UNITED STATES 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 September 30, 2005  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)


                              791 Broughton Street
                        Orangeburg, South Carolina 29115
--------------------------------------------------------------------------------
               (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 an  accelerated  filer
(as defined in Rule 12b-2 of the Exchange Act).

         Yes [ ] No [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, 4,404,303 shares outstanding on November 1, 2005.



<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 ..........  10
Item 3.      Quantitative and Qualitative Disclosures About Market Risk ...  24
Item 4.      Controls and Procedures ......................................  24

PART II -    OTHER INFORMATION

Item 6.      Exhibits .....................................................  25

SIGNATURES ................................................................  26



                                       2
<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

COMMUNITY BANKSHARES, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
                                                                                                     (Unaudited)
                                                                                                     September 30,      December 31,
                                                                                                         2005              2004
                                                                                                         ----              ----
                                                                                                          (Dollars in thousands)
Assets
<S>                                                                                                    <C>                <C>
     Cash and due from banks .................................................................         $  18,239          $  14,397
     Federal funds sold ......................................................................            23,999             12,571
                                                                                                       ---------          ---------
            Total cash and cash equivalents ..................................................            42,238             26,968
     Interest bearing deposits with other banks ..............................................               849                852
     Securities available-for-sale ...........................................................            56,901             55,471
     Securities held-to-maturity (estimated fair value $1,921 for 2005
          and $1,907 for 2004) ...............................................................             1,925              1,925
     Other investments .......................................................................             2,980              2,642
     Loans held for sale .....................................................................            17,682             15,090
     Loans receivable ........................................................................           414,290            393,649
         Less, allowance for loan losses .....................................................            (6,658)            (4,347)
                                                                                                       ---------          ---------
            Net loans ........................................................................           407,632            389,302
     Premises and equipment - net ............................................................             8,289              7,739
     Accrued interest receivable .............................................................             2,779              2,419
     Net deferred income tax assets ..........................................................             1,030                599
     Goodwill ................................................................................             4,321              4,321
     Core deposit intangible assets ..........................................................             2,899              3,083
     Prepaid expenses and other assets .......................................................             2,055              1,966
                                                                                                       ---------          ---------
            Total assets .....................................................................         $ 551,580          $ 512,377
                                                                                                       =========          =========
Liabilities
     Deposits
         Noninterest bearing .................................................................         $  67,600          $  67,046
         Interest bearing ....................................................................           387,698            356,412
                                                                                                       ---------          ---------
            Total deposits ...................................................................           455,298            423,458
     Short-term borrowings ...................................................................             7,890              6,662
     Long-term debt ..........................................................................            33,499             30,573
     Accrued interest payable ................................................................             1,216                691
     Accrued expenses and other liabilities ..................................................             1,556                966
                                                                                                       ---------          ---------
            Total liabilities ................................................................           499,459            462,350
                                                                                                       ---------          ---------
Shareholders' equity
     Common stock - no par value; 12,000,000 shares authorized; issued and
         outstanding - 4,404,303 for 2005 and
         4,390,784 for 2004 ..................................................................            30,202             30,042
     Retained earnings .......................................................................            22,247             20,075
     Accumulated other comprehensive income (loss) ...........................................              (328)               (90)
                                                                                                       ---------          ---------
            Total shareholders' equity .......................................................            52,121             50,027
                                                                                                       ---------          ---------
            Total liabilities and shareholders' equity .......................................         $ 551,580          $ 512,377
                                                                                                       =========          =========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.


                                       3
<PAGE>


COMMUNITY BANKSHARES, INC.
Consolidated Statements of Income
<TABLE>
<CAPTION>
                                                                                              (Unaudited)
                                                                                       Period Ended September 30,
                                                                                       --------------------------
                                                                              Three Months                       Nine Months
                                                                              ------------                       -----------
                                                                          2005              2004            2005               2004
                                                                          ----              ----            ----               ----
                                                                                 (Dollars in thousands, except per share)

Interest and dividend income
<S>                                                                     <C>              <C>              <C>               <C>
     Loans, including fees ....................................         $  7,593         $  5,756         $ 21,331          $ 16,536
     Interest bearing deposits with other banks ...............               11                4               30                12
     Debt securities ..........................................              464              434            1,333             1,339
     Dividends ................................................               35               19               93                57
     Federal funds sold .......................................              192               40              355               145
                                                                        --------         --------         --------          --------
         Total interest and dividend income ...................            8,295            6,253           23,142            18,089
                                                                        --------         --------         --------          --------
Interest expense
     Time deposits $100M and over .............................              818              360            1,975               996
     Other deposits ...........................................            1,577              958            4,146             2,772
                                                                        --------         --------         --------          --------
         Total deposits .......................................            2,395            1,318            6,121             3,768
     Short-term borrowings ....................................               53               76              140               245
     Long-term debt ...........................................              481              363            1,387             1,046
                                                                        --------         --------         --------          --------
         Total interest expense ...............................            2,929            1,757            7,648             5,059
                                                                        --------         --------         --------          --------
Net interest income ...........................................            5,366            4,496           15,494            13,030
Provision for loan losses .....................................            2,300            1,648            3,335             2,139
                                                                        --------         --------         --------          --------
Net interest income after provision ...........................            3,066            2,848           12,159            10,891
                                                                        --------         --------         --------          --------
Noninterest income
     Service charges on deposit accounts ......................              948              841            2,563             2,508
     Securities gains (losses) ................................                -               10              (10)                5
     Mortgage brokerage income ................................            1,150              835            2,881             2,487
     Other ....................................................              197              163              672               626
                                                                        --------         --------         --------          --------
         Total noninterest income .............................            2,295            1,849            6,106             5,626
                                                                        --------         --------         --------          --------
Noninterest expenses
     Salaries and employee benefits ...........................            2,550            2,123            7,162             6,459
     Premises and equipment ...................................              552              508            1,637             1,471
     Other ....................................................            1,347            1,195            3,994             3,403
                                                                        --------         --------         --------          --------
         Total noninterest expenses ...........................            4,449            3,826           12,793            11,333
                                                                        --------         --------         --------          --------
Income before income taxes ....................................              912              871            5,472             5,184
Income tax expense ............................................              330              306            1,979             1,839
                                                                        --------         --------         --------          --------
Net income ....................................................         $    582         $    565         $  3,493          $  3,345
                                                                        ========         ========         ========          ========
Per share
     Net income ...............................................         $   0.13         $   0.13         $   0.79          $   0.77
     Net income, assuming dilution ............................             0.13             0.12             0.78              0.74
     Cash dividends declared ..................................             0.10             0.10             0.30              0.30
</TABLE>



See accompanying notes to unaudited consolidated financial statements.


