SecProbe.io

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      September 19, 2005

Via Facsimile ((770) 532-5071) and U.S. Mail

T. Treadwell Syfan
Stewart, Melvin & Frost, LLP
200 Main Street, Suite 600
P.O. Box 3280
Gainesville, Georgia 30503

Re:	Allied Bancshares, Inc.
    Schedule 13E-3
    File No. 005-80951
    Filed August 26, 2005

    Preliminary Proxy Statement on Schedule 14A
    Filed August 26, 2005
	File No. 000-51269

Dear Mr. Syfan:

      We have reviewed your filings and have the following
comments.
Where indicated, we think you should revise your documents in
response to these comments.  If you disagree, we will consider
your
explanation as to why our comment is inapplicable or a revision is
unnecessary.  Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.

      Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects.  We welcome
any questions you may have about our comments or on any other
aspect
of our review.  Feel free to call us at the telephone numbers
listed
at the end of this letter.

Schedule 13E-3

General
1. It appears that, if approved, Allied Bancshares will authorize
a
new class of shares and will provide for the reclassification of
shares of common stock held by owners of 1,000 or less shares of
common stock into the new class of preferred stock.  Since you are
effectively issuing new securities to your current common holders,
explain in your response letter what exemption from Section 5 of
the
Securities Act of 1933 you are relying on to issue those new
securities without registration. Describe all relevant facts that
you
believe support your reliance on any such exemption.
2. We note that you are purporting to create two classes of
securities out of what is currently a class of common shares, for
the
purpose of taking the company private by causing each "new" class
to
be held by less than 300 shareholders of record.  In your response
letter, provide your legal analysis as to why the preferred stock
and
the common stock are truly separate classes for purposes of
determining eligibility to deregister under Section 12 of the
Securities Exchange Act of 1934.  We note that it appears that you
are simply replacing one security with another that is convertible
into common shares.  We also note the limited circumstance,
immediately prior to the closing of a change of control, where
such
preferred shares will be converted to common stock.  However,
since
the preferred shares are convertible into common, we would like to
see your legal analysis as to the number of record holders that
will
remain after this transaction.  Please support your analysis with
citations to state statutory or case law, where appropriate. We
may
have further comments after reviewing your response.
3. Please revise your disclosure in response to Item 3 to ensure
you
disclose all of the information required by Item 1003(c) of
Regulation M-A.  Also, ensure that you provide the disclosure
responsive to Item 3 of Schedule 13E-3 in the proxy statement, as
it
appears that you will deliver the proxy statement to security
holders, and not the Schedule 13E-3.

Schedule 14A

General
4. Please provide a pro forma beneficial ownership table to
disclose
the beneficial owners of 5% or more of each class of Allied
Bancshares` common stock after the amendment to its articles of
incorporation.
5. Please provide a brief statement as to arrears in dividends in
respect to the outstanding common stock that is subject to this
transaction, as required by Item 12(d) of Schedule 14A or
otherwise
advise.
6. Rule 14a-4(b)(1) requires you to separately break out on the
proxy
card each matter to be voted upon.  Separate matters may be cross-
conditioned upon one another, such that one will not pass unless
the
other does.  See the September 2004 interim supplement to the
Division of Corporation Finance`s Manual of Publicly Available
Telephone Interpretations (available on our Web site at
www.sec.gov).
Please revise to allow security holders to separately vote on the
authorization of the new series of preferred and the
reclassification
of the shares held by shareholders who own less than 1,000 common
shares.  For further guidance, please see SEC Release 34-31326
(October 16, 1992).

