U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-QSB

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

For the quarterly period ended March 31, 2004

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

For the transition period from              to             

Commission File Number: 333-97681

First Commerce Community Bankshares, Inc.

(Exact name of small business issuer as specified in its charter)

Georgia	76-0706098
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

9464 Highway 5, Douglasville, Georgia 30135

(Address of principal executive offices)

(770) 489-3222

(Issuer’s telephone number)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

State the number of shares outstanding of each of the issuer’s classes of common equity, as of May 14, 2004: 1,112,163; $1 par value.

Transitional Small Business Disclosure Format    Yes  ¨    No  x

FIRST COMMERCE COMMUNITY BANKSHARES, INC.

AND SUBSIDIARY

INDEX

		Page
PART I.	FINANCIAL INFORMATION
	Item 1. Financial Statements
	Consolidated Balance Sheet - March 31, 2004 and December 31, 2003	3
	Consolidated Statements of Operations and Comprehensive Income (Loss) Three Months Ended March 31, 2004 and 2003	4
	Consolidated Statements of Cash Flows - Three Months Ended March 31, 2004 and 2003	5
	Notes to Consolidated Financial Statements	6
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
	Item 3. Controls and Procedures	13
PART II.	OTHER INFORMATION
	Item 1 – Legal Proceedings	14
	Item 6 - Exhibits and Reports on Form 8-K	14
	Signatures	15

2

PART I - FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

FIRST COMMERCE COMMUNITY BANKSHARES, INC.

AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

MARCH 31, 2004 AND DECEMBER 31, 2003

(Unaudited)

	2004			2003
Assets
Cash and due from banks	$	531,523		$	381,517
Federal funds sold		6,141,000			5,093,000
Securities available-for-sale, at fair value		5,057,372			4,730,450
Loans		55,080,160			47,248,588
Less allowance for loan losses		580,000			475,000
Loans, net		54,500,160			46,773,588
Premises and equipment		1,335,797			1,294,083
Other assets		366,198			363,835
Total assets	$	67,932,050		$	58,636,473
Liabilities and Stockholder’s Equity
Deposits
Noninterest-bearing	$	5,178,446		$	5,069,927
Interest-bearing		52,496,109			43,466,977
Total deposits		57,674,555			48,536,904
Other liabilities		70,238			60,839
Total liabilities		57,744,793			48,597,743
Commitments and contingencies
Stockholder’s equity
Preferred stock, no par value; 10,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock, $1 par value; 100,000,000 shares authorized; 1,112,163 shares issued and outstanding		1,112,163			1,112,163
Capital surplus		9,962,224			9,962,224
Accumulated deficit		(921,451	)		(1,019,820	)
Accumulated other comprehensive income (loss)		34,321			(15,837	)
Total stockholder’s equity		10,187,257			10,038,730
Total liabilities and stockholder’s equity	$	67,932,050		$	58,636,473

See Notes to Consolidated Financial Statements.

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FIRST COMMERCE COMMUNITY BANKSHARES, INC.

AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

THREE MONTHS ENDED MARCH 31, 2004 AND 2003

(Unaudited)

	2004		2003
Interest income
Loans	$	807,978	$	33,136
Taxable securities		36,150		1,559
Federal funds sold		12,062		27,711
Total interest income		856,190		62,406
Interest expense
Deposits		266,176		3,770
Other borrowings		—		2,237
Total interest expense		266,176		6,007
Net interest income		590,014		56,399
Provision for loan losses		105,000		55,000
Net interest income after provision for loan losses		485,014		1,399
Other income
Service charges and fees		9,774		39
Other operating income		3,654		519
Total other income		13,428		558
Other expenses
Salaries and employee benefits		243,851		187,344
Occupancy and equipment expenses		43,971		27,368
Other operating expenses		112,251		102,150
Total other expenses		400,073		316,862
Net income (loss) before income taxes		98,369		(314,905	)
Income taxes		—		—
Net income (loss)		98,369		(314,905	)
Other comprehensive income :
Unrealized gains on securities available-for-sale arising during period		50,158		511
Comprehensive income/(loss)	$	148,527	$	(314,394	)
Basic and diluted earnings (losses) per share	$	0.09	$	(0.29	)
Cash dividends per share	$	—	$	—

See Notes to Consolidated Financial Statements.