                                       4
<PAGE>



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

<TABLE>
<CAPTION>
                                                                   (Unaudited)

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

<S>                                                             <C>           <C>           <C>            <C>            <C>
Balance, January 1, 2004 ..................................     4,331,460     $  29,402     $  18,610      $      58      $  48,070
                                                                                                                          ---------
Comprehensive income:
    Net income ............................................             -             -         3,345              -          3,345
                                                                                                                          ---------
    Unrealized holding gains and losses
      on available-for-sale securities arising
      during the period, net of income taxes of $14 .......             -             -             -             25             25
    Reclassification adjustment for losses (gains)
      realized in income, net of income taxes of $2 .......             -             -             -             (3)            (3)
                                                                                                                          ---------
      Total other comprehensive income ....................             -             -             -              -             22
                                                                                                                          ---------
        Total comprehensive income ........................             -             -             -              -          3,367
                                                                                                                          ---------
Exercise of employee stock options ........................        32,902           384             -              -            384
Cash dividends declared, $.30 per share ...................             -             -        (1,305)             -         (1,305)
                                                                ---------     ---------     ---------      ---------      ---------
Balance, September 30, 2004 ...............................     4,364,362     $  29,786     $  20,650      $      80      $  50,516
                                                                =========     =========     =========      =========      =========


Balance, January 1, 2005 ..................................     4,390,784     $  30,042     $  20,075      $     (90)     $  50,027
                                                                                                                          ---------
Comprehensive income:
    Net income ............................................             -             -         3,493              -          3,493
                                                                                                                          ---------
    Unrealized holding gains and losses
      on available-for-sale securities arising
      during the period, net of income taxes of $136 ......             -             -             -           (245)          (245)
    Reclassification adjustment for losses (gains)
      realized in income, net of income taxes of $3 .......             -             -             -              7              7
                                                                                                                          ---------
      Total other comprehensive income (loss) .............             -             -             -              -           (238)
                                                                                                                          ---------
        Total comprehensive income ........................             -             -             -              -          3,255
                                                                                                                          ---------
Exercise of employee stock options ........................        12,744           146             -              -            146
Sale of common stock ......................................           775            14             -              -             14
Cash dividends declared, $.30 per share ...................             -             -        (1,321)             -         (1,321)
                                                                ---------     ---------     ---------      ---------      ---------
Balance, September 30, 2005 ...............................     4,404,303     $  30,202     $  22,247      $    (328)     $  52,121
                                                                =========     =========     =========      =========      =========
</TABLE>








See accompanying notes to unaudited consolidated financial statements.


                                       5
<PAGE>




COMMUNITY BANKSHARES, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                                                                (Unaudited)
                                                                                                             Nine Months Ended
                                                                                                                September 30,
                                                                                                                -------------
                                                                                                            2005              2004
                                                                                                            ----              ----
                                                                                                            (Dollars in thousands)
Operating activities
<S>                                                                                                      <C>              <C>
     Net income ..................................................................................       $   3,493        $   3,345
     Adjustments to reconcile net income to net
         cash provided by operating activities
            Depreciation and amortization ........................................................             709              676
            Amortization of intangibles ..........................................................             184              184
            Net amortization of securities .......................................................              60              134
            Provision for loan losses ............................................................           3,335            2,139
            Net realized losses or (gains) on sales of securities ................................              10               (5)
            Net gain realized on sale of other real estate .......................................             (24)              (9)
            Proceeds of sales of loans held for sale .............................................         159,289          137,427
            Originations of loans held for sale ..................................................        (161,881)        (140,303)
            Increase in accrued interest receivable ..............................................            (360)             (28)
            Increase in other assets .............................................................            (585)            (490)
            Increase in accrued interest payable .................................................             525              157
            Increase (decrease) in other liabilities .............................................             590             (404)
                                                                                                         ---------        ---------
                Net cash provided by operating activities ........................................           5,345            2,823
                                                                                                         ---------        ---------
Investing activities
     Net decrease in interest bearing deposits with other banks ..................................               3              250
     Purchases of available-for-sale securities ..................................................         (11,244)         (24,671)
     Maturities, calls and paydowns of available-for-sale securities .............................           4,959           29,466
     Proceeds of sales of available-for-sale securities ..........................................           4,412           11,613
     Purchases of other investments ..............................................................            (338)              (2)
     Net increase in loans made to customers .....................................................         (21,665)         (51,515)
     Purchases of premises and equipment .........................................................          (1,259)          (1,158)
     Proceeds from sales of other real estate ....................................................             224              136
                                                                                                         ---------        ---------
                Net cash used by investing activities ............................................         (24,908)         (35,881)
                                                                                                         ---------        ---------
Financing activities
     Net increase in deposits ....................................................................          31,840           14,863
     Net increase (decrease) in short-term borrowings ............................................           1,228           (5,665)
     Proceeds from issuing long-term debt ........................................................           3,000           10,506
     Repayments of long-term debt ................................................................             (74)             (70)
     Exercise of employee stock options ..........................................................             146              384
     Sale of common stock ........................................................................              14                -
     Cash dividends paid .........................................................................          (1,321)          (1,305)
                                                                                                         ---------        ---------
                Net cash provided by financing activities ........................................          34,833           18,713
                                                                                                         ---------        ---------
Increase (decrease) in cash and cash equivalents .................................................          15,270          (14,345)
Cash and cash equivalents, beginning of period ...................................................          26,968           41,875
                                                                                                         ---------        ---------
Cash and cash equivalents, end of period .........................................................       $  42,238        $  27,530
                                                                                                         =========        =========
Supplemental Disclosures of Cash Flow Information
     Cash payments for interest, including $5 capitalized interest during construction ...........       $   7,128        $   4,902
                                                                                                         =========        =========
     Cash payments for income taxes ..............................................................       $   2,879        $   2,438
                                                                                                         =========        =========
Supplemental Disclosures of Non-cash Investing Activities
     Transfers of loans receivable to other real estate ..........................................       $       -        $      87
                                                                                                         =========        =========
</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 2004 are included in  Community  Bankshares,
Inc.'s (the  "Company" or "CBI")  Annual  Report on Form 10-K for the year ended
December 31, 2004.

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  periods 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 2004 Annual Report on Form 10-K.

Nonperforming  Loans - As of  September  30,  2005,  there were  $10,213,000  in
nonaccrual  loans  and  $417,000  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)
                                                                                      Period Ended September 30,
                                                                                      --------------------------
                                                                          Three Months                          Nine Months
                                                                          ------------                          -----------
                                                                    2005               2004               2005               2004
                                                                    ----               ----               ----               ----
                                                                            (Dollars in thousands, except per share amounts)

Net income per share, basic
<S>                                                              <C>                <C>                <C>                <C>
  Numerator - net income ...............................         $      582         $      565         $    3,493         $    3,345
                                                                 ==========         ==========         ==========         ==========
  Denominator
    Weighted average common shares
      issued and outstanding ...........................          4,404,303          4,363,582          4,399,089          4,348,798
                                                                 ==========         ==========         ==========         ==========

      Net income per share, basic ......................         $      .13         $      .13         $      .79         $      .77
                                                                 ==========         ==========         ==========         ==========

Net income per share, assuming dilution
  Numerator - net income ...............................         $      582         $      565         $    3,493         $    3,345
                                                                 ==========         ==========         ==========         ==========
  Denominator
    Weighted average common shares
      issued and outstanding ...........................          4,404,303          4,363,582          4,399,089          4,348,798
    Effect of dilutive stock options ...................             97,744            298,929            100,297            185,142
                                                                 ----------         ----------         ----------         ----------
               Total shares ............................          4,502,047          4,662,511          4,499,386          4,533,940
                                                                 ==========         ==========         ==========         ==========

          Net income per share, assuming dilution ......         $      .13         $      .12         $      .78         $      .74
                                                                 ==========         ==========         ==========         ==========
</TABLE>


                                       7
<PAGE>

Stock Based Compensation - As discussed below, on April 14, 2005, the Securities
and Exchange  Commission  (the SEC) adopted a rule amending the compliance  date
for the  adoption of Statement of Financial  Accounting  Standards  No.  123(R),
("SFAS  123(R)"),  until the first  interim  or annual  reporting  period of the
registrant's  first fiscal year beginning on or after June 15, 2005. The Company
has 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.  Options
issued under the Company's  plans have no intrinsic  value at the grant date and
no compensation  cost is recognized in accordance with APB No. 25.  Statement of
Financial  Accounting  Standards  No.  123  ("SFAS No.  123"),  "Accounting  for
Stock-Based Compensation," requires 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.  The  Company has
adopted and intends to continue using the disclosure provisions of SFAS No. 123,
as amended,  until the  required  adoption of the  provisions  of SFAS 123(R) on
January 1, 2006. Had compensation  cost for the Company's stock option plan been
determined  based on the fair value as of the grant  dates for awards  under the
plans  consistent with the method  prescribed by SFAS No. 123, the Company's net
income and earnings per share would have been  adjusted to the pro forma amounts
indicated below:




