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, 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 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, 4,475,232 shares outstanding on May 2, 2007.


<PAGE>


                           COMMUNITY BANKSHARES, INC.

                                    FORM 10-Q

                                      Index

                                                                            Page
PART I -   FINANCIAL INFORMATION

Item 1.    Financial Statements

           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 ..... 20

Item 4T.   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




                                       2
<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1. - Financial Statements

COMMUNITY BANKSHARES, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
                                                                                                   (Unaudited)
                                                                                                     March 31,          December 31,
                                                                                                       2007                 2006
                                                                                                       -----                ----
                                                                                                        (Dollars in thousands)
Assets
<S>                                                                                                    <C>                <C>
     Cash and due from banks .................................................................         $  16,833          $  17,622
     Federal funds sold ......................................................................             9,394             29,102
                                                                                                       ---------          ---------
            Total cash and cash equivalents ..................................................            26,227             46,724
     Interest-bearing deposits with other banks ..............................................             1,695              1,926
     Securities available-for-sale ...........................................................            81,268             84,783
     Securities held-to-maturity (estimated fair value $1,750 for 2007
          and $1,750 for 2006) ...............................................................             1,750              1,750
     Other investments .......................................................................             3,345              3,246
     Loans held for sale .....................................................................             9,023              9,235
     Loans receivable ........................................................................           424,328            409,720
         Less, allowance for loan losses .....................................................            (4,961)            (4,662)
                                                                                                       ---------          ---------
            Net loans ........................................................................           419,367            405,058
     Premises and equipment - net ............................................................            10,355             10,307
     Accrued interest receivable .............................................................             3,815              3,821
     Net deferred income tax assets ..........................................................             1,192              1,231
     Goodwill ................................................................................             4,321              4,321
     Core deposit intangible assets ..........................................................             2,530              2,591
     Prepaid expenses and other assets .......................................................             2,644              3,524
                                                                                                       ---------          ---------

            Total assets .....................................................................         $ 567,532          $ 578,517
                                                                                                       =========          =========

Liabilities
     Deposits
         Noninterest bearing .................................................................         $  60,674          $  61,693
         Interest-bearing ....................................................................           409,096            421,928
                                                                                                       ---------          ---------
            Total deposits ...................................................................           469,770            483,621
     Short-term borrowings ...................................................................            12,125             12,948
     Long-term debt ..........................................................................            29,685             26,188
     Accrued interest payable ................................................................             1,573              1,578
     Accrued expenses and other liabilities ..................................................               921              1,558
                                                                                                       ---------          ---------
            Total liabilities ................................................................           514,074            525,893
                                                                                                       ---------          ---------

Shareholders' equity
     Common stock - no par value; 12,000,000 shares authorized; issued and
         outstanding - 4,468,502 for 2007 and 4,426,648 for 2006 .............................            30,843             30,603
     Additional paid-in capital ..............................................................                27                  -
     Retained earnings .......................................................................            22,851             22,382
     Accumulated other comprehensive income (loss) ...........................................              (263)              (361)
                                                                                                       ---------          ---------
            Total shareholders' equity .......................................................            53,458             52,624
                                                                                                       ---------          ---------

            Total liabilities and shareholders' equity .......................................         $ 567,532          $ 578,517
                                                                                                       =========          =========
</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,
                                                                                                               ---------
                                                                                                       2007                  2006
                                                                                                      -----                  ----
                                                                                                         (Dollars in thousands,
                                                                                                          except per share)
Interest and dividend income
<S>                                                                                                    <C>                    <C>
     Loans, including fees ...........................................................                 $8,157                 $7,683
     Interest-bearing deposits with other banks ......................................                     33                     20
     Debt securities .................................................................                  1,016                    553
     Dividends .......................................................................                     47                     34
     Federal funds sold ..............................................................                    180                    323
                                                                                                       ------                 ------
         Total interest and dividend income ..........................................                  9,433                  8,613
                                                                                                       ------                 ------

