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 March 31, 2006      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 a 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, 4,434,898 shares outstanding on May 2, 2006.



<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                                                                                          9

Item 3.           Quantitative and Qualitative Disclosures About Market Risk                                           19

Item 4.           Controls and Procedures                                                                              20

PART II -         OTHER INFORMATION

Item 2.           Unregistered Sales of Equity Securities and Use of Proceeds
                                                                                                                       21

Item 6.           Exhibits
                                                                                                                       21

SIGNATURES                                                                                                             22
</TABLE>




                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1. - Financial Statements

COMMUNITY BANKSHARES, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
                                                                                                       (Unaudited)
                                                                                                         March 31,      December 31,
                                                                                                           2006             2005
                                                                                                           ----             ----
                                                                                                          (Dollars in thousands)
Assets
<S>                                                                                                    <C>                <C>
     Cash and due from banks .................................................................         $  16,963          $  19,508
     Federal funds sold ......................................................................            28,800             32,483
                                                                                                       ---------          ---------
            Total cash and cash equivalents ..................................................            45,763             51,991

     Interest-bearing deposits with other banks ..............................................             1,847              1,038
     Securities available-for-sale ...........................................................            57,420             58,701
     Securities held-to-maturity (estimated fair value $1,828 for 2006
          and $1,820 for 2005) ...............................................................             1,850              1,850
     Other investments .......................................................................             3,051              2,980
     Loans held for sale .....................................................................            13,305             12,447
     Loans receivable ........................................................................           417,451            413,984
         Less, allowance for loan losses .....................................................           (11,094)           (11,641)
                                                                                                       ---------          ---------
            Net loans ........................................................................           406,357            402,343
     Premises and equipment - net ............................................................             9,896              9,412
     Accrued interest receivable .............................................................             2,898              3,134
     Net deferred income tax assets ..........................................................             3,680              3,655
     Goodwill ................................................................................             4,321              4,321
     Core deposit intangible assets ..........................................................             2,776              2,837
     Prepaid expenses and other assets .......................................................             1,669              2,127
                                                                                                       ---------          ---------

            Total assets .....................................................................         $ 554,833          $ 556,836
                                                                                                       =========          =========

Liabilities
     Deposits
         Noninterest bearing .................................................................         $  66,095          $  67,146
         Interest-bearing ....................................................................           393,570            397,063
                                                                                                       ---------          ---------
            Total deposits ...................................................................           459,665            464,209

     Short-term borrowings ...................................................................            10,491              8,975
     Long-term debt ..........................................................................            31,693             32,196
     Accrued interest payable ................................................................             1,245              1,212
     Accrued expenses and other liabilities ..................................................             1,822              1,252
                                                                                                       ---------          ---------
            Total liabilities ................................................................           504,916            507,844
                                                                                                       ---------          ---------

Shareholders' equity
     Common stock - no par value; 12,000,000 shares authorized; issued and
         outstanding - 4,426,648 for 2006 and 4,404,303 for 2005 .............................            30,457             30,202
     Retained earnings .......................................................................            20,040             19,325
     Accumulated other comprehensive income (loss) ...........................................              (580)              (535)
                                                                                                       ---------          ---------
            Total shareholders' equity .......................................................            49,917             48,992
                                                                                                       ---------          ---------

            Total liabilities and shareholders' equity .......................................         $ 554,833          $ 556,836
                                                                                                       =========          =========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.


                                       3
<PAGE>

COMMUNITY BANKSHARES, INC.
Consolidated Statements of Income
<TABLE>
<CAPTION>
                                                                (Unaudited)
                                                            Three Months Ended
                                                                  March 31,
                                                              2006         2005
                                                              -----        ----
                                                          (Dollars in thousands,
                                                             except per share)
Interest and dividend income
<S>                                                         <C>         <C>
     Loans, including fees ............................     $ 7,683     $ 6,716
     Interest-bearing deposits with other banks .......          20           8
     Debt securities ..................................         553         437
     Dividends ........................................          34          24
     Federal funds sold ...............................         323          68
                                                            -------     -------
         Total interest and dividend income ...........       8,613       7,253
                                                            -------     -------

Interest expense
     Deposits
     Time deposits $100M and over .....................         859         527
     Other deposits ...................................       1,944       1,208
                                                            -------     -------
         Total interest expense on deposits ...........       2,803       1,735
     Short-term borrowings ............................         101          43
     Long-term debt ...................................         482         438
                                                            -------     -------
         Total interest expense .......................       3,386       2,216
                                                            -------     -------