<TABLE>
<CAPTION>
                                                                                              (Unaudited)
                                                                                       Period Ended September 30,
                                                                                       --------------------------
                                                                              Three Months                     Nine Months
                                                                              ------------                     -----------
                                                                           2005           2004             2005             2004
                                                                           ----           ----             ----             ----
                                                                               (Dollars in thousands, except per share amounts)

<S>                                                                      <C>             <C>             <C>               <C>
Net income, as reported ........................................         $   582         $   565         $   3,493         $   3,345
Deduct:  Total stock-based employee
     compensation expense determined under
     fair value based method for all awards,
     net of any related tax effects ............................              17             214               149               642
                                                                         -------         -------         ---------         ---------
Pro forma net income ...........................................         $   565         $   351         $   3,344         $   2,703
                                                                         =======         =======         =========         =========

Net income per share, basic
     As reported ...............................................         $  0.13         $  0.13         $    0.79         $    0.77
     Pro forma .................................................            0.13            0.08              0.76              0.62
Net income per share, assuming dilution
     As reported ...............................................         $  0.13         $  0.12         $    0.78         $    0.74
     Pro forma .................................................            0.13            0.08              0.75              0.60

</TABLE>

In December  2004,  the  Financial  Accounting  Standards  Board issued SFAS No.
123(R),  which  requires that the costs  resulting  from all share based payment
transactions  be recognized in the financial  statements.  SFAS 123(R)  replaces
SFAS  123  and  supersedes  APB  No.  25,  as  well  as  several  other  related
pronouncements.  As  originally  issued,  SFAS  123(R) was  effective  as of the
beginning of the first interim or annual period  beginning  after June 30, 2005.
The  Company  originally  stated in its Form 10-K filed for the period as of and
ending  December 31, 2004 that it would adopt the  provisions  of SFAS 123(R) as
required.  However,  the SEC issued,  effective April 21, 2005, an "Amendment to
Rule 4-01(a) of Regulation  S-X  Regarding  the Effective  Date for Statement of
Financial  Accounting  Standards No. 123 (Revised  2004),  Share Based Payment."
This amendment  changes the required SFAS 123(R) compliance date for registrants
that are not small  business  issuers to the  beginning of the first  interim or
annual reporting  period of the  registrant's  first fiscal year beginning on or
after June 15, 2005.  Early  adoption is permitted.  For CBI, this amendment has
the effect of delaying the required  implementation  of the  provisions  of SFAS
123(R) until the first quarter of 2006.  CBI now intends to adopt the provisions
of SFAS 123(R) as of January 1, 2006. CBI is currently evaluating the impact of


                                       8
<PAGE>

the adoption of SFAS 123(R) on its financial position and results of operations,
including the valuation  methods and support for the  assumptions  that underlie
the valuation of the awards.

Variable  Interest  Entity - On March 8, 2004,  CBI  sponsored the creation of a
Variable Interest Entity ("VIE"), SCB Capital Trust I (the "Trust"),  and is the
sole owner of the common  securities issued by the Trust. On March 10, 2004, the
Trust issued  $10,000,000 in floating rate capital  securities.  The proceeds of
this issuance, and the amount of CBI's capital investment,  were used to acquire
$10,310,000   principal  amount  of  CBI's  floating  rate  junior  subordinated
deferrable  interest debt  securities  ("Debentures")  due April 7, 2034,  which
securities,  and the accrued interest  thereon,  now constitute the Trust's sole
assets.  The  interest  rate  associated  with  the  debt  securities,  and  the
distribution  rate  on the  common  securities  of the  Trust,  was  established
initially at 3.91% and is  adjustable  quarterly at 3 month LIBOR plus 280 basis
points.  The index  rate  (LIBOR)  may not be lower  than  1.11%.  CBI may defer
interest payments on the Debentures for up to twenty consecutive  quarters,  but
not beyond the stated  maturity date of the  Debentures.  In the event that such
interest payments are deferred by CBI, the Trust may defer  distributions on the
common  securities.  In such an event, CBI would be restricted in its ability to
pay  dividends on its common stock and to perform under other  obligations  that
are not senior to the junior subordinated Debentures.

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

         FASB  Interpretation  46 (FIN 46),  "Consolidation of Variable Interest
Entities,"  was issued by the  Financial  Accounting  Standards  Board (FASB) in
January 2003.  FIN 46 requires the primary  beneficiary  of a variable  interest
entity's activities to consolidate the VIE. FIN 46 defines a VIE as an entity in
which the equity  investors do not have  substantive  voting rights and there is
not sufficient  equity at risk for the entity to finance its activities  without
additional  subordinated financial support. The primary beneficiary is the party
that absorbs a majority of the expected losses and/or receives a majority of the
expected  residual returns of the VIE's  activities.  In December 2003, the FASB
issued FIN 46(R),  which supersedes and amends certain provisions of FIN 46. FIN
46(R) retains many of the concepts and provisions of FIN 46, provides additional
guidance  related to the application of FIN 46, provides for certain  additional
scope exceptions,  and incorporates  several FASB Staff Positions issued related
to the  application  of  FIN  46.  The  provisions  of  FIN  46 are  immediately
applicable to VIEs  created,  or interests in VIEs  obtained,  after January 31,
2003  and the  provisions  of FIN  46(R)  are  required  to be  applied  to such
entities, except for special purpose entities, by the end of the first reporting
period ending after March 15, 2004 (March 31, 2004 for CBI).


         As a result  of FIN  46(R)  The  Federal  Reserve  announced  new rules
governing the treatment of Trust Preferred  Securities as Tier I capital.  These
new rules,  effective in April 2005,  permit trust  preferred  securities  to be
treated  as Tier I  capital  for the  first 25 years of the 30 year  term of the
related  junior  subordinated  debt  securities.  During the last five years the
amount included as capital will decline by twenty percent per year.


                                       9
<PAGE>

         Since CBI is not the primary  beneficiary  of the VIE as defined by FIN
46 and FIN 46(R), the activities of this VIE have not been consolidated into the
consolidated financial statements of CBI. CBI's investment in the VIE is carried
in the  consolidated  balance  sheet  in other  assets  and the  Debentures  are
included in long-term debt.


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 of the  words  "anticipates,"  "believes,"  "estimates,"
"expects," "intends," "plans," "predicts,"  "projects," and similar expressions.
The Company's expectations,  beliefs, estimates and projections are expressed in
good faith and are believed by the Company to have a reasonable basis, including
without  limitation,  management's  examination of historical  operating trends,
data  contained in the  Company's  records and other data  available  from third
parties, but there can be no assurance that management's expectations,  beliefs,
estimates or projections will result or be achieved or accomplished. The Company
cautions readers that forward looking statements,  including without limitation,
those  relating to the Company's  recent and  continuing  expansion,  its future
business  prospects,   revenues,  working  capital,  liquidity,  capital  needs,
interest  costs,  income,  and adequacy of the  allowance  for loan losses,  are
subject to risks and  uncertainties  that could cause  actual  results to differ
materially  from  those  indicated  in the  forward-looking  statements,  due to
several important factors herein  identified,  among others, and other risks and
factors  identified  from time to time in the  Company's  reports filed with the
Securities  and Exchange  Commission.  The Company  undertakes  no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.

REFERENCES TO OUR WEBSITE ADDRESS

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

CRITICAL ACCOUNTING POLICIES

         CBI  has  adopted  various  accounting   policies,   which  govern  the
application of accounting  principles generally accepted in the United States of
America  in the  preparation  of CBI's  financial  statements.  The  significant
accounting policies of CBI are described in detail in the notes to CBI's audited
consolidated  financial  statements included in CBI's 2004 Annual Report on Form
10-K.

