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, 2007  Commission File No. 000-22054


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


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


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


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



         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

         Yes [X]  No [ ]


         Indicate by check mark whether the  registrant  is a large  accelerated
filer,  an accelerated  filer,  or a  non-accelerated  filer.  See definition of
"accelerated  filer and large  accelerated  filer" in Rule 12b-2 of the Exchange
Act. (Check one):

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


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

         Yes [ ]  No [X]

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest practicable date: Common Stock, no par
or stated value, 4,443,456 shares outstanding on October 31, 2007.



<PAGE>


                           COMMUNITY BANKSHARES, INC.

                                    FORM 10-Q

                                      Index

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

Item 1.           Financial Statements

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

Item 2.           Management's Discussion and Analysis of Financial Condition and Results of Operations .............   9
Item 3.           Quantitative and Qualitative Disclosures About Market Risk ........................................  23
Item 4T.          Controls and Procedures ...........................................................................  24

PART II -         OTHER INFORMATION

Item 2.           Unregistered Sales of Equity Securities and Use of Proceeds........................................  25
Item 6.           Exhibits...........................................................................................  25

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




                                      -2-
<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1. - Financial Statements

COMMUNITY BANKSHARES, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
                                                                                                     (Unaudited)
                                                                                                      September 30,     December 31,
                                                                                                          2007               2006
                                                                                                          ----               ----
                                                                                                           (Dollars in thousands)
Assets
<S>                                                                                                    <C>                <C>
     Cash and due from banks .................................................................         $  23,034          $  17,622
     Federal funds sold ......................................................................                 -             29,102
                                                                                                       ---------          ---------
            Total cash and cash equivalents ..................................................            23,034             46,724
     Interest bearing deposits with other banks ..............................................               253              1,926
     Securities available-for-sale ...........................................................            80,619             84,783
     Securities held-to-maturity (estimated fair value $1,750 for 2007
          and $1,750 for 2006) ...............................................................             1,750              1,750
     Other investments .......................................................................             3,339              3,246
     Loans held for sale .....................................................................             7,502              9,235
     Loans receivable ........................................................................           456,742            409,720
         Less, allowance for loan losses .....................................................            (5,877)            (4,662)
                                                                                                       ---------          ---------
            Net loans ........................................................................           450,865            405,058
     Premises and equipment - net ............................................................            10,517             10,307
     Accrued interest receivable .............................................................             4,073              3,821
     Net deferred income tax assets ..........................................................             1,076              1,231
     Goodwill ................................................................................             4,321              4,321
     Core deposit intangible assets ..........................................................             2,407              2,591
     Prepaid expenses and other assets .......................................................             3,830              3,524
                                                                                                       ---------          ---------

            Total assets .....................................................................         $ 593,586          $ 578,517
                                                                                                       =========          =========

Liabilities
     Deposits
         Noninterest bearing .................................................................         $  58,527          $  61,693
         Interest bearing ....................................................................           412,905            421,928
                                                                                                       ---------          ---------
            Total deposits ...................................................................           471,432            483,621
     Short-term borrowings ...................................................................            35,322             12,948
     Long-term debt ..........................................................................            29,681             26,188
     Accrued interest payable ................................................................             1,411              1,578
     Accrued expenses and other liabilities ..................................................             1,182              1,558
                                                                                                       ---------          ---------
            Total liabilities ................................................................           539,028            525,893
                                                                                                       ---------          ---------

Shareholders' equity
     Common stock - no par value; 12,000,000 shares authorized; issued and
         outstanding - 4,443,456 for 2007 and 4,441,220 for 2006 .............................            30,433             30,603
     Additional paid-in capital ..............................................................                31                  -
     Retained earnings .......................................................................            24,122             22,382
     Accumulated other comprehensive income (loss) ...........................................               (28)              (361)
                                                                                                       ---------          ---------
            Total shareholders' equity .......................................................            54,558             52,624
                                                                                                       ---------          ---------

            Total liabilities and shareholders' equity .......................................         $ 593,586          $ 578,517
                                                                                                       =========          =========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.



                                      -3-
<PAGE>


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

Interest and dividend income
<S>                                                                       <C>              <C>              <C>              <C>
     Loans, including fees .....................................          $ 8,972          $ 8,587          $25,757          $24,426
     Interest bearing deposits with other banks ................                5               33               51               88
     Debt securities ...........................................            1,019              607            3,019            1,716
     Dividends .................................................               46               39              139              114
     Federal funds sold ........................................               82              350              342              988
                                                                          -------          -------          -------          -------
            Total interest and dividend income .................           10,124            9,616           29,308           27,332
                                                                          -------          -------          -------          -------

Interest expense
     Deposits
         Time deposits $100M and over ..........................            1,196            1,066            3,269            2,864
         Other deposits ........................................            2,794            2,460            8,131            6,637
                                                                          -------          -------          -------          -------
            Total interest expense on deposits .................            3,990            3,526           11,400            9,501
     Short-term borrowings .....................................              193               88              496              278
     Long-term debt ............................................              489              458            1,401            1,415
                                                                          -------          -------          -------          -------
            Total interest expense .............................            4,672            4,072           13,297           11,194
                                                                          -------          -------          -------          -------

Net interest income ............................................            5,452            5,544           16,011           16,138
Provision for loan losses ......................................              375              665              925            1,955
                                                                          -------          -------          -------          -------
Net interest income after provision ............................            5,077            4,879           15,086           14,183
                                                                          -------          -------          -------          -------