Interest expense
     Deposits
     Time deposits $100M and over ....................................................                    993                    859
     Other deposits ..................................................................                  2,645                  1,944
                                                                                                       ------                 ------
         Total interest expense on deposits ..........................................                  3,638                  2,803
     Short-term borrowings ...........................................................                    116                    101
     Long-term debt ..................................................................                    437                    482
                                                                                                       ------                 ------
         Total interest expense ......................................................                  4,191                  3,386
                                                                                                       ------                 ------

Net interest income ..................................................................                  5,242                  5,227
Provision for loan losses ............................................................                    375                    615
                                                                                                       ------                 ------
Net interest income after provision ..................................................                  4,867                  4,612
                                                                                                       ------                 ------

Noninterest income
     Service charges on deposit accounts .............................................                    891                    832
     Mortgage brokerage income .......................................................                    655                    837
     Net securities gains ............................................................                      2                      1
     Other ...........................................................................                    277                    264
                                                                                                       ------                 ------
         Total noninterest income ....................................................                  1,825                  1,934
                                                                                                       ------                 ------

Noninterest expenses
     Salaries and employee benefits ..................................................                  2,934                  2,579
     Premises and equipment ..........................................................                    562                    624
     Advertising .....................................................................                    143                     75
     Supplies ........................................................................                    125                     72
     Other ...........................................................................                  1,350                  1,277
                                                                                                       ------                 ------
         Total noninterest expenses ..................................................                  5,114                  4,627
                                                                                                       ------                 ------

Income before income taxes ...........................................................                  1,578                  1,919
Income tax expense ...................................................................                    573                    718
                                                                                                       ------                 ------
Net income ...........................................................................                 $1,005                 $1,201
                                                                                                       ======                 ======

Per share
     Net income ......................................................................                 $ 0.23                 $ 0.27
     Net income - diluted ............................................................                   0.22                   0.27
     Cash dividends declared .........................................................                   0.12                   0.11
</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
                                                                    ------------    Additional              Accumulated
                                                             Number of                Paid-in   Retained Other 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 ..........................................           -           -           -       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
                                                            =========   =========   =========   =========    =========    =========


Balance, January 1, 2007 ................................   4,441,220   $  30,603         $ -   $  22,382    $    (361)   $  52,624
                                                                                                                          ---------
Comprehensive income
    Net income ..........................................           -           -           -       1,005            -        1,005
                                                                                                                          ---------
    Unrealized holding gains and losses
      on available-for-sale securities arising
      during the period, net of income taxes of $48 .....           -           -           -           -           99           99
    Reclassification adjustment for losses (gains)
      realized in income, net of income taxes of $1 .....           -           -           -           -           (1)          (1)
                                                                                                                          ---------
        Total other comprehensive income (loss) .........           -           -           -           -            -           98
                                                                                                                          ---------
          Total comprehensive income ....................           -           -           -           -            -        1,103
                                                                                                                          ---------
Share-based compensation ................................           -           -          27           -            -           27
Proceeds of sale of common stock ........................         500           8           -           -            -            8
Exercise of employee stock options ......................      26,782         232           -           -            -          232
Cash dividends declared, $.12 per share .................           -           -           -        (536)           -         (536)
                                                            ---------   ---------   ---------   ---------    ---------    ---------
Balance, March 31, 2007 .................................   4,468,502   $  30,843   $      27   $  22,851    $    (263)   $  53,458
                                                            =========   =========   =========   =========    =========    =========
</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,
                                                                                                                  ---------
                                                                                                          2007               2006
                                                                                                          ----               ----
                                                                                                             (Dollars in thousands)
Operating activities
<S>                                                                                                     <C>                <C>
     Net income ..............................................................................          $  1,005           $  1,201
     Adjustments to reconcile net income to net
         cash provided by operating activities
            Depreciation and amortization ....................................................               289                314
            Net (accretion) amortization of securities .......................................                (8)                 6
            Provision for loan losses ........................................................               375                615
            Net securities gains .............................................................                (2)                (1)
            Proceeds of sales of loans held for sale .........................................            35,627             51,178
            Originations of loans held for sale ..............................................           (35,415)           (52,036)
            Losses on sales of other real estate .............................................                 5                  -
            (Increase) decrease in accrued interest receivable ...............................                (1)               236
            Decrease in other assets .........................................................               828                458
            (Decrease) increase in accrued interest payable ..................................                (5)                33
            Decrease (increase) in other liabilities .........................................              (637)               570
            Share-based compensation .........................................................                27                  -
                                                                                                        --------           --------
                Net cash provided by operating activities ....................................             2,088              2,574
                                                                                                        --------           --------