                                       10
<PAGE>

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

         CBI is a  holding  company  for four  community  banks  and a  mortgage
company and, as a financial institution,  believes the allowance for loan losses
is a critical accounting policy that requires the most significant judgments and
estimates used in preparation of its consolidated financial statements. Refer to
the sections  "Provision for Loan Losses,"  "Allowance for Loan Losses" and "The
Application of Critical  Accounting  Policies" in the Annual Report on Form 10-K
for 2004 for a detailed  description of CBI's estimation process and methodology
related to the allowance for loan losses.


CHANGES IN FINANCIAL CONDITION

         During the nine months ended  September  30, 2005,  loans  increased by
$20,641,000,  or 5.2%, over the amount as of December 31, 2004.  However,  loans
increased only $415,000 in the three months ended September 30, 2005,  primarily
due to increases  in interest  rates and  competitive  pressures on loan pricing
that  resulted in an increased  amount of loan  payoffs.  The allowance for loan
losses  increased by $2,311,000 since December 31, 2004 primarily as a result of
an increase of $5,552,000, or 109.3%, in nonperforming loans. See "Nonperforming
and Potential  Problem Loans." Loans held for sale as of September 30, 2005 were
$2,592,000, or 17.2%, more than the December 31, 2004 amount. Federal funds sold
as of the end of the 2005 nine month period were $11,428,000, or 90.9% more than
the  amount  at the end of 2004 and  $11,398,000  more  than  the June 30,  2005
amount.  These  increases  were funded  primarily by larger  amounts of interest
bearing  deposits,  which  increased by  $31,286,000  during the 2005 nine month
period, and by $18,374,000 in the 2005 three month period.

RESULTS OF OPERATIONS

Earnings Performance


         Increased yields on and larger volumes of earning assets, the Company's
ability to attract and manage  deposits and other funding  sources at reasonable
rates of interest,  and a resurgence in  noninterest  income  related to renewed
vigor  in  mortgage  brokerage  activities  represented   significant  areas  of
improvement during the 2005 periods.  However,  these positive developments were
offset by increased  provisions for loan losses in both the three and nine month
periods of 2005 and CBI's net income was only  slightly  higher for each  period
than for the same periods of 2004.


Three Months Ended September 30, 2005 and 2004


         CBI earned  consolidated  net income of $582,000 for the quarter  ended
September 30, 2005,  compared with $565,000 for the  comparable  period of 2004.
Basic  earnings per share was $.13 in the 2005 quarter,  unchanged from the 2004
quarter.  Diluted earnings per share was $.13 for the 2005 quarter compared with
$.12 for the 2004 quarter.


                                       11
<PAGE>



<TABLE>
<CAPTION>
                                                                                     Summary Income Statement
                                                                                     ------------------------
                                                                                      (Dollars in thousands)
For the Three Months Ended September 30,                         2005               2004           Dollar Change   Percentage Change
                                                                 ----               ----           -------------   -----------------
<S>                                                             <C>                <C>                 <C>                 <C>
Interest income .....................................           $8,295             $6,253              $2,042              32.7%
Interest expense ....................................            2,929              1,757               1,172              66.7%
                                                                ------             ------              ------
Net interest income .................................            5,366              4,496                 870              19.4%
Provision for loan losses ...........................            2,300              1,648                 652              39.6%
Noninterest income ..................................            2,295              1,849                 446              24.1%
Noninterest expenses ................................            4,449              3,826                 623              16.3%
Income tax expense ..................................              330                306                  24               7.8%
                                                                ------             ------              ------
Net income ..........................................           $  582             $  565              $   17               3.0%
                                                                ======             ======              ======
</TABLE>


         Operating  results for the third quarter of 2005 reflect  increased net
interest  income  resulting  from  improved  net interest  margin and  increased
volumes of earning  assets.  Although the Company's  loan growth during the 2005
three month  period was  limited,  loan  growth was strong  during the first six
months of 2005. Interest income from those loans was a significant factor in the
Company's improved net interest income in the 2005 third quarter.  The Company's
deposit  liabilities  increased  significantly  during the 2005  third  quarter.
Interest  bearing  deposits  increased  by  $18,374,000  during that three month
period.  Time deposits of $100,000 or more increased by  $11,993,000  during the
2005 third quarter. Accordingly, interest expense for the 2005 quarter increased
significantly  over the third  quarter of 2004.  Primarily  because of the large
increase in nonperforming loans, the provision for loan losses in the 2005 third
quarter was  $2,300,000,  an increase of $652,000,  or 39.6% over the amount for
the same period of 2004.  See  "Allowance for Loan Losses and Provision for Loan
Losses." Noninterest income was positively affected by increased service charges
assessed against deposit accounts and continuing  strength in mortgage brokerage
activities.  Noninterest  expenses  for the 2005 period were higher than for the
2004 period  primarily as a result of increased  salaries and employee  benefits
and higher expenses related to premises and equipment.


Nine Months Ended September 30, 2005 and 2004

         CBI's  consolidated  net income for the nine months ended September 30,
2005 was  $3,493,000,  an increase of $148,000 for the  comparable  2004 period.
Basic  earnings per share for the 2005 period was $.79,  compared  with $.77 per
share in 2004. Diluted earnings per share was $.78 for the 2005 period, compared
with $.74 for 2004.




<TABLE>
<CAPTION>
                                                                                    Summary Income Statement
                                                                                    ------------------------
                                                                                    (Dollars in thousands)
For the Nine Months Ended September 30,                          2005               2004           Dollar Change   Percentage Change
                                                                 ----               ----           -------------   -----------------
<S>                                                            <C>                 <C>                 <C>                 <C>
Interest income ......................................         $23,142             $18,089             $ 5,053             27.9%
Interest expense .....................................           7,648               5,059               2,589             51.2%
                                                               -------             -------             -------
Net interest income ..................................          15,494              13,030               2,464             18.9%
Provision for loan losses ............................           3,335               2,139               1,196             55.9%
Noninterest income ...................................           6,106               5,626                 480              8.5%
Noninterest expenses .................................          12,793              11,333               1,460             12.9%
Income tax expense ...................................           1,979               1,839                 140              7.6%
                                                               -------             -------             -------
Net income ...........................................         $ 3,493             $ 3,345             $   148              4.4%
                                                               =======             =======             =======
</TABLE>


                                       12
<PAGE>

         Net income for the first nine months of 2005 was positively affected by
increased net interest income and higher  noninterest  income.  The repricing of
variable  rate loans at higher  interest  rates and  increases in the amounts of
loans outstanding and federal funds sold during the period contributed to higher
interest income in the 2005 period.  Higher interest expenses in the 2005 period
resulted  from higher  interest  rates paid for  interest  bearing  deposits and
volume increases in that funding source.  Primarily  because of a large increase
in  non-performing  loans,  the provision for loan losses in the 2005 nine month
period was $3,335,000,  an increase of $1,196,000,  or 55.9% over the amount for
the same period of 2004.  See  "Allowance for Loan Losses and Provision for Loan
Losses" and  "Nonperforming  and Potential  Problem Loans."  Noninterest  income
increased for the 2005 nine month period primarily because of increased mortgage
brokerage  activity.  Noninterest  expenses increased due to higher salaries and
employee benefits and expenses related to premises and equipment.


Net Interest Income

         Net interest income is the amount of interest income earned on interest
earning assets (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 CBI'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 these assets.


         Net interest income increased by $870,000,  or 19.4%, in the 2005 third
quarter compared with the same 2004 quarter primarily due to increasing  volumes
of earning assets and increasing yields and spreads.


         During the 2005 nine month  period,  net interest  income  increased by
$2,464,000,  or 18.9%, over the same period of 2004,  primarily due to increased
volumes of loans and other categories of interest  earning assets.  Net yield on
earning assets  increased to 4.13% for the 2005 nine month period from 3.95% for
the same 2004 period.