Noninterest income
     Service charges on deposit accounts .......................              996              852            2,826            2,546
     Mortgage loan brokerage income ............................              528              963            1,927            2,787
     Net securities gains ......................................                -                -                2                1
     Gains on sales of other investments .......................                -                -              712                -
     Other .....................................................              215              143              864              618
                                                                          -------          -------          -------          -------
            Total noninterest income ...........................            1,739            1,958            6,331            5,952
                                                                          -------          -------          -------          -------

Noninterest expenses
     Salaries and employee benefits ............................            2,897            2,798            8,915            8,130
     Premises and equipment ....................................              582              648            1,763            1,885
     Advertising ...............................................              178              153              459              326
     Supplies ..................................................              106              156              341              313
     Provision for warranty liabilities ........................              572               10              716               57
     Other .....................................................            1,076            1,141            3,932            3,454
                                                                          -------          -------          -------          -------
            Total noninterest expenses .........................            5,411            4,906           16,126           14,165
                                                                          -------          -------          -------          -------

Income before income taxes .....................................            1,405            1,931            5,291            5,970
Income tax expense .............................................              533              730            1,944            2,195
                                                                          -------          -------          -------          -------
Net income .....................................................          $   872          $ 1,201          $ 3,347          $ 3,775
                                                                          =======          =======          =======          =======

Per share
     Net income ................................................          $  0.20          $  0.27          $  0.75          $  0.85
     Net income - diluted ......................................             0.19             0.27             0.74             0.84
     Cash dividends declared ...................................             0.12             0.11             0.36             0.33
</TABLE>

See accompanying notes to unaudited consolidated financial statements.




                                      -4-
<PAGE>

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

              (Unaudited)

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

<S>                                                    <C>          <C>          <C>          <C>           <C>           <C>
Balance, January 1, 2006 ............................  4,404,303    $   30,202   $        -   $   19,325    $     (535)   $ 48,992
                                                                                                                          --------
Comprehensive income
     Net income .....................................          -             -            -        3,775             -       3,775
                                                                                                                          --------
     Unrealized holding gains and losses
       on available-for-sale securities arising
       during the period, net of income taxes of $76           -             -            -            -           136         136
     Reclassification adjustment for losses (gains)
       realized in income, net of income taxes of $0           -             -            -            -            (1)         (1)
                                                                                                                          --------
     Total other comprehensive income (loss) ........          -             -            -            -             -         135
                                                                                                                          --------
     Total comprehensive income .....................          -             -            -            -             -       3,910
                                                                                                                          --------
Proceeds of sale of common stock ....................      1,000            16            -            -             -          16
Exercise of employee stock options ..................     36,917           396            -            -             -         396
Cash dividends declared, $.33 per share .............          -             -            -       (1,463)            -      (1,463)
                                                       ---------    ----------   ----------   ----------    ----------    --------
Balance, September 30, 2006 .........................  4,442,220    $   30,614   $        -   $   21,637    $     (400)   $ 51,851
                                                       =========    ==========   ==========   ==========    ==========    ========


Balance, January 1, 2007 ............................  4,441,220    $   30,603   $        -   $   22,382    $     (361)   $ 52,624
                                                                                                                          --------
Comprehensive income
     Net income .....................................          -             -            -        3,347             -       3,347
                                                                                                                          --------
     Unrealized holding gains and losses
       on available-for-sale securities arising
       during the period, net of income taxes of $165          -             -            -            -           334         334
     Reclassification adjustment for losses (gains)
       realized in income, net of income taxes of $1           -             -            -            -            (1)         (1)
                                                                                                                          --------
     Total other comprehensive income (loss) ........          -             -            -            -             -         333
                                                                                                                          --------
     Total comprehensive income .....................          -             -            -            -             -       3,680
                                                                                                                          --------
Stock-based compensation ............................          -             -           31            -             -          31
Proceeds of sale of common stock ....................        500             8            -            -             -           8
Exercise of employee stock options ..................     43,836           429            -            -             -         429
Repurchases  and cancellation of common stock .......    (42,100)         (607)           -            -             -        (607)
Cash dividends declared, $.36 per share .............          -             -            -       (1,607)            -      (1,607)
                                                       ---------    ----------   ----------   ----------    ----------    --------
Balance, September 30, 2007 .........................  4,443,456    $   30,433   $       31   $   24,122    $      (28)   $ 54,558
                                                       =========    ==========   ==========   ==========    ==========    ========
</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,
                                                                                                         2007                 2006
                                                                                                        -----                 ----
                                                                                                           (Dollars in thousands)
Operating activities
<S>                                                                                                    <C>                <C>
     Net income ..............................................................................         $   3,347          $   3,775
     Adjustments to reconcile net income to net
         cash provided by operating activities
            Provision for loan losses ........................................................               925              1,955
            Depreciation and amortization ....................................................               624                763
            Amortization of intangibles ......................................................               184                184
            Net (accretion) or amortization of securities ....................................               (23)                13
            Net securities (gains) or losses .................................................                (2)                (1)
            Net gains on sales of other investments ..........................................              (712)                 -
            Proceeds of sales of loans held for sale .........................................           104,076            183,989
            Originations of loans held for sale ..............................................          (102,343)          (185,961)
            Increase in accrued interest receivable ..........................................              (252)              (173)
            Decrease in other assets .........................................................               737                640
            (Gains) losses on sale of foreclosed assets ......................................               (21)                27
            (Decrease) increase in accrued interest payable ..................................              (167)               416
            (Decrease) increase in other liabilities .........................................            (1,129)             1,315
            Provision for recourse liabilities ...............................................               716                 57
            Share-based compensation .........................................................                31                  -
                                                                                                       ---------          ---------
                Net cash provided by operating activities ....................................             5,991              6,999
                                                                                                       ---------          ---------
Investing activities
     Net decrease (increase) in interest bearing deposits with other banks ...................             1,673               (545)
     Purchases of available-for-sale securities ..............................................            (6,972)            (8,499)
     Maturities, calls and paydowns of available-for-sale securities .........................            11,658             11,740
     Purchases of other investments ..........................................................              (555)                 -
     Proceeds of sales of other investments ..................................................             1,174                203
     Net increase in loans made to customers .................................................           (48,483)            (3,784)
     Purchases of premises and equipment .....................................................              (835)            (2,569)
     Proceeds of dispositions of premises and equipment ......................................                 1                  -
     Proceeds from sales of foreclosed assets ................................................               757                408
                                                                                                       ---------          ---------
                Net cash used by investing activities ........................................           (41,582)            (3,046)
                                                                                                       ---------          ---------
Financing activities
     Net (decrease) increase in deposits .....................................................           (12,189)             6,608
     Net increase (decrease) in short-term borrowings ........................................            22,374             (1,145)
     Proceeds from issuing long-term debt ....................................................             7,500                  -
     Repayment of long-term debt .............................................................            (4,007)            (6,007)
     Exercise of employee stock options ......................................................               429                396
     Proceeds of sale of common stock ........................................................                 8                 16
     Repurchases and cancellation of common stock ............................................              (607)                 -
     Cash dividends paid .....................................................................            (1,607)            (1,463)
                                                                                                       ---------          ---------
                Net cash provided (used) by financing activities .............................            11,901             (1,595)
                                                                                                       ---------          ---------
(Decrease) increase in cash and cash equivalents .............................................           (23,690)             2,358
Cash and cash equivalents, beginning of period ...............................................            46,724             51,991
                                                                                                       ---------          ---------
Cash and cash equivalents, end of period .....................................................         $  23,034          $  54,349
                                                                                                       =========          =========

