2                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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


For the quarterly period ended June 30, 2007       Commission File No. 000-22054


                           COMMUNITY BANKSHARES, INC.
 -------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


         South Carolina                                    57-0966962
   ------------------------------              --------------------------------
  (State or other jurisdiction of              (IRS Employer Identification No.)
  incorporation or organization)


                               102 Founders Court
                        Orangeburg, South Carolina 29118
--------------------------------------------------------------------------------
               (Address of principal executive offices, zip code)


                                 (803) 535-1060
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)



         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 mark 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. (Check one):

Large accelerated filer [ ]    Accelerated filer [ ]  Non-accelerated filer [X]


         Indicate by check mark  whether  the  registrant  is shell  company (as
defined in Rule 12b-2 of the Exchange Act).

         Yes [ ]  No [X]

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest practicable date: Common Stock, no par
or stated value, 4,485,556 shares outstanding on July 25, 2007.



<PAGE>


                           COMMUNITY BANKSHARES, INC.

                                    FORM 10-Q

                                      Index

<TABLE>
<CAPTION>
                                                                                                                     Page
PART I -          FINANCIAL INFORMATION

Item 1.           Financial Statements

<S>                                                                                                                    <C>
                  Consolidated Balance Sheets ......................................................................    3
                  Consolidated Statements of Income ................................................................    4
                  Consolidated Statements of Changes in Shareholders' Equity .......................................    5
                  Consolidated Statements of Cash Flows ............................................................    6
                  Notes to Unaudited Consolidated Financial Statements .............................................    7

Item 2.           Management's Discussion and Analysis of Financial Condition and Results of Operations ............   10
Item 3.           Quantitative and Qualitative Disclosures About Market Risk .......................................   23
Item 4T.          Controls and Procedures ..........................................................................   23

PART II -         OTHER INFORMATION

Item 4.           Submission of Matters to a Vote of Security Holders ..............................................   24
Item 6.           Exhibits .........................................................................................   25

SIGNATURES .........................................................................................................   26
</TABLE>




                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1. - Financial Statements

COMMUNITY BANKSHARES, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
                                                                                                 (Unaudited)
                                                                                                   June 30,          December 31,
                                                                                                      2007               2006
                                                                                                      -----              ----
                                                                                                       (Dollars in thousands)
Assets
<S>                                                                                                <C>                <C>
     Cash and due from banks .................................................................     $  16,879          $  17,622
     Federal funds sold ......................................................................         7,987             29,102
                                                                                                   ---------          ---------
            Total cash and cash equivalents ..................................................        24,866             46,724
     Interest bearing deposits with other banks ..............................................           449              1,926
     Securities available-for-sale ...........................................................        78,693             84,783
     Securities held-to-maturity (estimated fair value $1,750 for 2007
          and $1,750 for 2006) ...............................................................         1,750              1,750
     Other investments .......................................................................         3,114              3,246
     Loans held for sale .....................................................................         9,121              9,235
     Loans receivable ........................................................................       447,945            409,720
         Less, allowance for loan losses .....................................................        (5,733)            (4,662)
                                                                                                   ---------          ---------
            Net loans ........................................................................       442,212            405,058
     Premises and equipment - net ............................................................        10,379             10,307
     Accrued interest receivable .............................................................         3,537              3,821
     Net deferred income tax assets ..........................................................         1,414              1,231
     Goodwill ................................................................................         4,321              4,321
     Core deposit intangible assets ..........................................................         2,468              2,591
     Prepaid expenses and other assets .......................................................         3,245              3,524
                                                                                                   ---------          ---------

            Total assets .....................................................................     $ 585,569          $ 578,517
                                                                                                   =========          =========

Liabilities
     Deposits
         Noninterest bearing .................................................................     $  59,067          $  61,693
         Interest bearing ....................................................................       421,178            421,928
                                                                                                   ---------          ---------
            Total deposits ...................................................................       480,245            483,621
     Short-term borrowings ...................................................................        18,948             12,948
     Long-term debt ..........................................................................        29,683             26,188
     Accrued interest payable ................................................................         1,525              1,578
     Accrued expenses and other liabilities ..................................................         1,055              1,558
                                                                                                   ---------          ---------
            Total liabilities ................................................................       531,456            525,893
                                                                                                   ---------          ---------

Shareholders' equity
     Common stock - no par  value; 12,000,000 shares authorized; issued and
         outstanding - 4,483,556 for 2007 and 4,441,220 for 2006 .............................        31,017             30,603
     Additional paid-in capital ..............................................................            27                  -
     Retained earnings .......................................................................        23,782             22,382
     Accumulated other comprehensive income (loss) ...........................................          (713)              (361)
                                                                                                   ---------          ---------
            Total shareholders' equity .......................................................        54,113             52,624
                                                                                                   ---------          ---------

            Total liabilities and shareholders' equity .......................................     $ 585,569          $ 578,517
                                                                                                   =========          =========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.



                                       3
<PAGE>


COMMUNITY BANKSHARES, INC.
Consolidated Statements of Income
<TABLE>
<CAPTION>
                                                                                                (Unaudited)
                                                                                            Period Ended June 30,
                                                                                            ---------------------
                                                                                 Three Months                     Six Months
                                                                                 ------------                     ----------
                                                                            2007             2006            2007             2006
                                                                            -----            -----           -----            ----
                                                                                    (Dollars in thousands, except per share)

Interest and dividend income
<S>                                                                       <C>              <C>              <C>              <C>
     Loans, including fees .....................................          $ 8,628          $ 8,156          $16,785          $15,839
     Interest bearing deposits with other banks ................               13               35               46               55
     Debt securities ...........................................              984              556            2,000            1,109
     Dividends .................................................               46               41               93               75
     Federal funds sold ........................................               80              315              260              638
                                                                          -------          -------          -------          -------
            Total interest and dividend income .................            9,751            9,103           19,184           17,716
                                                                          -------          -------          -------          -------

Interest expense
     Deposits
         Time deposits $100M and over ..........................            1,080              939            2,073            1,798
         Other deposits ........................................            2,692            2,233            5,337            4,177
                                                                          -------          -------          -------          -------
            Total interest expense on deposits .................            3,772            3,172            7,410            5,975
     Short-term borrowings .....................................              187               89              303              190
     Long-term debt ............................................              475              475              912              957
                                                                          -------          -------          -------          -------
            Total interest expense .............................            4,434            3,736            8,625            7,122
                                                                          -------          -------          -------          -------

Net interest income ............................................            5,317            5,367           10,559           10,594
Provision for loan losses ......................................              175              675              550            1,290
                                                                          -------          -------          -------          -------
Net interest income after provision ............................            5,142            4,692           10,009            9,304
                                                                          -------          -------          -------          -------

Noninterest income
     Service charges on deposit accounts .......................              939              862            1,830            1,694
     Mortgage loan brokerage income ............................              744              987            1,399            1,824
     Net securities gains ......................................                -                -                2                1
     Gains on sales of other investments .......................              712                -              712                -
     Other .....................................................              372              211              649              475
                                                                          -------          -------          -------          -------
            Total noninterest income ...........................            2,767            2,060            4,592            3,994
                                                                          -------          -------          -------          -------

Noninterest expenses
     Salaries and employee benefits ............................            3,084            2,753            6,018            5,332
     Premises and equipment ....................................              619              613            1,181            1,237
     Advertising ...............................................              138               98              281              173
     Supplies ..................................................              110               85              235              157
     Other .....................................................            1,650            1,083            3,000            2,360
                                                                          -------          -------          -------          -------
            Total noninterest expenses .........................            5,601            4,632           10,715            9,259
                                                                          -------          -------          -------          -------

Income before income taxes .....................................            2,308            2,120            3,886            4,039
Income tax expense .............................................              838              747            1,411            1,465
                                                                          -------          -------          -------          -------
Net income .....................................................          $ 1,470          $ 1,373          $ 2,475          $ 2,574
                                                                          =======          =======          =======          =======

Per share
     Net income ................................................          $  0.33          $  0.31          $  0.56          $  0.58
     Net income - diluted ......................................             0.32             0.30             0.55             0.57
     Cash dividends declared ...................................             0.12             0.11             0.24             0.22
</TABLE>

See accompanying notes to unaudited consolidated financial statements.