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FIRST COMMERCE COMMUNITY BANKSHARES, INC.

AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2004 AND 2003

(Unaudited)

	2004			2003
OPERATING ACTIVITIES
Net income (loss)	$	98,369		$	(314,905	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		22,435			16,496
Provision for loan losses		105,000			55,000
Increase in interest receivable		(1,028	)		(22,500	)
Increase in interest payable		12,702			1,510
Other operating activities		4,688			(8,145	)
Net cash used in operating activities		242,166			(272,544	)
INVESTING ACTIVITIES
Net increase in federal funds sold		(1,048,000	)		(6,162,000	)
Purchases of securities available-for-sale		(286,090	)		(2,591,333	)
Net increase in loans		(7,831,572	)		(5,555,732	)
Purchase of premises, equipment and computer software		(64,149	)		(221,672	)
Net cash used in investing activities		(9,229,811	)		(14,530,737	)
FINANCING ACTIVITIES
Net increase in deposits		9,137,651			5,584,514
Proceeds from sale of common stock		—			11,004,530
Repayment of other borrowings, net		—			(1,624,924	)
Net cash provided by financing activities		9,137,651			14,964,120
Net increase in cash and due from banks		150,006			160,839
Cash and due from banks, beginning of year		381,517			3,726
Cash and due from banks, end of year	$	531,523		$	164,565
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest	$	253,474		$	4,497

See Notes to Consolidated Financial Statements.

5

FIRST COMMERCE COMMUNITY BANKSHARES, INC.

AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. BASIS OF PRESENTATION

First Commerce Community Bankshares, Inc. (the “Company”) was incorporated on July 23, 2002, to operate as a bank holding company. The Company owns 100% of the issued and outstanding capital stock of First Commerce Community Bank, the “Bank”, a bank organized under the laws of the State of Georgia to conduct a general banking business in Douglasville, Douglas County, Georgia. The Bank commenced operations on March 4, 2003.

The consolidated financial information included herein is unaudited; however, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim period. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-KSB for the year ended December 31,2003.

The results of operations for the period ended March 31, 2004 are not necessarily indicative of the results to be expected for the full year.

NOTE 2. STOCK COMPENSATION PLANS

At March 31, 2004, the Company had two stock-based employee compensation plans. The Company accounts for those plans under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net income (loss), as all options granted under those plans had an exercise price equal to the market value of the underlying stock on the date of grant. The following table illustrates the effect on net income (loss) and earnings (losses) per share if the Company had applied the fair value recognition provisions of SFAS Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.

	Three Months Ended March 31,
	2004			2003
Net income (loss), as reported	$	98,369		$	(314,905	)
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards		(529,180	)		—
Pro forma net loss	$	(430,811	)	$	(314,905	)
Earnings (losses) per share:
Basic and diluted - as reported	$	0.09		$	(0.29	)
Basic and diluted - pro forma	$	(0.39	)	$	(0.29	)

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NOTE 3. EARNINGS (LOSSES) PER SHARE

Basic earnings (losses) per share are computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding. Diluted earnings per share are computed by dividing net income (loss) by the sum of the weighted average number of common shares outstanding and common stock equivalents. Common stock equivalents consist of stock options and stock warrants. Common stock equivalents did not have a dilutive effect on earnings (loss) per share for the three months ended March 31, 2004 and 2003.

NOTE 4. CURRENT ACCOUNTING DEVELOPMENTS

There are no recent accounting pronouncements that have had, or are expected to have, a material effect on the Company’s financial statements.

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FIRST COMMERCE COMMUNITY BANKSHARES, INC.

AND SUBSIDIARY

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

The following is management’s discussion and analysis of certain significant factors which have affected the financial position and operating results of First Commerce Community Bankshares, Inc. and its bank subsidiary, First Commerce Community Bank, during the period included in the accompanying consolidated financial statements.