Supplemental Disclosures of Cash Flow Information
     Cash payments for interest ..............................................................         $  13,464          $  10,778
                                                                                                       =========          =========
     Cash payments for income taxes ..........................................................         $   2,993          $     781
                                                                                                       =========          =========
Supplemental Disclosures of Non-cash Activities
     Transfers of loans receivable to foreclosed assets ......................................         $   1,751          $   1,120
                                                                                                       =========          =========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.




                                      -6-
<PAGE>


COMMUNITY BANKSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

Accounting  Principles - A summary of  significant  accounting  policies and the
audited  financial  statements  for 2006 are included in  Community  Bankshares,
Inc.'s (the  "Company" or "CBI")  Annual  Report on Form 10-K for the year ended
December 31, 2006 filed with the  Securities  and Exchange  Commission.  Certain
amounts in the 2006 financial  statements  have been  reclassified to conform to
the current presentation.  Such reclassifications had no effect on net income or
retained earnings for any period.

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

Nonperforming  Loans - As of  September  30,  2007,  there  were  $7,480,000  in
nonaccrual  loans  and no loans 90 or more  days  past  due and  still  accruing
interest.

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



                                      -7-
<PAGE>

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

Net income per share, basic
<S>                                                              <C>                <C>                <C>                <C>
Numerator - net income .................................         $      872         $    1,201         $    3,347         $    3,775
                                                                 ==========         ==========         ==========         ==========
Denominator
Weighted average common shares
issued and outstanding .................................          4,466,184          4,439,245          4,463,718          4,429,198
                                                                 ==========         ==========         ==========         ==========

Net income per share, basic ............................         $      .20         $      .27         $      .75         $      .85
                                                                 ==========         ==========         ==========         ==========

Net income per share, assuming dilution
Numerator - net income .................................         $      872         $    1,201         $    3,347         $    3,775
                                                                 ==========         ==========         ==========         ==========
Denominator
Weighted average common shares
issued and outstanding .................................          4,466,184          4,439,245          4,463,718          4,429,198
Effect of dilutive stock options .......................             80,215             78,967             48,535             71,050
                                                                 ----------         ----------         ----------         ----------
               Total shares ............................          4,546,399          4,518,212          4,512,253          4,500,248
                                                                 ==========         ==========         ==========         ==========

Net income per share, assuming dilution ................         $      .19         $      .27         $      .74         $      .84
                                                                 ==========         ==========         ==========         ==========
</TABLE>


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

Options  previously  issued under the Company's  plans had no intrinsic value at
the grant date and no  compensation  cost was recognized in accordance  with APB
No. 25.  Statement of Financial  Accounting  Standards No. 123 ("SFAS No. 123"),
"Accounting  for  Stock-Based  Compensation,"  required  entities to provide pro
forma  disclosures of net income,  and earnings per share,  as if the fair value
based method of accounting  promulgated by that standard had been applied. Under
the  modified  prospective  application  method of SFAS  123(R),  the Company is
required  to apply  SFAS  123(R)  only to new  awards  and to  awards  modified,
repurchased or cancelled after the required  effective date. Also,  compensation
cost  would  be  recognized  for  the  portions  of  previously  granted  awards
outstanding  which had not vested on the effective date. The Company had no such
awards  outstanding as of January 1, 2006. During the first nine months of 2007,
stock-based compensation included in salaries and benefits totaled $31,000.

Variable  Interest  Entity - On March 8, 2004,  CBI  sponsored the creation of a
Variable Interest Entity ("VIE"), SCB Capital Trust I (the "Trust"),  and is the
sole owner of the common  securities issued by the Trust. On March 10, 2004, the
Trust issued  $10,000,000 in floating rate capital  securities.  The proceeds of
this issuance, and the amount of CBI's investment in the common securities, 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


                                      -8-
<PAGE>

Trust's sole assets.  The interest rate  associated  with the Debentures and the
capital  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. In accordance with Financial
Accounting Standards Board  Interpretation  46(R), the Trust is not consolidated
in the Company's financial statements.