Investing activities
     Net decrease (increase) in interest-bearing deposits with other banks ...................               231               (809)
     Purchases of available-for-sale securities ..............................................            (1,966)            (2,499)
     Maturities, calls and paydowns of available-for-sale securities .........................             5,635              3,705
     Proceeds of sales of other investments ..................................................               238                  -
     Purchases of other investments ..........................................................              (337)               (71)
     Net increase in loans made to customers .................................................           (15,016)            (4,629)
     Purchases of premises and equipment .....................................................              (276)              (737)
     Proceeds from sales of foreclosed assets ................................................               379                  -
                                                                                                        --------           --------
                Net cash used by investing activities ........................................           (11,112)            (5,040)
                                                                                                        --------           --------

Financing activities
     Net decrease in deposits ................................................................           (13,851)            (4,544)
     Net (decrease) increase in short-term borrowings ........................................              (823)             1,516
     Proceeds from issuing long-term debt ....................................................             7,500                  -
     Repayment of long-term debt .............................................................            (4,003)              (503)
     Proceeds from sale of stock .............................................................                 8                 16
     Exercise of employee stock options ......................................................               232                239
     Cash dividends paid .....................................................................              (536)              (486)
                                                                                                        --------           --------
                Net cash used by financing activities ........................................           (11,473)            (3,762)
                                                                                                        --------           --------
Decrease in cash and cash equivalents ........................................................           (20,497)            (6,228)
Cash and cash equivalents, beginning of period ...............................................            46,724             51,991
                                                                                                        --------           --------
Cash and cash equivalents, end of period .....................................................          $ 26,227           $ 45,763
                                                                                                        ========           ========

Supplemental disclosures of cash flow information
     Cash payments for interest ..............................................................          $  4,196           $  3,353
                                                                                                        ========           ========
     Cash payments for income taxes ..........................................................          $     48           $      -
                                                                                                        ========           ========

Supplemental disclosures of non-cash investing activities
     Transfers of loans receivable to other real estate ......................................          $    276           $      -
                                                                                                        ========           ========
</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 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.

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 March 31, 2007, there were $6,326,000 in nonaccrual
loans  and  $167,000  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,
                                                                                                              ---------
                                                                                                       2007                 2006
                                                                                                       ----                 ----
                                                                                                      (Dollars in thousands,
                                                                                                      except per share amounts)

Net income per share, basic
<S>                                                                                                <C>                    <C>
  Numerator - net income .............................................................             $    1,005             $    1,201
                                                                                                   ==========             ==========
  Denominator
    Weighted average common shares issued and outstanding ............................              4,448,546              4,414,059
                                                                                                   ==========             ==========

               Net income per share, basic ...........................................             $      .23             $      .27
                                                                                                   ==========             ==========

Net income per share, assuming dilution
  Numerator - net income .............................................................             $    1,005             $    1,201
                                                                                                   ==========             ==========
  Denominator
    Weighted average common shares issued and outstanding ............................              4,448,546              4,414,059
    Effect of dilutive stock options .................................................                 62,091                 84,916
                                                                                                   ----------             ----------
               Total shares ..........................................................              4,510,637              4,498,975
                                                                                                   ==========             ==========
               Net income per share, assuming dilution ...............................             $      .22             $      .27
                                                                                                   ==========             ==========
</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.  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 quarter of 2007, stock-based  compensation
included in salaries and employee benefits totaled $27,000.