Forward Looking Statements

This Report contains statements which constitute forward-looking statements under federal securities laws, including the Securities Act of 1933 and the Securities Exchange Act of 1934. These statements are based on many assumptions and estimates and are not guarantees of future performance. Our actual results may differ materially from those projected in any forward-looking statements, as they will depend on many factors about which we are unsure, including many factors which are beyond our control. The words “may,” “would,” “could,” “will,” “expect,” “anticipate,” “believe,” “intend,” “plan,” and “estimate,” as well as similar expressions, are meant to identify such forward-looking statements, although some may use other phrasing. Potential risks and uncertainties include, but are not limited to:

• significant increases in competitive pressure in the banking and financial services industries;

• changes in the interest rate environment which could reduce anticipated or actual margins;

• changes in political conditions or the legislative or regulatory environment;

• general economic conditions, either nationally or regionally and especially in primary service area, becoming less favorable than expected resulting in, among other things, a deterioration in credit quality;

• changes occurring in business conditions and inflation;

• changes in technology;

• changes in monetary and tax policies;

• our ability to retain key personnel;

• changes in the securities markets; and

• other risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission.

Many of these factors are beyond our ability to control or predict, and readers are cautioned not to place undue reliance on these forward-looking statements. We disclaim any obligation to update or revise these forward-looking statements.

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Critical Accounting Estimates

We have adopted various accounting policies which govern the application of accounting principles generally accepted in the United States in the preparation of our financial statements. Our significant accounting policies are described in the footnotes to the financial statements at December 31, 2003 as filed in our annual report on Form 10-KSB. Certain accounting policies involve significant judgments and assumptions by us which have a material impact on the carrying value of certain assets and liabilities. We consider these accounting judgments and assumptions to be our critical accounting estimates. The judgments and assumptions we use are based on historical experience and other factors, which we believe to be reasonable under the circumstances. Because of the nature of the judgments and assumptions we make, actual results could differ from these judgments and estimates which could have a material impact on our carrying values of assets and liabilities and our results of operations.

We believe the allowance for loan losses is a critical accounting estimate that requires the most significant judgments and assumptions used in preparation of our consolidated financial statements. Refer to the portion of this discussion that addresses our allowance for loan losses for a description of our processes and methodology for determining our allowance for loan losses.

Liquidity and Capital Resources

We monitor our liquidity resources on an ongoing basis. Our liquidity also is monitored on a periodic basis by State and Federal regulatory authorities. As of March 31, 2004, our liquidity, as determined under guidelines established by regulatory authorities and internal policy, was satisfactory.

At March 31, 2004, our capital ratios were adequate based on regulatory minimum capital requirements. The minimum capital requirements and the actual capital ratios on a consolidated and bank-only basis are as follows:

	Actual
	Consolidated		Bank		Minimum Regulatory Requirement
Leverage capital ratios	16.05	%	14.46	%	4.00	%
Risk-based capital ratios:
Core capital	17.12		15.44		4.00
Total capital	18.10		16.41		8.00

These ratios may decline as asset growth continues, but are expected to exceed the minimum regulatory requirements.

Off-Balance Sheet Arrangements

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

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Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments. A summary of our commitments as of March 31, 2004 is as follows:

Commitments to extend credit	$	15,770,795
Letters of credit		461,989
	$	16,232,784

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Standby letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. Collateral is required in instances which we deem necessary.

If needed, we have the ability on a short-term basis to borrow and purchase Federal funds from other financial institutions. At March 31, 2004, we had arrangements with two commercial banks for short-term advances of $4,250,000.

As of March 31, 2004, we had a commitment to purchase land in the amount of $700,000 for the future site of our main office banking facility. See “Item 1. Legal Proceedings” for a discussion of certain legal proceedings relating to the property for our future main office.

Financial Condition

Our total assets grew by 15.85% for the first quarter of 2004 as compared to December 31, 2003. Deposit growth of $9.14 million was primarily invested in loans. Our ratio of loans to deposits has remained relatively stable at 95.50% as of March 31, 2004 as compared to 96.37% as of December 31, 2003.