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

New Accounting Pronouncements

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


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

Forward Looking Statements

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


                                      -9-
<PAGE>

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

     o    the Company's growth and ability to maintain growth;
     o    governmental  monetary and fiscal policies, as well as legislative and
          regulatory changes;
     o    the effects of interest rate changes on our level and  composition  of
          deposits,  loan  demand  and the  value  of our  loan  collateral  and
          securities;
     o    the effects of competition from other financial institutions operating
          in the Company's  market areas and elsewhere,  including  institutions
          operating locally, regionally, nationally and internationally;
     o    failure of assumptions  underlying the  establishment of the allowance
          for loan losses, including the value of collateral securing loans; and
     o    loss of consumer  confidence and economic  disruptions  resulting from
          terrorist activities.

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

                        REFERENCES TO OUR WEBSITE ADDRESS

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

Critical Accounting Policies

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

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


                                      -10-
<PAGE>

and  estimates,  which could have a material  impact on the  carrying  values of
assets and liabilities and the results of operations of CBI.

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


CHANGES IN FINANCIAL CONDITION

         During the first nine months of 2007, gross loans receivable  increased
by $47,022,000,  loans held for sale decreased by $1,733,000, federal funds sold
decreased  by  $29,102,000  and  securities   available-for-sale   decreased  by
$4,164,000.  Also during the nine months ended  September  30, 2007,  short term
borrowings  increased by  $22,374,000,  long-term  debt increased by $3,493,000,
noninterest  bearing  deposits  decreased by  $3,166,000  and  interest  bearing
deposits decreased by $9,023,000.

         During the third quarter of 2007, gross loans  receivable  increased by
$8,797,000,  federal funds sold decreased by $7,987,000, and loans held for sale
decreased by  $1,619,000.  Interest  bearing  deposits  decreased by  $8,273,000
during the 2007  three  month  period and  short-term  borrowings  increased  by
$16,374,000.

         During 2007 loan growth has been strong and  deposits  have been stable
to  slightly  decreasing,  thereby  creating  pressure  on the Bank's  liquidity
position.  This  challenge has impacted many  community  banks.  Management  has
addressed this issue by selective use of brokered deposits,  long and short-term
advances  from  the  Federal  Home  Loan  Bank,  and  targeted  deposit  product
promotions.


RESULTS OF OPERATIONS

Earnings Performance

Three Months Ended September 30, 2007 and 2006

         For the quarter ended September 30, 2007, CBI recorded consolidated net
income of $872,000,  compared with $1,201,000 for the comparable period of 2006.
This represents a decrease of $329,000 or 27.4%.  Basic and diluted earnings per
share were $.20 and $.19,  respectively,  in the 2007 period, compared with $.27
for both measures for the 2006 quarter.

         Compared  with the third  quarter of 2006,  operating  results  for the
third  quarter  of 2007  reflect  slightly  lower  net  interest  income,  lower
provisions  for loan  losses,  a  significantly  higher  provision  for warranty
liabilities,  higher service  charge  income,  and lower mortgage loan brokerage
income.  Lower net interest  income was caused by higher interest rates paid for
and higher  average  amounts of time deposits and  short-term  borrowings in the
2007  period  which more than offset the  effects of higher  average  amounts of
loans and  investments.  The provision for loan losses  decreased as a result of
lower net charge-offs  during the 2007 three month period.  The higher provision
for warranty  liabilities is attributable to general warranty and representation


                                      -11-
<PAGE>

obligations  related to  imperfections  in loans sold  during 2006 by the Bank's
mortgage loan division. The widespread and well-publicized  problems in the home
mortgage markets has resulted in an unusually large number of warranty claims by
loan purchasers as well as lower volumes of loans closed during the 2007 quarter
and a reduction in income from that activity.

<TABLE>
<CAPTION>
                                                                               Summary Income Statement
                                                                               ------------------------
                                                                                (Dollars in thousands)
For the Three Months Ended September 30,                   2007                2006           Dollar Change      Percentage Change
                                                           ----                ----           -------------      -----------------
<S>                                                      <C>                 <C>                 <C>                   <C>
Interest income ....................................     $10,124             $ 9,616             $   508               5.3%
Interest expense ...................................       4,672               4,072                 600              14.7%
                                                         -------             -------             -------
Net interest income ................................       5,452               5,544                 (92)             -1.7%
Provision for loan losses ..........................         375                 665                (290)            -43.6%
Noninterest income .................................       1,739               1,958                (219)            -11.2%
Noninterest expenses ...............................       5,411               4,906                 505              10.3%
Income tax expense .................................         533                 730                (197)            -27.0%
                                                         -------             -------             -------
Net income .........................................     $   872             $ 1,201             $  (329)            -27.4%
                                                         =======             =======             =======
</TABLE>

Nine Months Ended September 30, 2007 and 2006

         For the nine months ended September 30, 2007, CBI recorded consolidated
net income of $3,347,000,  compared with $3,775,000 for the comparable period of
2006. This represents a decrease of $428,000 or 11.3%.  Basic earnings per share
were $.75 in the 2007 period,  compared  with $.85 for the 2006 period.  Diluted
earnings per share for the 2007 nine months  period were $.74 compared with $.84
for the same period of 2006.