                                       4
<PAGE>


COMMUNITY BANKSHARES, INC.
Consolidated Statements of Changes in Shareholders' Equity

<TABLE>
<CAPTION>
                                                                    (Unaudited)

                                                                Common Stock                                Accumulated
                                                                ------------         Additional                Other
                                                             Number of                Paid-in   Retained   Comprehensive
                                                              Shares      Amount      Capital   Earnings    Income (Loss)    Total
                                                              ------      ------      -------   --------    -------------    -----
                                                                          (Dollars in thousands, except per share)

<S>                                                         <C>         <C>         <C>         <C>          <C>          <C>
Balance, January 1, 2006 ................................   4,404,303   $  30,202   $       -   $  19,325    $    (535)   $  48,992
                                                                                                                          ---------
Comprehensive income
    Net income ..........................................           -           -           -       2,574            -        2,574
                                                                                                                          ---------
    Unrealized holding gains and losses
      on available-for-sale securities arising
      during the period, net of income taxes of $75 .....           -           -           -           -         (132)        (132)
    Reclassification adjustment for losses (gains)
      realized in income, net of income taxes of $0 .....           -           -           -           -           (1)          (1)
                                                                                                                          ---------
    Total other comprehensive income (loss) .............           -           -           -           -            -         (133)
                                                                                                                          ---------
    Total comprehensive income ..........................           -           -           -           -            -        2,441
                                                                                                                          ---------
Proceeds of sale of common stock ........................       1,000          16           -           -            -           16
Exercise of employee stock options ......................      30,595         328           -           -            -          328
Cash dividends declared, $.22 per share .................           -           -           -        (974)           -         (974)
                                                            ---------   ---------   ---------   ---------    ---------    ---------
Balance, June 30, 2006 ..................................   4,435,898   $  30,546   $       -   $  20,925    $    (668)   $  50,803
                                                            =========   =========   =========   =========    =========    =========


Balance, January 1, 2007 ................................   4,441,220   $  30,603   $       -   $  22,382    $    (361)   $  52,624
                                                                                                                          ---------
Comprehensive income
    Net income ..........................................           -           -           -       2,475            -        2,475
                                                                                                                          ---------
    Unrealized holding gains and losses
      on available-for-sale securities arising
      during the period, net of income taxes of $174 ....           -           -           -           -         (351)        (351)
    Reclassification adjustment for losses (gains)
      realized in income, net of income taxes of $1 .....           -           -           -           -           (1)          (1)
                                                                                                                          ---------
    Total other comprehensive income (loss) .............           -           -           -           -            -         (352)
                                                                                                                          ---------
    Total comprehensive income ..........................           -           -           -           -            -        2,123
                                                                                                                          ---------
Share-based compensation ................................           -           -          27           -            -           27
Proceeds of sale of common stock ........................         500           8           -           -            -            8
Exercise of employee stock options ......................      41,836         406           -           -            -          406
Cash dividends declared, $.24 per share .................           -           -           -      (1,075)           -       (1,075)
                                                            ---------   ---------   ---------   ---------    ---------    ---------
Balance, June 30, 2007 ..................................   4,483,556   $  31,017   $      27   $  23,782    $    (713)   $  54,113
                                                            =========   =========   =========   =========    =========    =========
</TABLE>






See accompanying notes to unaudited consolidated financial statements.



                                       5
<PAGE>


COMMUNITY BANKSHARES, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                                                                (Unaudited)
                                                                                                              Six Months Ended
                                                                                                                  June 30,
                                                                                                                  --------
                                                                                                           2007               2006
                                                                                                           -----              ----
                                                                                                             (Dollars in thousands)
Operating activities
<S>                                                                                                    <C>                <C>
     Net income ..............................................................................         $   2,475          $   2,574
     Adjustments to reconcile net income to net
         cash (used) provided by operating activities
            Provision for loan losses ........................................................               550              1,290
            Depreciation and amortization ....................................................               537                624
            Net amortization of securities ...................................................               (15)                 9
            Net securities gains .............................................................                (2)                (1)
            Net gains on sales of other investments ..........................................              (712)                 -
            Proceeds of sales of loans held for sale .........................................            76,040            113,356
            Originations of loans held for sale ..............................................           (75,926)          (121,701)
            Decrease (increase) in accrued interest receivable ...............................               284                 (2)
            Decrease (increase) in other assets ..............................................               868               (165)
            Gains on sales of foreclosed assets ..............................................               (48)                 -
            (Decrease) increase in accrued interest payable ..................................               (53)               336
            (Decrease) increase in other liabilities .........................................              (503)               709
            Share-based compensation .........................................................                27                  -
                                                                                                       ---------          ---------
                Net cash provided (used) by operating activities .............................             3,522             (2,971)
                                                                                                       ---------          ---------
Investing activities
     Net decrease (increase) in interest bearing deposits with other banks ...................             1,477               (573)
     Purchases of available-for-sale securities ..............................................            (1,966)            (6,499)
     Maturities, calls and paydowns of available-for-sale securities .........................             7,546              7,872
     Proceeds of sales of other investments ..................................................             1,182                203
     Purchases of other investments ..........................................................              (338)                 -
     Net increase in loans made to customers .................................................           (38,831)            (8,246)
     Purchases of premises and equipment .....................................................              (530)            (1,379)
     Proceeds from sales and other disposals of fixed assets .................................                44                  -
     Proceeds from sales of foreclosed assets ................................................               578                  -
                                                                                                       ---------          ---------
                Net cash used by investing activities ........................................           (30,838)            (8,622)
                                                                                                       ---------          ---------
Financing activities
     Net decrease in deposits ................................................................            (3,376)            (4,966)
     Net increase in short-term borrowings ...................................................             6,000              3,445
     Proceeds from issuing long-term debt ....................................................             7,500                  -
     Repayment of long-term debt .............................................................            (4,005)            (6,004)
     Exercise of employee stock options ......................................................               406                328
     Sale of common stock ....................................................................                 8                 16
     Cash dividends paid .....................................................................            (1,075)              (974)
                                                                                                       ---------          ---------
                Net cash provided (used) by financing activities .............................             5,458             (8,155)
                                                                                                       ---------          ---------
Decrease in cash and cash equivalents ........................................................           (21,858)           (19,748)
Cash and cash equivalents, beginning of period ...............................................            46,724             51,991
                                                                                                       ---------          ---------
Cash and cash equivalents, end of period .....................................................         $  24,866          $  32,243
                                                                                                       =========          =========
</TABLE>


See accompanying notes to unaudited consolidated financial statements.



                                       6
<PAGE>

<TABLE>
<CAPTION>

Supplemental Disclosures of Cash Flow Information
<S>                                                                                                      <C>                  <C>
     Cash payments for interest ..........................................................               $8,678               $6,786
                                                                                                         ======               ======
     Cash payments for income taxes ......................................................               $1,625               $  631
                                                                                                         ======               ======

Supplemental Disclosures of Non-cash Activities
     Transfers from loans receivable to foreclosed assets ................................               $1,127                  $ -
                                                                                                         ======               ======
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

COMMUNITY BANKSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

Accounting  Principles - A summary of  significant  accounting  policies and the
audited  financial  statements  for 2006 are included in  Community  Bankshares,
Inc.'s (the  "Company" or "CBI")  Annual  Report on Form 10-K for the year ended
December 31, 2006 filed with the  Securities  and Exchange  Commission.  Certain
amounts in the 2006 financial  statements  have been  reclassified to conform to
the current presentation.

Management  Opinion  - The  interim  financial  statements  in this  report  are
unaudited.  In the  opinion of  management,  all the  adjustments  necessary  to
present a fair  statement of the results for the interim  period have been made.
Such adjustments are of a normal and recurring nature. The results of operations
for any  interim  period are not  necessarily  indicative  of the  results to be
expected for an entire year. These interim  financial  statements should be read
in conjunction with the annual financial  statements and notes thereto contained
in the 2006 Annual Report on Form 10-K.

