes in technology and/or products  especially those that result in increased costs to us or less benefits to us than we had expected;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the effects of war or other conflict, acts of terrorism or other catastrophic events; and
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | other factors and risks described in any of our subsequent reports that we make with the Securities and Exchange Commission (the Commission) under the Exchange Act.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

All written or oral forward-looking statements that are made by or are attributable to us are expressly qualified in their
entirety by this cautionary notice. Our forward-looking statements apply only as of the date of this report or the respective date of the document from which they are incorporated herein by reference. We have no obligation and do not undertake to
update, revise or correct any of the forward-looking statements after the date of this report, or after the respective dates on which such statements otherwise are made, whether as a result of new information, future events or otherwise.



1



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##### Table of Contents

MAIN STREET BANKS, INC.

TABLE OF CONTENTS

FORM 10-Q

March 31, 2006



|                              |  |                                                                                                        |  |     
|----------------------------- |  | ------------------------------------------------------------------------------------------------------ |  | ----
|                              |  |                                                                                                        |  | Page
|PART I.
FINANCIAL INFORMATION |  |                                                                                                       
|                              |  |                                                                                                       
|Item 1.                       |  | Financial Statements                                                                                   |  |     
|                              |  |                                                                                                       
|                              |  | Consolidated Balance Sheets March 31, 2006 (unaudited) and December 31, 2005                           |  | 3   
|                              |  |                                                                                                       
|                              |  | Consolidated Statements of Income (unaudited) Three Months Ended March 31, 2006 and 2005               |  | 4   
|                              |  |                                                                                                       
|                              |  | Consolidated Statements of Comprehensive Income (unaudited) Three Months Ended March 31, 2006 and 2005 |  | 5   
|                              |  |                                                                                                       
|                              |  | Consolidated Statements of Cash Flows (unaudited) Three Months Ended March 31, 2006 and 2005           |  | 6   
|                              |  |                                                                                                       
|                              |  | Notes to Consolidated Financial Statements (unaudited)                                                 |  | 7   
|                              |  |                                                                                                       
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                  |  | 14  
|                              |  |                                                                                                       
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                             |  | 23  
|                              |  |                                                                                                       
|Item 4.                       |  | Controls and Procedures                                                                                |  | 23  
|                              | 
|PART II.
OTHER INFORMATION    |  |                                                                                                       
|                              |  |                                                                                                       
|Item 1.                       |  | Legal Proceedings                                                                                      |  | 23  
|                              |  |                                                                                                       
|Item 1A.                      |  | Risk Factors                                                                                           |  | 23  
|                              |  |                                                                                                       
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                            |  | 23  
|                              |  |                                                                                                       
|Item 3.                       |  | Defaults Upon Senior Securities                                                                        |  | 23  
|                              |  |                                                                                                       
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                    |  | 23  
|                              |  |                                                                                                       
|Item 5.                       |  | Other Information                                                                                      |  | 24  
|                              |  |                                                                                                       
|Item 6.                       |  | Exhibits                                                                                               |  | 24  



2



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##### Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Main Street Banks, Inc.

Consolidated Balance Sheets

(dollars in thousands)



|                                                                                                                              |  |                            |            |   |                   |   |            |  
|----------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ---------- | - | ----------------- | - | ---------- | -
|                                                                                                                              |  | (Unaudited) March 31, 2006 |            |   | December 31, 2005 |  
|Assets                                                                                                                        |  |                            |            |   |                   |   |            |  
|Cash and due from banks                                                                                                       |  | $                          | 47,642     |   |                   | $ | 45,579     |  
|Interest-bearing deposits in banks                                                                                            |  |                            | 583        |   |                   |   | 470        |  
|Federal funds sold and securities purchased under agreements to resell                                                        |  |                            | 4,431      |   |                   |   | 12,401     |  
|Investment securities available for sale (cost of $227,385 and $233,059 at March 31, 2006 and December 31, 2005
respectively) |  |                            | 221,569    |   |                   |   | 228,683    |  
|Investment securities held to maturity (fair value of $7,919 and $7,954 at March 31, 2006 and December 31, 2005
respectively) |  |                            | 8,080      |   |                   |   | 8,190      |  
|Other investments                                                                                                             |  |                            | 21,213     |   |                   |   | 23,664     |  
|Mortgage loans held for sale                                                                                                  |  |                            | 4,184      |   |                   |   | 8,072      |  
|Loans, net of unearned income                                                                                                 |  |                            | 1,801,314  |   |                   |   | 1,802,512  |  
|Allowance for loan losses                                                                                                     |  |                            | (25,256    | ) |                   |   | (25,239    | )
|                                                                                                                              |  |                            |            |   |                   |   |            |  
|Loans, net                                                                                                                    |  |                            | 1,776,058  |   |                   |   | 1,777,273  |  
|Premises and equipment, net                                                                                                   |  |                            | 51,589     |   |                   |   | 52,392     |  
|Other real estate                                                                                                             |  |                            | 6,106      |   |                   |   | 4,302      |  
|Accrued interest receivable                                                                                                   |  |                            | 10,786     |   |                   |   | 10,760     |  
|Goodwill and other intangible assets                                                                                          |  |                            | 102,012    |   |                   |   | 101,980    |  
|Bank owned life insurance                                                                                                     |  |                            | 60,899     |   |                   |   | 60,284     |  
|Other assets                                                                                                                  |  |                            | 16,877     |   |                   |   | 16,468     |  
|                                                                                                                              |  |                            |            |   |                   |   |            |  
|Total assets                                                                                                                  |  | $                          | 2,332,029  |   |                   | $ | 2,350,518  |  
|                                                                                                                              |  |                            |            |   |                   |   |            |  
|Liabilities                                                                                                                   |  |                            |            |   |                   |   |            |  
|Deposits:                                                                                                                     |  |                            |            |   |                   |   |            |  
|Noninterest-bearing demand                                                                                                    |  | $                          | 254,358    |   |                   | $ | 251,967    |  
|Interest-bearing demand and money market                                                                                      |  |                            | 608,703    |   |                   |   | 606,737    |  
|Savings                                                                                                                       |  |                            | 43,885     |   |                   |   | 43,702     |  
|Time deposits of $100,000 or more                                                                                             |  |                            | 429,032    |   |                   |   | 389,117    |  
|Other time deposits                                                                                                           |  |                            | 393,552    |   |                   |   | 439,960    |  
|                                                                                                                              |  |                            |            |   |                   |   |            |  
|Total deposits                                                                                                                |  |                            | 1,729,530  |   |                   |   | 1,731,483  |  
|Accrued interest payable                                                                                                      |  |                            | 6,661      |   |                   |   | 6,082      |  
|Federal Home Loan Bank advances                                                                                               |  |                            | 162,901    |   |                   |   | 188,035    |  
|Federal funds purchased and securities sold under repurchase agreements                                                       |  |                            | 71,752     |   |                   |   | 70,883     |  
|Subordinated debentures                                                                                                       |  |                            | 51,547     |   |                   |   | 51,547     |  
|Other liabilities                                                                                                             |  |                            | 9,149      |   |                   |   | 7,239      |  
|                                                                                                                              |  |                            |            |   |                   |   |            |  
|Total liabilities                                                                                                             |  |                            | 2,031,540  |   |                   |   | 2,055,269  |  
|                                                                                                                              |  |                           
|Shareholders Equity                                                                                                          |  |                            |            |   |                   |   |            |  
|Common stock-no par value per share                                                                                           |  |                            | 165,447    |   |                   |   | 164,094    |  
|Treasury stock, at cost                                                                                                       |  |                            | (8,789     | ) |                   |   | (8,789     | )
|Retained earnings                                                                                                             |  |                            | 148,512    |   |                   |   | 144,053    |  
|Accumulated other comprehensive loss, net of tax                                                                              |  |                            | (4,681     | ) |                   |   | (4,109     | )
|                                                                                                                              |  |                            |            |   |                   |   |            |  
|Total shareholders equity                                                                                                    |  |                            | 300,489    |   |                   |   | 295,249    |  
|                                                                                                                              |  |                            |            |   |                   |   |            |  
|Total liabilities and shareholders equity                                                                                    |  | $                          | 2,332,029  |   |                   | $ | 2,350,518  |  
|                                                                                                                              |  |                            |            |   |                   |   |            |  
|Common shares issued and outstanding                                                                                          |  |                            | 21,562,341 |   |                   |   | 21,502,227 |  
|Common shares authorized                                                                                                      |  |                            | 50,000,000 |   |                   |   | 50,000,000 |  
|Treasury shares of common stock                                                                                               |  |                            | 564,082    |   |                   |   | 564,082    |  

See accompanying notes to consolidated financial statements



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##### Table of Contents

Main Street Banks, Inc.

Consolidated Statements of Income (unaudited)

(dollars and shares in thousands except per share data)