Net interest income ...................................       5,227       5,037
Provision for loan losses .............................         615         450
                                                            -------     -------
Net interest income after provision ...................       4,612       4,587
                                                            -------     -------

Noninterest income
     Service charges on deposit accounts ..............         832         762
     Mortgage brokerage income ........................         837         692
     Net securities gains or (losses) .................           1         (10)
     Other ............................................         264         221
                                                            -------     -------
         Total noninterest income .....................       1,934       1,665
                                                            -------     -------

Noninterest expenses
     Salaries and employee benefits ...................       2,579       2,278
     Premises and equipment ...........................         624         535
     Other ............................................       1,424       1,306
                                                            -------     -------
         Total noninterest expenses ...................       4,627       4,119
                                                            -------     -------

Income before income taxes ............................       1,919       2,133
Income tax expense ....................................         718         773
                                                            -------     -------
Net income ............................................     $ 1,201     $ 1,360
                                                            =======     =======

Per share
     Net income .......................................     $  0.27     $  0.31
     Net income - diluted .............................        0.27        0.30
     Cash dividends declared ..........................        0.11        0.10
</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
                                                                Number of                   Retained   Other Comprehensive
                                                                 Shares         Amount      Earnings     Income (Loss)      Total
                                                                 ------         ------      --------     -------------      -----
                                                                             (Dollars in thousands, except per share)

<S>                                                             <C>           <C>           <C>            <C>            <C>
Balance, January 1, 2005 ..................................     4,390,784     $  30,042     $  20,075      $     (90)     $  50,027
                                                                                                                          ---------
Comprehensive income
    Net income ............................................             -             -         1,360              -          1,360
                                                                                                                          ---------
    Unrealized holding gains and losses
      on available-for-sale securities arising
      during the period, net of income
      taxes of $203 .......................................             -             -             -           (361)          (361)
    Reclassification adjustment for losses (gains)
      realized in income, net of
      income taxes of $3 ..................................             -             -             -              7              7
                                                                                                                          ---------
         Total other comprehensive income (loss) ..........             -             -             -              -           (354)
                                                                                                                          ---------
              Total comprehensive income ..................             -             -             -              -          1,006
                                                                                                                          ---------
Exercise of employee stock options ........................        12,232           140             -              -            140
Cash dividends declared, $.10 per share ...................             -             -          (439)             -           (439)
                                                                ---------     ---------     ---------      ---------      ---------
Balance, March 31, 2005 ...................................     4,403,016     $  30,182     $  20,996      $    (444)     $  50,734
                                                                =========     =========     =========      =========      =========


Balance, January 1, 2006 ..................................     4,404,303     $  30,202     $  19,325      $    (535)     $  48,992
                                                                                                                          ---------
Comprehensive income
    Net income ............................................             -             -         1,201              -          1,201
                                                                                                                          ---------
    Unrealized holding gains and losses
      on available-for-sale securities arising
      during the period, net of income
      taxes of $25 ........................................             -             -             -            (44)           (44)
    Reclassification adjustment for losses (gains)
      realized in income, net of
      income taxes of $0 ..................................             -             -             -             (1)            (1)
                                                                                                                          ---------
         Total other comprehensive income (loss) ..........             -             -             -              -            (45)
                                                                                                                          ---------
              Total comprehensive income ..................             -             -             -              -          1,156
                                                                                                                          ---------
Proceeds of sale of common stock ..........................         1,000            16             -              -             16
Exercise of employee stock options ........................        21,345           239             -              -            239
Cash dividends declared, $.11 per share ...................             -             -          (486)             -           (486)
                                                                ---------     ---------     ---------      ---------      ---------
Balance, March 31, 2006 ...................................     4,426,648     $  30,457     $  20,040      $    (580)     $  49,917
                                                                =========     =========     =========      =========      =========
</TABLE>











See accompanying notes to unaudited consolidated financial statements.