Nonperforming  Loans - As of June 30, 2007,  there were $5,157,000 in nonaccrual
loans and no loans 90 or more days past due and still accruing interest.

Earnings Per Share - Basic earnings per share is computed by dividing net income
applicable  to common  shares by the weighted  average  number of common  shares
outstanding.  Diluted earnings per share is computed by dividing  applicable net
income by the weighted  average  number of shares  outstanding  and any dilutive
potential  common  shares and  dilutive  stock  options.  It is assumed that all
dilutive  stock  options are  exercised at the beginning of each period and that
the proceeds are used to purchase  shares of the  Company's  common stock at the
average market price during the period.  Net income per share and net income per
share, assuming dilution, were computed as follows:


                                       7
<PAGE>

<TABLE>
<CAPTION>
                                                                                          (Unaudited)
                                                                                      Period Ended June 30,
                                                                                      ---------------------
                                                                         Three Months                          Six Months
                                                                         ------------                          ----------
                                                                    2007               2006               2007              2006
                                                                    ----               ----               ----              ----
                                                                      (Dollars in thousands, except per share amounts)

Net income per share, basic
<S>                                                              <C>                <C>                <C>                <C>
  Numerator - net income ...............................         $    1,470         $    1,373         $    2,475         $    2,574
                                                                 ==========         ==========         ==========         ==========
  Denominator
    Weighted average common shares
      issued and outstanding ...........................          4,476,229          4,434,012          4,462,464          4,424,091
                                                                 ==========         ==========         ==========         ==========

      Net income per share, basic ......................         $      .33         $      .31         $      .56         $      .58
                                                                 ==========         ==========         ==========         ==========

Net income per share, assuming dilution
  Numerator - net income ...............................         $    1,470         $    1,373         $    2,475         $    2,574
                                                                 ==========         ==========         ==========         ==========
  Denominator
    Weighted average common shares
      issued and outstanding ...........................          4,476,229          4,434,012          4,462,464          4,424,091
    Effect of dilutive stock options ...................             49,123             69,624             52,981             70,690
                                                                 ----------         ----------         ----------         ----------
               Total shares ............................          4,525,352          4,503,636          4,515,445          4,494,781
                                                                 ==========         ==========         ==========         ==========

     Net income per share, assuming dilution ..........         $      .32         $      .30         $      .55         $      .57
                                                                 ==========         ==========         ==========         ==========
</TABLE>

Stock  Based  Compensation  -  Effective  January 1,  2006,  the  Company  began
accounting  for  compensation  expenses  related  to stock  options  granted  to
employees and directors  under the  recognition  and  measurement  principles of
Statement of  Accounting  Standards  No.  123(R)  "Share-Based  Payment"  ("SFAS
123(R)")  using the modified  prospective  application  method.  The Company had
previously  elected to continue using the  methodology of Accounting  Principles
Board Opinion No. 25 ("APB No. 25"), "Accounting for Stock Issued to Employees,"
to account for compensation  expenses related to stock-based  compensation until
the mandatory effective date for SFAS 123(R).

Options  previously  issued under the Company's  plans had no intrinsic value at
the grant date and no  compensation  cost was recognized in accordance  with APB
No. 25.  Statement of Financial  Accounting  Standards No. 123 ("SFAS No. 123"),
"Accounting  for  Stock-Based  Compensation,"  required  entities to provide pro
forma  disclosures of net income,  and earnings per share,  as if the fair value
based method of accounting  promulgated by that standard had been applied. Under
the  modified  prospective  application  method of SFAS  123(R),  the Company is
required  to apply  SFAS  123(R)  only to new  awards  and to  awards  modified,
repurchased or cancelled after the required  effective date.  Compensation  cost
would  also  be  recognized  for  the  portions  of  previously  granted  awards
outstanding  which had not vested on the effective date. The Company had no such
awards outstanding as of January 1, 2006 and the Company made no awards of stock
options  during  2006.  During  the  first  six  months  of  2007,   stock-based
compensation included in salaries and benefits totaled $27,000.

Variable  Interest  Entity - On March 8, 2004,  CBI  sponsored the creation of a
Variable Interest Entity ("VIE"), SCB Capital Trust I (the "Trust"),  and is the
sole owner of the common  securities issued by the Trust. On March 10, 2004, the
Trust issued  $10,000,000 in floating rate capital  securities.  The proceeds of
this issuance, and the amount of CBI's capital investment,  were used to acquire
$10,310,000   principal  amount  of  CBI's  floating  rate  junior  subordinated
deferrable  interest debt  securities  ("Debentures")  due April 7, 2034,  which
securities,  and the accrued interest  thereon,  now constitute the Trust's sole
assets.  The  interest  rate  associated  with  the  debt  securities,  and  the
distribution  rate  on the  common  securities  of the  Trust,  was  established


                                       8
<PAGE>

initially at 3.91% and is  adjustable  quarterly at 3 month LIBOR plus 280 basis
points.  The index  rate  (LIBOR)  may not be lower  than  1.11%.  CBI may defer
interest payments on the Debentures for up to twenty consecutive  quarters,  but
not beyond the stated  maturity date of the  Debentures.  In the event that such
interest payments are deferred by CBI, the Trust may defer  distributions on the
common  securities.  In such an event, CBI would be restricted in its ability to
pay  dividends on its common stock and to perform under other  obligations  that
are not senior to the junior subordinated Debentures.

         The  Debentures are redeemable at par at the option of CBI, in whole or
in part, on any interest  payment date on or after April 7, 2009.  Prior to that
date,  the  Debentures  are  redeemable  at 105% of par upon the  occurrence  of
certain  events  that would  have a  negative  effect on the Trust or that would
cause it to be required to be  registered  as an  investment  company  under the
Investment  Company Act of 1940 or that would cause trust  preferred  securities
not to be eligible to be treated as Tier 1 capital by the Federal Reserve Board.
Upon repayment or redemption of the Debentures,  the Trust will use the proceeds
of the transaction to redeem an equivalent amount of trust preferred  securities
and trust common securities.  The Trust's  obligations under the trust preferred
securities are  unconditionally  guaranteed by CBI. In accordance with Financial
Accounting Standards Board  Interpretation  46(R), the Trust is not consolidated
in the Company's financial statements.

         The  Company's  investment  in the  Trust is  carried  at cost in other
assets and the  debentures  are included in long-term  debt in the  consolidated
balance sheet.

New Accounting Pronouncements

The  Financial   Accounting   Standards  Board  issued  Statement  of  Financial
Accounting  Standards  No. 159 "The Fair Value Option for  Financial  Assets and
Financial  Liabilities,"  ("SFAS No. 159" or the "Statement") which is effective
for fiscal years beginning after November 15, 2007. Under the provisions of SFAS
No. 159,  entities may choose,  but are not required,  to measure many financial
instruments  and certain  other items at their fair values,  with changes in the
fair  values  of those  instruments  reported  in  earnings.  While  most of the
Statement's  provisions apply only to entities that elect the fair value option,
SFAS No. 159 also  applies to all entities  with trading and  available-for-sale
securities,  such as the Company. The Company has not determined what effect, if
any,  the  Statement  will  have  on  its  future  financial  statements,  other
agreements, or planned or intended changes in business practices.