|                                                        |  |                             |        |      |   |        |  
|------------------------------------------------------- |  | --------------------------- | ------ | ---- | - | ------ | -
|                                                        |  | Three months endedMarch 31, |       
|                                                        |  | 2006                        |        | 2005 |  
|Interest income:                                        |  |                             |        |      |   |        |  
|Loans, including fees                                   |  | $                           | 35,093 |      | $ | 29,591 |  
|Investment securities:                                  |  |                             |        |      |   |        |  
|Taxable                                                 |  |                             | 2,114  |      |   | 2,761  |  
|Non-taxable                                             |  |                             | 287    |      |   | 340    |  
|Federal funds sold and other short-term investments     |  |                             | 124    |      |   | 66     |  
|Interest-bearing deposits in banks                      |  |                             | 29     |      |   | 12     |  
|Other investments                                       |  |                             | 265    |      |   | 225    |  
|                                                        |  |                             |        |      |   |        |  
|Total interest income                                   |  |                             | 37,912 |      |   | 32,995 |  
|Interest expense:                                       |  |                             |        |      |   |        |  
|Interest-bearing demand and money market                |  |                             | 4,726  |      |   | 3,501  |  
|Savings                                                 |  |                             | 73     |      |   | 62     |  
|Time deposits of $100,000 or more                       |  |                             | 4,101  |      |   | 2,473  |  
|Other time deposits                                     |  |                             | 3,900  |      |   | 2,763  |  
|Federal funds purchased                                 |  |                             | 747    |      |   | 434    |  
|Federal Home Loan Bank advances                         |  |                             | 1,327  |      |   | 1,179  |  
|Subordinated debt                                       |  |                             | 1,003  |      |   | 749    |  
|Other interest expense                                  |  |                             | 34     |      |   | 223    |  
|                                                        |  |                             |        |      |   |        |  
|Total interest expense                                  |  |                             | 15,911 |      |   | 11,384 |  
|                                                        |  |                             |        |      |   |        |  
|Net interest income                                     |  |                             | 22,001 |      |   | 21,611 |  
|Provision for loan losses                               |  |                             | 1,180  |      |   | 2,209  |  
|                                                        |  |                             |        |      |   |        |  
|Net interest income after provision for loan losses     |  |                             | 20,821 |      |   | 19,402 |  
|Non-interest income:                                    |  |                             |        |      |   |        |  
|Service charges on deposit accounts                     |  |                             | 1,969  |      |   | 1,897  |  
|Other customer service fees                             |  |                             | 462    |      |   | 340    |  
|Mortgage banking income                                 |  |                             | 357    |      |   | 692    |  
|Investment agency commissions                           |  |                             | 183    |      |   | 401    |  
|Insurance agency income                                 |  |                             | 3,290  |      |   | 3,174  |  
|Income from SBA lending                                 |  |                             | 246    |      |   | 829    |  
|Income on bank owned life insurance                     |  |                             | 1,106  |      |   | 530    |  
|Investment securities gains, net                        |  |                             | 9      |      |   | 224    |  
|Gain (loss) on sales of premises and equipment          |  |                             | 50     |      |   | (536   | )
|Other income                                            |  |                             | 101    |      |   | 536    |  
|                                                        |  |                             |        |      |   |        |  
|Total non-interest income                               |  |                             | 7,773  |      |   | 8,087  |  
|Non-interest expense:                                   |  |                             |        |      |   |        |  
|Salaries and other compensation                         |  |                             | 8,581  |      |   | 7,933  |  
|Employee benefits                                       |  |                             | 1,472  |      |   | 1,620  |  
|Net occupancy and equipment expense                     |  |                             | 2,043  |      |   | 2,052  |  
|Data processing fees                                    |  |                             | 549    |      |   | 510    |  
|Professional services                                   |  |                             | 1,351  |      |   | 469    |  
|Communications & supplies                               |  |                             | 952    |      |   | 962    |  
|Marketing expense                                       |  |                             | 259    |      |   | 291    |  
|Regulatory agency assessments                           |  |                             | 105    |      |   | 68     |  
|Amortization of intangible assets                       |  |                             | 131    |      |   | 129    |  
|Other expense                                           |  |                             | 2,217  |      |   | 1,630  |  
|                                                        |  |                             |        |      |   |        |  
|Total non-interest expense                              |  |                             | 17,660 |      |   | 15,664 |  
|                                                        |  |                             |        |      |   |        |  
|Income before income taxes                              |  |                             | 10,934 |      |   | 11,825 |  
|Income tax expense                                      |  |                             | 3,125  |      |   | 3,642  |  
|                                                        |  |                             |        |      |   |        |  
|Net income                                              |  | $                           | 7,809  |      | $ | 8,183  |  
|                                                        |  |                             |        |      |   |        |  
|Basic net income available to shareholders per share   |  | $                           | 0.36   |      | $ | 0.38   |  
|Diluted net income available to shareholders per share |  | $                           | 0.36   |      | $ | 0.38   |  
|Cash dividend per share                                 |  | $                           | 0.165  |      | $ | 0.153  |  
|Weighted average shares - basic                         |  |                             | 21,540 |      |   | 21,278 |  
|Weighted average shares - diluted                       |  |                             | 21,890 |      |   | 21,818 |  

See accompanying notes to consolidated financial statements



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##### Table of Contents

Main Street Banks, Inc.

Consolidated Statements of Comprehensive Income (Unaudited)

(dollars in thousands)



|                                                                       |  |                    |       |   |               |   |        |  
|---------------------------------------------------------------------- |  | ------------------ | ----- | - | ------------- | - | ------ | -
|                                                                       |  | Three Months Ended |      
|                                                                       |  | March 31,2006      |       |   | March 31,2005 |  
|Net income                                                             |  | $                  | 7,809 |   |               | $ | 8,183  |  
|                                                                       |  |                   
|Other comprehensive income, net of tax:                                |  |                    |       |   |               |   |        |  
|Unrealized losses on securities available for sale                     |  |                    | (964  | ) |               |   | (3,330 | )
|Unrealized gain (loss) on derivative contracts                         |  |                    | 398   |   |               |   | (723   | )
|Less reclassification adjustment for net losses included in net income |  |                    | (6    | ) |               |   | (148   | )
|                                                                       |  |                    |       |   |               |   |        |  
|Comprehensive income                                                   |  | $                  | 7,237 |   |               | $ | 3,982  |  
|                                                                       |  |                    |       |   |               |   |        |  

See accompanying notes to consolidated financial statements



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##### Table of Contents

Main Street Banks, Inc.

Consolidated Statements of Cash Flows (Unaudited)

(dollars in thousands)



|                                                                                  |  |                             |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                  |  | Three months endedMarch 31, |        
|                                                                                  |  | 2006                        |         |   | 2005 |  
|Operating activities                                                              |  |                             |         |   |      |   |         |  
|Net income                                                                        |  | $                           | 7,809   |   |      | $ | 8,183   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                             |         |   |      |   |         |  
|Provision for loan losses                                                         |  |                             | 1,180   |   |      |   | 2,209   |  
|Depreciation and amortization of premises and equipment                           |  |                             | 924     |   |      |   | 937     |  
|Amortization of intangible assets                                                 |  |                             | 131     |   |      |   | 129     |  
|Loss on sales of other real estate                                                |  |                             | 220     |   |      |   | 72      |  
|Investment securities gains, net                                                  |  |                             | (9      | ) |      |   | (224    | )
|Net amortization of investment securities                                         |  |                             | 76      |   |      |   | 286     |  
|Net accretion of loans purchased                                                  |  |                             | (7      | ) |      |   | 4       |  
|(Gain) loss on sales of premises and equipment                                    |  |                             | (50     | ) |      |   | 536     |  
|Net decrease in mortgage loans held for sale                                      |  |                             | 3,888   |   |      |   | 35,489  |  
|Gains on sales of SBA loans                                                       |  |                             | (30     | ) |      |   | (594    | )
|Deferred income tax benefit                                                       |  |                             | (285    | ) |      |   | (2,342  | )
|Deferred net loan fees (cost amortization)                                        |  |                             | (971    | ) |      |   | (8      | )
|Vesting in restricted stock award plan                                            |  |                             | 514     |   |      |   | 330     |  
|Changes in operating assets and liabilities:                                      |  |                             |         |   |      |   |         |  
|(Increase) decrease in accrued interest receivable                                |  |                             | (26     | ) |      |   | 186     |  
|Increase in cash surrender value of bank-owned life insurance                     |  |                             | (1,106  | ) |      |   | (529    | )
|Increase in accrued interest payable                                              |  |                             | 579     |   |      |   | 411     |  
|Other                                                                             |  |                             | 2640    |   |      |   | (3,242  | )
|                                                                                  |  |                             |         |   |      |   |         |  
|Net cash provided by operating activities                                         |  |                             | 15,477  |   |      |   | 41,833  |  
|Investing activities                                                              |  |                             |         |   |      |   |         |  
|Purchases of investment securities available for sale                             |  |                             |        |   |      |   | (14,958 | )
|Net change in other investments                                                   |  |                             | 2,451   |   |      |   | (945    | )
|Maturities, paydowns and calls of investment securities available for sale        |  |                             | 5,718   |   |      |   | 11,444  |  
|Proceeds from sales of investment securities available for sale                   |  |                             |        |   |      |   | 25,491  |  
|Net increase in loans funded                                                      |  |                             | (1,148  | ) |      |   | (81,681 | )
|Purchase of bank-owned life insurance                                             |  |                             |        |   |      |   | (15,000 | )
|Net change in premises and equipment                                              |  |                             | (281    | ) |      |   | (1,253  | )
|Proceeds from sales of premises and equipment                                     |  |                             | 210     |   |      |   | 16      |  
|Proceeds from sales of other real estate                                          |  |                             | 383     |   |      |   | 783     |  
|Improvements to other real estate                                                 |  |                             |        |   |      |   | (127    | )
|Net cash paid for acquisitions                                                    |  |                             | (163    | ) |      |   | (200    | )
|Proceeds from life insurance policy                                               |  |                             | 491     |   |      |   |        |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Net cash provided by (used in) investing activities                               |  |                             | 7,661   |   |      |   | (76,430 | )
|Financing activities                                                              |  |                             |         |   |      |   |         |  
|Net increase in demand and savings accounts                                       |  |                             | 4,540   |   |      |   | 28,561  |  
|(Decrease) increase in time deposits                                              |  |                             | (6,492  | ) |      |   | 7,667   |  
|Increase (decrease) in Federal Funds purchased                                    |  |                             | 869     |   |      |   | (16,803 | )
|Decrease in Federal Home Loan Bank advances                                       |  |                             | (25,134 | ) |      |   | (15,134 | )
|Dividends paid                                                                    |  |                             | (3,554  | ) |      |   | (3,241  | )
|Proceeds from issuance of common stock                                            |  |                             | 839     |   |      |   | 729     |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Net cash (used in) provided by financing activities                               |  |                             | (28,932 | ) |      |   | 1,779   |  
|Net decrease in cash and cash equivalents                                         |  |                             | (5,794  | ) |      |   | (32,818 | )
|Cash and cash equivalents at beginning of period                                  |  |                             | 58,450  |   |      |   | 71,221  |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                        |  |                             | 52,656  |   |      | $ | 38,403  |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Supplemental disclosures of cash flow information                                 |  |                             |         |   |      |   |         |  
|Cash paid during the period for:                                                  |  |                             |         |   |      |   |         |  
|Interest                                                                          |  |                             | 15,332  |   |      | $ | 7,018   |  
|Income taxes                                                                      |  |                             | 3,005   |   |      |   | 3,800   |  
|Supplemental disclosures of noncash transactions                                  |  |                             |         |   |      |   |         |  
|Loans transferred to other real estate acquired through foreclosure               |  |                             | 2,407   |   |      | $ | 738     |  

See accompanying notes to consolidated financial statements



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##### Table of Contents

Main Street Banks, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

Note A 
Significant Accounting Policies

Basis of Presentation: The unaudited consolidated financial statements include the accounts of
the parent company Main Street Banks, Inc. (Company) and its direct and indirect wholly owned subsidiaries, Main Street Bank (Bank), Main Street Insurance Services, Inc. (MSII), Piedmont Settlement Services, Inc.
(Piedmont) (inactive as of June 30, 2005, dissolved as of December 31, 2005), and MSB Payroll Solutions, LLC. All significant intercompany transactions and balances have been eliminated in consolidation.