We expect to continue to hold funds in federal funds sold and to purchase investment securities as loan growth stabilizes and we identify opportunities appropriate to our overall asset and liability strategies and goals. We expect continued growth in assets and liabilities during the remainder of 2004. We will monitor growth and seek to maintain a proper mix of types, maturities, and interest rates. We believe that our current capital and liquidity levels are adequate to support the current growth of the bank.

Our total equity increased by $148,000 during the three months ended March 31, 2004, due primarily to net income for the three months ended March 31, 2004 of $98,000. Total equity was also positively affected by an increase in unrealized gains on securities available for sale in the amount of $50,000 for the three months ended March 31, 2004.

10

Results of Operations For The Three Months Ended March 31, 2004 and 2003

The results of operations are determined by our ability to effectively manage net interest income, control non-interest expenses, generate non-interest income and minimize loan losses. In order for us to become cumulatively profitable, we must increase the amount of earning assets so that net interest income along with non-interest income will be sufficient to cover normal operating expenses incurred in a banking operation and the bank’s provision for loan losses.

Our banking operations commenced on March 4, 2003, therefore our operating results from banking activities is limited for the three months ended March 31, 2003. Prior to March 4, 2003, we were in organization. During the organizational stage, we were focused on preparing the Bank to commence operations, raising our initial capital, hiring our personnel, renovating our banking facilities and other activities necessary to commence banking operations.

Our net interest income was $590,000 for the quarter ended March 31, 2004 as compared to $56,000 for the quarter ended March 31, 2003. The increase in net interest income is due primarily to the increased volume of average loans outstanding. Our net interest margin was 3.86% during the first quarter of 2004 which is a decrease from 6.47% for the same quarter in 2003. This decrease, which was expected, is the result of a larger reliance on interest bearing deposits to fund loans. As of March 31, 2003, our interest earning assets were primarily funded by the proceeds from our stock offering. The yield earned on average earning assets was 5.60% in the first quarter of 2004 while our cost of funds was 2.22%.

The provision for loan losses was $105,000 and $55,000, respectively, for the three months ended March 31, 2004 and 2003. The amounts provided are due to loan growth and to our assessment of the inherent risk in the portfolio. Management believes that the $580,000 in the allowance for loan losses at March 31, 2004, or 1.05% of total net outstanding loans, is adequate to absorb known risks in the portfolio. No assurance can be given, however, that increased loan volume, and adverse economic conditions or other circumstances will not result in increased losses in our loan portfolio.

Information with respect to nonaccrual, past due, restructured, and potential problem loans at March 31, 2004 is as follows (Dollars in Thousands):

Nonaccrual loans	$	0
Loans contractually past due ninety days or more as to interest or principal payments and still accruing		0
Restructured loans		0
Potential problem loans		0
Interest income that would have been recorded on nonaccrual and restructured loans under original terms		0
Interest income that was recorded on nonaccrual and restructured loans		0

11

Potential problem loans are defined as loans about which we have serious doubts as to the ability of the borrower to comply with the present loan repayment terms and which may cause the loan to be placed on nonaccrual status, to become past due more than ninety days, or to be restructured.

It is our policy to discontinue the accrual of interest income when, in the opinion of management, collection of such interest becomes doubtful. This status is accorded interest when (1) there is a significant deterioration in the financial condition of the borrower and full repayment of principal and interest is not expected and (2) the principal or interest is more than ninety days past due, unless the loan is both well-secured and in the process of collection.

Loans classified for regulatory purposes as loss, doubtful, substandard, or special mention that have not been included in the table above do not represent or result from trends or uncertainties which management reasonably expects will materially impact future operating results, liquidity or capital resources. Management is not aware of any information that causes it to have serious doubts as to the ability of borrowers to comply with the loan repayment terms.