                           FORWARD LOOKING STATEMENTS

         Statements  included in this report which are not  historical in nature
are intended to be, and are hereby  identified as  `forward-looking  statements'
for  purposes  of the safe  harbor  provided  by Section  21E of the  Securities
Exchange Act of 1934, as amended.  Forward-looking statements include statements
concerning plans, objectives,  goals,  strategies,  future events or performance
and underlying  assumptions and other statements which are other than statements
of historical facts. Such forward-looking statements may be identified,  without
limitation, by the use the of the words "anticipates,"  "believes," "estimates,"
"expects," "intends," "plans," "predicts,"  "projects," and similar expressions.
The Company's expectations,  beliefs, estimates and projections are expressed in
good faith and are believed by the Company to have a reasonable basis, including
without  limitation,  management's  examination of historical  operating trends,


                                       9
<PAGE>

data  contained in the  Company's  records and other data  available  from third
parties, but there can be no assurance that management's expectations,  beliefs,
estimates or projections will result or be achieved or accomplished. The Company
cautions readers that forward-looking statements,  including without limitation,
those  relating to the Company's  recent and  continuing  expansion,  its future
business  prospects,   revenues,  working  capital,  liquidity,  capital  needs,
interest  costs,  income,  and adequacy of the  allowance  for loan losses,  are
subject to risks and  uncertainties  that could cause  actual  results to differ
materially  from  those  indicated  in the  forward-looking  statements,  due to
several important factors herein  identified,  among others, and other risks and
factors  identified  from time to time in the  Company's  reports filed with the
Securities and Exchange Commission. The risks and uncertainties include, but are
not limited to:

     o    the Company's growth and ability to maintain growth;

     o    governmental  monetary and fiscal policies, as well as legislative and
          regulatory changes;

     o    the effects of interest rate changes on our level and  composition  of
          deposits,  loan  demand  and the  value  of our  loan  collateral  and
          securities;

     o    the effects of competition from other financial institutions operating
          in the Company's  market areas and elsewhere,  including  institutions
          operating locally, regionally, nationally and internationally;

     o    failure of assumptions  underlying the  establishment of the allowance
          for loan losses, including the value of collateral securing loans; and

     o    loss of consumer  confidence and economic  disruptions  resulting from
          terrorist activities.

         The Company  undertakes no obligation to publicly  update or revise any
forward-looking  statements,  whether  as a result  of new  information,  future
events or otherwise.

                        REFERENCES TO OUR WEBSITE ADDRESS

         References to our website address  throughout this Quarterly  Report on
Form 10-Q and in any documents incorporated into this Form 10-Q by reference are
for informational purposes only, or to fulfill specific disclosure  requirements
of the Securities and Exchange Commission's rules or the American Stock Exchange
listing standards. These references are not intended to, and do not, incorporate
the contents of our website by reference into this Form 10-Q or the accompanying
materials.

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

Critical Accounting Policies

         CBI  has  adopted  various  accounting   policies,   which  govern  the
application of accounting  principles generally accepted in the United States of
America  in the  preparation  of CBI's  financial  statements.  The  significant
accounting policies of CBI are described in detail in the notes to CBI's audited
consolidated  financial  statements included in CBI's 2006 Annual Report on Form
10-K filed with the Securities and Exchange Commission.

         Certain accounting policies involve significant judgments and estimates
by  management,  which have a material  impact on the carrying  value of certain
assets and  liabilities.  Management  considers such  accounting  policies to be
critical accounting policies. The judgments and estimates used by management are
based on  historical  experience  and other  factors,  which are  believed to be
reasonable under the  circumstances.  Because of the nature of the judgments and


                                       10
<PAGE>

assumptions made by management, actual results could differ from these judgments
and  estimates,  which could have a material  impact on the  carrying  values of
assets and liabilities and the results of operations of CBI.

         CBI is a holding  company for a community  bank and a mortgage  company
and, as a financial  institution,  believes the  allowance  for loan losses is a
critical  accounting  policy that  requires the most  significant  judgments and
estimates used in preparation of its consolidated financial statements. Refer to
the sections  "Allowance for Loan Losses" and "Provision for Loan Losses" in the
Annual  Report  on Form  10-K  for  2006  for a  detailed  description  of CBI's
estimation process and methodology related to the allowance for loan losses.


CHANGES IN FINANCIAL CONDITION

         During the six months ended June 30, 2007, loans  receivable  increased
by $38,225,000,  or 9.3%, over the amount as of December 31, 2006. The growth in
this earning asset category was funded largely by reducing the amounts of liquid
assets,  most  notably  federal  funds  sold,  but  secondarily   maturities  of
marketable securities  available-for-sale.  Most of this growth was attributable
to new business development in the Midlands region.

         The  aggregate   amounts  of  deposits  and  short-term  and  long-term
borrowings  increased by only $6,119,000,  or 1.17%,  from the December 31, 2006
amounts.  During the second  quarter of 2007,  the Company  obtained  short-term
brokered  certificates of deposit totaling $7,213,000.  These wholesale deposits
were used primarily to fund loan growth. The overall level of deposits decreased
by  $3,376,000  or 0.7%.  The level of deposits has been impacted by normal cash
flow requirements of large local government  customers.  Management expects that
the  Company  will  continue to utilize  this and similar  sources of funding as
needed to supplement the Company's marketing efforts for deposit accounts within
its market  areas.  Given the current  expectations  for interest  rates,  it is
expected  that the rates paid by the Company to fund asset growth will  increase
in the near term.


RESULTS OF OPERATIONS

Earnings Performance

Three Months Ended June 30, 2007 and 2006

         For the quarter  ended June 30,  2007,  CBI recorded  consolidated  net
income of $1,470,000,  compared with  $1,373,000  for the  comparable  period of
2006. This  represents an increase of $97,000 or 7.1%.  Basic earnings per share
and earnings per share, assuming dilution were $.33 and $.32,  respectively,  in
the 2007  period,  compared  with  $.31  and  $.30,  respectively,  for the 2006
quarter.

         Compared  with the second  quarter of 2006,  operating  results for the
second quarter of 2007 were affected  primarily by higher  salaries and employee
benefits and other noninterest  expenses,  lower mortgage loan brokerage income,
non-recurring  gains of $712,000 on the sale of other investments and a decrease
of $500,000 in the amount  provided for loan losses.  Market  interest rates, as
well as the rates associated with the Company's  interest earning assets and its
interest-bearing liabilities were generally higher in the 2007 period reflecting
the effects of Federal Reserve policies. The increase in rates paid for interest
bearing  liabilities  was greater  than the  increased  yield on earning  assets
resulting in a decrease in net interest margin.


                                       11
<PAGE>


<TABLE>
<CAPTION>
                                                                               Summary Income Statement
                                                                               ------------------------
                                                                                (Dollars in thousands)
For the Three Months Ended June 30,                          2007                2006            Dollar Change   Percentage Change
-----------------------------------                          ----                ----            -------------   -----------------
<S>                                                         <C>                 <C>                 <C>                <C>
Interest income ....................................        $9,751              $9,103              $  648             7.1%
Interest expense ...................................         4,434               3,736                 698            18.7%
                                                            ------              ------              ------
Net interest income ................................         5,317               5,367                 (50)           -0.9%
Provision for loan losses ..........................           175                 675                (500)          -74.1%
Noninterest income .................................         2,767               2,060                 707            34.3%
Noninterest expenses ...............................         5,601               4,632                 969            20.9%
Income tax expense .................................           838                 747                  91            12.2%
                                                            ------              ------              ------
Net income .........................................        $1,470              $1,373              $   97             7.1%
                                                            ======              ======              ======
</TABLE>


Six Months Ended June 30, 2007 and 2006

         CBI's  consolidated  net income for the six months  ended June 30, 2007
was positively  affected by a $740,000 reduction in the amount provided for loan
losses and gains of $712,000 on the disposition of other  investments.  However,
lower  mortgage  loan  brokerage  income and  increases in salaries and employee
benefits,  advertising,  supplies  and other  expenses  more than  offset  those
positive effects.

<TABLE>
<CAPTION>
                                                                                   Summary Income Statement
                                                                                   ------------------------
                                                                                    (Dollars in thousands)
For the Six Months Ended June 30,                             2007                2006           Dollar Change     Percentage Change
---------------------------------                             ----                ----           -------------     -----------------
<S>                                                         <C>                 <C>                 <C>                     <C>
Interest income .....................................       $19,184             $17,716             $ 1,468                 8.3%
Interest expense ....................................         8,625               7,122               1,503                21.1%
                                                            -------             -------             -------
Net interest income .................................        10,559              10,594                 (35)               -0.3%
Provision for loan losses ...........................           550               1,290                (740)              -57.4%
Noninterest income ..................................         4,592               3,994                 598                15.0%
Noninterest expenses ................................        10,715               9,259               1,456                15.7%
Income tax expense ..................................         1,411               1,465                 (54)               -3.7%
                                                            -------             -------             -------
Net income ..........................................       $ 2,475             $ 2,574             $   (99)               -3.8%
                                                            =======             =======             =======
</TABLE>

Net Interest Income

         Net interest income is the amount of interest income earned on interest
earning assets  (primarily  loans,  securities,  interest  bearing deposits with
other banks,  and federal  funds sold),  less the interest  expense  incurred on
interest bearing  liabilities  (interest bearing deposits and other borrowings),
and is the principal  source of the Company's  earnings.  Net interest income is
affected by the level of  interest  rates,  volume and mix of  interest  earning
assets  and  interest  bearing  liabilities  and the  relative  funding of those
assets.