On December 15, 2005, Main Street Banks, Inc. announced it had signed a definitive agreement to be acquired by BB&T Corporation (BB&T). The
transaction is subject to customary regulatory approvals as well as the approval of the holders of a majority of Main Street Banks, Incs outstanding common stock. The Company expects that the transaction will close during the second quarter of
2006.

The accompanying unaudited consolidated financial statements for the Company have been prepared in accordance with U.S. generally
accepted accounting principles, followed within the financial services industry for interim financial information and with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission Regulation S-X. Accordingly, they do not
include all of the information and notes required for complete financial statement presentation. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) considered necessary for a fair presentation of the
financial position and results of operations for interim periods have been included.

The results of operations for the three month period
ended March 31, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006, or for any other period. These financial statements should be read in conjunction with the consolidated
financial statements and notes thereto for the year ended December 31, 2005, included in the Companys Annual Report on Form 10-K.

Certain previously reported amounts have been reclassified to conform to current financial statement presentation. These reclassifications had no effect on net income or stockholders equity.



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##### Table of Contents

Note B  Other Accounting Matters

In December 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 123 (revised 2004), Share-Based Payment, which
addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. This
Statement is a revision to Statement 123 and APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. This Statement requires measurement of the cost of employee services received in exchange
for stock compensation based on the grant date fair value of the employee stock options. Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized. The Company adopted this Standard on
January 1, 2006 under the modified prospective method of application. Under that method, the Company recognized compensation costs for new grants of share-based awards made after the effective date, awards modified after the effective date, and
the remaining portion of the fair value of the unvested awards at the adoption date. Including the impact of employee stock options granted through March 31, 2006, the Company has determined the adoption of SFAS No. 123R resulted in a
reduction of income before income taxes and net income in the three month period ended March 31, 2006 of approximately $0.3 million or $0.014 per basic and diluted share and our forecast for 2006 is a reduction of net income of approximately
$1.2 million or $ 0.06 per basic and diluted share. The adoption of this statement had no material effect on cash flow from operating or financing activities in the period ended March 31, 2006.

In March 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 156 (SFAS No. 156),
Accounting for Servicing of Financial Assets. This statement amends SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, with respect to the accounting for separately recognized servicing
assets and servicing liabilities. SFAS 156 requires companies to recognize a servicing asset or servicing liability each time they undertake an obligation to service a financial asset by entering into a servicing contract. The statement permits a
company to choose either the amortized cost method or fair value measurement method for each class of separately recognized servicing assets. This statement is effective as of the beginning of a companys first fiscal year after
September 15, 2006. The Company is still in the process of analyzing the impact of SFAS No. 156.

Note C - Earnings per Common
Share

The Company accounts for earnings per share in accordance with FASB Statement No. 128, Earnings Per Share. Basic
earnings per share (EPS) is computed by dividing net income available to common shareholders by the weighted average common shares outstanding for the period. Diluted EPS is calculated by adding to the shares outstanding the additional
net effect of employee stock options that could be exercised into common shares. The computation of diluted earnings per share is as follows:



|                                 |  |                                             |        |               |   |       
|-------------------------------- |  | ------------------------------------------- | ------ | ------------- | - | ------
|                                 |  | Three months ended                         
|                                 |  | March 31,2006                               |        | March 31,2005
|                                 |  | (Amounts in thousandsexcept per share data)
|Basic and diluted net income     |  | $                                           | 7,809  |               | $ | 8,183 
|Basic earnings per share         |  | $                                           | 0.36   |               | $ | 0.38  
|Diluted earnings per share       |  | $                                           | 0.36   |               | $ | 0.38  
|                                 |  |                                            
|Basic weighted average shares    |  |                                             | 21,540 |               |   | 21,278
|Effect of employee stock options |  |                                             | 350    |               |   | 540   
|                                 |  |                                             |        |               |   |       
|Diluted weighted average shares  |  |                                             | 21,890 |               |   | 21,818

Note D  Commitments and Contingencies

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheets. The
contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments. The Company uses the same credit policies in making commitments and conditional obligations as are used for
on-balance-sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any
condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.



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##### Table of Contents

The Company issues standby letters of credit, which are conditional commitments issued to guarantee the
performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements and expire in decreasing amounts with terms ranging from one to four years. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company holds various assets as collateral supporting those commitments for which collateral is deemed necessary.

The Company evaluates each customers creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the
Company upon extension of credit, is based on managements credit evaluation of the borrower. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, residential real estate, and income-producing
commercial properties on those commitments for which collateral is deemed necessary.

The following represents the Companys
commitments to extend credit and standby letters of credit:



|                             |  |                        |         |                   |   |        
|---------------------------- |  | ---------------------- | ------- | ----------------- | - | -------
|                             |  | March 31, 2006         |         | December 31, 2005
|                             |  | (Dollars in Thousands)
|Commitments to extend credit |  | $                      | 343,236 |                   | $ | 348,455
|Standby letters of credit    |  |                        | 6,333   |                   |   | 6,167  

Note E - Loans

Loans are stated at the principal amounts outstanding adjusted for purchase premiums / discounts, deferred net loan fees and costs, and unearned income.
Interest income on loans is generally recognized over the terms of the loans based on the unpaid daily principal amount outstanding. If the collectibility of interest appears doubtful, the accrual thereof is discontinued. When accrual of interest is
discontinued, all current period unpaid interest is reversed. Interest income on such loans is subsequently recognized only to the extent cash payments are received, the full recovery of principal is anticipated, or after full principal has been
recovered when collection of principal is in question.

A substantial portion of the Companys loans are secured by real estate in
northeast Georgia communities, primarily in Barrow, Clarke, Cobb, DeKalb, Forsyth, Fulton, Gwinnett, Newton, Rockdale, and Walton counties. In addition, a substantial portion of real estate acquired through foreclosure consists of commercial and
residential properties and land located in these same markets. The ultimate collectibility of a substantial portion of the Companys loan portfolio and the recovery of a substantial portion of the carrying amount of real estate are susceptible
to changes in economic and market conditions in northeast Georgia.

The Company occasionally sells the guaranteed portion of Small Business
Administration (SBA) loans to third parties and retains the servicing rights for these loans. The Company has limited recourse related to these sales if a loan sold by the Bank defaults within 90 days of sale. The servicing asset for the
sold portion of the SBA loans is included in Loans, net of unearned income. The Company repurchased 2 loans totaling $253 thousand during the quarter ended March 31, 2006.

The Company evaluates loans for impairment when a loan is risk rated as substandard or doubtful. The Company measures impairment based upon the present
value of the loans expected future cash flows discounted at the loans effective interest rate, except where foreclosure or liquidation is probable or when the primary source of repayment is provided by real estate collateral. In these
circumstances, impairment is measured based upon the estimated fair value of the collateral. In addition, in certain circumstances, impairment may be based on the loans observable estimated fair value. Impairment with regard to substantially
all of the Companys impaired loans has been measured based on the estimated fair value of the underlying collateral. The Companys policy for recognizing interest income on impaired loans is consistent with its nonaccrual policy. At the
time the contractual payments on a loan are deemed to be uncollectible, the Companys policy is to record a charge-off against the Allowance for Loan Losses.

Nonperforming assets include loans classified as nonaccrual or renegotiated, foreclosed real estate, and other property. It is the policy of the Company to stop accruing interest income and place the recognition of
interest on a cash basis when any commercial, industrial or commercial real estate loan is 90 days or more past due as to principal or interest and/or the ultimate collection of either is in doubt. On an exception basis the Company will continue to
accrue interest on loans 90 days or more past due when collection of both principal and interest is assured by way of sufficient collateral, guarantees or other security. Accrual of interest income on consumer loans, including residential real
estate loans, is suspended when any payment of principal or interest, or both, is more than 120 days delinquent. When a loan is placed on nonaccrual status, any interest previously accrued but not collected is reversed against current income
unless the collateral for the loan is sufficient to cover the accrued interest or a guarantor assures payment of interest.



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##### Table of Contents

The following table represents the composition of the Companys loan portfolio:



|                                              |  |                        |           |   |                   |   |           |  
|--------------------------------------------- |  | ---------------------- | --------- | - | ----------------- | - | --------- | -
|                                              |  | March 31, 2006         |           |   | December 31, 2005 |  
|                                              |  | (Dollars in thousands) |          
|Loans                                         |  |                        |           |   |                   |   |           |  
|Commercial and industrial                     |  | $                      | 127,982   |   |                   | $ | 124,124   |  
|Real estate construction                      |  |                        | 464,432   |   |                   |   | 454,805   |  
|Residential mortgage                          |  |                        | 277,156   |   |                   |   | 291,156   |  
|Commercial real estate                        |  |                        | 892,565   |   |                   |   | 896,473   |  
|Consumer and other                            |  |                        | 42,336    |   |                   |   | 39,312    |  
|                                              |  |                        |           |   |                   |   |           |  
|Total loans receivable                        |  |                        | 1,804,471 |   |                   |   | 1,805,870 |  
|Less:                                         |  |                        |           |   |                   |   |           |  
|Purchase discount                             |  |                        | (44       | ) |                   |   | (50       | )
|Deferred net loan fees                        |  |                        | (4,763    | ) |                   |   | (5,083    | )
|Unearned income                               |  |                        | 1,650     |   |                   |   | 1,775     |  
|                                              |  |                        |           |   |                   |   |           |  
|Loans net of unearned income                  |  |                        | 1,801,314 |   |                   |   | 1,802,512 |  
|Allowance for loan losses                     |  |                        | (25,256   | ) |                   |   | (25,239   | )
|                                              |  |                        |           |   |                   |   |           |  
|Loans, net                                    |  | $                      | 1,776,058 |   |                   | $ | 1,777,273 |  
|                                              |  |                        |           |   |                   |   |           |  
|Mortgage loans held for sale                  |  | $                      | 4,184     |   |                   | $ | 8,072     |  
|Composition of loan portfolio as a percentage |  |                        |           |   |                   |   |           |  
|Commercial and industrial                     |  |                        | 7.09      | % |                   |   | 6.87      | %
|Real estate construction                      |  |                        | 25.74     | % |                   |   | 25.19     | %
|Residential mortgage                          |  |                        | 15.36     | % |                   |   | 16.12     | %
|Commercial Real estate                        |  |                        | 49.46     | % |                   |   | 49.64     | %
|Consumer and other                            |  |                        | 2.35      | % |                   |   | 2.18      | %
|                                              |  |                        |           |   |                   |   |           |  
|Total loans receivable                        |  |                        | 100.00    | % |                   |   | 100.00    | %
|                                              |  |                        |           |   |                   |   |           |  

At March 31, 2006 the Company had a market value adjustment on loans that were acquired in a
2003 acquisition of $0.3 million which is reflected in the loan amounts above. The balance is being amortized monthly.