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  the  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>

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.

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 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.

                                       9
<PAGE>

         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 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
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.


RESULTS OF OPERATIONS

Changes in Financial Condition

         During the three  months ended March 31,  2007,  deposits  decreased by
$13,851,000, or 2.9%, due to a net seasonal outflow of deposits related to local
government  tax  receipts  and to the  Company's  deliberate  actions  to reduce
certain high cost time deposits. Loans increased by $14,608,000, or 3.6%, during
the  period.   Real  estate  mortgage  and   construction   loans  increased  by
$20,031,000,  or 6.8%,  during the 2007  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.  In
addition,  the Company  increased  long-term debt by $3,497,000 during the first
quarter of 2007.



                                       10
<PAGE>

Earnings Performance

         For the  quarter  ended March 31,  2007,  CBI earned  consolidated  net
income of $1,005,000,  compared with  $1,201,000  for the  comparable  period of
2006, a decrease of $196,000 or 16.3%. Basic earnings per share were $.23 in the
2007 period, compared with $.27 for the 2006 quarter. Diluted earnings per share
were $.22 for the 2007 period and $.27 for the 2006 period.

         Net  interest  income for the first  quarter of 2007 was  substantially
unchanged  from the amount  reported for the first quarter of 2006. The positive
effects of higher average amounts of securities and higher rates earned on loans
and securities in 2007 were  substantially  offset by higher  interest  expenses
resulting  primarily  from  higher  rates  paid  for  interest  bearing  deposit
accounts.   The  Federal  Reserve's  Open  Market  Committee  (the  "Committee")
continued  to hold steady the  federal  funds  rates  throughout  the 2007 first
quarter.   At  present,   market  interest  rates  for  shorter-term   financial
instruments  generally exceed the rates for longer-term  financial  instruments.
Interest rates have generally increased for the Company's  pre-existing variable
rate  loans and the  Company  is  currently  charging  higher  rates for new and
renewed loans. The Company also realized higher rates for federal funds sold and
new  investments  in  securities  during the 2007 first  quarter.  The Company's
funding sources  primarily are short-term  deposits,  and rates  associated with
those sources, as well as any short-term  borrowings and long-term debt incurred
during the 2007 period,  have also been subject to the  increases.  The interest
rate  spread  (yield  earned on  average  earning  assets  less the rate paid on
average interest  bearing  liabilities) for the first three months of 2007 was 6
basis points lower than for the same period of 2006.

         The results for the 2007 period were affected  favorably by the regular
re-evaluation  of the Company's  allowance for loan losses,  which resulted in a
decrease of $240,000 in the  provision  for loan losses  compared  with the same
period of 2006.

         Noninterest  income for the 2007 first  quarter was $109,000  less than
for the same period of 2006  primarily due to a decrease of $182,000 in mortgage
brokerage  income.  Service charges  assessed on deposit  accounts and for other
services increased by $59,000 in the 2007 period over the prior year amount.

         Noninterest  expense for the first  quarter of 2007 was  $487,000  more
than for the same  period of 2006  primarily  due to  increases  of  $355,000 in
salaries  and  employee  benefits  and  $121,000  in  advertising  and  supplies
expenses,  partially  offset by a $62,000  decrease in expenses for premises and
equipment during the 2007 period.

         Much of the increase in salaries and employee  benefits is attributable
to  management's  decision to augment its lending staff.  During the past twelve
months, the Bank has added six highly experienced lending officers to its staff,
only one of whom was a replacement.  However, largely as a result of the efforts
of the new  lending  officers,  the  loan  portfolio  increased  3.6%,  or $14.6
million,  during the first quarter of 2007, which is expected to have a positive
impact on earnings in future periods.