Information regarding certain loans and the allowance for loan loss for the three months ended March 31, 2004 and 2003 is as follows (Dollars in Thousands):

	2004		2003
Average amount of loans outstanding	$	51,613	$	2,715
Balance of allowance for loan losses at beginning of period	$	475	$	0
Loans charged off
Commercial and financial		0		0
Real estate mortgage		0		0
Installment		0		0
		0		0
Loans recovered
Commercial and financial		0		0
Real estate mortgage		0		0
Installment		0		0
		0		0
Net charge-offs		0		0
Additions to allowance charged to operating expense during period		105		55
Balance of allowance for loan losses at end of period	$	580	$	55
Ratio of net loans charged off during the period to average loans outstanding		—		—

12

The allowance for loan losses is maintained at a level that is deemed appropriate by management to adequately cover all known and inherent risks in the loan portfolio. Management’s evaluation of the loan portfolio includes a loan classification program. Under the program, as each loan is made, we assign a loan grade. Each loan grade is assigned an allowance percentage determined based on our experience specifically and the historical experience of the banking industry generally. Loan classifications are then subject to periodic review by the responsible lending officers and by senior management based upon their judgment, current economic conditions that may affect the borrower’s ability to repay, lender requirements, the underlying collateral value of the loans and other appropriate information. Management relies predominantly on this ongoing review of the loan portfolio to assess the risk characteristics of the portfolio in the aggregate and to determine adjustments, if any, to our allowance for loan losses. Based upon this ongoing review, we may identify loans that could be impaired. A loan is considered impaired when it is probable that we will be unable to collect all principal and interest due in accordance with the contractual terms of the loan agreement. When we identify a loan as impaired, the allowance for loan losses is increased if we determine that the amount of impairment is in excess of the allowance determined under our loan classification program.

Other income was $13,428 and $558, respectively, for the three months ended March 31, 2004 and 2003. For the year 2004 other income consisted of service charges on deposit accounts of $9,774 and other operating income of $3,654. We expect our service charges on deposit accounts to continue to increase as our deposit base increases.

Other expenses totaled approximately $400,000 and $317,000, respectively, for the three months ended March 31, 2004 and 2003. For the year 2004 other expenses consisted of salaries and employee benefits of $244,000, equipment and occupancy expenses of $44,000, and other operating expenses of $112,000. The increase in salaries and employee benefits over 2003 are due to the 14 full time equivalent employees employed at March 31, 2004 and to other annual salary costs and employee benefits. The increase in equipment and occupancy expenses and other operating expenses are due to our overall growth and our normal banking operations during the first quarter of 2004 as compared to the first quarter of 2003 when we were still predominately in the organizational stage.

We have not recorded income tax expense (benefits) for the three months ended March 31, 2004 and 2003 due to cumulative operating losses recorded to date.

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

ITEM 3. Controls and Procedures

A review and evaluation was performed by the Company’s management, including the Company’s Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based on that review and evaluation, the CEO and CFO have concluded that the Company’s current disclosure controls and procedures, as designed and implemented, were effective. There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect the Company’s internal controls subsequent to the date of their evaluation. There were no material weaknesses identified in the course of such review and evaluation and, therefore, no corrective measures were taken by the Company.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

On January 27, 2004, a plaintiff filed a complaint in the Superior Court of Douglas County to commence an action against First Commerce Community Bank and the City of Douglasville, Georgia. The complaint seeks a declaratory judgment to overturn the bank’s successful rezoning of a property that would allow the Bank to use the property for its future main office facility. Management believes that it has meritorious defenses to the action and intends to vigorously defend the action.

If the complaint were successful, the Bank would be required to locate another property for its future main office facility. While the Bank has entered into an agreement to acquire the property for $700,000, the Bank will not be required to acquire the property if the plaintiff is successful in its action to overturn the rezoning of the property. Other than as described above, there were no legal proceedings to which we, or any of our properties, were subject.

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

(a) Exhibits.

31.1 Rule 15d-14(a) Certification of CEO

31.2 Rule 15d-14(a) Certification of CFO

32.1 Section 1350 Certification of CEO

32.2 Section 1350 Certification of CFO

(b) Reports on Form 8-K.

None.

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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.

FIRST COMMERCE COMMUNITY BANKSHARES, INC.

(Registrant)

DATE: May 14, 2004	BY:	/s/ William C. Lumpkin, Jr.
		William C. Lumpkin, Jr. President and C.E.O.
		(Principal Executive Officer)
DATE: May 14, 2004	BY:	/s/ Tom D. Richey
		Tom D. Richey, Chief Financial Officer
		(Principal Financial and Accounting Officer)

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