Note F - Stock
Options and Long-term Compensation Plans

In 2000 and 2001, respectively, the Board of Directors and Shareholders approved the Omnibus
Stock Ownership and Long-Term Incentive Plan (Omnibus Plan) under which incentive stock and non-qualified stock options to acquire shares of common stock, restricted stock, stock appreciation rights or units may be granted to eligible
employees. A total of 800,000 shares were initially authorized to be issued under the plan and the Board of Directors and Shareholders approved an additional 800,000 shares to be used under the plan in 2003. Under the plan, 213,880 shares of
restricted stock were issued as of March 31, 2006. A total of 105,165 shares were vested with 108,715 shares issued and unvested as of March 31, 2006. The estimated intrinsic value of the vested restricted stock as of March 31, 2006
was $2.7 million.

During the three month period ended March 31, 2006, the Company issued no shares of restricted stock and granted
128,829 options under the Omnibus Plan. Including all types of awards, which include the above-mentioned option awards, the total number of share awards issued under the Omnibus Plan were 1,404,718 shares at March 31, 2006. Option prices under
all stock option plans are equal to the fair value of the Companys common stock on the date of the grant. The options vest over time periods determined by the Compensation Committee of the Board of Directors and expire ten years from date of
grant. At March 31, 2006 the weighted average fair value of vested options was $6.16, and the aggregate intrinsic value of vested options was $6.6 million.



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A summary of the Companys stock option activity and related information is as follows:



|                                  |  |                                                 |   |  |                                 |      
|--------------------------------- |  | ----------------------------------------------- | - |  | ------------------------------- | -----
|                                  |  | For the Three Month Period
Ended March 31, 2006
|                                  |  | Number                                          |   |  | Weighted-Average Exercise Price
|Under option, beginning of period |  | 925,101                                         |   |  | $                               | 18.04
|Granted                           |  | 128,829                                         |   |  | $                               | 25.90
|Exercised                         |  | (60,114                                         | ) |  | $                               | 13.95
|Terminated                        |  | (29,658                                         | ) |  | $                               | 25.73
|                                  |  |                                                 |   |  |                                 |      
|Under option, end of period       |  | 964,158                                         |   |  | $                               | 19.11
|                                  |  |                                                 |   |  |                                 |      
|Exercisable, end of period        |  | 556,972                                         |   |  | $                               | 14.08
|                                  |  |                                                 |   |  |                                 |      

Following is a summary of the status of options outstanding at March 31, 2006:



|                         |  |                      |  |                     |  |                                |       |                                          |   |                                                       |   |      
|------------------------ |  | -------------------- |  | ------------------- |  | ------------------------------ | ----- | ---------------------------------------- | - | ----------------------------------------------------- | - | -----
|                         |  | Under Option         |  | Options Exercisable
|Range of Exercise Prices |  | Vested (Exercisable) |  | Unvested            |  | Weighted-Average ExercisePrice |       | WeightedAverageRemainingContractual Life |   | Weighted-Average ExercisePrice of Vested(Exercisable)
|$3.34 - $6.70            |  | 2,038                |  | 0                   |  | $                              | 4.55  |                                          | 2 |                                                       | $ | 4.55 
|$6.90- $10.04            |  | 166,558              |  | 0                   |  | $                              | 8.12  |                                          | 3 |                                                       | $ | 8.12 
|$10.04-$13.39            |  | 222,066              |  | 0                   |  | $                              | 11.71 |                                          | 4 |                                                       | $ | 11.71
|$13.39-$16.74            |  | 1,500                |  | 950                 |  | $                              | 16.35 |                                          | 6 |                                                       | $ | 16.35
|$16.74-$20.09            |  | 68,430               |  | 50,178              |  | $                              | 18.96 |                                          | 6 |                                                       | $ | 18.70
|$20.09-$23.44            |  | 10,300               |  | 12,200              |  | $                              | 20.90 |                                          | 7 |                                                       | $ | 20.83
|$23.44-$26.78            |  | 46,994               |  | 224,108             |  | $                              | 25.69 |                                          | 9 |                                                       | $ | 25.54
|$26.78-$30.13            |  | 32,683               |  | 94,138              |  | $                              | 28.91 |                                          | 9 |                                                       | $ | 28.98
|$30.13-$33.48            |  | 6,403                |  | 25,612              |  | $                              | 33.48 |                                          | 9 |                                                       | $ | 33.48
|                         |  |                      |  |                     |  |                                |       |                                          |   |                                                       |   |      
|                         |  | 556,972              |  | 407,186             |  | $                              | 19.11 |                                          | 6 |                                                       | $ | 14.08
|                         |  |                      |  |                     |  |                                |       |                                          |   |                                                       |   |      

Prior to January 1, 2006 the Company had elected to follow Accounting Principles Board
Opinion No. 25 Accounting for Stock issued to Employees (APB 25) and related interpretations in accounting for its employee stock options. Under APB 25, because the exercise price of the Companys employee stock options equals
the market price of the underlying stock on the date of grant, no compensation expense was recognized. As discussed in Note B, as of January 1, 2006, the Company adopted SFAS 123R which required the Company to record a charge to expense over
the vesting period of the options based on the estimated value of the option at grant date. During the first quarter of 2006 the Company recorded approximately $0.3 million (or $0.014 per share) as option expense.



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##### Table of Contents

The fair value of these options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions for the three months ended March 31, 2006: risk free interest of 4.73%; dividend yield of 2.52%, volatility factor of the expected market price of the Companys common stock of 23.54%
and a weighted-average expected life of the options of 8 years. The weighted average fair value of options granted during the three month period ended March 31, 2006 was $6.96.

Unrecognized stock option compensation expense for the remainder of 2006 and beyond is estimated as follows:



|                          |  |                |      
|------------------------- |  | -------------- | -----
|Year                      |  | (in thousands)
|April 2006- December 2006 |  | $              | 929  
|2007                      |  |                | 600  
|2008                      |  |                | 209  
|2009                      |  |                | 48   
|2010                      |  |                | 10   
|                          |  |                |      
|Total                     |  | $              | 1,796
|                          |  |                |      

Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation, as amended by SFAS No.148, required pro forma disclosures of net income and earnings per share for companies not adopting its fair value accounting method for stock-based employee compensation. The pro-forma disclosure below for
the first quarter of 2005 uses the fair value method of SFAS 123 to measure compensation expense for stock-based employee compensation plans.

For purposes of pro forma disclosures, the estimated fair value of the options granted is amortized to expense over the options vesting period. The Companys pro forma information follows (in thousands except per share data):



|                                       |  |                                  |       |  
|-------------------------------------- |  | -------------------------------- | ----- | -
|                                       |  | Three months endedMarch 31, 2005 |      
|Net income                             |  | $                                | 8,183 |  
|Earnings per share - Basic             |  |                                  | 0.38  |  
|Earnings per share - Diluted           |  |                                  | 0.38  |  
|Compensation cost - Fair Value         |  |                                  | 271   |  
|Less: Tax Effect                       |  |                                  | (92   | )
|                                       |  |                                  |       |  
|Net compensation costs - Fair Value    |  |                                  | 179   |  
|Net Income, Pro-forma                  |  |                                  | 8,004 |  
|Pro-forma earnings per share - Basic   |  |                                  | 0.38  |  
|Pro-forma earnings per share - Diluted |  |                                  | 0.37  |  

Note G  Goodwill and Other Intangible Assets

Goodwill is not amortized, but rather is assessed at least annually for impairment and any such impairment will be recognized in the period identified.
Intangible assets related to capital lease rights are being amortized over the term of the related lease using the straight-line method. Core deposit intangible assets are amortized over a period of 5 to 20 years. All other intangible assets are
being amortized over 5 to 15 year periods using the straight-line method.

The Company recognized amortization expense on intangible assets
for the three month periods ending March 31, 2006 and 2005 of $131 thousand and $129 thousand, respectively.

Goodwill and other
intangible assets at March 31, 2006 and December 31, 2005 are as follows:



|                                     |  |                        |         |   |                  |   |         |   
|------------------------------------ |  | ---------------------- | ------- | - | ---------------- | - | ------- | --
|                                     |  | March 312006           |         |   | December 31,2005 |  
|                                     |  | (Dollars in thousands) |        
|Non-amortizing goodwill              |  | $                      | 98,783  |   |                  | $ | 98,620  |   
|                                     |  |                       
|Core deposit intangibles             |  |                        | 1,877   |   |                  |   | 1,877   |   
|Customer intangibles                 |  |                        | 2,937   |   |                  |   | 2,937   |   
|Covenants not to compete             |  |                        | 372     |   |                  |   | 372     |   
|Lease rights                         |  |                        | 248     |   |                  |   | 248     |   
|                                     |  |                        |         |   |                  |   |         |   
|Total goodwill and intangible assets |  |                        | 104,217 |   |                  |   | 104,054 |   
|Accumulated amortization             |  |                        | (2,205  | ) |                  |   | (2,074  | ))
|                                     |  |                        |         |   |                  |   |         |   
|Net goodwill and intangible assets   |  | $                      | 102,012 |   |                  | $ | 101,980 |   
|                                     |  |                        |         |   |                  |   |         |   

The increase in non-amortizing goodwill during the three months ended March 31, 2006
is the result of an earn out payment related to a prior year acquisition.