                                       5
<PAGE>

COMMUNITY BANKSHARES, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                                                                 (Unaudited)
                                                                                                             Three Months Ended
                                                                                                                  March 31,
                                                                                                          2006                2005
                                                                                                          ----                ----
                                                                                                         (Dollars in thousands)
Operating activities
<S>                                                                                                     <C>                <C>
     Net income ..............................................................................          $  1,201           $  1,360
     Adjustments to reconcile net income to net
         cash provided by operating activities
            Depreciation and amortization ....................................................               314                286
            Net amortization of securities ...................................................                 6                 32
            Provision for loan losses ........................................................               615                450
            Net securities (gains) losses ....................................................                (1)                10
            Proceeds of sales of loans held for sale .........................................            51,178             43,781
            Originations of loans held for sale ..............................................           (52,036)           (44,807)
            Decrease (increase) in accrued interest receivable ...............................               236                (65)
            Decrease in other assets .........................................................               458                652
            Increase in accrued interest payable .............................................                33                174
            Increase in other liabilities ....................................................               570                 30
                                                                                                        --------           --------
                Net cash provided by operating activities ....................................             2,574              1,903
                                                                                                        --------           --------

Investing activities
     Net (increase) decrease in interest-bearing deposits with other banks ...................              (809)               309
     Purchases of available-for-sale securities ..............................................            (2,499)            (3,500)
     Maturities, calls and paydowns of available-for-sale securities .........................             3,705              2,069
     Proceeds of sales of available-for-sale securities ......................................                 -              4,412
     Purchases of other investments ..........................................................               (71)              (216)
     Net increase in loans made to customers .................................................            (4,629)           (12,475)
     Purchases of premises and equipment .....................................................              (737)              (214)
                                                                                                        --------           --------
                Net cash used by investing activities ........................................            (5,040)            (9,615)
                                                                                                        --------           --------

Financing activities
     Net (decrease) increase in deposits .....................................................            (4,544)             6,608
     Net increase in short-term borrowings ...................................................             1,516                168
     Proceeds from issuing long-term debt ....................................................                 -              2,998
     Repayment of long-term debt .............................................................              (503)                 -
     Proceeds from sale of stock .............................................................                16                  -
     Exercise of employee stock options ......................................................               239                140
     Cash dividends paid .....................................................................              (486)              (439)
                                                                                                        --------           --------
                Net cash (used) provided by financing activities .............................            (3,762)             9,475
                                                                                                        --------           --------
(Decrease) increase in cash and cash equivalents .............................................            (6,228)             1,763
Cash and cash equivalents, beginning of period ...............................................            51,991             26,968
                                                                                                        --------           --------
Cash and cash equivalents, end of period .....................................................          $ 45,763           $ 28,731
                                                                                                        ========           ========



Supplemental disclosures of cash flow information
     Cash payments for interest ..............................................................          $  3,353           $  2,042
                                                                                                        ========           ========
     Cash payments for income taxes ..........................................................          $      -           $      -
                                                                                                        ========           ========

Supplemental disclosures of non-cash investing activities
     Transfers of loans receivable to other real estate ......................................          $      -           $      -
                                                                                                        ========           ========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.


                                       6
<PAGE>

COMMUNITY BANKSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

Accounting  Principles - A summary of  significant  accounting  policies and the
audited  financial  statements  for 2005 are included in  Community  Bankshares,
Inc.'s (the  "Company" or "CBI")  Annual  Report on Form 10-K for the year ended
December 31, 2005 filed with the  Securities  and Exchange  Commission.  Certain
amounts in the 2005 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 2005 Annual Report on Form 10-K.

Nonperforming Loans - As of March 31, 2006, there were $14,779,000 in nonaccrual
loans  and  $1,678,000  in 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:

<TABLE>
<CAPTION>
                                                                                                              (Unaudited)
                                                                                                           Three Months Ended
                                                                                                                March 31,
                                                                                                                      ---
                                                                                                     2006                    2005
                                                                                                     ----                    ----
                                                                                                        (Dollars in thousands,
                                                                                                       except per share amounts)

Net income per share, basic
<S>                                                                                               <C>                     <C>
  Numerator - net income ...........................................................              $    1,201              $    1,360
                                                                                                  ==========              ==========
  Denominator
    Weighted average common shares issued and outstanding ..........................               4,414,059               4,394,078
                                                                                                  ==========              ==========

               Net income per share, basic .........................................              $      .27              $      .31
                                                                                                  ==========              ==========

Net income per share, assuming dilution
  Numerator - net income ...........................................................              $    1,201              $    1,360
                                                                                                  ==========              ==========
  Denominator
    Weighted average common shares issued and outstanding ..........................               4,414,059               4,394,078
    Effect of dilutive stock options ...............................................                  84,916                 102,720
                                                                                                  ----------              ----------
               Total shares ........................................................               4,498,975               4,496,798
                                                                                                  ==========              ==========
               Net income per share, assuming dilution .............................              $      .27              $      .30
                                                                                                  ==========              ==========
</TABLE>


                                       7
<PAGE>

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. Also,  compensation
cost  would  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.