                                       12
<PAGE>

Three Months Ended June 30, 2007 and 2006

         Net  interest  income  for the three  months  ended  June 30,  2007 was
$5,317,000,  a decrease of $50,000,  or 0.9%,  from the amount  reported for the
second  quarter of 2006.  Interest  income  and  interest  expense  for the 2007
quarter were both significantly  higher than during the same period of 2006, due
to increases in the related  balance sheet items and increases in interest rates
earned on, or paid for,  those items.  Basic earnings per share and earnings per
share, assuming dilution were $0.33and $.32,  respectively,  in the 2007 period,
compared with $.31 and $.30, respectively, for the 2006 quarter.

         The average rate earned on loans,  including  loans held for sale,  was
7.81% and 7.54% for the  second  quarters  of 2007 and 2006,  respectively.  The
average  yield on  earning  assets  was 7.30% for the  second  quarter  of 2007,
compared  with 6.99% for the second  quarter of 2006.  The average  cost of time
deposits increased to 4.68% for the second quarter of 2007,  compared with 4.03%
for  the  same  period  of  2006.  The  average  cost  of  all  interest-bearing
liabilities  was 3.89%  for the 2007  quarter  and 3.40% for the same  period of
2006. Accordingly, the interest rate spread (interest earning assets yield minus
the rate paid for  interest-bearing  liabilities)  for the 2007  second  quarter
narrowed to 3.41%,  or 18 basis  points  lower than for the same period of 2006,
and net yield on earning assets (net interest income divided by average interest
earning  assets) for the 2007  quarter was 3.98%,  or 14 basis points lower than
for the same period of 2006.

         Average amounts of interest earning assets were  $13,583,000  higher in
the  2007  period   than  in  the  2006  period  and  the  average   amounts  of
interest-bearing  liabilities  were  $15,924,000  higher in the 2007 three month
period.  During the second  quarter of 2007,  the  Company  was more  reliant on
interest-bearing  liabilities to fund earning assets than it was during the 2006
second quarter.


                                       13
<PAGE>

<TABLE>
<CAPTION>
                                                                               Average Balances, Yields and Rates
                                                                                  Three Months Ended June 30,
                                                                                  ---------------------------
                                                                            2007                                 2006
                                                                            ----                                 ----
                                                                          Interest                             Interest
                                                               Average     Income/    Yields/       Average     Income/     Yields/
                                                              Balances     Expense    Rates(1)     Balances     Expense     Rates(1)
                                                              --------     -------    --------     --------     -------     --------
                                                                                     (Dollars in thousands)
Assets
<S>                                                          <C>          <C>            <C>      <C>           <C>           <C>
Interest earning deposits ...............................    $   1,008    $      13      5.17%    $   1,791     $      35     7.84%
Investment securities - taxable .........................       80,597          988      4.92%       56,700           553     3.91%
Investment securities - tax exempt (2) ..................        4,645           42      3.63%        4,966            44     3.55%
Federal funds sold ......................................        6,452           80      4.97%       25,220           315     5.01%
Loans, including loans held for sale (2)(3) .............      443,325        8,628      7.81%      433,767         8,156     7.54%
                                                             ---------    ---------               ----------    ---------
         Total interest earning assets ..................      536,027        9,751      7.30%      522,444         9,103     6.99%
Cash and due from banks .................................       16,984                               14,438
Allowance for loan losses ...............................       (6,045)                             (10,665)
Premises and equipment, net .............................        8,004                                9,827
Intangible assets .......................................        5,907                                7,670
Other assets ............................................       11,967                                8,724
                                                             ---------                            ---------
         Total assets ...................................    $ 572,844                            $ 552,438
                                                             =========                            =========

Liabilities and shareholders' equity
Interest bearing deposits
     Savings ............................................    $  89,660    $     627      2.80%    $  89,000     $     576     2.60%
     Interest bearing transaction accounts ..............       72,862          273      1.50%       73,212           179     0.98%
     Time deposits ......................................      246,329        2,872      4.68%      240,609         2,417     4.03%
                                                             ---------    ---------               ----------    ---------
         Total interest bearing deposits ................      408,851        3,772      3.70%      402,821         3,172     3.16%
Short-term borrowings ...................................       18,056          187      4.15%        7,718            89     4.63%
Long-term debt ..........................................       29,701          475      6.41%       30,145           475     6.32%
                                                             ---------    ---------               ---------     --------
         Total interest bearing liabilities .............      456,608        4,434      3.89%      440,684         3,736     3.40%
Noninterest bearing demand deposits .....................       59,693                               57,052
Other liabilities .......................................        2,307                                2,493
Shareholders' equity ....................................       54,236                               52,209
                                                             ---------                            ---------
         Total liabilities and shareholders' equity .....    $ 572,844                            $ 552,438
                                                             =========                            =========


Interest rate spread ....................................                                3.41%                                3.59%
Net interest income and net yield
     on earning assets ..................................                 $   5,317      3.98%                  $   5,367     4.12%
</TABLE>

(1) Yields and rates are annualized.
(2) Yields  on  tax-exempt  securities  and  loans  have  not been  stated  on a
    tax-equivalent basis.
(3) Nonaccruing  loans of  $5,157,000  are included in the average  balances and
    income from such loans is recognized on a cash basis.



                                       14
<PAGE>

Six Months Ended June 30, 2007 and 2006

         Net interest income for the six months ended June 30, 2007 decreased by
$35,000,  or 0.3% from the amount  for the same  period of 2006.  Both  interest
income and interest  expense  increased  significantly in the 2007 period due to
higher  levels of market  interest  rates  and,  to a lesser  extent,  to higher
amounts of interest earning assets and interest-bearing liabilities.

         For the 2007  year-to-date  period,  the  interest  rate spread and net
yield on earning assets both decreased as compared with the same period of 2006.
Interest  rate  spread  decreased  by 11 basis  points  and net yield on earning
assets decreased by eight basis points.  These decreases resulted primarily from
higher rates paid on interest-bearing liabilities, which increased slightly more
than rates earned on earning  assets.  In  particular,  the  Company's  costs of
funding  increased  primarily  due to higher  rates  paid on larger  amounts  of
certificates  of deposit and increased  amounts of short-term  borrowings  while
earnings  on assets  increased  due to a shift from  holding  highly  liquid but
low-yielding federal funds sold to higher-yielding taxable investment securities
and loans. The Company's average loans outstanding for the 2007 six month period
is not  much  changed  from  the  2006  six-month  average  due to the  sale  of
$8,162,000 of loans during the fourth quarter of 2006.