                                       11
<PAGE>


<TABLE>
<CAPTION>
                                                                              Summary Income Statement
                                                                              ------------------------
                                                                               (Dollars in thousands)
For the Three Months Ended March 31,                       2007                2006            Dollar Change     Percentage Change
                                                           ----                ----            -------------     -----------------
<S>                                                       <C>                 <C>                 <C>                 <C>
Interest income ....................................      $9,433              $8,613              $  820                9.5%
Interest expense ...................................       4,191               3,386                 805               23.8%
                                                          ------              ------              ------
Net interest income ................................       5,242               5,227                  15                0.3%
Provision for loan losses ..........................         375                 615                (240)             -39.0%
Noninterest income .................................       1,825               1,934                (109)              -5.6%
Noninterest expenses ...............................       5,114               4,627                 487               10.5%
Income tax expense .................................         573                 718                (145)             -20.2%
                                                          ------              ------              ------
Net income .........................................      $1,005              $1,201              $ (196)             -16.3%
                                                          ======              ======              ======
</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  $820,000,  or 9.5%,  in the 2007 first
quarter compared with the same 2006 period. Interest income from loans increased
from  $7,683,000 in the 2006 period to  $8,157,000 in the 2007 period  primarily
due to higher rates charged on loans outstanding. The Company sold approximately
$8,162,000 of loans during the fourth  quarter of 2006 and gross  charge-offs of
loans  during 2006  totaled  $11,365,000.  These events led to a lower amount of
average  loans in the first  quarter of 2007  compared with the first quarter of
2006  despite  a  $14,608,000  increase  in the  period-ending  amount  of loans
compared with the ending amount as of December 31, 2006.  The amount of interest
earned on investment  securities  in the first quarter of 2007 was $476,000,  or
81.1%,  higher than in the 2006 period due to both increased average volumes and
higher  yields  earned.  Interest  earned on  federal  funds sold  decreased  by
$143,000,  or 44.3%, from the amount for the first quarter of 2006 primarily due
to a decrease of  $15,437,000,  or 52.2%,  in the  average  amount of such funds
outstanding during the period.

         Interest  expense for deposits  increased from  $2,803,000 for the 2006
period  to  $3,638,000  for  the  2007  period  primarily  due to  higher  rates
associated with all categories of interest  bearing  deposits.  The average rate
paid for all  interest  bearing  deposits  was  3.56%  during  the 2007  period,
compared  with  2.87%  during  the  2006  period.   Larger  average  amounts  of
interest-bearing   deposits,   especially   savings  and  time  deposits,   also
contributed to this increased interest expense. During the first three months of
2007, the Company  reduced rates offered for certain new time deposit  accounts.
These actions are expected to reduce the volume of new interest bearing deposits
and reduce the rate of future increases in deposit interest expenses.

         In the first  quarter of 2007,  interest  expense for  long-term  debt,
which includes  junior  subordinated  debentures and advances  obtained from the
Federal Home Loan Bank of Atlanta,  totaled $437,000,  a decrease of $45,000, or
9.3%, from the amount for the same period of 2006.  Although  average amounts of
long-term debt outstanding decreased by $6,435,000,  or 19.7%, the interest rate
paid for such borrowings increased by 76 basis points.


                                       12
<PAGE>

         Interest  expenses for  short-term  borrowings  in the first quarter of
2007 were $116,000,  an increase of $15,000,  or 14.9%,  over the amount for the
same period of 2006, as a result of an increase of $1,550,000,  or 15.1%, in the
average amount of those borrowings.