Variable  Interest  Entities - On March 8, 2004, CBI sponsored the creation of a
Delaware trust, 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  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  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.

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.


                                       8
<PAGE>

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

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,
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 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.

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 2005 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
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 four  community  banks  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


                                       9
<PAGE>

Annual  Report  on Form  10-K  for  2005  for a  detailed  description  of CBI's
estimation process and methodology related to the allowance for loan losses.


RESULTS OF OPERATIONS

Changes in Financial Condition

         During the three  months ended March 31,  2006,  deposits  decreased by
$4,544,000,  or 1.0%, primarly due to a net seasonal outflow of deposits related
to local  government  tax receipts.  Loans  increased by  $3,467,000  during the
period.  Funding for these  changes was  provided  primarily by  decreasing  the
Company's cash and federal funds sold positions and by allowing some maturities,
calls and paydowns of the Company's investments in securities available-for-sale
to occur without reinvestment.

Earnings Performance

         For the  quarter  ended March 31,  2006,  CBI earned  consolidated  net
income of $1,201,000,  compared with  $1,360,000  for the  comparable  period of
2005. This represents a decrease of $159,000 or 11.7%.  Basic earnings per share
were $.27 in the 2006 period,  compared with $.31 for the 2005 quarter.  Diluted
earnings per share were $.27 for the 2006 period and $.30 for the 2005 period.

         Operating  results  for the  first  quarter  of 2006 were  affected  by
increased net interest  income  resulting  from both higher  average  amounts of
loans and  higher  rates  earned  on those  assets,  partially  offset by higher
interest expenses  resulting mainly from higher interest rates paid for interest
bearing  deposit  accounts.  The Federal  Reserve's  Open Market  Committee (the
"Committee")  continued  to raise the federal  funds rates  throughout  the 2006
first  quarter.  It is  expected  that  such  actions  will  continue  until the
Committee is satisfied that inflation does not pose a significant  threat to the
economy.  The  principal  effect of those rate  increases  has been to  increase
market rates of interest for instruments with  short-to-medium  term maturities,
while longer term interest rates have been affected to a lesser degree.  For the
Company,  the changes in interest rates have generally  resulted in increases in
rates associated with pre-existing variable rate loans,  increased rates charged
for new and renewed loans,  and higher rates realized for federal funds sold and
new investments in securities. Since the Company's funding sources generally are
short-term  deposits,  rates  associated  with  those  sources,  as  well as any
short-term borrowings, have also been subject to the increases.

         The results for the 2006 period were affected  adversely by the regular
re-evaluation of the Company's  allowance for loan losses,  which resulted in an
increase of $165,000 in the  provision  for loan losses  compared  with the same
period of 2005.

         Noninterest  income for the 2006 first  quarter was $269,000  more than
for the same period of 2005 due to an increase of $145,000 in mortgage brokerage
income and a $70,000  increase in service charges  assessed on deposit  accounts


                                       10
<PAGE>

and for other services.  Mortgage brokerage income for the 2006 period increased
due to continued strength in demand for mortgage loan originations.

         Noninterest  expense for the first  quarter of 2006 was  $508,000  more
than for the same period of 2005 due to  increases  of $301,000 in salaries  and
employee  benefits,  $89,000 in premises and equipment  expenses and $118,000 in
other  expenses.  The  increase in salaries  and  employee  benefits in the 2006
quarter was caused  primarily  by the  addition  of a Chief  Credit  Officer,  a
director  of human  resources  and other  management  personnel  after the first
quarter of 2005, higher commission-based  compensation in the mortgage brokerage
subsidiary,  and normal salary  increases.  Also, during the 2006 first quarter,
the Company increased its 401K matching  contributions.  Increased  expenses for
premises  and  equipment  resulted  from the  Company's  moving  into its  newly
constructed  headquarters and operations center building in the first quarter of
2006 and the leasing of other  office  space to provide for the needs of certain
management  and  other  personnel  who  are  located  away  from  the  corporate
headquarters.