                                       15
<PAGE>
<TABLE>
<CAPTION>
                                                                                  Average Balances, Yields and Rates
                                                                                      Six Months Ended June 30,
                                                                                      -------------------------
                                                                              2007                                2006
                                                                              ----                                ----
                                                                            Interest                            Interest
                                                                 Average     Income/   Yields/       Average      Income/   Yields/
                                                                Balances     Expense    Rates(1)     Balances     Expense   Rates(1)
                                                                --------     -------    --------     --------     -------   --------
                                                                                              (Dollars in thousands)
Assets
<S>                                                          <C>          <C>            <C>      <C>           <C>           <C>
Interest earning deposits ...............................    $   1,773    $      46      5.23%    $   1,665     $      55     6.66%
Investment securities - taxable .........................       82,648        2,008      4.90%       57,281         1,093     3.85%
Investment securities - tax exempt (2) ..................        4,697           85      3.65%        5,193            91     3.53%
Federal funds sold ......................................       10,282          260      5.10%       27,394           638     4.70%
Loans, including loans held for sale (2)(3) .............      433,533       16,785      7.81%      431,948        15,839     7.39%
                                                              --------    ---------               ---------      --------
         Total interest earning assets ..................      532,933       19,184      7.26%      523,481        17,716     6.82%
Cash and due from banks .................................       17,156                               15,332
Allowance for loan losses ...............................       (5,458)                             (11,002)
Premises and equipment, net .............................        8,694                               10,135
Intangible assets .......................................        6,849                                7,096
Other assets ............................................        9,745                                8,353
                                                             ---------                            ---------
         Total assets ...................................    $ 569,919                            $ 553,395
                                                             =========                            =========

Liabilities and shareholders' equity
Interest bearing deposits
     Savings ............................................    $  92,886    $   1,299      2.82%    $  87,270     $   1,027     2.37%
     Interest bearing transaction accounts ..............       74,945          532      1.43%       73,557           398     1.09%
     Time deposits ......................................      243,963        5,579      4.61%      238,367         4,550     3.85%
                                                              --------    ---------               ---------      --------
         Total interest bearing deposits ................      411,794        7,410      3.63%      399,194         5,975     3.02%
Short-term borrowings ...................................       14,958          303      4.08%        8,990           190     4.26%
Long-term debt ..........................................       27,998          912      6.57%       31,421           957     6.14%
                                                              --------    ---------               ---------      --------
         Total interest bearing liabilities .............      454,750        8,625      3.82%      439,605         7,122     3.27%
Noninterest bearing demand deposits .....................       59,382                               60,102
Other liabilities .......................................        2,065                                2,731
Shareholders' equity ....................................       53,722                               50,957
                                                             ---------                            ---------
         Total liabilities and shareholders' equity .....    $ 569,919                            $ 553,395
                                                             =========                            =========


Interest rate spread ....................................                                3.44%                                3.55%
Net interest income and net yield
     on earning assets ..................................                 $  10,559      4.00%                  $  10,594     4.08%
</TABLE>

(1) Yields and rates are annualized.
(2) Yields  on  tax-exempt  securities  and  loans  have  not been  stated  on a
    tax-equivalent basis.
(3) Nonaccruing  loans of  $5,157,000  are included in the average  balances and
    income from such loans is recognized on a cash basis.


Provision and Allowance for Loan Losses

         The  provision  for loan  losses  for the 2007 three  month  period was
$175,000, a decrease of $500,000, or 74.1%, from $675,000 for the same period of
2006. The provision for loan losses decreased to $550,000 for the 2007 six month


                                       16
<PAGE>

period from $1,290,000 for the 2006 six month period,  a decrease of $740,000 or
57.4%.

         The  activity in the  allowance  for loan losses is  summarized  in the
following table:

<TABLE>
<CAPTION>
                                                                               Six Months         Year Ended             Six Months
                                                                                  Ended           December 31,             Ended
                                                                              June 30, 2007          2006              June 30, 2006
                                                                              -------------          ----              -------------
                                                                                              (Dollars in thousands)
<S>                                                                           <C>                  <C>                   <C>
Allowance at beginning of period ..................................           $   4,662            $  11,641             $  11,641
Provision for loan losses .........................................                 550                2,950                 1,290
Net (charge-offs) or recoveries ...................................                 521               (9,929)               (3,060)
                                                                              ---------            ---------             ---------
Allowance at end of period ........................................           $   5,733            $   4,662             $   9,871
                                                                              =========            =========             =========
Allowance as a percentage of loans outstanding ....................                1.28%                1.14%                 2.35%

Loans at end of period ............................................           $ 447,945            $ 409,720             $ 419,170
                                                                              =========            =========             =========
</TABLE>


         Following is a summary of non-performing  loans as of June 30, 2007 and
December 31, 2006:

                                                       June 30,    December 31,
                                                         2007         2006
                                                         ----         ----
                                                      (Dollars in thousands)
Non-performing loans
  Nonaccrual loans .................................  $   5,157      $4,714
  Past due 90 days or more and still accruing ......          -         232
                                                      ---------      ------
                Total ..............................  $   5,157      $4,946
                                                      =========      ======
Nonperforming loans as a percentage of:
  Loans outstanding ................................       1.15%       1.21%
  Allowance for loan losses ........................      89.95%     106.09%


         The  following  table  shows  quarterly  changes in  nonperforming  and
potential problem loans since December 31, 2005.


                                       17
<PAGE>
<TABLE>
<CAPTION>
                                                      90 Days or
                                                    More Past Due        Total         Percentage                       Percentage
                                      Nonaccrual       and Still     Nonperforming      of Total      Potential          of Total
                                        Loans           Accruing          Loans           Loans      Problem Loans        Loans
                                        -----           --------          -----           -----      -------------        -----
                                                                         (Dollars in thousands)
<S>                                     <C>            <C>                <C>              <C>          <C>               <C>
December 31, 2005 ............          11,651              729           12,380           2.99%        29,313            7.08%
Net change ...................           3,128              949            4,077                        (2,767)
                                      --------         --------          -------                      --------
March 31, 2006 ...............          14,779            1,678           16,457           3.94%        26,546            6.36%
Net change ...................          (3,628)          (1,476)          (5,104)                       (3,461)
                                      --------         --------          -------                      --------
June 30, 2006 ................          11,151              202           11,353           2.71%        23,085            5.51%
Net change ...................          (2,483)             175           (2,308)                         (219)
                                      --------         --------          -------                      --------
September 30, 2006 ...........           8,668              377            9,045           2.19%        22,866            5.55%
Net change ...................          (3,954)            (145)          (4,099)                       (7,475)
                                      --------         --------          -------                      --------
December 31, 2006 ............           4,714              232            4,946           1.21%        15,391            3.76%
Net change ...................           1,612              (65)           1,547                        (1,143)
                                      --------         --------          -------                      --------
March 31, 2007 ...............           6,326              167            6,493           1.53%        14,248            3.36%
Net change ...................          (1,169)            (167)          (1,336)                          385
                                      --------         --------          -------                      --------
June 30, 2007 ................        $  5,157         $      -         $  5,157           1.15%      $ 14,633            3.27%
                                      ========         ========         ========                      ========
</TABLE>

         During the second  quarter of 2007,  nonperforming  loans  decreased by
$1,336,000  while  potential  problem  loans  increased by  $385,000.  The major
component of the improvement in nonperforming loans was the transfer of a single
$750,000  commercial credit to other real estate owned. The Company  anticipates
an auction of that property, which includes real and personal business property,
during the third  quarter.  At June 30,  2007 other real  estate  owned  totaled
$1,176,000, compared to $108,000 for the comparable period in 2006.

         Management will continue to monitor the levels of non-performing  loans
and address the  weaknesses in these credits to enhance the ultimate  collection
or  recovery  of these  assets.  Management  considers  the levels and trends in
non-performing  assets  and  potential  problem  loans  in  determining  how the
provision  and  allowance  for loan losses is  estimated  and  adjusted.  In the
opinion of management,  the Company's allowance for loan losses at June 30, 2007
is adequate to provide for losses that may be inherent in the loan portfolio.


                                       18
<PAGE>


Noninterest Income

         Noninterest income for the 2007 second quarter increased  $707,000,  or
34.3%,  over the  $2,060,000  reported  for the same 2006  period.  The  Company
realized a one-time  $712,000 gain on the sale of other  investments  during the
2007 period,  primarily from the sale of surplus stock of a  correspondent  bank
which resulted from the merger of the Company's four bank  subsidiaries into one
bank late in 2006. Mortgage loan brokerage income was significantly lower during
the 2007 period due to lower volumes of loan  originations,  consistent with the
overall slowing of the real estate market.

         For the six months ended June 30, 2007,  noninterest  income  increased
$598,000,  or 15.0%,  over noninterest  income for the first six months of 2006.
Again,  this increase was the result of the one-time gain from the sale of other
investments.  Mortgage  loan  brokerage  income for the first six months of 2007
decreased  $425,000  compared with the same period of 2006,  consistent with the
overall slowing of the real estate market.