<TABLE>
<CAPTION>
                                                                                   Average Balances, Yields and Rates
                                                                                      Three Months Ended March 31,
                                                                                      ----------------------------
                                                                               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 ...............................    $   2,547      $      33      5.25%    $   1,538     $      20    5.27%
Investment securities - taxable .........................       84,722          1,020      4.88%       57,868           540    3.78%
Investment securities - tax exempt (2) ..................        4,750             43      3.67%        5,423            47    3.51%
Federal funds sold ......................................       14,155            180      5.16%       29,592           323    4.43%
Loans, including loans held for sale (2)(3) .............      423,632          8,157      7.81%      430,109         7,683    7.24%
                                                             ---------      ---------               ---------     ---------
            Total interest earning assets ...............      529,806          9,433      7.22%      524,530         8,613    6.66%
Cash and due from banks .................................       17,330                                 16,236
Allowance for loan losses ...............................       (4,864)                               (11,343)
Premises and equipment ..................................       10,313                                  6,516
Intangible assets .......................................        6,880                                 10,446
Other assets ............................................        7,497                                  7,978
                                                             ---------                              ---------
            Total assets ................................    $ 566,962                              $ 554,363
                                                             =========                              =========

Liabilities and shareholders' equity
Interest bearing deposits
       Interest bearing transaction accounts ............    $  77,051      $     259      1.36%    $  73,906     $     219    1.20%
       Savings ..........................................       96,148            672      2.83%       85,521           451    2.14%
       Time deposits ....................................      241,571          2,707      4.54%      236,100         2,133    3.66%
                                                             ---------      ---------               ---------     ---------
            Total interest bearing deposits .............      414,770          3,638      3.56%      395,527         2,803    2.87%
Short-term borrowings ...................................       11,826            116      3.98%       10,276           101    3.99%
Long-term debt ..........................................       26,276            437      6.74%       32,711           482    5.98%
                                                             ---------      ---------               ---------     ---------
            Total interest bearing liabilities ..........      452,872          4,191      3.75%      438,514         3,386    3.13%
Noninterest bearing demand deposits .....................       59,068                                 63,186
Other liabilities .......................................        1,820                                  2,972
Shareholders' equity ....................................       53,202                                 49,691
                                                             ---------                              ---------
            Total liabilities and
              shareholders' equity ......................    $ 566,962                              $ 554,363
                                                             =========                              =========

Interest rate spread ....................................                                  3.47%                               3.53%
Net interest income and net yield on earning assets .....                   $   5,242      4.01%                  $   5,227    4.04%
</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 are  included in the loan  balance and income from such
      loans is recognized on a cash basis.  The amounts of such loans and income
      are not material.


                                       13
<PAGE>

Provision and Allowance for Loan Losses

         The  provision for loan losses for the 2007 first quarter was $375,000,
a decrease of $240,000, or 39.0%, from the $615,000 provided for the same period
of 2006. This decrease was due primarily to a decrease in net charge-offs during
the 2007 first quarter, as discussed below.

         Net  charge-offs  during the three  months  ended  March 31,  2007 were
$76,000, compared with $1,162,000 for the same period of 2006. The allowance for
loan losses as of March 31, 2007 was 1.17% of loans  outstanding,  compared with
1.14% as of December 31, 2006 and 2.66% as of March 31, 2006.

         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,
                                                                              2007                    2006                  2006
                                                                              ----                    ----                  ----
                                                                                            (Dollars in thousands)
<S>                                                                          <C>                   <C>                   <C>
Allowance at beginning of period .................................           $   4,662             $  11,641             $  11,641
Provision for loan losses ........................................                 375                 2,950                   615
Net charge-offs ..................................................                 (76)               (9,929)               (1,162)
                                                                             ---------             ---------             ---------
Allowance at end of period .......................................           $   4,961             $   4,662             $  11,094
                                                                             =========             =========             =========
Allowance as a percentage of loans outstanding ...................                1.17%                 1.14%                 2.66%

Loans at end of period ...........................................           $ 424,328             $ 409,720             $ 417,451
                                                                             =========             =========             =========
</TABLE>