         Total average  interest  earning  assets for the 2005 nine month period
increased  $59,804,000  or 13.6%  over  the  same  2004  period.  Average  loans
outstanding  for the 2005 period,  including  loans held for sale,  increased by
$64,404,000,  or 17.9%,  over the 2004 period.  As of September 30, 2005, loans,
including loans held for sale, were  $23,233,000,  or 5.7%, more than the amount
of such loans as of December 31,  2004.  The average  yield on loans,  including
loans held for sale, increased to 6.69% for the 2005 nine month period, compared
with 6.11% for the same period of 2004. The average  yields on other  categories
of earning assets also increased for the 2005 nine month period.

         Total average  interest  bearing  liabilities  for the 2005 nine months
increased  $53,525,000 or 14.9% over 2004. Average short-term borrowings for the
2005 nine-month period fell $2,872,000, or 25.5%, below the average for the same
period  of  2004,  while  long-term  debt  for  the  2005  period  increased  by
$4,788,000,  or 17.1%,  primarily  because  of  additional  borrowings  from the
Federal Home Loan Bank of Atlanta by the subsidiary  banks during 2005.  Average
savings and interest bearing  transaction account balances grew significantly in
the 2005 nine month period, also, increasing $16,072,000, or 12.0%. Average time
deposits were significantly higher in the 2005 period, increasing by $35,537,000
or 19.2% over the prior year average.  Management  believes that higher  average
rates paid for all of the Company's  interest  bearing  deposit  products in the
2005 nine month period contributed to these volume increases.

                                       13
<PAGE>

         The following table provides  details of the changes in the composition
of CBI's  average  balance  sheet,  its  interest  income and  expense,  and the
relationships between those items.



<TABLE>
<CAPTION>
                                                                          Average Balances, Yields and Rates
                                                                            Nine Months Ended September 30,
                                                                            -------------------------------
                                                                     2005                                         2004
                                                                     ----                                         ----
                                                                   Interest                                     Interest
                                                     Average       Income /    Yields /           Average       Income /    Yields /
                                                    Balances       Expense      Rates *          Balances       Expense      Rates *
                                                    --------       -------      -------          --------       -------      -------
                                                                                    (Dollars in thousands)
Assets
<S>                                                   <C>            <C>            <C>          <C>            <C>            <C>
Interest earning deposits ........................    $     592      $     30       6.76%        $   1,008      $     12       1.59%
Investment securities - taxable ..................       52,925         1,262       3.18%           50,662         1,152       3.03%
Investment securities - tax exempt (1) ...........        6,388           164       3.42%            9,619           244       3.38%
Federal funds sold ...............................       14,650           355       3.23%           17,866           145       1.08%
Loans, including loans held for sale (1,2) .......      425,127        21,331       6.69%          360,723        16,536       6.11%
                                                      ---------      --------                    ---------      --------
          Total interest earning assets ..........      499,682        23,142       6.18%          439,878        18,089       5.48%
Cash and due from banks ..........................       15,542                                     15,536
Allowance for loan losses ........................       (4,957)                                    (4,283)
Premises and equipment, net ......................        7,948                                      7,166
Intangible assets ................................        7,311                                      7,557
Other assets .....................................        4,286                                      4,014
                                                      ---------                                  ---------
          Total assets ...........................    $ 529,812                                  $ 469,868
                                                      =========                                  =========

Liabilities and shareholders' equity
Interest bearing deposits
      Savings ....................................    $  87,894      $    996       1.51%        $  78,882      $    571       0.97%
      Interest bearing transaction accounts ......       61,873           308       0.66%           54,813           165       0.40%
      Time deposits ..............................      221,094         4,817       2.90%          185,557         3,032       2.18%
                                                      ---------      --------                    ---------      --------
          Total interest bearing deposits ........      370,861         6,121       2.20%          319,252         3,768       1.57%
Short-term borrowings ............................        8,379           140       2.23%           11,251           245       2.90%
Long-term debt ...................................       32,731         1,387       5.65%           27,943         1,046       4.99%
                                                      ---------      --------                    ---------      --------
          Total interest bearing liabilities .....      411,971         7,648       2.48%          358,446         5,059       1.88%
Noninterest bearing demand deposits ..............       63,927                                     59,704
Other liabilities ................................        2,085                                      1,772
Shareholders' equity .............................       51,829                                     49,946
                                                      ---------                                  ---------
          Total liabilities and
              shareholders' equity ...............    $ 529,812                                  $ 469,868
                                                      =========                                  =========

Interest rate spread (3)..........................                                  3.70%                                      3.60%
Net interest income and net yield
      on earning assets (4).......................                   $ 15,494       4.13%                       $ 13,030       3.95%
</TABLE>

* Yields and rates are annualized.

(1)  Interest income on tax exempt loans and investment  securities has not been
     calculated on a tax-equivalent basis.
(2)  Nonaccruing loans are included in the average balances and income from such
     loans is recognized on a cash basis.
(3)  Total interest earning assets yield less total interest bearing liabilities
     rate.
(4)  Net yield  equals net  interst  income  divided by total  interest  earning
     assets.


                                       14
<PAGE>



 Allowance for Loan Losses and Provision for Loan Losses

         The  Corporation  operates four  independent  community  banks in South
Carolina.  Under the provisions of law and  regulations  governing  banks,  each
bank's board of directors is  responsible  for  determining  the adequacy of its
bank's loan loss allowance.  In addition,  each bank is supervised and regularly
examined by the Office of the  Comptroller  of the Currency  (the "OCC") (or the
South Carolina State Board of Financial Institutions (the "State Board") and the
Federal Deposit  Insurance  Corporation (the "FDIC") in the case of the Ridgeway
bank. As a normal part of a safety and  soundness  examination,  bank  examiners
assess and comment on the adequacy of a bank's allowance for loan losses and may
require that changes be made in the  allowance.

         The purpose of the allowance is to provide a capital reserve to protect
the banks from credit loss risks  inherent in their loan  portfolios.  Generally
accepted accounting principles control the methods by which banks estimate their
allowances  for loan losses.  The  allowance for loan losses is increased by the
provision  for loan  losses,  which is a direct  charge  to  expense.  Losses on
specific  loans  are  charged  against  the  allowance  in the  period  in which
management   determines   that  such  loans,  or  a  portion   thereof,   become
uncollectible.  Recoveries of previously  charged-off  loans are credited to the
allowance.

         The  nature  of  community  banking  is such that the  individual  loan
portfolios  are  predominantly  composed of small and medium size  business  and
individual loans. As community banks, there exists, by definition,  a geographic
concentration of loans within each Bank's respective city or county.  Management
at each bank monitors the loan  concentrations  and loan portfolio quality on an
ongoing  basis  including,  but  not  limited  to:  quarterly  analysis  of loan
concentrations,  monthly  reporting  of past dues,  nonaccruals,  and  potential
problem loans, and quarterly reporting of loan charge-offs and recoveries. These
efforts focus on historical  experience and are bolstered by quarterly  analysis
of local and state economic conditions,  which are part of the Banks' assessment
of the adequacy of their allowances for loan losses.