<TABLE>
<CAPTION>
                                                                             Summary Income Statement
                                                         ----------------------------------------------------------------------
                                                                              (Dollars in thousands)
For the Three Months Ended March 31,                     2006               2005             Dollar Change    Percentage Change
------------------------------------                     ----               ----             -------------    -----------------
<S>                                                    <C>                 <C>                 <C>                 <C>
Interest income .....................................  $ 8,613             $ 7,253             $ 1,360              18.8%
Interest expense ....................................    3,386               2,216               1,170              52.8%
                                                       -------             -------             ------
Net interest income .................................    5,227               5,037                 190               3.8%
Provision for loan losses ...........................      615                 450                 165              36.7%
Noninterest income ..................................    1,934               1,665                 269              16.2%
Noninterest expenses ................................    4,627               4,119                 508              12.3%
Income tax expense ..................................      718                 773                 (55)             -7.1%
                                                       -------             -------             ------
Net income ..........................................  $ 1,201             $ 1,360             $  (159)            -11.7%
                                                       =======             =======             =======
</TABLE>

Net Interest Income

         Net interest income is the amount of interest income earned on interest
earning assets (primarily loans, securities,  interest bearing deposits in 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.

         Interest  income  increased by $1,360,000,  or 18.8%, in the 2006 first
quarter compared with the same 2005 period. Interest income from loans increased
from  $6,716,000 in the 2005 period to  $7,683,000 in the 2006 period  primarily
due to higher rates charged on loans outstanding, supplemented by higher average
volumes  of loans  outstanding.  The  amounts  of  interest  earned on all other
categories of interest earning assets  increased by $393,000,  in the aggregate,
due to  increases  in both the average  amounts of, and rates  associated  with,
federal funds sold and taxable investments and other securities.

         Interest  expense for deposits  increased from  $1,735,000 for the 2005
period to  $2,803,000  for the 2006  period  primarily  due to  increased  rates
associated  with all  categories of interest  bearing  deposits.  Larger average
amounts of interest-bearing deposits,  primarily time deposits, also contributed
to this increased interest expense.



                                       11
<PAGE>

         During the first quarter of 2004, CBI sponsored the creation of a Trust
that issued  $10,000,000 in trust preferred  securities.  The Trust invested the
proceeds  of  this  issuance  and  $310,000  of  capital  provided  by CBI  into
$10,310,000  of junior  subordinated  debentures  ("Debentures")  issued by CBI.
Interest  payments on the  Debentures  are due quarterly at a variable  interest
rate. CBI used the proceeds of the Debentures to repay certain pre-existing debt
obligations,  to enhance the capital position of two of the subsidiary banks, to
provide an additional funding mechanism for its mortgage  brokerage  activities,
and for other general corporate purposes.  Under current regulatory  guidelines,
the trust  preferred  securities  issued by the Trust are  includible  in Tier 1
capital for risk-based capital purposes.

         In the first  quarter of 2006,  interest  expense for  long-term  debt,
which includes the  Debentures and advances  obtained from the Federal Home Loan
Bank of Atlanta,  totaled $482,000,  an increase of $44,000,  or 10.0%, over the
amount  for  the  same  period  of  2005.  Average  amounts  of  long-term  debt
outstanding  increased by  $1,623,000,  or 5.2%,  and the interest rate paid for
such borrowings increased by 27 basis points.

         Interest  expenses for  short-term  borrowings  in the first quarter of
2006 were $101,000,  an increase of $58,000,  or 134.9%, over the amount for the
same  period of 2005.  An  increase  of 193 basis  points  in the  average  rate
associated  with those  borrowings was primarily  responsible  for the increased
expense.



                                       12
<PAGE>

<TABLE>
<CAPTION>
                                                                                 Average Balances, Yields and Rates
                                                                                    Three Months Ended March 31,
                                                                                    ----------------------------

                                                                              2006                                 2005
                                                                              ----                                 ----
                                                                            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 ............................     $   1,538      $      20      5.27%     $     794       $     8     4.09%
Investment securities - taxable ......................        57,868            540      3.78%        52,075           405     3.15%
Investment securities - tax exempt (2) ...............         5,423             47      3.51%         6,825            56     3.33%
Federal funds sold ...................................        29,592            323      4.43%        11,744            68     2.35%
Loans, including loans held for sale (2) .............       430,109          7,683      7.24%       415,869         6,716     6.55%
                                                           ---------        -------                ---------       -------
          Total interest earning assets ..............       524,530          8,613      6.66%       487,307         7,253     6.04%
Cash and due from banks ..............................        16,236                                  15,826
Allowance for loan losses ............................       (11,343)                                 (4,816)
Premises and equipment ...............................         6,516                                   7,888
Intangible assets ....................................        10,446                                   7,372
Other assets .........................................         7,978                                   4,165
                                                           ---------                               ---------
          Total assets ...............................     $ 554,363                               $ 517,742
                                                           =========                               =========