Noninterest Expenses

         Noninterest  expenses for the second quarter of 2007 were $969,000,  or
20.9%,  higher than the amounts  reported for the same period of 2006.  Salaries
and employee  benefits  expenses  were  $331,000,  or 12.0%,  higher in the 2007
period,  due to the  hiring  of  several  new loan  officers  and  additions  to
executive  management.  Increases in certain other expense  categories,  such as
advertising and supplies,  are primarily the  after-effects of the consolidation
of the Company's former four-bank structure late in 2006.

         Noninterest  expenses for the first six months of 2007 were $1,456,000,
or 15.7%, more than for the same period of 2006.  Salaries and employee benefits
for the 2007 six month period were  $686,000,  or 12.9%,  more than for the same
period of 2006.  This expense  increased due to new hires noted above and normal
periodic  wage  and  salary  adjustments.  Other  factors  contributing  to  the
increased non interest  expenses were consulting costs related to preparation of
a strategic plan, recourse provision  associated with secondary market loans and
a $240,000 deposit related fraud loss.


Income Taxes

         Income tax expense was $91,000  higher in the 2007 second  quarter than
for the 2006 period,  as a result of higher taxable income before taxes.  Income
tax  expense for the 2007 six month  period was  $54,000  less than for the same
period of 2006 due to lower net income before taxes.


LIQUIDITY

         Liquidity is the ability to meet current and future obligations through
liquidation  or maturity of existing  assets or the  acquisition  of  additional
liabilities.  Adequate  liquidity  is  necessary  to meet  the  requirements  of
customers for loans and deposit  withdrawals in a timely and economical  manner.
The most manageable  sources of liquidity are composed of liabilities,  with the
primary  focus of  liquidity  management  being the ability to attract  deposits
within CBI's market areas.  Individual and  commercial  deposits are the primary
source of funds for credit activities,  along with long-term borrowings from the
Federal  Home Loan Bank of Atlanta and the  proceeds of issuing  $10,000,000  of
subordinated debentures.  Cash and amounts due from banks and federal funds sold



                                       19
<PAGE>

are CBI's  primary  sources of asset  liquidity.  These funds  provide a cushion
against  short-term  fluctuation  in cash  flow from  both  loans and  deposits.
Securities  available-for-sale  are CBI's  principal  source of secondary  asset
liquidity.  However,  the  availability  of this  source is limited by  pledging
commitments  for  public  deposits  and  securities  sold  under  agreements  to
repurchase, and is influenced by market conditions.

         Total  deposits  as of June 30, 2007 were  $480,245,000,  a decrease of
$3,376,000,  or 0.7%, from the amount as of December 31, 2006.  During the first
six  months of 2007,  there was a notable  movement  of funds  from  noninterest
bearing demand deposit,  interest-bearing  transaction and savings accounts into
time deposit accounts.  The Company purchased  $7,213,000 of short-term brokered
certificates  of deposit during the 2007 second  quarter to supplement  deposits
obtained from the local markets. Short-term borrowings,  particularly repurchase
agreement accounts, increased significantly during the first six months of 2007,
primarily due to attractive  rates paid for such funds.  As of June 30, 2007 the
loan to deposit ratio,  excluding loans held for sale, was 93.3%,  compared with
84.7% at December 31, 2006 and 91.3% at June 30, 2006.

         Management  believes CBI's  liquidity  sources are adequate to meet its
current and projected operating needs.


CAPITAL RESOURCES

         CBI and its  bank  subsidiary  are  subject  to  regulatory  risk-based
capital adequacy  standards.  Under these standards,  bank holding companies and
banks  are  required  to  maintain   certain   minimum   ratios  of  capital  to
risk-weighted  assets and average  total  assets.  Under the  provisions  of the
Federal Deposit  Insurance  Corporation  Improvement  Act of 1991,  federal bank
regulatory  authorities are required to implement  prescribed "prompt corrective
actions"  upon the  deterioration  of the  capital  position  of a bank.  If the
capital position of an affected  institution were to fall below a certain level,
increasingly stringent regulatory corrective actions would be mandated.

         The June 30, 2007  risk-based  capital  ratios for CBI and the bank are
presented in the  following  table,  compared  with the "well  capitalized"  and
minimum ratios under the regulatory definitions and guidelines:

                                                       June 30, 2007
                                                       -------------
                                                Tier 1  Total Capital   Leverage
                                                ------  -------------   --------

Community Bankshares, Inc. ..................   13.06%       14.31%     10.26%
Community Resource Bank .....................   11.44%       12.69%      8.95%
Minimum "well capitalized" requirement ......    6.00%       10.00%      6.00%
Minimum requirement .........................    4.00%        8.00%      5.00%


         As shown in the table  above,  each of the capital  ratios  exceeds the
regulatory  requirement to be considered  "well  capitalized." In the opinion of
management,  the current and projected capital positions of CBI and the bank are
adequate.




                                       20
<PAGE>

OFF-BALANCE-SHEET ARRANGEMENTS

         In the normal course of business,  CBI engages in transactions that, in
accordance with generally accepted  accounting  principles,  are not recorded in
the  financial  statements  (generally  commitments  to  extend  credit)  or are
recorded  in  amounts  that  differ  from  their  notional  amounts   (generally
derivatives).  These transactions involve elements of credit,  interest rate and
liquidity risk of varying degrees.

Variable Interest Entity

         As discussed  under  "Capital  Resources" and in the notes to unaudited
consolidated  financial  statements under "Variable Interest Entity," as of June
30, 2007, CBI held an equity  interest in, and guarantees the  liabilities of, a
non-consolidated variable interest entity, SCB Capital Trust I.

Commitments

         CBI  is  party   to   credit   related   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.  Such  commitments  involve varying
degrees of credit and interest  rate risk in excess of the amount  recognized in
the consolidated  balance sheets.  Exposure to credit loss is represented by the
contractual, or notional, amounts of these commitments. The same credit policies
are used in making commitments as for on-balance-sheet instruments.

         The following table sets forth the  contractual  amounts of commitments
which represent credit risk:

                                  June 30, 2007
                                  -------------
                                   (Dollars in
                                   thousands)
Loan commitments ..............     $ 61,545
Standby letters of credit .....        2,542


         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  fully drawn upon,  the total  commitment  amounts do not
necessarily  represent  future  cash  requirements.  The  amount  of  collateral
obtained,  if deemed necessary by management upon extension of credit,  is based
on management's  credit evaluation of the counter-party.  Collateral held varies
but may include personal residences,  accounts receivable,  inventory, property,
plant and equipment, and income-producing commercial properties.

         Standby  letters  of  credit  are  conditional  commitments  issued  to
guarantee  the  performance  of a customer to a third  party.  Those  letters of
credit are  primarily  issued to support  private  borrowing  arrangements.  All
letters of credit are short-term guarantees. The credit risk involved in issuing
letters of credit is  essentially  the same as that  involved in extending  loan
facilities to customers.  Generally,  collateral supporting those commitments is
held if deemed  necessary.  Since  many of the  standby  letters  of credit  are
expected to expire  without being drawn upon, the total letter of credit amounts
do not necessarily represent future cash requirements.


                                       21
<PAGE>


         The  Company  entered  into a contract  for the  construction  of a new
branch office to be located on Clemson Road in the northeast Columbia,  SC area.
Construction  was begun  during  the  second  quarter  of 2007 and the office is
expected  to  open  for  business  around  the  beginning  of  2008.   Estimated
construction costs total $830,000.

Derivative Financial Instruments

         In  April,  2003,  the  Financial  Accounting  Standards  Board  issued
Statement No. 149,  "Amendment of Statement  133 on Derivative  Instruments  and
Hedging Activities." Among other requirements, this Statement provides that loan
commitment contracts entered into or modified after June 30, 2003 that relate to
the  origination of mortgage loans that will be held for sale shall be accounted
for as derivative  instruments by the issuer of the loan  commitment.  In March,
2004,  the SEC issued  its Staff  Accounting  Bulletin  No 105  "Application  of
Accounting  Principles  to Loan  Commitments,"  which  resulted in no changes in
CBI's  accounting  for such  commitments.  CBI  issues  mortgage  loan rate lock
commitments  to  potential  borrowers  to  facilitate  its  origination  of home
mortgage  loans that are  intended to be sold.  Between the time that CBI issues
its  commitments  and the time that the loans close and are sold, CBI is subject
to variability in the selling prices related to those commitments due to changes
in market rates of interest.  However,  CBI offsets this variability through the
use of so-called "forward sales contracts" to investors in the secondary market.
Under these  arrangements,  an investor agrees to purchase the closed loans at a
predetermined  price.  CBI generally enters into such forward sales contracts at
the same  time  that  rate  lock  commitments  are  issued.  These  arrangements
effectively  insulate  CBI from the effects of changes in interest  rates during
the time the commitments are outstanding, but the arrangements do not qualify as
fair value hedges.  These  derivative  financial  instruments are carried in the
balance sheet at estimated  fair value and changes in the estimated  fair values
of these  derivatives  are  recorded in the  statement of income in net gains or
losses on loans held for sale.