         Non-performing  loans,  consisting of nonaccrual  loans and loans 90 or
more days past due which are still accruing  interest,  totaled $6,493,000 as of
March 31, 2007, compared with $4,946,000 as of December 31, 2006, an increase of
$1,547,000 or 31.3%. The majority of  non-performing  loans as of March 31, 2007
were secured by commercial real estate and other  collateral.  Accordingly,  the
amount of such non-performing loans does not reflect the amount of probable loss
that  management  estimates  will be incurred  with respect to those 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, 2007 and
December 31, 2006:

                                                   March 31,    December 31,
                                                     2007          2006
                                                     ----          ----
                                                    (Dollars in thousands)
Non-performing loans
  Nonaccrual loans ..............................    $6,326       $4,714
  Past due 90 days or more and still accruing ...       167          232
                                                     ------       ------
                Total ...........................    $6,493       $4,946
                                                     ======       ======
Non-performing loans as a percentage of:
  Loans outstanding .............................      1.53%        1.21%
  Allowance for loan losses .....................    130.88%      106.09%


                                       14
<PAGE>




         The  following  table shows  quarterly  changes in  non-performing  and
potential  problem loans since  December 31, 2004.  Potential  problem loans are
loans as to which  information  about the borrowers'  possible  credit  problems
causes  management  to have serious  doubts  about their  ability to comply with
current repayment terms,  which may result in subsequent  classification of such
loans as non-performing loans.

<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            1.18%
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%
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%
                                         ========        ========        ========                     ========
</TABLE>

         During  the  first  quarter  of 2007,  nonaccrual  loans  increased  by
$1,612,000,  primarily  as a result of the  addition of a $1 million real estate
secured  acquisition and development  loan.  Other elements of the increase were
attributable  to a small number of real estate  secured loans that migrated from
potential  problem  loan  status.  During  the month of April,  $600,000  of the
increase was paid off without loss to the Bank.

         Management  will continue to monitor the levels of  non-performing  and
potential  problem loans and dedicate the resources it believes are 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  loans  and past due  loans  in  determining  how the
provision and allowance for loan losses is estimated and adjusted.


                                       15
<PAGE>

Noninterest Income


         Noninterest income for the first quarter of 2007 decreased by $109,000,
or 5.6%, from the $1,934,000  reported for the 2006 period.  Mortgage  brokerage
income decreased by $182,000 or 21.7%, from $837,000 for the 2006 period, due to
a softening of the  residential  real estate market and a decrease in the number
of loans originated and sold during the quarter. The Company decided in mid-2006
to refocus its  mortgage-lending  efforts to  emphasize  production  for sale of
conventional  one-to-four  family  mortgages,  and to limit  wholesale  mortgage
production to a select group of  high-quality  originators.  Service  charges on
deposit accounts increased by $59,000 over the first quarter of 2006,  primarily
as a result of increased volumes of overdraft fee income.


Noninterest Expenses


         Salaries  and  employee  benefits  for the first  quarter  of 2007 were
$355,000,  or 13.8%,  more than in the same 2006 period.  This increase resulted
from the hiring of two  additional  senior loan  officers in the  mortgage  loan
division  during  the first  quarter of 2007,  the  hiring of other  experienced
lenders  during 2006 and early 2007,  the hiring of a Director of Internal Audit
in early 2007,  and related  personnel  and normal  salary  increases  generally
granted in conjunction with annual employee  performance reviews. One of the new
mortgage loan division  officers will lead the Bank's  mortgage loan  production
office  opened in Charlotte,  NC during the first  quarter of 2007.  Expenses of
premises and equipment  decreased by $62,000,  or 9.9%, for the first quarter of
2007 as a result of the first quarter 2006 retirement of several obsolete assets
and demolition costs associated with the old corporate headquarters building. In
early May 2007 the  Company  began  construction  of a new branch  office in the
rapidly growing northeast Columbia, SC market. This office, which is expected to
cost  approximately  $830,000,  is expected  to open for  business by the end of
2007.