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##### Table of Contents

Selected Financial Data

The following table sets forth selected unaudited financial data as of and for the three month period ending March 31, 2006 and 2005. This data should be read in conjunction with the consolidated financial
statements and the notes thereto and the information contained in our Managements Discussion and Analysis of Financial Condition and Results of Operations. The selected historical financial data as of and for the three month
periods ended March 31, 2006 and 2005 are derived from our unaudited financial statements and related notes. In the opinion of our management, this information reflects all adjustments, consisting of only normal recurring adjustments, necessary
for a fair presentation of this data as of those dates and for those periods. Results for the three month period ended March 31, 2006 are not necessarily indicative of results on an annualized basis or for any future period.



|                                                |  |                             |           |   |      |   |           |  
|----------------------------------------------- |  | --------------------------- | --------- | - | ---- | - | --------- | -
|                                                |  | Three months endedMarch 31, |          
|                                                |  | 2006                        |           |   | 2005 |  
|RESULTS OF OPERATIONS                           |  |                             |           |   |      |   |           |  
|Net interest income                             |  | $                           | 22,001    |   |      | $ | 21,611    |  
|Net interest income (tax equivalent)            |  |                             | 22,148    |   |      |   | 21,786    |  
|Provision for loan losses                       |  |                             | 1,180     |   |      |   | 2,209     |  
|Non-interest income                             |  |                             | 7,773     |   |      |   | 8,087     |  
|Non-interest expense                            |  |                             | 17,660    |   |      |   | 15,664    |  
|Net income                                      |  |                             | 7,809     |   |      |   | 8,183     |  
|SELECTED AVERAGE BALANCES                       |  |                             |           |   |      |   |           |  
|Loans, net of unearned income                   |  | $                           | 1,799,331 |   |      | $ | 1,731,089 |  
|Investment securities                           |  |                             | 233,202   |   |      |   | 316,742   |  
|Earning assets                                  |  |                             | 2,071,340 |   |      |   | 2,092,064 |  
|Total assets                                    |  |                             | 2,333,516 |   |      |   | 2,335,055 |  
|Deposits                                        |  |                             | 1,720,534 |   |      |   | 1,709,580 |  
|Shareholders equity                            |  |                             | 298,136   |   |      |   | 280,723   |  
|PERIOD-END BALANCES                             |  |                             |           |   |      |   |           |  
|Loans, net of unearned income                   |  | $                           | 1,801,314 |   |      | $ | 1,743,589 |  
|Earning assets                                  |  |                             | 2,061,375 |   |      |   | 2,075,286 |  
|Total assets                                    |  |                             | 2,332,029 |   |      |   | 2,328,239 |  
|Deposits                                        |  |                             | 1,729,530 |   |      |   | 1,746,438 |  
|Long-term obligations *                         |  |                             | 214,448   |   |      |   | 237,483   |  
|Shareholders equity                            |  |                             | 300,489   |   |      |   | 280,490   |  
|PER COMMON SHARE                                |  |                             |           |   |      |   |           |  
|Earnings per shareBasic                        |  | $                           | 0.36      |   |      | $ | 0.38      |  
|Earning per shareDiluted                       |  | $                           | 0.36      |   |      | $ | 0.38      |  
|Book value per share at end of period           |  | $                           | 13.94     |   |      | $ | 13.16     |  
|End of period shares outstanding                |  |                             | 21,562    |   |      |   | 21,316    |  
|Weighted average shares outstanding             |  |                             |           |   |      |   |           |  
|Basic                                           |  |                             | 21,540    |   |      |   | 21,278    |  
|Diluted                                         |  |                             | 21,890    |   |      |   | 21,818    |  
|STOCK PERFORMANCE                               |  |                             |           |   |      |   |           |  
|Market Price:                                   |  |                             |           |   |      |   |           |  
|Closing                                         |  | $                           | 25.88     |   |      | $ | 26.45     |  
|High                                            |  |                             | 27.74     |   |      |   | 35.34     |  
|Low                                             |  |                             | 25.14     |   |      |   | 26.35     |  
|Trading volume                                  |  |                             | 6,816     |   |      |   | 4,241     |  
|Cash dividends per share                        |  | $                           | 0.165     |   |      | $ | 0.153     |  
|Dividend payout ratio                           |  |                             | 46.25     | % |      |   | 40.66     | %
|Price to trailing twelve months earnings        |  |                             | 19.31     |   |      |   | 17.58     |  
|Price to book value                             |  |                             | 1.86      |   |      |   | 2.01      |  
|PERFORMANCE RATIOS                              |  |                             |           |   |      |   |           |  
|Return on average assets                        |  |                             | 1.34      | % |      |   | 1.40      | %
|Return on average equity                        |  |                             | 10.48     | % |      |   | 11.66     | %
|Average loans as percentage of average deposits |  |                             | 104.58    | % |      |   | 101.26    | %
|Net interest margin (tax equivalent)            |  |                             | 4.34      | % |      |   | 4.18      | %
|Average equity to average assets                |  |                             | 12.78     | % |      |   | 12.02     | %
|Efficiency ratio                                |  |                             | 59.31     | % |      |   | 52.49     | %

---

|* | Long-term obligations include Federal Home Loan Bank advances and junior subordinated debentures.
|- | -------------------------------------------------------------------------------------------------



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##### Table of Contents

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The following is managements discussion and analysis of certain significant factors which have affected the Companys
financial position at March 31, 2006 as compared to December 31, 2005 and operating results for the three month period ended March 31, 2006 as compared to the three month period ended March 31, 2005. These comments should be read
in conjunction with the Companys unaudited consolidated financial statements and accompanying notes appearing elsewhere herein.

Significant
Recent Matter

On December 15, 2005, Main Street Banks, Inc. announced it had signed a definitive agreement to be acquired by
BB&T Corporation (BB&T). The transaction is subject to customary regulatory approvals as well as the approval of the holders of a majority of Main Street Banks, Inc.s outstanding common stock. The Company expects that the transaction
will close during the second quarter of 2006.

Overview

The Companys total assets decreased $18.5 million or 0.8% since December 31, 2005. Loans decreased 0.1% or $1.2 million since December 31,
2005, primarily in commercial and residential real estate loans. Total deposits decreased by 0.1% or $2.0 million. The primary reason for these decreases was reduced production capacity due to recent staff turnover.

Net income was $7.8 million for the three months ended March 31, 2006 compared to $8.2 million in the first quarter of 2005. Diluted earnings per
share for the first quarter of 2006 were $0.36 versus $0.38 for the first quarter of 2005.

Return on average equity for the three months
ended March 31, 2006 was 10.48% on average equity of $298.1 million. This compares to 11.66% on average equity of $280.7 million for the same period in 2005. Return on average assets for the three months ended March 31, 2006 was 1.34%.
This compares to 1.40% for the same period in 2005.

Results of Operations for the Three Months Ended March 31, 2006 and 2005

Interest Income

Interest
income for the three months ended March 31, 2006 was $37.9 million, an increase of $4.9 million, or 14.9% compared to $33.0 million for the same period in 2005. Average earning assets for the three month period decreased $20.7 million, or 1.0%
to $2.1 billion as of March 31, 2006 as compared to the three month period ended March 31, 2005. Yield on earning assets increased 108 basis points to 7.45% from 6.37% between the quarters ended March 31, 2006 and 2005, as a result of
rising interest rates and pricing discipline.

Interest Expense

Interest expense on deposits and other borrowings for the three months ended March 31, 2006 was $15.9 million, representing a $4.5 million, or 39.8%
increase from the three months ended March 31, 2005. Average interest bearing liabilities decreased $24.2 million, or 1.4% to $1.8 billion for the three months ended March 31, 2006 and, the rate on average interest bearing liabilities
increased 110 basis points to 3.64% for the first quarter of 2006 from 2.54% for the first quarter of 2005. The increase is due to rising interest rates on all funding sources and competition in the Atlanta market for deposits.

Net Interest Income

Net
interest income for the three months ended March 31, 2006 increased $0.4 million, or 1.8% to $22.0 million compared to $21.6 million for the same period ending March 31, 2005. The increase was mainly attributable to improved asset pricing,
and wider spreads on core deposit funding. The Companys net interest margin increased to 4.34% for the three months ended March 31, 2006 compared to 4.18% for the three months ended March 31, 2005.

Provision for Loan Losses

The
provision for loan losses was $1.2 million for the three months ended March 31, 2006 as compared to $2.2 million for the three months ended March 31, 2005. The lower provision was primarily due to lower net charge offs and a reduction in
the allowance for loan losses to 1.4% of loans as called for by the methodology used internally to estimate the appropriate level for the allowance. The Companys Executive Review Committee monitors asset quality indicators to determine the
adequacy of the loan loss reserve. These factors include changes in the size and character of the loan portfolio, changes in



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##### Table of Contents

nonperforming and past due loans, historical loan loss experience, the existing risk of individual loans and related
specific reserves, concentrations of loans to specific borrowers or industries and current economic conditions. Management believes that the allowance for loan losses was adequate at March 31, 2006.

Non-interest Income

Non-interest income was $7.8 million for the three months ended March 31, 2006, a decrease of $0.3 million, or 3.9% compared to $8.1 million for the three months ended March 31, 2005. The decrease was primarily due to lower
mortgage banking and SBA lending income, partially offset by higher income on bank owned life insurance.

Non-interest Expense

Non-interest expense increased $2.0 million or 12.7% to $17.7 million from $15.7 million for the three months ended March 31,
2006 and 2005, respectively. In the three months ended March 31, 2006, salaries and other compensation were $8.6 million, an increase of $0.6 million, or 8.2%, fees for professional services were $1.4 million, an increase of $0.9 million or
188% and other expense was $2.2 million, an increase of $0.6 million or 36% from the three months ended March 31, 2005. Half of the increase in salaries and other compensation, $0.3 million, was caused by expense recorded for employee stock
options. As discussed more fully in Note B to the Consolidated Financial Statements, the Company adopted FASB Statement 123R, Share-Based Payment as of January 1, 2006 and is now required to recognize compensation costs for
stock options. It is anticipated that this expense will reduce net income by approximately $1.2 million or $0.06 per share in 2006. The other half of the increase was related to higher salary expense. The Companys full-time equivalent
employees (FTEs) decreased by 12 to 504 as of March 31, 2006 from 517 as of March 31, 2005. FTEs as of March 31, 2006 decreased by 45 from 549 as of December 31, 2005 with most of the decrease occurring later in the quarter.

Fees for professional services increased primarily because of higher merger related legal and other fees. The increase in other expense
was primarily due to an increase in other real estate owned expense, $0.1 million related to increased foreclosure activity and an increase of $0.2 million in demand deposit overdraft charge-offs. These were primarily related to four large
charge-offs which exceeded the Companys 45 day charge-off policy. Collection efforts continue on these charge-offs.

The
Companys efficiency ratio was 59.3% for the three months ended March 31, 2006 compared to 52.5% for the three months ended March 31, 2005.

Income Taxes

The amount of income tax expense is influenced by the amount of taxable income,
the amount of tax-exempt income, and the amount of nondeductible expenses. For the three months ended March 31, 2006 and 2005, the provision for taxes was $3.1 million and $3.6 million, respectively. The effective tax rate for the three months
ended March 31, 2006 was 28.6% compared to 30.8% for the same period in 2005. This effective rate decrease is due primarily to an increase in non-taxable bank owned life insurance income which was $1.1 million in the first quarter of 2006
compared to $0.5 million in the first quarter of 2005, as well as changes in the level of tax-advantaged loans and investments and is impacted by federal and state tax planning strategies.