Liabilities and shareholders' equity
Interest bearing deposits
      Interest bearing transaction accounts ..........     $  73,906      $     219      1.20%     $  64,420       $    95     0.60%
      Savings ........................................        85,521            451      2.14%        90,073           307     1.38%
      Time deposits ..................................       236,100          2,133      3.66%       208,779         1,333     2.59%
                                                           ---------        -------                ---------       -------
          Total interest bearing deposits ............       395,527          2,803      2.87%       363,272         1,735     1.94%
Short-term borrowings ................................        10,276            101      3.99%         8,446            43     2.06%
Long-term debt .......................................        32,711            482      5.98%        31,088           438     5.71%
                                                           ---------        -------                ---------       -------
          Total interest bearing liabilities .........       438,514          3,386      3.13%       402,806         2,216     2.23%
Noninterest bearing demand deposits ..................        63,186                                  62,815
Other liabilities ....................................         2,972                                   1,456
Shareholders' equity .................................        49,691                                  50,665
                                                           ---------                               ---------
          Total liabilities and
            shareholders' equity .....................     $ 554,363                               $ 517,742
                                                           =========                               =========

Interest rate spread .................................                                   3.53%                                 3.81%
Net interest income and net yield ....................
      on earning assets ..............................                      $ 5,227      4.04%                     $ 5,037     4.19%
</TABLE>
----------------------------------
(1)  Yields and rates are annualized.
(2)  Yields  on  tax-exempt  securities  and  loans  have not been  stated  on a
     tax-equivalent basis.

Provision and Allowance for Loan Losses

         The  provision for loan losses for the 2006 first quarter was $615,000,
an increase of  $165,000,  or 36.7%,  over the  $450,000  provided  for the same
period  of  2005.  This  increase  was  due  primarily  to an  increase  in  net
charge-offs and non-performing loans during the 2006 first quarter, as discussed
below.

         Net  charge-offs  during the three  months  ended  March 31,  2006 were
$1,162,000, compared with $75,000 for the same period of 2005. The allowance for


                                       13
<PAGE>

loan losses as of March 31, 2006 was 2.66% of loans  outstanding,  compared with
2.81% as of December 31, 2005 and 1.16% as of March 31, 2005.

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


<TABLE>
<CAPTION>
                                                                           Three Months                                 Three Months
                                                                              Ended               Year Ended                Ended
                                                                             March 31,            December 31,            March 31,
                                                                               2006                  2005                   2005
                                                                               ----                  ----                   ----
                                                                                           (Dollars in thousands)
<S>                                                                          <C>                   <C>                   <C>
Allowance at beginning of period .................................           $  11,641             $   4,347             $   4,347
Transfer of allowance for off-balance-sheet
  contingencies to other liabilities .............................                   -                  (305)                    -
Provision for loan losses ........................................                 615                 9,637                   450
Net charge-offs ..................................................              (1,162)               (2,038)                  (75)
                                                                             ---------             ---------             ---------
Allowance at end of period .......................................           $  11,094             $  11,641             $   4,722
                                                                             =========             =========             =========
Allowance as a percentage of loans outstanding ...................                2.66%                 2.81%                 1.16%

Loans at end of period ...........................................           $ 417,451             $ 413,984             $ 406,049
                                                                             =========             =========             =========
</TABLE>


         During the first quarter of 2006, net charge-offs  included  $1,100,000
of partial  charge-offs  related to two  borrowers in the  manufactured  housing
business. Loans to these borrowers were placed in nonaccrual status in the third
quarter of 2005.

         Non-performing  loans,  consisting of nonaccrual  loans and loans 90 or
more days past due which are still accruing interest,  totaled $16,457,000 as of
March 31, 2006,  compared with  $12,380,000 as of December 31, 2005, an increase
of $4,077,000 or 32.9%. The majority of  non-performing  loans at March 31, 2006
were secured by commercial real estate and other  collateral.  Accordingly,  the
amount of  problem  loans does not  reflect  the  amount of  probable  loss that
management  estimates will be incurred with respect to problem loans. The amount
of such estimated loss is included in the allowance for loan losses.