Cover Page
7. On the cover page and in other prominent parts of the proxy
statement, including the Summary Term Sheet section, disclose that
current security holders will receive no consideration for their
shares in this transaction(s) and will lose the benefits of
holding
Section 12 registered securities. This revised disclosure should
include a discussion of the impact on shareholders of holding
unregistered securities.  Provide the same disclosure in each
place
in the proxy statement where you discuss what security holders
will
receive.
8. See our last comment.  Highlight the fact that security holders
who receive preferred stock will lose voting rights on any matter
other than a change in control transaction and will also lose the
benefits of registration. Provide similar disclosure as to the
effect
on common stock security holders going forward.
9. See our last two comments.  In a similarly prominent manner,
disclose that shareholders who own less than 1,000 shares of
common
stock and who will receive preferred stock in this transaction can
instead elect to receive cash for their shares by exercising
appraisal rights.  This disclosure should be accompanied by a
brief
explanation of how to exercise dissenters` appraisal rights, and
in
particular, that Georgia law apparently permits the exercise of
dissenters` rights by simply notifying the company within a set
time
period after the reclassification and redesignation transaction,
which obligates the company to pay the dissenting security holder
"fair value" for the shares, plus accrued interest.
10. See our last comment. Disclose what amount the company
believes
is fair value, or discuss how it will determine that value by
outlining the factors and the methodology it will use to calculate
fair value.

Summary Term Sheet, page 2
11. Please consolidate the disclosure in this Summary Term Sheet
and
the Question and Answer section to avoid duplication of the same
information.  In particular, we suggest you limit the Questions
and
Answers section to procedural matters relating to the meeting.
Generally revise your document to avoid the unnecessary repetition
of
disclosure.
12. In this section, provide a comparison of the rights of common
stock as compared to preferred stock security holders.  Consider
presenting in tabular format to most clearly present the
differences
between the new classes of securities, and the rights that
existing
common holders will give up in this transaction.
13. Discuss (briefly in this section and more extensively in the
Special Factors section) the reasons for the transaction, and in
particular the structure.  That is, why did the board choose a
method
of going private that results in shareholders receiving
unregistered
securities with no voting rights and no accompanying cash payment?
We note the reasons given for the going private transaction on
page
3.  However, each of these three reasons existed at the time the
company planned and completed its April 2004 initial public
offering.
Explain how the board of directors determined to proceed with its
initial public offering in light of these reasons and how the same
board of directors, less than 18 months after completion of the
offering, reached a different conclusion regarding its status as a
reporting company.

Purpose and Structure of the Reclassification Transaction, page 4
14. We refer you to the discussion regarding the treatment of
shares
held in "street name."  You indicate that security holders should
talk to their broker, nominee or agent to determine how they
expect
the reclassification transaction to affect them.  Explain whether
and
how a security holder may convert their shares so that they hold
them
of record rather than in street name or may purchase additional
shares, dispose of shares or change their ownership structure to
be
certain they either remain common security holders or become
preferred security holders.

Interests of Certain Persons in the Reclassification Transaction,
page 7
15. Please reconcile the disclosure in the first sentence of the
second paragraph with the disclosure on page 47 that Charles
Allgood,
one of your directors, currently holds only 100 shares of your
common
stock.  Make similar revisions on page 32 and throughout your
proxy
statement, as necessary.
16. Refer to the disclosure identified in our last comment.  Why
is
that disclosure phrased as an expectation rather than a fact?
That
is, disclose whether Mr. Allgood has indicated that he will
purchase
additional shares in order to exceed the 1,000 share threshold to
become a common stock holder, or whether he will receive shares
from
the company for this purpose. If so, explain why (that is, why
would
he prefer to hold common stock rather than preferred stock going
forward?).

Dissenters` Rights, page 9
17. Refer to our comment above concerning the need to prominently
describe the appraisal rights available to common stock holders.
This section should be expanded to provide that summary, rather
than
just a cite to another place in the document.

What will I receive in the reclassification transaction?, page 8
18. See our comments above.  Emphasize that security holders will
not
receive cash in this transaction unless they can and do exercise
appraisal rights.

Can I change my vote after I have mailed my proxy card?, page 10
19. Briefly describe how a shareholder may revoke a proxy here.
See
our comment below about the need to correct some of the disclosure
under "Voting and Revocation of Proxies" on page 45.