         CBI's  consolidated  net income for the nine months ended September 30,
2007 was affected by slightly  lower net interest  income,  lower  provision for
loan losses,  lower  mortgage loan  brokerage  income,  and higher  salaries and
employee benefits expenses.  Net interest income decreased primarily because the
rates paid for deposits and other  funding  sources were 46 basis points  higher
than in the prior year nine month period. Mortgage loan brokerage income and the
provision for warranty  liabilities were affected by the same factors  discussed
above.  Salaries and employee benefits expenses  increased  primarily because of
the  addition of new loan  officers in the  Midlands,  Florence and the mortgage
division  and the  addition  of a new  officer in the IT area.  These  increases
occurred over the course of 2006 and early 2007.

<TABLE>
<CAPTION>
                                                                                 Summary Income Statement
                                                                                 ------------------------
                                                                                  (Dollars in thousands)
For the Nine Months Ended September 30,                     2007                 2006           Dollar Change     Percentage Change
                                                            ----                 ----           -------------     -----------------
<S>                                                       <C>                 <C>                 <C>                   <C>
Interest income .....................................     $29,308             $27,332             $ 1,976               7.2%
Interest expense ....................................      13,297              11,194               2,103              18.8%
                                                          -------             -------             -------
Net interest income .................................      16,011              16,138                (127)             -0.8%
Provision for loan losses ...........................         925               1,955              (1,030)            -52.7%
Noninterest income ..................................       6,331               5,952                 379               6.4%
Noninterest expenses ................................      16,126              14,165               1,961              13.8%
Income tax expense ..................................       1,944               2,195                (251)            -11.4%
                                                          -------             -------             -------
Net income ..........................................     $ 3,347             $ 3,775             $  (428)            -11.3%
                                                          =======             =======             =======
</TABLE>


                                      -12-
<PAGE>


Net Interest Income

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

Three Months Ended September 30, 2007 and 2006

         Net interest  income for the three months ended  September 30, 2007 was
$5,452,000,  a decrease of $92,000,  or 1.7%,  from the amount  reported for the
third quarter of 2006. Interest income and interest expense for the 2007 quarter
were both  significantly  higher  than  during the same  period of 2006.  Higher
average amounts of interest earning assets,  especially loans resulted in higher
amounts of  interest  income.  Higher  interest  rates  paid and higher  average
amounts  of  interest-bearing   liabilities   outstanding  were  almost  equally
responsible for higher interest expenses in the 2007 three month period.


         The average rate earned on loans,  including  loans held for sale,  was
7.78%  and  7.95% for the third  quarters  of 2007 and 2006,  respectively.  The
primary  driver for the rate  decline  was  increased  competition  for new loan
business,  predominantly  in our  Midlands  region where we have had most of our
growth.  In  addition,  in late  September  the Bank reduced its prime rate from
8.25% to 7.75%.  Vaiable rate loans  constitute  approximately  one third of the
Bank's  portfolio.  The average yield on earning  assets was 7.30% for the third
quarter of 2006,  compared with 7.35% for the third quarter of 2006. The average
cost of time deposits increased to 4.73% for the third quarter of 2007, compared
with 4.31% for the same period of 2006. The average cost of all interest-bearing
liabilities  was 3.96%  for the 2007  quarter  and 3.69% for the same  period of
2006. Accordingly, the interest rate spread (interest earning assets yield minus
the rate  paid for  interest-bearing  liabilities)  for the 2007  third  quarter
narrowed to 3.34%,  or 32 basis  points  lower than for the same period of 2006.
Net yield on earning  assets (net interest  income  divided by average  interest
earning  assets) for the 2007  quarter was 3.93%,  or 31 basis points lower than
for the same period of 2006.

         Average   amounts  of  interest   earning  assets  were   approximately
$31,294,000  higher in the 2007 period than in the 2006 period.  Average taxable
investment  securities  increased by $24,969,000  and average loans increased by
$29,004,000.  Average federal funds sold decreased by $21,004,000.  In addition,
robust growth was noted in the average amounts of  interest-bearing  liabilities
as the 2007  average  amount was  approximately  $30,206,000  more than the 2006
amount.


         Over the past four  quarters  yields on loans have been  impacted  most
significantly by competition. Rates on deposits have been impacted by the Bank's
efforts to consolidate  and unify product lines  subsequent to the merger of the
Company's four bank  subsidiaries  in October 2006,  efforts to reduce high cost
time deposits and overall market  competition for transaction and nontransaction
deposit  accounts.  The net  impact has been a  reduction  in margin of 31 basis
points from the third quarter of 2006 to the third quarter of 2007.


                                      -13-
<PAGE>

<TABLE>
<CAPTION>
                                                                          Average Balances, Yields and Rates
                                                                           Three Months Ended September 30,
                                                                           --------------------------------
                                                          2007                                  2006
                                                          ----                                  ----
                                                                    Interest                              Interest
                                                         Average     Income /   Yields /       Average     Income /   Yields /
                                                        Balances     Expense   Rates (1)      Balances     Expense    Rates (1)
                                                        --------     -------   ---------      --------     -------    ---------
                                                                             (Dollars in thousands)
Assets
<S>                                                      <C>           <C>          <C>         <C>             <C>        <C>
Interest earning deposits with other banks ...........   $     488     $     5      4.06%       $  1,772        $ 33       7.39%
Investment securities - taxable ......................      80,817       1,023      5.02%         55,848         601       4.27%
Investment securities - tax exempt (2) ...............       4,566          42      3.65%          4,917          45       3.63%
Federal funds sold ...................................       6,786          82      4.79%         27,830         350       4.99%
Loans, including loans held for sale (2) (3) .........     457,548       8,972      7.78%        428,544       8,587       7.95%
                                                         ---------     -------                  --------      ------
         Total interest earning assets ...............     550,205      10,124      7.30%        518,911       9,616       7.35%
Cash and due from banks ..............................      18,355                                15,839
Allowance for loan losses ............................      (5,140)                               (9,382)
Premises and equipment, net ..........................      11,897                                 9,699
Intangible assets ....................................       8,569                                 7,004
Other assets .........................................       2,920                                 8,736
                                                         ---------                              --------
         Total assets ................................   $ 586,806                              $550,807
                                                         =========                              ========