         Following is a summary of non-performing loans as of March 31, 2006 and
December 31, 2005:


                                                     March 31,      December 31,
                                                       2006            2005
                                                       ----            ----
                                                      (Dollars in thousands)
Non-performing loans
  Nonaccrual loans ...............................    $14,779       $11,651
  Past due 90 days or more and still accruing ....      1,678           729
                                                      -------       -------
                Total ............................    $16,457       $12,380
                                                      =======       =======
Nonperforming loans as a percentage of:
  Loans outstanding ..............................       3.94%         2.99%
  Allowance for loan losses ......................     148.34%       106.35%



                                       14
<PAGE>

         The  following  table  shows  quarterly  changes in  nonperforming  and
potential problem loans since December 31, 2004.

<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, 2004 ................        $ 4,941        $   137         $ 5,078               1.29%        $ 4,628          1.20%
Net change .......................            118            215             333                              2,972
                                          -------        -------         -------                            -------
March 31, 2005 ...................          5,059            352           5,411               1.33%          7,600          1.87%
Net change .......................            200             (9)            191                             10,400
                                          -------        -------         -------                            -------
June 30, 2005 ....................          5,259            343           5,602               1.35%         18,000          4.35%
Net change .......................          4,954             74           5,028                             (4,107)
                                          -------        -------         -------                            -------
September 30, 2005 ...............         10,213            417          10,630               2.57%         13,893          3.35%
Net change .......................          1,438            312           1,750                             15,420
                                          -------        -------         -------                            -------
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%
                                          =======        =======         =======                            =======
</TABLE>

         The  $3,128,000  increase in  nonaccrual  loans in the first quarter of
2006 represents the further  deterioration of loans aggregating  $2,867,000 that
were previously  identified as potential  problem loans,  $107,000 of loans that
were  previously  90  days or  more  past  due and  still  accruing,  and  loans
aggregating $1,896,000 that were not previously included in potential problem or
nonperforming  loans.  Of these loans,  approximately  $951,000  are  unsecured,
$1,819,000   are   collateralized   by  real  estate  and  the   remainder   are
collateralized by accounts receivable, commercial equipment, and automobiles.

         Subsequent to March 31, 2006, the collateral  underlying one borrower's
nonaccrual  loans was sold and the Company's  loans were  settled.  The original
amount of this borrower's relationship was approximately $3,452,000. During 2004
the Company  charged the value of the loans down by $1,000,000.  During 2005 the
Company  provided an additional  specific  allocation of $1,000,000  against the
loans. In early April 2006 the Company  realized a final settlement of the loans
in the amount  $1,800,000,  for a net  life-to-date  loss of $1,652,000,  all of
which was recognized in prior years, as noted above.

         Management  will continue to monitor the levels of  non-performing  and
potential  problem  loans and  dedicate the  resources  necessary to address the
weaknesses in these credits in order to enhance the probability of collection or
recovery  of these  assets.  Management  considers  the  levels  and  trends  in
non-performing  assets and past due loans in  determining  how the provision and
allowance for loan losses is estimated and adjusted.

Noninterest Income

         Noninterest income for the first quarter of 2006 increased by $269,000,
or 16.2%, from the $1,665,000  reported for the 2005 period.  Service charges on
deposit accounts increased by $70,000 from the prior year amount.  This increase
was primarily the result of increased returned check revenue. Mortgage brokerage
income increased by $145,000 or 21.0%, from $692,000 for the 2005 period, due to
fees derived from a larger number of loans originated in the quarter.

                                       15
<PAGE>

Noninterest Expenses

         Salaries  and  employee  benefits  for the first  quarter  of 2006 were
$301,000 or 13.2%,  more than in the same 2005 period.  This  increase  resulted
primarily  from expenses  associated  with the hiring of several  administrative
officers  since the end of the first  quarter of 2005,  higher  commission-based
compensation related to the mortgage-brokerage operation, and increased matching
contributions for the Company's 401K retirement plan for employees. During 2005,
the Company  built a new  headquarters  office  building  where it now  provides
office space for many of its management officers and operations personnel.  This
facility was initially occupied in early 2006. In addition, other recently hired
management  personnel occupy offices in recently leased facilities  located more
centrally  within the  Company's  geographic  footprint.  As a result,  expenses
associated  with premises and equipment  were $89,000,  or 16.6%,  higher in the
2006 period.

         During the first  quarter of 2006,  CBI's Board of  Directors  directed
management to plan for a transition to a single bank  charter.  Contingent  upon
receiving required legal and regulatory approvals, implementation of this change
is expected by year-end  2006.  CBI  expects  that this change  ultimately  will
result in significant  financial savings,  improved  operational  efficiency and
effectiveness,  improved  customer service through unified  selection of banking
products  and  services,  accelerated  approval  of loan  requests,  and  better
availability of ATM and in-bank services for all customers.