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##### Table of Contents

Capital

Capital management consists of providing equity to support both current and anticipated future operations. The Company is subject to capital adequacy requirements imposed by the Federal Reserve Board and the Georgia
Department of Banking and Finance (Georgia Department) and the Bank is subject to capital adequacy requirements imposed by the FDIC and the Georgia Department.

The Federal Reserve Board, the FDIC, and the Georgia Department have adopted risk-based capital requirements for assessing bank holding company and bank
capital adequacy. These standards define and establish minimum capital requirements in relation to assets and off-balance sheet exposure, adjusted for credit risk. The risk-based capital standards currently in effect are designed to make regulatory
capital requirements more sensitive to differences in risk profiles among bank holding companies and banks, and to account for off-balance sheet exposure.

The guideline for a minimum ratio of total capital to total risk-weighted assets (including certain off- balance-sheet activities, such as standby letters of credit) is 8%. At least half of the total capital must
consist of Tier 1 Capital, which includes common equity, retained earnings and a limited amount of qualifying preferred stock and qualifying trust preferred securities, less goodwill. The remainder may consist of non-qualifying preferred stock,
qualifying subordinated, perpetual, and/or mandatory convertible debt, term subordinated debt and intermediate term preferred stock and up to 45% of the pretax unrealized holding gains on available-for-sale equity securities with readily
determinable market values that are prudently valued, and a limited amount of any loan loss allowance (Tier 2 Capital and, together with Tier 1 Capital, Total Capital).

In addition, the federal agencies have established minimum leverage ratio guidelines for bank holding companies and state banks, which provide for a
minimum leverage ratio of Tier 1 Capital to adjusted average quarterly assets (leverage ratio) equal to 3%, plus an additional cushion of 1.0% to 2.0% if the institution has less than the highest regulatory rating. The guidelines also
provide that institutions experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets. Higher capital
may be required in individual cases, depending upon a bank holding companys risk profile. All bank holding companies and banks are expected to hold capital commensurate with the level and nature of their risks, including the volume and
severity of their problem loans. Lastly, the Federal Reserves guidelines indicate that the Federal Reserve will continue to consider a Tangible Tier 1 Leverage Ratio (deducting all intangibles) in evaluating proposals for expansion
or new activity.

The capital measures used by the federal banking regulators are the Total Capital ratio, the Tier 1 Capital ratio, and
the leverage ratio. Under the regulations, a bank holding company or a bank will be well capitalized if it has a Total Capital ratio of 10% or greater, a Tier 1 Capital ratio of 6% or greater, a leverage ratio of 5% or greater, and is not subject to
any written agreement, order, capital directive, or prompt corrective action directive by a federal bank regulatory agency to meet and maintain a specific capital level for any capital measure.

The Georgia Department has adopted generally the same definitions for capital adequacy as the Federal Reserve and the FDIC. Under Georgia Department
policies, Georgia state banks must maintain not less than 4.5% Tier 1 capital, and generally most institutions will require at least 5.5% Tier 1 capital. Additional capital may be required based on the Georgia Departments consideration of the
quality, type and diversification of assets, current and historical earnings, provisions for liquidity with particular emphasis on asset/liability mismatches and sensitivity to market risks in the asset portfolios, the quality of management, and the
existence of other activities that may expose the institution to risk, including the degree of leverage and risk undertaken by any parent company or affiliates. Further, the Georgia Departments policies generally require that Georgia bank
holding companies maintain a Tier 1 capital ratio of 4.0%, although higher ratios are required for holding companies experiencing or anticipating higher growth, and for those companies with significant financial or operational weaknesses, or higher
risk profiles.

The Federal Reserve, the FDIC and the Georgia Department have not advised the Company or the Bank of any specific minimum
capital ratios applicable to them.



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##### Table of Contents

At March 31, 2006, the Company and the Bank were well capitalized for regulatory purposes. The
following table provides a comparison of the Companys and the Banks leverage and risk-weighted capital ratios as of March 31, 2006 to the minimum and well-capitalized regulatory standards:



|                           |  |         |   |  |       |   |  |                  |     |  |                  |  
|-------------------------- |  | ------- | - |  | ----- | - |  | ---------------- | --- |  | ---------------- | -
|                           |  | Company |   |  | Bank  |   |  | Minimum Required |     |  | Well Capitalized |  
|Leverage ratio             |  | 11.33   | % |  | 10.70 | % |  | 4.00             | %   |  | 5.00             | %
|Risk based capital ratios: |  |         |   |  |       |   |  |                  |     |  |                  |  
|Tier 1 risk based capital  |  | 12.87   | % |  | 12.25 | % |  | 4.00             | % * |  | 6.00             | %
|Total risk-based capital   |  | 14.13   | % |  | 13.50 | % |  | 8.00             | %   |  | 10.00            | %

---

|* | 4.5% to 5.5% for Georgia Department purposes
|- | --------------------------------------------

Considering the well capitalized position as shown above together with low projected capital needs in the foreseeable future,, on March 30, 2006, the Companys Board of Directors declared a regular quarterly dividend of $0.165 per
common share of stock and a special dividend of $0.085 per share of common stock all payable on April 24, 2006 to shareholders of record on April 10, 2006. The dividend amounted to approximately $5.4 million. Subsequent to the payment of
the dividend, the Company and the Bank remain well capitalized.

Non-Performing Assets

Nonperforming assets include loans classified as non-accrual or renegotiated, foreclosed real estate and other property. It is the general policy of the
Company to stop accruing interest income and place the recognition of interest on a cash basis when any commercial, industrial or commercial real estate loan is 90 days or more past due as to principal or interest and/or the ultimate collection
of either is in doubt, unless collection of both principal and interest is assured by way of collateralization, guarantees or other security. Accrual of interest income on consumer loans, including residential real estate loans, is suspended when
any payment of principal or interest, or both, is more than 120 days delinquent. When a loan is placed on non-accrual status, any interest previously accrued but not collected is reversed against current income unless the collateral for the
loan is sufficient to cover the accrued interest or a guarantor assures payment of interest.

The Company has several procedures in place
to assist management in maintaining the overall quality of its loan portfolio. The Company has established written guidelines contained in its Lending Policy for the collection of past due loan accounts. These guidelines explain in detail the
Companys policy on the collection of loans over 30, 60, and 90 days delinquent. Generally, loans 90 days or more past due are placed in a non-accrual status.

However, if the loan is deemed to be in process of collection, it may be maintained on an accrual basis. The Companys management conducts continuous training and communicates regularly with loan officers to make
them aware of its lending policy and the collection policy contained therein. The Companys management has also staffed its collection department with properly trained staff to assist lenders with collection efforts and to maintain records and
develop reports on delinquent borrowers. Management is not aware of any loans that meet the definition of a troubled debt restructuring as of March 31, 2006. The Company records real estate acquired through foreclosure at the lesser of the
outstanding loan balance or the fair value at the time of foreclosure, less estimated costs to sell.

The Company usually disposes of real
estate acquired through foreclosure within one year; however, if it is unable to dispose of the foreclosed property, the propertys value is assessed annually and written down to its fair value less costs to sell.

Non-performing assets increased by $2.4 million to $20.3 million as of March 31, 2006 as compared to December 31, 2005. The increase was
primarily attributable to a loan secured by land for future development ($1.5 million) and a loan secured by a hotel ($0.7 million).



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##### Table of Contents

The following table presents information regarding non-performing assets at the dates
indicated:



|                                                                                            |  |                        |        |   |                   |   |        |  
|------------------------------------------------------------------------------------------- |  | ---------------------- | ------ | - | ----------------- | - | ------ | -
|                                                                                            |  | March 31, 2006         |        |   | December 31, 2005 |  
|                                                                                            |  | (Dollars in thousands) |       
|Non-performing assets                                                                       |  |                        |        |   |                   |   |        |  
|Non-accrual loans                                                                           |  |                        |        |   |                   |   |        |  
|Commercial and industrial                                                                   |  | $                      | 759    |   |                   | $ | 838    |  
|Real estate - construction                                                                  |  |                        | 2,424  |   |                   |   | 169    |  
|Real estate - mortgage                                                                      |  |                        | 5,695  |   |                   |   | 4,826  |  
|Other real estate                                                                           |  |                        | 5,250  |   |                   |   | 7,660  |  
|Consumer and other                                                                          |  |                        | 21     |   |                   |   | 23     |  
|Other real estate and repossessions                                                         |  |                        | 6,106  |   |                   |   | 4,302  |  
|                                                                                            |  |                        |        |   |                   |   |        |  
|Total non-performing assets                                                                 |  | $                      | 20,255 |   |                   | $ | 17,818 |  
|Loans past due 90 days or more and still accruing                                           |  | $                      | 9,925  |   |                   | $ | 7,885  |  
|Ratio of loans past due 90 days or more and still accruing to loans, net of unearned income |  |                        | 0.55   | % |                   |   | 0.44   | %
|Ratio of non-performing assets to loans, net of unearned income and other real estate       |  |                        | 1.12   | % |                   |   | 0.99   | %

Loans and Allowance for Loan Losses

At March 31, 2006, loans, net of unearned income, were approximately $1.8 billion, substantially the same as net loans at December 31, 2005 of
approximately $1.8 billion. The overall lack of growth in loans is primarily the result of reduced production capacity due to recent staff turnover. The Company continues to monitor the composition of the loan portfolio to evaluate the adequacy of
the allowance for loan losses in light of changes in the economic environment on the loan portfolio.

The Company primarily focuses on the
following loan categories: (1) commercial and industrial, (2) real estate construction, (3) residential mortgage, (4) commercial real estate, and (5) consumer loans. The Companys management has strategically located
its branches in high growth markets to take advantage of a surge in residential and industrial growth in metropolitan Atlanta.

The
allowance for loan losses is a reserve established through charges to earnings in the form of a provision for loan losses. The allowance for loan losses is based on managements evaluation of the size and composition of the loan portfolio, the
level of non-performing and past due loans, historical trends of charged-off loans and recoveries, prevailing economic conditions and other factors management deems appropriate. The Companys management has established an allowance for loan
losses which it believes is adequate for the risk of loss inherent in the loan portfolio. Based on a credit evaluation of the loan portfolio, management presents a quarterly review of the allowance for loan losses to the Companys Board of
Directors. The review that management has developed primarily focuses on risk by evaluating the level of loans in certain risk categories. These categories have also been established by management and take the form of loan grades. These loan grades
closely mirror regulatory classification guidelines and include pass loan categories 1 through 4 and special mention, substandard, doubtful, and loss categories of 5 through 8, respectively. By grading the loan portfolio in this manner the
Companys management is able to effectively evaluate the portfolio by risk, which management believes is the most effective way to analyze the loan portfolio and thus analyze the adequacy of the allowance for loan losses. Management also
reviews charge-offs and recoveries on a monthly basis to identify trends.