Special factors, p. 14

Background of the Reclassification Transaction, page 15
20. We note your disclosure that one of the reasons for the going
private transaction was that it is time-consuming and expensive to
maintain "so many shareholder accounts."  Given that your proposed
transaction does not reduce the number of security holder accounts
you need to maintain, explain your reasoning.
21. On a related matter, we note that as part of your initial
public
offering you did not intend to obtain a listing or create a
trading
market for your securities.  Since part of the reason you did not
receive the expected benefits of being a reporting company (i.e.,
an
active trading market and the ability to use stock to raise
capital
or make acquisitions) is due mainly to your actions or lack
thereof,
please clarify the reasons for this transaction.
22. You disclose that your board initially began to evaluate
repurchasing shares from security holders in June 2005.  Describe
what consideration, if any, the board gave to the fact that you
conducted a capital-raising offering in 2004 and that the current
transaction provides security holders with no cash consideration.
23. Expand the background section to describe in greater detail
the
discussions of the board of directors, at meetings or otherwise,
with
respect to the going private transaction.  We note, for example,
your
reference in the second full paragraph of page 16 to discussions
held
subsequent to your June 15, 2005 board meeting.  We also note that
there appear to have been very few meetings before a decision to
effect the going private transaction was reached.
24. We note your disclosure in the last paragraph of page 17 that
the
numerical threshold for the reclassification would result in a
number
of security holders that "would allow enough room for growth going
forward."  Explain your disclosure.  Why would you need such "room
for growth going forward"?  In addition, clarify that you are
apparently referring to growth without the need to re-register
your
securities under Section 12 of the Exchange Act.

Allied Bancshares` Reasons for the Reclassification Transaction,
page
18
25. Given that several of the factors you list as contributing to
the
decision to take the company private appear to have existed for at
least one year, such as the expenses to be incurred as the cost
savings from not having to comply with our filing requirements and
the lack of a liquid market for your securities, revise to
indicate
why you are undertaking the going private transaction at this time
as
opposed to other times in the company`s operating history.  Refer
to
Item 1013(c) of Regulation M-A.
26. Refer to the first bullet point in this section.  Given your
disclosure in the second bullet point with respect to continuing
to
deliver annual reports, explain how you will be able to realize
cost
savings on the expenses listed in the first bullet point.  Will
the
annual report cost less to prepare?  Will you be able to prepare
and
send unaudited financial statements?  Will counsel not review your
annual report before you deliver it?
27. Clarify which specific requirements of the Sarbanes-Oxley Act
would allow you to realize one-time savings of $105,000.
28. Refer to the third bullet point.  Clarify which direct and
indirect costs you are referring to, how those costs have
"recently
increased as a result of heightened government oversight" and what
you mean by "recently."
29. We note your reference to "low trading volume."  Please
reconcile
this disclosure with disclosure elsewhere in the proxy statement
that
there is no trading in your shares except for privately arranged
transactions.
30. Please explain your statement in the sixth bullet point that
holders of shares of common and preferred stock will participate
"at
the same value per share."  Given that these classes of securities
have different rights, how will their holders be able to
participate
at the same value per share?

Allied Bancshares` Position as to the Fairness of the Transaction,
page 21
31. Please revise this section generally to avoid excessive
repetition of the same information.  In addition, reorganize the
disclosure to separately address fairness to unaffiliated holders
of
preferred stock and of common stock.
32. You disclose on page 21 that the board believes that the
transaction and the terms and provisions of the reclassification
transaction are substantively and procedurally fair to your
unaffiliated security holders.  Please clarify whether the board`s
conclusion applies to security holders that will receive preferred
stock and to security holders that will continue to own shares of
common stock.  As noted in our last comment, both sets of security
holders should be addressed.
33. Expand to address the loss of the benefits of registration
under
Section 12 of the Securities Exchange Act of 1934 as a potential
negative associated with this transaction.
34. We note in the second bullet point on page 23 that you intend
to
continue providing security holders with your annual report and
"periodic information."  Specify the type of "periodic
information"
you intend to distribute.
35. We note that you disclose on page 23 that your board of
directors
is primarily comprised of independent members.  Please revise to
define "primarily."  In this regard, disclose the total number of
directors and the number of directors that are independent.  Also,
your disclosure should explain the criteria upon which you are
judging independence.
36. We refer you page 25.  Please explain your assertion that the
board considered the difference in value between the preferred
stock
(without voting rights) and the common stock (with voting rights)
to
be "minimal, since the holders of common stock whose shares would
be
converted into preferred stock