Income Taxes

         Income tax expense for the first quarter of 2006 decreased $55,000,  or
7.1%,  from the amount for the first  quarter of 2005.  The average tax rate for
2006 was 37.4% compared with 36.2% in 2005.


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 net proceeds of issuing $10,000,000 of
trust  preferred  securities.  Cash and amounts due from banks and federal funds
sold 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 March 31, 2006 were  $459,665,000,  a decrease of
$4,544,000,  or 1.0%,  from the amount as of December 31, 2005.  As of March 31,
2006 the loan to deposit  ratio was 90.8%,  compared  with 89.2% at December 31,
2005 and 94.4% at March 31, 2005. Loans  held-for-sale have not been included in
the  numerator  of the  calculation  of the loan to deposit  ratio.  The banking
subsidiaries  have  significant   amounts  of  long-term  debt  available  under
agreements with the Federal Home Loan Bank of Atlanta.


                                       16
<PAGE>

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


CAPITAL RESOURCES

         CBI and its banking  subsidiaries 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 March 31, 2006  risk-based  capital  ratios for CBI and its banking
subsidiaries  are  presented in the  following  table,  compared  with the "well
capitalized" and minimum ratios under the regulatory definitions and guidelines:


                                                       March 31, 2006
                                                       --------------
                                               Tier 1   Total Capital   Leverage
                                               ------   -------------   --------

Community Bankshares, Inc. ................    12.89%      14.16%        9.76%
Orangeburg National Bank ..................    11.44%      12.69%        8.25%
Sumter National Bank ......................     9.83%      11.15%        7.46%
Florence National Bank ....................     9.83%      11.08%        8.73%
Bank of Ridgeway ..........................    11.28%      12.53%        8.79%
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 banks' 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 its
banking subsidiaries are adequate.


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. Such transactions are used by CBI for general
corporate purposes.

Variable Interest Entity

         As discussd under "Results of Operations - Net Interest  Income" and in
the  notes  to  unaudited  consolidated  financial  statements  under  "Variable
Interest  Entities," as of March 31, 2006,  CBI held an equity  interest in, and
guarantees the liabilities of, a non-consolidated  variable interest entity, SCB
Capital Trust I.


                                       17
<PAGE>

Commitments

         CBI's banking and mortgage brokerage subsidiaries are parties to credit
related financial instruments with  off-balance-sheet  risk in the normal course
of business to meet the  financing  needs of their  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:


                                                          March 31, 2006
                                                          --------------
                                                           (Dollars in
                                                            thousands)
Loan commitments .......................................     $ 61,239
Standby letters of credit ..............................        2,360

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

Neither  the  Company  nor the  Bank is  involved  in  other  off-balance  sheet
contractual  relationships or transactions  that could result in liquidity needs
or other commitments or significantly impact earnings.

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


                                       18
<PAGE>

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  March  31,  2006,  and the  estimated  fair  values  of  those  financial
instruments  included in other assets and liabilities in the balance sheet as of
that date.


                                                             March 31, 2006
                                                          ----------------------
                                                                     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 .....................................      $23,686      $  (190)
Forward sales contracts with investors
  of mortgage loans to be held for sale .............      $23,686      $   190


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 March 31, 2006,  CBI is positioned so that
net interest  income  would  increase  $123,000  and net income  would  increase
$73,000 in the next  twelve  months if  interest  rates  rose 100 basis  points.
Conversely,  net  interest  income would  decline  $123,000 and net income would
decline  $73,000 in the next twelve months if interest  rates declined 100 basis


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<PAGE>

points. In the current interest rate environment,  it is not expected that there
will be any large  decreases in market  interest rates in the immediate  future.
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 March 31, 2006 there was no significant  change from the interest
rate  sensitivity  analysis for the various changes in interest rates calculated
as of December 31, 2005. 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 2005 Annual Report
on Form 10-K.


Item 4.  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 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.



                                       20
<PAGE>


                           PART II--OTHER INFORMATION

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

         On February 10, 2006, the Company sold 1,000 shares of its common stock
to an executive officer for an aggregate purchase price of $16,100.  Issuance of
the securities  was not registered  under the Securities Act of 1933 in reliance
on the exemption provided by Section 4(2) thereof because no public offering was
involved.

Item 6.  Exhibits

Exhibits   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




                                       21
<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: May 12, 2006

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)



                                       22
<PAGE>

                                 EXHIBIT INDEX

        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









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