Liabilities and shareholders' equity
Interest bearing deposits
     Savings .........................................   $  89,637     $   639      2.83%       $ 90,231     $   674       2.96%
     Interest bearing transaction accounts ...........      71,806         281      1.55%         66,453         182       1.09%
     Time deposits ...................................     257,313       3,070      4.73%        245,619       2,670       4.31%
                                                         ---------     -------                  --------     -------
         Total interest bearing deposits .............     418,756       3,990      3.78%        402,303       3,526       3.48%
Short-term borrowings ................................      19,955         193      3.84%         11,536          88       3.03%
Long-term debt .......................................      29,835         489      6.50%         24,501         458       7.42%
                                                         ---------     -------                  --------     -------
         Total interest bearing liabilities ..........     468,546       4,672      3.96%        438,340       4,072       3.69%
Noninterest bearing demand deposits ..................      60,744                                54,758
Other liabilities ....................................       2,752                                 3,360
Shareholders' equity .................................      54,764                                54,349
                                                         ---------                              --------
         Total liabilities and .......................   $ 586,806                              $550,807
                                                         =========                              ========
             shareholders' equity

Interest rate spread .................................                              3.34%                                  3.66%
Net interest income and net yield
     on earning assets ...............................                 $ 5,452      3.93%                    $ 5,544       4.24%
Interest free funds supporting earning
     assets ..........................................   $  81,659                              $ 80,571
</TABLE>
----------------------------------

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


                                      -14-
<PAGE>

Nine Months Ended September 30, 2007 and 2006

         Net  interest  income for the nine  months  ended  September  30,  2007
decreased by $127,000,  or .8% from the amount for the same period of 2006. Both
interest income and interest expense increased  significantly in the 2007 period
due to higher  market  interest  rates  throughout  the 2007  period  and higher
amounts of interest earning assets and interest-bearing liabilities.

         For the 2007  year-to-date  period,  the  interest  rate spread and net
yield on earning assets both decreased as compared with the same period of 2006.
Interest  rate  spread  decreased  by 19 basis  points  and net yield on earning
assets  decreased by 16 basis points.  These decreases  resulted  primarily from
higher  rates paid on  interest-bearing  liabilities,  which  increased 46 basis
points.  Rates earned on earning  assets  increased by 27 basis points.  Average
amounts of interest  earning  assets,  especially  loans and taxable  investment
securities, were higher in the 2007 period.



                                      -15-
<PAGE>

<TABLE>
<CAPTION>
                                                                           Average Balances, Yields and Rates
                                                                            Nine Months Ended September 30,
                                                                            -------------------------------
                                                                        2007                                  2006
                                                                        ----                                  ----
                                                                      Interest                              Interest
                                                          Average     Income /   Yields /       Average     Income /   Yields /
                                                         Balances     Expense   Rates (1)      Balances     Expense    Rates (1)
                                                         --------     -------   ---------      --------     -------    ---------
                                                                                    (Dollars in thousands)
Assets
<S>                                                        <C>          <C>          <C>         <C>          <C>           <C>
Interest bearing deposits with other banks ............    $  1,340     $    51      5.09%       $  1,701     $    88       6.92%
Investment securities - taxable .......................      82,031       3,031      4.94%         56,798       1,694       3.99%
Investment securities - tax exempt (2) ................       4,653         127      3.65%          5,100         136       3.57%
Federal funds sold ....................................       9,104         342      5.02%         27,541         988       4.80%
Loans, including loans held for sale (2) (3) ..........     441,626      25,757      7.80%        430,801      24,426       7.58%
                                                           --------     -------                  --------     -------
         Total interest earning assets ................     538,754      29,308      7.27%        521,941      27,332       7.00%
Cash and due from banks ...............................      17,560                                15,503
Allowance for loan losses .............................      (5,351)                              (10,456)
Premises and equipment, net ...........................      10,384                                 9,988
Intangible assets .....................................       6,818                                 7,065
Other assets ..........................................       7,804                                 8,482
                                                           --------                              --------
         Total assets .................................    $575,969                              $552,523
                                                           ========                              ========

Liabilities and shareholders' equity
Interest bearing deposits
     Savings ..........................................    $ 91,791     $ 1,938      2.82%       $ 88,268     $ 1,701       2.58%
     Interest bearing transaction accounts ............      73,887         813      1.47%         71,163         580       1.09%
     Time deposits ....................................     248,462       8,649      4.65%        240,811       7,220       4.01%
                                                           --------     -------                  --------     -------
         Total interest bearing deposits ..............     414,140      11,400      3.68%        400,242       9,501       3.17%
Short-term borrowings .................................      16,642         496      3.98%          9,848         278       3.77%
Long-term debt ........................................      28,617       1,401      6.55%         29,089       1,415       6.50%
                                                           --------     -------                  --------     -------
         Total interest bearing liabilities ...........     459,399      13,297      3.87%        439,179      11,194       3.41%
Noninterest bearing demand deposits ...................      59,841                                58,301
Other liabilities .....................................       2,297                                 2,943
Shareholders' equity ..................................      54,073                                52,100
                                                           --------                              -------
         Total liabilities and shareholders' equity....    $575,610                              $552,523
                                                           ========                              ========

Interest rate spread ..................................                              3.40%                                  3.59%
Net interest income and net yield
     on earning assets ................................                 $16,011      3.97%                    $16,138       4.13%

</TABLE>
(1)  Yields and rates are annualized.
(2)  Yields  on  tax-exempt  securities  and  loans  have not been  stated  on a
     tax-equivalent basis.
(3)  Nonaccruing loans are included in the average balances and income from such
     loans is recognized on a cash basis.