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


<TABLE>
<CAPTION>
                                                                             Nine Months                               Nine Months
                                                                                Ended             Year Ended               Ended
                                                                             September 30,        December 31,        September 30,
                                                                                2005                  2004                 2004
                                                                                ----                  ----                 ----
                                                                                           (Dollars in thousands)
<S>                                                                          <C>                   <C>                   <C>
Allowance at beginning of period .................................           $   4,347             $   4,206             $   4,206
Provision for loan losses ........................................               3,335                 5,102                 2,139
Net charge-offs ..................................................              (1,024)               (4,961)                 (576)
                                                                             ---------             ---------             ---------
Allowance at end of period .......................................           $   6,658             $   4,347             $   5,769
                                                                             =========             =========             =========
Allowance as a percentage of loans outstanding ...................                1.61%                 1.10%                 1.51%

Loans at end of period ...........................................           $ 414,290             $ 393,649             $ 382,958
                                                                             =========             =========             =========
</TABLE>



         The  provision  for  loan  losses  for the  third  quarter  of 2005 was
$2,300,000, an increase of $652,000, or 39.6%, over the same period of 2004. Net
charge-offs were $454,000 during the 2005 third quarter,  compared with $164,000
during the same  period of 2004.  Of the 2005  third  quarter  net  charge-offs,


                                       15
<PAGE>

$258,000  represents  the charge-off of a loan that was included in the group of
nonperforming  loans handled by a former lending  officer that were discussed in
filings  during 2004.  During the third quarter of 2005,  the provision for loan
losses included $108,000 related to the same $258,000 loan. The remainder of the
provision  expense,  approximately  $2,192,000,  was primarily  attributable  to
specific  amounts  allocated to  nonperforming  and potential  problem loans and
other net  charge-offs.  The  allowance for loan losses as a percentage of loans
outstanding  (excluding  loans held for sale) was 1.61% as of September 30, 2005
compared with 1.51% at the end of the third quarter of 2004.

         The  provision  for loan  losses  for the nine  month  2005  period was
$3,335,000,  an increase of $1,196,000,  or 55.9%, over the same period of 2004.
Net charge-offs were $1,024,000 during the 2005 nine month period, compared with
$576,000 during the same period of 2004. Of the 2005 amount, $801,000 represents
the charge-off of loans that were included in  nonperforming  loans handled by a
former  lending  officer  as  discussed  in  filings  during  2004.   Management
determined  during the course of the 2005 nine month period that the  collateral
associated  with these loans had become  worthless  and the  borrowers  were not
likely to perform. The provision for loan losses for the nine month period ended
September  30,  2005  included  $535,000  related to net charge  offs during the
period  of  nonperforming  loans  of the same  former  lending  officer.  Of the
remainder  of the  provision  for  the  2005  nine  month  period,  $35,000  was
attributable  to growth  in the loan  portfolio  and  $2,765,000  was  allocated
primarily to nonperforming  and potential  problem loans. The allowance for loan
losses  stood at 1.61% of loans  outstanding  (excluding  loans  held for sale),
compared with 1.10% at the end of 2004.


Nonperforming and Potential Problem Loans

         Nonperforming  loans are defined as loans that are 90 or more days past
due and are still  accruing  interest and loans that are in  nonaccrual  status.
Potential  problem loans,  a lower level of concern,  are defined as loans where
information  about the borrowers' credit problems causes management to have more
than normal  concern  about the  borrowers'  ability to comply with the original
repayment terms.

         Nonperforming  loans  totaled  $10,630,000  as of the  end of the  2005
period  compared  with  $5,078,000  as of  December  31,  2004,  an  increase of
$5,552,000  or  109.3%.  Following  is a  summary  of  nonperforming  loans  and
potential problem loans for each of the past three quarters.








                                       16
<PAGE>

<TABLE>
<CAPTION>
                                                          90 days + past      Total
                                           Nonaccrual     due and still  nonperforming   % of total      Potential       % of total
$ amounts in thousands                       loans           accruing        loans          loans       problem loans        loans
                                             -----           --------        -----          -----       -------------        -----

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

         Nonaccrual loans increased $4,954,000 during the third quarter of 2005.
The major components of this increase are discussed below:

         A commercial loan of $1,316,000 moved from potential problem loans into
nonaccrual  status because of concerns  about the  borrower's  ability to comply
with the loan's terms. The loan is substantially  collateralized  by real estate
and business  furniture  and  fixtures.  An  appraisal  completed in August 2005
indicates  that  the  real  estate  collateral  has  a  value  of  approximately
$1,200,000.  Other collateral,  consisting principally of the business furniture
and fixtures, has a cost value estimated at approximately $500,000.

         Also,  two  unrelated  loan  relationships,   aggregating   $2,038,000,
involving  borrowers in the  manufactured  housing business moved from potential
problem  loans into  nonaccrual  status  because of concern  about the continued
deterioration of their financial condition and cash flows. Collateral pledged to
support the loans consists of receivables,  mobile home  inventories and display
model  modular  homes.  Collateral  values were  estimated  to be  approximately
$1,490,000 as of September 30, 2005.

         A  fourth  loan  relationship   totaling  $999,000  was  downgraded  to
nonaccrual  status.  This  relationship  was a  portion  of the  group  of loans
identified  in the third  quarter of 2004 as  originated  by the former  lending
officer  referred to above.  The borrower has  performance  weaknesses.  Limited
guarantor  strength and weakness in the  collateral  are reflected in a specific
allowance allocation for this credit.

         CBI management has made specific loan loss  allowance  allocations  for
these four relationships  based on an assessment of collateral,  the capacity of
the customer to perform, and related factors.

         The major component of nonperforming  loans existing prior to the third
quarter of 2005 is discussed below:

         Approximately  $2,434,000 of the September 30, 2005  nonperforming loan
amount  represents the balance of a loan  relationship  that  originated in July
2004 to finance the purchase of a business.  During the fourth  quarter of 2004,
management became aware that the business was not performing as expected and the
borrower  stopped  making the  required  payments.  The  borrower  alleged  that
financial  information  furnished by the seller and relied upon in  establishing
the value of the business (and its purchase  price) was  fraudulent.  Management
determined during the fourth quarter of 2004 that the loan had become collateral
dependent and wrote the loan down to the estimated  net realizable  value of the


                                       17
<PAGE>

collateral as of December 31, 2004. An independent appraisal of the real estate,
fixtures and equipment of the business was completed  during the second  quarter
of 2005 under the  assumption  that the  business  was not  operating as a going
concern. That appraisal supports management's estimated net realizable value and
the loan's  carrying amount has not since changed.  CBI is presently  exercising
forbearance  with respect to this  relationship  and  continues to work with the
borrower  who is  actively  trying  to sell  the  business  as a going  concern.
Management has retained legal counsel to assist with respect to this loan.

         The  remaining  nonperforming  loans  consist  of 74 loans  to  various
individuals and businesses with an aggregate balance of $3,426,000.  The amounts
of the individual loans range up to approximately $500,000.

         Loans  that are 90 days or more  past due and still  accruing  interest
represent  loans  with  significant  performance  issues,  but where  management
believes that each loan's  collateral  position  provides enough protection that
the bank  expects  full  recovery of  principal  and  interest  on the loan.  At
September  30, 2005 this  category  represented  approximately  .10% of the loan
portfolio.

         At September 30, 2005, the Corporation had identified  $13,893,000,  or
3.4%, of the loan portfolio,  as potential problem loans. This is an increase of
$9,265,000 over the amount as of December 31, 2004. The significant  increase in
potential problem loans resulted largely from risk grade changes  recommended by
a new loan review firm,  discussed  below,  during their initial loan  portfolio
reviews earlier in 2005. The  substantial  decrease during the third quarter was
associated  with  several of the  credits  being  reclassified  into  nonaccrual
status, which are discussed above.

         The amount of potential  problem loans does not represent  management's
estimate of  potential  losses  since a  significant  portion of these loans are
secured by real estate and other forms of collateral.  Approximately $654,000 of
potential problem loans were unsecured as of September 30, 2005.

         Management will continue to closely monitor the levels of nonperforming
and  potential  problem  loans and address the  weaknesses  in those  credits to
enhance  the  amount  of  ultimate  collection  or  recovery  of  these  assets.
Management  considers  the  levels  and  trends in  nonperforming,  past due and
potential  problem loans in determining how the provision and allowance for loan
losses is estimated and adjusted.