         Derivative financial  instruments are written in amounts referred to as
notional  amounts.  Notional  amounts  only  provide  the basis for  calculating
payments  between  counterparties  and do not represent  amounts to be exchanged
between parties or a measure of financial risk. The following table includes the
notional  principal amounts of rate lock commitments and forward sales contracts
as of  June  30,  2007,  and  the  estimated  fair  values  of  those  financial
instruments  included in other assets and liabilities in the balance sheet as of
that date.

                                                           June 30, 2007
                                                           -------------
                                                                      Estimated
                                                                     Fair Value
                                                        Notional       Asset
                                                         Amount      (Liability)
                                                         ------      -----------
                                                        (Dollars in thousands)
Rate lock commitments to potential borrowers
  to originate mortgage loans to be
  held for sale .......................................      $9,877      $    4
Forward sales contracts with investors
  of mortgage loans to be held for sale ...............       9,877          (4)


                                       22
<PAGE>

Item 3. Quantitative and Qualitative Disclosures about Market Risk

         Market risk is the risk of loss from adverse  changes in market  prices
and rates. CBI's market risk arises principally from interest rate risk inherent
in its lending,  deposit and borrowing activities.  Management actively monitors
and manages its interest rate risk  exposure.  Although CBI manages other risks,
such as credit  quality and  liquidity  risk in the normal  course of  business,
management  considers  interest rate risk to be its most significant market risk
and this  risk  could  potentially  have the  largest  material  effect on CBI's
financial condition and results of operations.  Other types of market risks such
as foreign  currency  exchange risk and commodity price risk do not arise in the
normal course of community banking activities.

         CBI's  Asset/Liability  Committee uses a simulation  model to assist in
achieving  consistent growth in net interest income while managing interest rate
risk. According to the model, as of June 30, 2007, CBI is positioned so that net
interest income would decrease $100,000 and net income would decrease $64,000 in
the next twelve months if interest rates rose 100 basis points.  Conversely, net
interest income would increase $100,000 and net income would increase $64,000 in
the next twelve months if interest rates declined 100 basis points.  Computation
of  prospective  effects of  hypothetical  interest  rate  changes  are based on
numerous  assumptions,  including  relative  levels of market interest rates and
loan prepayment,  and should not be relied upon as indicative of actual results.
Further,  the  computations do not contemplate any actions CBI and its customers
could undertake in response to changes in interest rates.

         As of June 30, 2007 there was no  significant  change from the interest
rate  sensitivity  analysis for the various changes in interest rates calculated
as of December 31, 2006. The foregoing disclosures related to the market risk of
CBI should be read in connection  with  Management's  Discussion and Analysis of
Financial Position and Results of Operations  included in the 2006 Annual Report
on Form 10-K.


Item 4T.  Controls and Procedures

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

         There  has  been no  change  in the  Company's  internal  control  over
financial  reporting  during the most recent fiscal  quarter that has materially
affected,  or is reasonably likely to materially  affect, the Company's internal
control over financial reporting.




                                       23
<PAGE>


                           PART II--OTHER INFORMATION


Item 4.  Submission of Matters to a Vote of Security Holders

         On Monday, May 15, 2007, the shareholders of Community Bankshares, Inc.
held their regular annual meeting. At the meeting, two matters were submitted to
a vote with results as follows:

1.  Election  of four  directors  to hold  office  for three  year terms and one
director to hold office for a two year term:

<TABLE>
<CAPTION>
                                                                            SHARES VOTED
                                                     -------------------------------------------------------------------------------
                                                                               AGAINST OR                    BROKER
         DIRECTORS                                       FOR              AUTHORITY WITHHELD                NON-VOTES
                                                         ---              ------------------                ---------

<S>                                                  <C>                        <C>                        <C>
         Three-Year Terms
           Samuel L. Erwin                           3,190,743                  54,117                     1,224,307
           Anna O. Dantzler                          3,177,916                  66,944                     1,224,307
           Richard L. Haveksot.                      3,170,888                  73,972                     1,224,307
           Samuel F. Reid, Jr.                       3,167,329                  77,531                     1,224,307

         Two Year Term
           Charles P. Thompson, Jr                   3,189,352                  55,508                     1,224,307
</TABLE>

         The following directors continue to serve until the expiration of their
terms at the  annual  meetings  to be held in the years  indicated  and were not
voted on at the 2007 annual  meeting:  Thomas B. Edmunds - 2008;  Martha Rose C.
Carson - 2008; J. M. Guthrie - 2008; Wm.  Reynolds  Williams - 2008;  Charles E.
Fienning - 2008;  E. J.  Ayers,  Jr. - 2009;  Alvis J.  Bynum - 2009;  and J. V.
Nicholson, Jr. - 2009.

2.   Approval of the Community Bankshares, Inc. 2007 Equity Plan

<TABLE>
<CAPTION>
                                                                               SHARES VOTED
                                                     -------------------------------------------------------------------------------
                                                                               AGAINST OR                    BROKER
                                                         FOR               AUTHORITY WITHHELD              NON-VOTES
                                                         ---               ------------------              ---------
<S>                                                  <C>                       <C>                         <C>
                                                     2,080,782                 162,342                     1,224,307
</TABLE>


         At a meeting on July 30,  2007,  the Board of  Directors  of  Community
Bankshares,  Inc. adopted two amendments to the 2007 Equity Plan. Section 5.4(c)
of the 2007 Equity Plan, which provides for cashless  exercise of options issued
under the 2007 Plan, was amended to clarify that cashless exercise would only be
allowed if specifically permitted by the Board of Directors in its discretion. A
new  Section  5.7 to the plan was  adopted,  which  provides  that,  during  the
lifetime of the employee,  an option shall be exercisable  only by the employee,
and no option is assignable or  transferable by an employee except by will or by
the laws of descent and distribution.

         The Board had the authority  under  Section  12.2(a) of the 2007 Equity
Plan to adopt the foregoing amendments to the plan without shareholder approval.
Furthermore,  no  awards  had been  granted  under  the 2007  Plan  prior to the
amendments,  so no consent of any  participant to these  amendments was required
under Section 12.2 of the 2007 Plan.



                                       24
<PAGE>




Item 6.  Exhibits

     Exhibits 10  Community Bankshares, Inc. 2007 Equity Plan (as amended July
                  30, 2007)

            31-1   Rule 13a-14(a)/15d-14(a) Certification of principal executive
                   officer

            31-2   Rule 13a-14(a)/15d-14(a) Certification of principal financial
                   officer

            32     Certifications Pursuant to 18 U.S.C. Section 1350







                                       25
<PAGE>


SIGNATURES

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

                                                          DATED: August 13, 2007

COMMUNITY BANKSHARES, INC.

By:  s/  Samuel L. Erwin
     --------------------------------------------
         Samuel L. Erwin
         Chief Executive Officer

By:  s/  William W. Traynham
     --------------------------------------------
         William W. Traynham
         President and Chief Financial Officer
         (Principal Accounting Officer)




                                       26
<PAGE>




                                  EXHIBIT INDEX

     Exhibits 10   Community Bankshares, Inc. 2007 Equity Plan (as amended July
                   30, 2007)

            31-1   Rule 13a-14(a)/15d-14(a) Certification of principal executive
                   officer

            31-2   Rule 13a-14(a)/15d-14(a) Certification of principal financial
                   officer

            32     Certifications Pursuant to 18 U.S.C. Section 1350








                                       27