The Companys risk management processes include a loan
review program to evaluate the credit risk in the loan portfolio and ensure credit grade accuracy. The credit review department is independent of the loan function and reports to the Executive Vice President of Risk Management. Through the loan
review process, the Company maintains a classified loan watch list which, along with the delinquency report of loans, serves as a tool to assist management in assessing the overall quality of the loan portfolio and the adequacy of the allowance for
loan losses. Loans classified as substandard are those loans with clear and defined weaknesses such as a highly leveraged position, unfavorable financial ratios, uncertain financial ratios, uncertain repayment sources, deterioration in
underlying collateral values, or poor financial condition which may jeopardize recoverability of the debt. Loans classified as doubtful are those loans that have characteristics similar to substandard loans but have an increased risk of
loss, or at least a portion of the loan may require being charged-off. Loans classified as loss are those loans that are in the process of being charged-off.



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##### Table of Contents

The allowance for loan losses is established by risk group as follows:



| |  |  | Large classified loans are evaluated individually with specific reserves allocated based on managements review.
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | The remainder of the portfolio is allocated a portion of the allowance based on past loss experience and the economic conditions for the particular loan category. Allocation weights
are assigned based on the Companys historical loan loss experience in each loan category; although a higher allocation weight may be used if current conditions indicate that loan losses may exceed historical experience.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

When determining the adequacy of the allowance for loan losses, management considers changes in the size and character of
the loan portfolio, changes in nonperforming and past due loans, historical loan loss experience, the existing risk of individual loans, concentrations of loans to specific borrowers or industries and current economic conditions. Management does not
believe these factors have significantly changed over the periods presented. Historically, we believe our estimates of the level of allowance for loan losses required have been appropriate and our expectation is that the primary factors considered
in the provision calculation will continue to be consistent with prior trends.

For the three month period ending March 31, 2006, net
charge-offs totaled $1.2 million or 0.26% (annualized) of average loans outstanding for the period, net of unearned income, compared to $2.4 million or .56% (annualized) in net charge-offs for the same period in 2005. The provision for loan losses
for the three months ended March 31, 2006 was $1.2 million compared to $2.2 million for the same period in 2005. The allowance for loan losses totaled $25.3 million or 1.40% of total loans, net of unearned income at March 31, 2006,
compared to $25.2 million or 1.40% of total loans at December 31, 2005. In its loan loss reserve analysis, the Company establishes specific reserves for its large criticized loan relationships.

The following table presents an analysis of the allowance for loan losses for the three month period ended March 31, 2006 and 2005:



|                                                                  |  |                              |        |   |      |        |   |  |   |        |   |  |        |  
|----------------------------------------------------------------- |  | ---------------------------- | ------ | - | ---- | ------ | - |  | - | ------ | - |  | ------ | -
|                                                                  |  | Three Months Ended March 31, |       
|                                                                  |  | 2006                         |        |   | 2005 |       
|                                                                  |  | (Dollars in thousands)       |       
|Balance of allowance for loan losses at beginning of period       |  | $                            | 25,239 |   |      |        |   |  | $ | 25,191 |   |  |        |  
|Provision charged to operating expense                            |  |                              | 1,180  |   |      |        |   |  |   | 2,209  |   |  |        |  
|Charge-offs:                                                      |  |                              |        |   |      |        |   |  |   |        |   |  |        |  
|Commercial and industrial                                         |  |                              | 190    |   |      | 15.07  | % |  |   | 2,017  |   |  | 56.72  | %
|Real estate - construction                                        |  |                              | 406    |   |      | 32.20  | % |  |   |       |   |  | 0.00   | %
|Real estate - mortgage                                            |  |                              | 279    |   |      | 22.13  | % |  |   | 961    |   |  | 27.02  | %
|Real estate - other                                               |  |                              | 86     |   |      | 6.81   | % |  |   | 231    |   |  | 6.50   | %
|Consumer and other                                                |  |                              | 300    |   |      | 23.79  | % |  |   | 347    |   |  | 9.76   | %
|                                                                  |  |                              |        |   |      |        |   |  |   |        |   |  |        |  
|Total charge-offs                                                 |  |                              | 1,261  |   |      | 100.00 | % |  |   | 3,556  |   |  | 100.00 | %
|Recoveries:                                                       |  |                              |        |   |      |        |   |  |   |        |   |  |        |  
|Commercial and industrial                                         |  |                              | 19     |   |      | 19.39  | % |  |   | 334    |   |  | 29.30  | %
|Real estate - construction                                        |  |                              | 0      |   |      | 0.00   | % |  |   |       |   |  | 0.00   | %
|Real estate - mortgage                                            |  |                              | 14     |   |      | 14.29  | % |  |   | 537    |   |  | 47.11  | %
|Real estate - other                                               |  |                              | 11     |   |      | 11.22  | % |  |   | 161    |   |  | 14.12  | %
|Consumer and other                                                |  |                              | 54     |   |      | 55.10  | % |  |   | 108    |   |  | 9.47   | %
|                                                                  |  |                              |        |   |      |        |   |  |   |        |   |  |        |  
|Total recoveries                                                  |  |                              | 98     |   |      | 100.00 | % |  |   | 1,140  |   |  | 100.00 | %
|                                                                  |  |                              |        |   |      |        |   |  |   |        |   |  |        |  
|Net charge-offs                                                   |  |                              | 1,163  |   |      |        |   |  |   | 2,416  |   |  |        |  
|                                                                  |  |                              |        |   |      |        |   |  |   |        |   |  |        |  
|Balance of allowance for loan losses at end of period             |  | $                            | 25,256 |   |      |        |   |  | $ | 24,984 |   |  |        |  
|                                                                  |  |                              |        |   |      |        |   |  |   |        |   |  |        |  
|Net annualized charge-offs as a percentage of average loans       |  |                              | 0.26   | % |      |        |   |  |   | 0.56   | % |  |        |  
|Reserve for loan losses as a percentage of loans at end of period |  |                              | 1.40   | % |      |        |   |  |   | 1.43   | % |  |        |  



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Interest Rate Sensitivity and Liquidity

Asset Liability Management

The
Companys primary market risk exposures are credit (as discussed previously), interest rate risk and liquidity risk. The Company operates under an Asset Liability and Risk Management policy created by the Asset and Liability Committee
(ALCO) and approved by the Board of Directors. The policy outlines limits on interest rate risk in terms of changes in net interest income and changes in the economic values of assets and liabilities over certain changes in interest rate
environments. These measurements are made through a simulation model which projects the impact of changes in interest rates on assets and liabilities. The policy also outlines responsibility for monitoring interest rate risk, and the process for the
approval, implementation and monitoring of interest rate risk strategies to achieve the Companys interest rate risk objectives.

The
ALCO is comprised of senior officers. The ALCO makes all tactical and strategic decisions with respect to the sources and uses of funds that may affect net interest income. The ALCOs decisions are based upon policies established by the Board
of Directors, which are designed to meet three goals: manage interest rate risk, improve net interest income and maintain adequate liquidity.

The ALCO has developed a program of action which includes, among other things, the following: (i) selling substantially all conforming, long-term, fixed rate mortgage originations, (ii) originating and retaining for the portfolio
shorter term, higher yielding loan products which meet the Companys underwriting criteria; and (iii) actively managing the Companys interest rate risk exposure.

Interest Rate Risk

The normal
course of business activity exposes the Company to interest rate risk. Interest rate risk is managed within an overall asset and liability framework for the Company. The principal objectives of asset and liability management are to assess the
sensitivity of net interest income to potential changes in interest rates and enhance profitability in ways that promise sufficient reward for recognized and controlled risk. Funding positions are kept within predetermined limits designed to ensure
that risk-taking is not excessive and that liquidity is properly managed. The Company employs sensitivity analysis in the form of a net interest income simulation to help characterize the potential volatility of net interest income to changes in
interest rates. In addition, fluctuations in interest rates usually result in changes in the fair market value of the Companys financial instruments and cash flows. The Companys interest rate risk position is managed by ALCO.

The Company uses a simulation modeling process to measure interest rate risk and evaluate potential strategies. The Companys net interest income
simulation includes all financial assets and liabilities. This simulation measures both the mismatch risk and basis risk in the Companys assets and liabilities. The simulation also captures the option characteristics of products, such as caps
and floors on floating rate loans, the right to pre-pay mortgage loans without penalty and the ability of customers to withdraw deposits on demand. These options are modeled through the use of primarily historical customer behavior and statistical
analysis. Other interest rate-related risks such as prepayment, basis and option risk are also considered. Simulation results quantify interest rate risk under various interest rate scenarios. Management then develops and implements appropriate
strategies. The Board of Directors regularly reviews the overall rate risk position and asset and liability management strategies.

In
fiscal 2006, the Company will continue to face term risk and basis risk and may be confronted with several risk scenarios. If interest rates rise, net interest income may actually increase if deposit rates lag increases in market rates. The Company
could, however, experience significant pressure on net interest income if there is a substantial increase in deposit rates relative to market rates. A declining interest rate environment might result in a decrease in loan rates, while deposit rates
remain relatively stable, which could also create significant risk to net interest income. ALCOs subcommittee, the pricing committee, meets weekly to establish interest rates on loans and deposits and review interest rate sensitivity and
liquidity positions.

The Company uses three standard scenarios  rates unchanged, rising rates, and declining rates  in
analyzing interest rate sensitivity. The rising and declining rate scenarios cover a 100 basis point upward and downward rate shock. The following table illustrates the expected effect a given interest rate shift would have on the fair market value
of the Balance Sheet and the annualized projected net interest income of the Company as of March 31, 2006:



|                         |                      |                                |   |                     |       |  
|------------------------ | -------------------- | ------------------------------ | - | ------------------- | ----- | -
|Change in Interest Rates |                      | Percent Increase/(Decrease) in |  
|                         | FMV of Balance Sheet |                                |   | Net Interest Income |      
|100 basis points         |                      | 4.29                           |   |                     | 4.93  |  
|- 100 basis points       |                      | (4.63                          | ) |                     | (5.81 | )

These simulated computations should not be relied upon as indicative of actual future results.
Further, the computations do not contemplate certain actions that management may undertake in response to future changes in interest rates.