Provision and Allowance for Loan Losses

         The  provision  for loan  losses  for the 2007 three  month  period was
$375,000, a decrease of $290,000, or 43.6%, from $665,000 for the same period of
2006.  The  provision  for loan losses  decreased  to $925,000 for the 2007 nine
month  period  from  $1,955,000  for the 2006 nine month  period,  a decrease of


                                       16
<PAGE>

$1,030,000 or 52.7%. Although the provisions for loan losses were lower for each
of the  2007  periods,  charge-offs  and  higher  levels  of  nonperforming  and
potential problem loans continue to affect the Company's allowance and provision
for loan losses.  Management  continues to use new information about these loans
to refine its estimates of the loans' ultimate  collectibility  and the adequacy
of its loan loss allowance.

         Net  recoveries  during the nine months ended  September  30, 2007 were
$290,000,  compared with net  charge-offs  of $4,542,000  for the same period of
2006.  The coverage ratio  (allowance  for loan losses divided by  nonperforming
loans) was .79x as of September 30, 2007 and .94x as of December 31, 2006.

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

<TABLE>
<CAPTION>
                                                                               Nine Months                             Nine Months
                                                                               EndedEnded              Year                Ended
                                                                              September 30,         December 31,       September 30,
                                                                                 2007                  2006                 2006
                                                                                 ----                  ----                 ----
                                                                                            (Dollars in thousands)
<S>                                                                           <C>                  <C>                   <C>
Allowance at beginning of period ..................................           $   4,662            $  11,641             $  11,641
Provision for loan losses .........................................                 925                2,950                 1,955
Net recoveries or (charge-offs) ...................................                 290               (9,929)               (4,542)
                                                                              ---------            ---------             ---------
Allowance at end of period ........................................           $   5,877            $   4,662             $   9,054
                                                                              =========            =========             =========
Allowance as a percentage of loans outstanding ....................                1.29%                1.14%                 2.20%

Loans at end of period ............................................           $ 456,742            $ 409,720             $ 412,106
                                                                              =========            =========             =========
</TABLE>

         Following is a summary of nonperforming  loans as of September 30, 2007
and December 31, 2006:

<TABLE>
<CAPTION>
                                                                                            September 30,            December 31,
                                                                                                2007                    2006
                                                                                                ----                    ----
                                                                                                    (Dollars in thousands)
Non-performing loans
<S>                                                                                           <C>                        <C>
Nonaccrual loans ................................................................             $   7,480                  $4,714
Past due 90 days or more and still accruing .....................................                     -                     232
                                                                                              ---------                  ------
                     Total ......................................................             $   7,480                  $4,946
                                                                                              =========                  ======
Nonperforming loans as a percentage of:
Loans outstanding ...............................................................                     1.64%                1.21%
Allowance for loan losses .......................................................                   127.28%              106.09%
</TABLE>

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


                                       17
<PAGE>

<TABLE>
<CAPTION>
                                                      90 Days or
                                                     More Past Due         Total        Percentage                       Percentage
                                      Nonaccrual        and Still      Nonperforming     of Total       Potential         of Total
                                        Loans           Accruing           Loans           Loans      Problem Loans       Loans
                                        -----           --------           -----           -----      -------------       -----
                                                                           (Dollars in thousands)
<S>                                   <C>              <C>              <C>                 <C>        <C>                 <C>
December 31, 2005 ............        $ 11,651         $    729         $ 12,380            2.99%      $ 29,313            7.08%
Net change ...................           3,128              949            4,077                                         (2,767)
                                      --------         --------         --------                       --------
March 31, 2006 ...............          14,779            1,678           16,457            3.94%        26,546            6.36%
Net change ...................          (3,628)          (1,476)          (5,104)                                        (3,461)
                                      --------         --------         --------                       --------
June 30, 2006 ................          11,151              202           11,353            2.71%        23,085            5.51%
Net change ...................          (2,483)             175           (2,308)                                          (219)
                                      --------         --------         --------                       --------
September 30, 2006 ...........           8,668              377            9,045            2.19%        22,866            5.55%
Net change ...................          (3,954)            (145)          (4,099)                                        (7,475)
                                      --------         --------         --------                       --------
December 31, 2006 ............           4,714              232            4,946            1.21%        15,391            3.76%
Net change ...................           1,612              (65)           1,547                                         (1,143)
                                      --------         --------         --------                       --------
March 31, 2007 ...............           6,326              167            6,493            1.53%        14,248            3.36%
Net change ...................          (1,169)            (167)          (1,336)                                           385
                                      --------         --------         --------                       --------
June 30, 2007 ................           5,157                -            5,157            1.15%        14,633            3.27%
Net change ...................           2,323                -            2,323                                          1,332
                                      --------         --------         --------                       --------
September 30, 2007 ...........        $  7,480         $      -         $  7,480            1.64%      $ 15,965            3.50%
                                      ========         ========         ========                       ========
</TABLE>

         During the third  quarter of 2007,  non-performing  loans  increased by
$2,323,000  and  potential  problem  loans  increased  by  $1,332,000.  The most
significant  component of the increase in non-performing assets was the addition
of a single $1.6 million credit from our Florence region.  This is a real estate
secured  loan,  which  management  estimates  has  a  low  potential  for  loss.
Subsequent to the end of the quarter,  the loan was brought  current.  The major
components of the increase in potential  problem loans were two large,  secured,
performing commercial credits with technical weaknesses.