         During the fourth  quarter of 2006,  the Company merged its four former
subsidiary  banks into a single  bank.  The  Company  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.
Higher advertising and supplies expenses in the first quarter of 2007,  however,
reflect some of the short-term costs of this change.


Income Taxes

         Income tax expense for the first quarter of 2007 decreased $145,000, or
20.2%,  from the amount for the first quarter of 2006.  The average tax rate for
2007 was 36.3% compared with 37.4% in 2006.


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


                                       16
<PAGE>

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, 2007 were  $469,770,000,  a decrease of
$13,851,000,  or 2.9%,  from the amount as of December 31, 2006. As of March 31,
2007 the loan to deposit  ratio was 90.3%,  compared  with 84.7% at December 31,
2006 and 90.8% at March 31, 2006. Loans  held-for-sale have not been included in
the  numerator of the  calculation  of the loan to deposit  ratio.  The Bank has
significant  amounts of  long-term  debt  available  under  agreements  with the
Federal Home Loan Bank of Atlanta.

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


CAPITAL RESOURCES

         CBI and the Bank 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, 2007  risk-based  capital ratios for CBI and the Bank are
presented in the following  table,  compared with the "well  capitalized"  (Bank
only) and minimum ratios under the regulatory definitions and guidelines:

                                                       March 31, 2007
                                                       --------------
                                               Tier 1  Total Capital   Leverage
                                               ------  -------------   --------

Community Bankshares, Inc. ................    13.26%      14.43%       10.17%
Community Resource Bank ...................    11.65%      12.83%        8.88%
Minimum "well capitalized" requirement ....     6.00%      10.00%        6.00%
Minimum requirement .......................     4.00%       8.00%        5.00%


         As shown in the table  above,  the  Bank's  capital  ratios  exceed 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.


                                       17
<PAGE>

SUBSEQUENT EVENT

         In the fourth  quarter of 2006, CBI merged its four banks into one bank
and,  as part of its  ongoing  asset/liability  review  process,  has since been
reviewing  its combined  balance  sheet.  For a long period,  each of the former
subsidiary  banks  maintained  an investment in the stock of The Bankers Bank in
Atlanta,  Georgia.  Management  determined  that  the  Bank  had  too  great  an
investment  in that stock and  elected to sell 275 of the 375 shares  owned at a
pretax  gain of  $704,000.  This  nonrecurring  gain will be  recognized  in the
consolidated financial statements for the second quarter of 2007.


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, 2007,  CBI held an equity  interest in, and
guarantees the liabilities of, a non-consolidated  variable interest entity, SCB
Capital Trust I.

Commitments

         The  Bank  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:

                                  March 31, 2007
                                  --------------
                                   (Dollars in
                                   thousands)
Loan commitments ...............    $ 64,084
Standby letters of credit ......       2,595


         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


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<PAGE>

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.


         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  is  expected  to begin  during the second  quarter of 2007 and the
office is expected to open for business before year end. 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  March  31,  2007,  and the  estimated  fair  values  of  those  financial
instruments  included in other assets and liabilities in the balance sheet as of
that date.



                                       19
<PAGE>

                                                         March 31, 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 ..................................  $ 16,320          $ 22
Forward sales contracts with investors
  of mortgage loans to be held for sale ..........  $ 16,320         $ (22)


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, 2007,  CBI is positioned so that
net interest income would decrease $48,000 and net income would decrease $32,000
in the next twelve months if interest  rates rose 100 basis points.  Conversely,
net interest income would increase $48,000 and net income would increase $32,000
in the next twelve months if interest  rates  declined 100 basis 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, 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 report, were effective.



                                       20
<PAGE>

         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.


                           PART II--OTHER INFORMATION

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

         On February 14,  2007,  the Company sold 500 shares of its common stock
to an executive officer for an aggregate  purchase price of $8,250.  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 10, 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)




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