         Credit Risk Management System

         Risk  taking is  inherent  in the  granting  of credit.  To control the
amounts and types of risks  incurred,  and to minimize  losses,  management  has
established loan policies and practices.  On an ongoing basis,  management seeks
to better  manage risk and improve  internal  control  systems.  As part of this
continuous process,  management hired a Chief Credit Officer for the Corporation
in the second  quarter of 2005.  This officer has specific  prior loan  approval
authority over major loan  relationships  and also assists the subsidiary  banks
and mortgage company in other areas of loan operation and administration.  Also,
during the second  quarter of 2005  management  changed its outside  independent
loan  review  provider.  Their  initial  review  covered  essentially  all  loan
relationships  greater than  $400,000,  the highest risk area of the  portfolio.
Their preliminary reports were received late in the second quarter. CBI reviewed
these reports and disclosed a substantial increase in potential problem loans in
the second  quarter and recorded an  additional  provision to the  allowance for
loan losses in recognition of the increase.

                                       18
<PAGE>

         During  the third  quarter  of 2005 the Chief  Credit  Officer  began a
systematic and ongoing review of the most significant  problem loans within each
bank  subsidiary's  portfolio with each bank's senior  management.  This ongoing
process,  combined  with the recent  loan  review  reports,  and more  currently
available information led to a determination by management that some of the most
problematic  loans  should  be  moved  into  nonaccrual  status.  Based on these
factors,  CBI recorded a net increase in nonaccrual assets of $4,107,000 for the
quarter.  This also  accounts,  in large part,  for the  decrease  in  potential
problem loans from the second quarter to the third quarter.

         In a continuation of its efforts to measure and recognize the potential
issues  related to its asset  quality,  during the fourth quarter CBI management
directed  its  external  loan  review  firm to conduct a loan  review of certain
segments of its loan  portfolio  they had  previously  not reviewed.  Management
believes that it is possible an additional special provision for loan losses may
be required during the fourth quarter as a result of the current review.



Noninterest Income

         Non-interest income for the 2005 quarter increased  $446,000,  or 24.1%
over the 2004 quarter. The majority of the increase was attributable to mortgage
brokerage income which increased $315,000,  or 37.7%. Service charges on deposit
accounts increased by $107,000 for the 2005 quarter, primarily because of a more
disciplined  approach to the assessment and collection of these revenues  during
that period.  Management intends to maintain this focus throughout the remainder
of  2005  and   beyond.   CBI   realized   gains  of   $10,000   from  sales  of
available-for-sale  securities  in the 2004  three-month  period.  There were no
sales of securities in the 2005 quarter.

         Non-interest  income for the 2005 nine month period increased $480,000,
or 8.5%,  over the 2004  amount.  Most of the  increase  was  attributable  to a
$394,000 or 15.8% increase in mortgage  brokerage income. The Company's mortgage
brokerage  activities in 2005 have been affected positively by relatively stable
mortgage  interest  rates which have allowed demand for mortgage loans to remain
strong. CBI recorded  securities losses of $10,000 in the 2005 nine month period
compared with securities gains of $5,000 in the same 2004 period.

Noninterest Expenses

         Noninterest  expenses  increased by $623,000,  or 16.3%,  for the third
quarter of 2005 compared with the 2004 quarter.  Salaries and employee  benefits
increased $427,000,  or 20.1%,  primarily due to additions made to the Company's
executive  management and staffing a new branch office of Florence National Bank
that opened  during the first quarter of 2005.  Premises and equipment  expenses
increased  $44,000,  or 9.5%,  primarily  due to the  opening  of the new leased
branch office.


         During the first nine months of 2005,  noninterest  expenses  increased
$1,460,000,  or 12.9%,  as  compared  with the same 2004  period.  Salaries  and
employee benefits increased $703,000, or 10.9%, due to additions made in 2005 to
the  Company's  executive  management,  the  opening of a new office of Florence
National Bank in the first  quarter of 2005 and normal  periodic wage and salary
adjustments.  For the first nine months of 2005, premises and equipment expenses
were up $166,000,  or 11.3%, as compared with the 2004 period,  primarily due to
expenses  resulting from the opening of the new banking  office.  Other expenses
increased  by  $591,000  for the 2005  nine-month  period  due in large  part to
expenses  related  to the  Company's  efforts  to  prepare  to  comply  with the
requirements of the Sarbanes-Oxley Act of 2002 that will apply to the Company in
the near future.

                                       19
<PAGE>

         Management believes that noninterest expenses will continue to increase
for the remainder of 2005 and through 2006 as a result of continuing  growth and
expansion of the Company's network of banking offices. In addition,  noninterest
expenses  will be increased in the future by  depreciation  of the new corporate
headquarters building,  which is currently under construction and is expected to
be completed by late November,  and amortization and other costs of the new core
management  information  system,  which  will be  implemented  during the second
quarter of 2006.


Income Tax Expense

         Income tax expense increased $24,000 and $140,000 for the third quarter
and nine months ended September 30, 2005, respectively, due to increased taxable
income.  The average  income tax rates  applied to  year-to-date  income  before
income  taxes  during  2005  and  2004  were  approximately   36.2%  and  35.5%,
respectively.

LIQUIDITY


         Liquidity is the ability to meet current and future obligations through
liquidation  or maturity of existing  assets or the  acquisition  of  additional
liabilities.  Adequate  liquidity  is  necessary  to meet  the  requirements  of
customers for loans and deposit  withdrawals in a timely and economical  manner.
The most manageable  sources of liquidity are composed of liabilities,  with the
primary  focus of  liquidity  management  being the ability to attract  deposits
within CBI's market areas.  Individual and  commercial  deposits are the primary
source of funds for credit activities,  along with long-term borrowings from the
Federal  Home Loan Bank of Atlanta and the  proceeds of issuing  $10,000,000  of
subordinated debentures.  Cash and amounts due from banks and federal funds sold
are CBI's  primary  sources of asset  liquidity.  These funds  provide a cushion
against  short-term  fluctuations  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  influenced  by legal
requirements that CBI pledge  investment  securities as collateral for any local
government  deposits  not  covered  by  FDIC  insurance,   repurchase  agreement
collateral and by market conditions.


         Total deposits at September 30, 2005 were $455,298,000,  an increase of
$31,840,000  or 7.5% over the amount at December 31, 2004.  As of September  30,
2005,  the loan to deposit  ratio,  excluding  loans  held for sale,  was 91.0%,
compared with 93.0% at December 31, 2004 and 97.3% as of September 30, 2004.


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


CAPITAL RESOURCES

         CBI and its banking  subsidiaries are subject to regulatory  risk-based
capital adequacy  standards.  Under these standards,  bank holding companies and
banks  are  required  to  maintain   certain   minimum   ratios  of  capital  to
risk-weighted  assets and average  total  assets.  Under the  provisions  of the
Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA),  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  certain
levels, increasingly stringent regulatory corrective actions are mandated.


                                       20
<PAGE>

         The  September  30,  2005 risk  based  capital  ratios  for CBI and its
banking  subsidiaries  are presented in the following  table,  compared with the
minimum  required  ratios  and,  in the case of the  banks,  the  minimum  "well
capitalized" ratios under the regulatory definitions and guidelines:




<TABLE>
<CAPTION>
                                                                                                  September 30, 2005
                                                                                                  ------------------
                                                                                   Tier 1            Total Capital          Leverage
                                                                                   ------            -------------          --------

<S>                                                                                <C>                  <C>               <C>
Community Bankshares, Inc. ..........................................              13.40%               14.65%            10.29%
Orangeburg National Bank ............................................              12.05%               13.23%             9.01%
Sumter National Bank ................................................               9.47%               10.74%             7.50%
Florence National Bank ..............................................              10.20%               11.38%             8.78%
Bank of Ridgeway ....................................................              12.35%               13.60%             8.58%
Minimum "well capitalized" requirement* .............................               6.00%               10.00%             6.00%
Minimum requirement .................................................               4.00%                8.00%             4.00%
</TABLE>


*This requirement only applies to the banks.