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Derivative Instruments and Hedging Activities

Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133) and
Statement of Financial Accounting Standards No. 149, Amendment of Statement 133 on Accounting for Derivative Instruments and Hedging Activities (SFAS 149), as amended and interpreted, establish accounting and reporting
standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. As required by SFAS 133, the Company records all derivatives on the balance sheet at fair value. Fair value is
estimated based on published bid prices or bid quotations for interest rate swaps and floors received from securities dealers. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the
resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used
to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

For derivatives designated as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk are recognized in earnings. For derivatives designated as cash flow hedges, the effective portion of
changes in the fair value of the derivative is initially reported in other comprehensive income (outside of earnings) and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of changes in
the fair value of the derivative is recognized directly in earnings. The Company assesses the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in
fair value or cash flows of the designated hedged item or transaction. For derivatives not designated as hedges, changes in fair value are recognized in earnings.

Interest rate swaps are currently utilized by the Company to hedge the interest rate risk associated with pools of loans that bear interest based upon the prime rate. The interest rate swaps synthetically convert the
floating interest rate payments received on pools of assets bearing interest based upon the prime rates to fixed interest receipts. The Company assesses hedge effectiveness and measures hedge ineffectiveness on a quarterly basis for each hedging
relationship. The Company performs its effectiveness testing by comparing the present value of the cumulative change in the variable interest payments on each swap to the present value of the cumulative change in the overall variable receipts on the
underlying loans since the inception of the hedge. Hedge ineffectiveness is recognized to the extent that the cumulative change on the swap exceeds the cumulative change on the hedged variable interest receipts on the loans. If the ratio of the
cumulative changes in the variable interest payments on a swap to the cumulative changes in the variable receipts on the underlying loans is outside of the range of 80% to 125%, the Company considers the hedging relationship to no longer be highly
effective and would dedesignate the interest rate swap from its hedging relationship. Subsequent changes in the value of the derivative would be remeasured directly through earnings.

The Companys objective in using derivatives is to add stability to interest income and/or interest expense and to manage its exposure to interest
rate movements or other identified risks. To accomplish this objective, the Company primarily uses interest rate swaps as part of its cash flow hedging strategy. Interest rate swaps designated as cash flow hedges involve the receipt of fixed-rate
amounts in exchange for variable-rate payments over the life of the agreements without exchange of the underlying principal amount.

Market
risk is the adverse effect that a change in interest rates or the implied volatility of interest rates have on the value of a financial instrument. The Company manages the market risk associated with interest rate contracts by establishing and
monitoring limits as to the types and degree of risk that may be undertaken.

The Companys derivatives activities are monitored by
its ALCO as part of its risk-management oversight of the Companys treasury functions. The Companys ALCO is responsible for approving various hedging strategies that are developed through its analysis of data from financial simulation
models and other internal and industry sources. The resulting hedging strategies are then incorporated into the Companys overall interest rate risk management and trading strategies.

The following chart illustrates the Banks derivative positions as of March 31, 2006. Market values have been determined by published bid
prices or bid quotations for interest rate swaps received from securities dealers. Amounts are in thousands.

Interest Rate Swaps



|                           |  |                 |  |          |  |          |         |         |      |   |             |      |   |               |       |   |             |   |      |  
|-------------------------- |  | --------------- |  | -------- |  | -------- | ------- | ------- | ---- | - | ----------- | ---- | - | ------------- | ----- | - | ----------- | - | ---- | -
|Type                       |  | TransactionDate |  | TermDate |  | Notional |         | PayRate |      |   | ReceiveRate |      |   | CurrentSpread |       |   | MarketValue |  
|Received Fixed Prime Swap  |  | Mar-03          |  | Apr-06   |  | $        | 50,000  |         | 7.75 | % |             | 5.26 | % |               | -2.49 | % |             | $ | (57  | )
|Received Fixed Prime Swap  |  | Aug-03          |  | Aug-06   |  | $        | 100,000 |         | 7.75 | % |             | 5.59 | % |               | -2.16 | % |             | $ | (870 | )
|                           |  |                 |  |          |  |          |         |         |      |   |             |      |   |               |       |   |             |   |      |  
|Total Received Fixed Swaps |  |                 |  |          |  | $        | 150,000 |         |      |   |             |      |   |               |       |   |             | $ | (927 | )
|                           |  |                 |  |          |  |          |         |         |      |   |             |      |   |               |       |   |             |   |      |  



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Liquidity

Liquidity involves the Companys ability to raise funds to support asset growth or reduce assets to meet deposit withdrawals and other payment obligations, to maintain reserve requirements and otherwise to
operate on an ongoing basis. During the past three years, the Companys liquidity needs have primarily been met by growth in deposits, advances from Federal Home Loan Bank (FHLB), purchases of federal funds, and capital from
retained earnings and acquisitions. The FHLB allows member banks to borrow against their eligible collateral to satisfy their liquidity requirements. As of March 31, 2006, the Company had $47.5 million available on its FHLB line based on
current eligible collateral. Federal funds purchased and other short-term borrowings are additional sources of liquidity and, basically, represent the Companys incremental borrowing capacity. These sources of liquidity are short-term in nature
and are used as necessary to fund asset growth and meet short-term liquidity needs. As of March 31, 2006, the Company had $60.9 million in federal funds purchased and $162.9 million in FHLB advances. Federal funds purchased lines total $215.0
million including a line of $150 million with BB&T. Under these lines, $154.1 million was available to be drawn upon at March 31, 2006. The Companys cash and federal funds sold and cash flows from amortizing investment and loan
portfolios have generally created an adequate liquidity position. Executive management reviews liquidity monthly. This review is from a regulatory as well as static and a forecasted standpoint.

Market and public confidence in the financial strength of the Company and financial institutions in general will determine the Companys access to
supplementary sources of liquidity. The Companys capital levels and asset quality determine levels at which the Company can access supplementary funding sources.

The Company relies primarily on customer deposits, securities sold under repurchase agreements and shareholders equity to fund interest-earning assets. The FHLB is also a major source of liquidity for the Bank.
The FHLB allows member banks to borrow against their eligible collateral to satisfy their liquidity requirements.

Management believes the
Company has sufficient liquidity to meet all reasonable borrower, depositor, and creditor needs in the present economic environment. The Company has not received any recommendations from regulatory authorities that would materially affect liquidity,
capital resources or operations.

Maintaining a steady funding base is achieved by diversifying funding sources, competitively pricing
deposit products, and extending the contractual maturity of liabilities. This reduces the Companys exposure to roll over risk on deposits and limits reliance on volatile short-term purchased funds.

Short-term funding needs arise from funding of loan commitments and requests for new loans and from declines in deposits or other funding sources. The
Companys strategy is to fund assets to the maximum extent possible with core deposits that provide a sizable source of relatively stable and low-cost funds. Core deposits include all deposits, except time deposits of $100,000 and over.



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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Companys primary market risk
exposures are credit (as discussed previously), interest rate risk and liquidity risk. The Company operates under an Asset Liability and Risk Management policy created by the Asset and Liability Committee (ALCO) and approved by the Board
of Directors. The policy outlines limits on interest rate risk in terms of changes in net interest income and changes in the economic values of assets and liabilities over certain changes in interest rate environments. These measurements are made
through a simulation model which projects the impact of changes in interest rates on assets and liabilities. The policy also outlines responsibility for monitoring interest rate risk, and the process for the approval, implementation and monitoring
of interest rate risk strategies to achieve the Companys interest rate risk objectives.

The ALCO is comprised of senior officers.
The ALCO makes all tactical and strategic decisions with respect to the sources and uses of funds that may affect net interest income. The ALCOs decisions are based upon policies established by the Board of Directors, which are designed to
meet three goals: manage interest rate risk, improve net interest income and maintain adequate liquidity.

The ALCO has developed a program
of action which includes, among other things, the following: (i) selling substantially all conforming, long-term, fixed rate mortgage originations, (ii) originating and retaining for the portfolio shorter term, higher yielding loan
products which meet the Companys underwriting criteria; and (iii) actively managing the Companys interest rate risk exposure.

Additional information required by Item 305 of Regulation S-K is set forth under Item 2 of this report.

ITEM 4. CONTROLS AND PROCEDURES

Our Chief Executive Officer and Chief Financial Officer have evaluated
the Companys disclosure controls and procedures as of the end of the quarterly period covered by this Form 10-Q and have concluded that the Companys disclosure controls and procedures were effective as of that date in ensuring that
information required to be disclosed in this Quarterly Report on Form 10-Q was recorded, processed, summarized, and reported within the time period required by the SECs rules and forms. During the first quarter of 2006 the Company made no
changes to internal control over financial reporting that have materially affected, or are likely to materially affect, the Companys internal control over financial reporting.

PART II.  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Neither the Company nor any of its subsidiaries are a party to, nor is any of
their property the subject of, any material pending legal proceedings, other than ordinary routine proceedings incidental to the business of the Company. To the Companys knowledge, no such material proceedings were threatened against it or its
subsidiaries. From time to time, the Company and its subsidiaries are parties to legal proceedings in the ordinary course of business. After consultation with legal counsel, the Company does not anticipate that the current litigation matters will
have a material adverse effect on the Companys financial position, results of operations or cash flows.

ITEM 1A. RISK FACTORS

There have been no material changes in the risk factors as previously disclosed in
the SEC Form 10K for the year ended December 31, 2005.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

No matter was submitted to a vote of security
holders by solicitation of proxies or otherwise during the first quarter of 2006.



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ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS



|            |  |                                                                                                                                                                                                                          
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                              
|            | 
|2.1         |  | Agreement and plan of merger, dated as of December 4, 2005 by and between BB&T Corporation and Main Street Banks Inc. (incorporated by reference to exhibit 2.1 to the registrants
Form 8-K filed on December 14, 2005).
|            | 
|31.1        |  | Certificate of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                         
|            | 
|31.2        |  | Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                         
|            | 
|32.1        |  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                       
|            | 
|32.2        |  | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                       



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SIGNATURES

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



| |  |                   |  |                         |  |                                  
| |  | ----------------- |  | ----------------------- |  | ---------------------------------
| |  |                   |  | MAIN STREET BANKS, INC.
| |  |                   | 
| |  | Date: May 9, 2006 |  | By:                     |  | /s/ William P. OHalloran        
| |  |                   |  |                         |  | William P. OHalloran, Controller
| |  |                   |  |                         |  | (Principal Accounting Officer)   



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