         As shown in the table above,  each of the banks'  capital ratios exceed
the regulatory  requirement  for being  considered  "well  capitalized."  In the
opinion  of  management,  the CBI  and the  banking  subsidiaries'  current  and
projected capital positions are adequate.


OFF-BALANCE-SHEET ACTIVITIES

         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  discussed  in  the  notes  to  unaudited   consolidated   financial
statements  under  "Variable  Interest  Entities," as of September 30, 2005, CBI
held an interest  in, and  guarantees  the  liabilities  of, a  non-consolidated
variable interest entity.

Commitments

         CBI's banking and mortgage brokerage subsidiaries are parties to credit
related financial instruments with  off-balance-sheet  risk in the normal course
of business to meet the  financing  needs of their  customers.  These  financial
instruments  include commitments to extend credit and standby letters of credit.
Such  commitments  involve  varying  degrees of credit and interest rate risk in
excess of the amount recognized in the consolidated balance sheets.  Exposure to
credit loss is represented  by the  contractual,  or notional,  amounts of these
commitments.  The same credit  policies  are used in making  commitments  as for
on-balance-sheet instruments.

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


                                       21
<PAGE>

                                                            September 30, 2005
                                                            ------------------
                                                                (Dollars in
                                                                 thousands)
Loan commitments ..........................................      $52,267
Standby letters of credit .................................        2,144


         Commitments  to extend  credit are  agreements to lend to a customer as
long as there is no  violation of any  condition  established  in the  contract.
Commitments  generally have fixed expiration dates or other termination  clauses
and may require  payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The amount of collateral obtained, if deemed
necessary  by  management  upon  extension of credit,  is based on  management's
credit evaluation of the  counter-party.  Collateral held varies but may include
personal  residences,  accounts  receivable,  inventory,  property,  plant,  and
equipment, and income-producing commercial properties.

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


         On March 22, 2005, CBI entered into a contract for the  construction of
an  approximately  16,000  square foot  two-story  office  building to house its
corporate  headquarters  and  operations  center.  The  contract  price for this
project is $1,476,000.  Through  October 31, 2005,  $1,162,000 has been expended
for this project and related  architectural  and  engineering  fees.  Management
expects  completion  of the building in late  November 2005 and the Company will
relocate shortly thereafter.

         On  June  30,  2005,  CBI  reached  an  agreement  with  Jack  Henry  &
Associates,   Inc.  to  obtain  licensing  rights  for  a  new  core  management
information software system, known as Silverlake,  to be used by the company and
each of its  subsidiaries.  The  cost of this  core  system  conversion  will be
approximately $1,000,000. The agreement also requires CBI to pay various support
and maintenance  costs throughout the license period.  CBI estimates that during
the next five years costs will range from approximately $200,000 to $300,000 per
year.  However,  the exact amounts will be determined by future events,  such as
asset  growth,  and cannot be  determined  precisely  at this  time.  Management
expects to complete the conversion process during the second quarter 2006.


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


                                       22
<PAGE>

commitments  to  potential  borrowers  to  facilitate  its  origination  of home
mortgage  loans that are  intended to be sold.  Between the time that CBI issues
its  commitments  and the time that the loans close and are sold, CBI is subject
to variability in the selling prices related to those commitments due to changes
in market rates of interest.  However,  CBI offsets this variability through the
use of so-called "forward sales contracts" to investors in the secondary market.
Under these  arrangements,  an investor agrees to purchase the closed loans at a
predetermined  price.  CBI generally enters into such forward sales contracts at
the same  time  that  rate  lock  commitments  are  issued.  These  arrangements
effectively  insulate  CBI from the effects of changes in interest  rates during
the time the commitments are outstanding, but the arrangements do not qualify as
fair value hedges.  These  derivative  financial  instruments are carried in the
balance sheet at estimated  fair value and changes in the estimated  fair values
of these  derivatives  are  recorded in the  statement of income in net gains or
losses on loans held for sale.

         Derivative financial  instruments are written in amounts referred to as
notional  amounts.  Notional  amounts  only  provide  the basis for  calculating
payments  between  counterparties  and do not represent  amounts to be exchanged
between parties or a measure of financial risk. The following table includes the
notional  principal amounts of rate lock commitments and forward sales contracts
as of  September  30, 2005,  and the  estimated  fair values of those  financial
instruments  included in other assets and liabilities in the balance sheet as of
that date.

                                                           September 30, 2005
                                                           ------------------
                                                                     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 .....     $21,540     $  (119)
Forward sales contracts with investors
  of mortgage loans to be held for sale ...............      21,540         119


ACCOUNTING AND REPORTING CHANGES

         The  American  Institute of Certified  Public  Accountants'  Accounting
Standards  Executive  Committee  issued its Statement of Position  ("SOP") 03-3,
"Accounting for Certain Loans or Debt Securities  Acquired in a Transfer," which
is  effective  generally  for loans  acquired in fiscal  years  beginning  after
December  15,  2004.  The  SOP  addresses  accounting  for  differences  between
contractual  cash  flows  and  cash  flows  expected  to be  collected  from  an
investor's  initial investment in loans or debt securities (loans) acquired in a
transfer if those  differences  are  attributable,  at least in part,  to credit
quality. It includes loans acquired in business  combinations and applies to all
nongovernmental organizations,  including not-for-profit organizations.  The SOP
does not apply to loans  originated by the entity.  For loans acquired in fiscal
years  prior to this  SOP's  effective  date and  within  the scope of  Practice
Bulletin 6, the SOP also  amends the  application  of  Practice  Bulletin 6 with
regard to accounting for decreases in cash flows  expected to be collected.  The
adoption  of this SOP as of  January  1,  2005 had no  impact  on the  Company's
financial statements.


         In May 2005,  the FASB  issued SFAS No.  154,  "Accounting  Changes and
Error  Corrections - a replacement  of APB Opinion No. 20 and FASB Statement No.
3" ("SFAS No. 154"). SFAS No. 154 establishes  retrospective  application as the
required  method for  reporting a change in accounting  principle,  unless it is
impracticable,  in which  case the  changes  should  be  applied  to the  latest
practicable  date presented.  SFAS No. 154 also requires that a correction of an


                                       23
<PAGE>

error be reported as a prior period adjustment by restating prior period interim
statements.  SFAS No. 154 is effective for accounting  changes and correction of
errors made in fiscal years beginning after December 15, 2005.




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 September  30, 2005,  CBI is positioned so
that net interest  income would increase  $263,000 and net income would increase
$159,000 in the next  twelve  months if  interest  rates rose 100 basis  points.
Conversely,  net  interest  income would  decline  $263,000 and net income would
decline  $159,000 in the next twelve months if interest rates declined 100 basis
points. In the current interest rate environment, it appears unlikely that there
will be any  large  rate  decreases  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, its customers and
the issuers of its investment  securities could undertake in response to changes
in interest rates.


         As of September  30,  2005,  there was no  significant  change from the
interest rate  sensitivity  analysis for the various  changes in interest  rates
calculated  as of December 31, 2004.  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 2004
Annual Report on Form 10-K.

Item 4.  Controls and Procedures

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

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

         The Company  qualifies for the extended  compliance period provided for
in SEC Release 33-8392 for implementing Section 404 of the Sarbanes Oxley Act by
non-accelerated filers.


                                       24
<PAGE>



                           PART II--OTHER INFORMATION

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









                                       25
<PAGE>


SIGNATURES

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


                                                        DATED: November 14, 2005


COMMUNITY BANKSHARES, INC.

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

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






















                                       26
<PAGE>

                                  EXHIBIT INDEX

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

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

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



                                       27