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

Noninterest Income

         Noninterest  income for the 2007 third quarter decreased  $219,000,  or
11.2%,  from the  $1,958,000  reported for the same 2006 period.  Mortgage  loan
brokerage  income for the 2007 third  quarter  decreased by $435,000,  or 45.2%,
from the $963,000 recorded in the 2006 period. This decrease was attributable to
lower  volumes of loan  originations  resulting  from a  slowdown  in demand for
residential mortgage loans and overall mortgage industry conditions.


                                       18
<PAGE>

         For the nine months ended  September 30, 2007,  noninterest  income was
$379,000,  or 6.4% more than for the first nine months of 2006 primarily because
the  Company  recognized  a gain of  $712,000  on the sale of other  investments
during the 2007  second  quarter..  Mortgage  loan  brokerage  income  decreased
$860,000, or 30.9%, for the 2007 nine month period, as discussed above.


Noninterest Expenses

         Noninterest  expenses for the third quarter of 2007 were  $505,000,  or
10.3%, higher than the amounts reported for the same period of 2006. The Company
provided  $572,000 during the third quarter of 2007 related to estimated  losses
on warranty  liabilities on prior sales of mortgage loans.  The Company provided
$10,000 for such liabilities in the 2006 third quarter.

         Noninterest expenses for the first nine months of 2007 were $1,961,000,
or 13.8%, more than for the same period of 2006.  Salaries and employee benefits
expenses increased primarily because of the addition of new loan officers in the
Midlands,  Florence and the mortgage  division and the addition of a new officer
in the IT area. These increases occurred over the course of 2006 and early 2007.


         Also, during the 2007 nine month period,  the Company provided $716,000
for its  warranty  obligations  with  respect  to  loans  sold  by the  mortgage
division,  an  increase  of  $659,000  from the 2006  amount and an  increase of
$500,000  over the budget  amount for 2007.  The  reason for the  increase  over
budget  was  management's  identification  during  the third  quarter of 2007 of
approximately  $1.1 million in loans,  12 accounts,  originated  by the mortgage
division,  mostly during 2006,  as to which there was a significant  possibility
that investors  might question the original  representations  and warranties and
sufficient  reason  might  exist for  repurchase.  These  loans  were  primarily
originated  by the  wholesale  area  of the  mortgage  division.  After  review,
management   estimated  the  potential  loss  associated  with  these  loans  at
approximately $500,000 and during the quarter this amount was provided.

         During  the  summer  of 2006  management  of the Bank  reorganized  the
wholesale  operation of the mortgage division and severely limited  originations
of  non-conventional  mortgage  loan  originations.  Management  believes  these
actions   significantly  reduce  the  possibility  of  future  substantial  loss
provisions related to warranty obligations.

         Despite  adverse local and  macroeconmic  events in the mortgage arena,
the  division   continues  to  generate  an  earnings  stream  from  originating
traditional one to four family  residential  mortgage  loans,  albeit at a lower
overall volume.  Further,  during 2007 the division has generated a net increase
of more than $15 million in real estate  secured  equity lines and lot loans for
the Bank's portfolio.



Income Taxes

         Income tax expense was $197,000 less in the 2007 third quarter than for
the 2006 period.  Income tax expense for the 2007 nine month period was $251,000
less than for the same period of 2006. Both decreases are  attributable to lower
amounts of income before income taxes in the 2007 periods.



                                       19
<PAGE>

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  lending  activities.  Those  sources  are  supplemented  by
long-term borrowings from the Federal Home Loan Bank of Atlanta and the proceeds
of issuing 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  fluctuation  in cash  flow  from  both  loans  and
deposits.  Securities available-for-sale are CBI's principal source of secondary
asset liquidity. However, the availability of this source is limited by pledging
commitments  for  public  deposits  and  securities  sold  under  agreements  to
repurchase, and is influenced by market conditions.

         CBI and the Bank also  maintain  various  federal funds lines of credit
with correspondent  banks and are able to borrow from the Federal Home Loan Bank
of Atlanta ("FHLB") and the Federal Reserve Bank's discount window.


         Total deposits as of September 30, 2007 were  $471,432,000,  a decrease
of  $12,189,000,  or 2.5%,  from the amount as of December 31, 2006.  During the
nine months ended  September 30, 2007,  time deposits  increased by $11,104,000,
with approximately 95% of that growth taking the form of time deposits issued in
denominations of $100,000 or more. Approximately $5,006,000 of brokered deposits
matured and were paid out during the third  quarter of 2007 and were replaced by
a short-term  advance of $5,000,000  from the Federal Home Loan Bank of Atlanta.
As of September 30, 2007, the Bank had obtained short-term  borrowings,  federal
funds purchased,  from a correspondent bank in the amount of $10,180,000.  As of
September 30, 2007 the loan to deposit ratio, excluding loans held for sale, was
96.9%, compared with 84.7% at December 31, 2006 and 87.5% at September 30, 2006.

         The 2007 decline in deposits was  primarily  the result of an effort to
reduce  high  cost  time  deposits  and the  cash  flow  requirements  of  local
government  customers.   Management  anticipates  that  year  end  property  tax
collections  will result in some  increase in  government  deposits over current
levels.  Management has addressed the Bank's liquidity requirements by selective
use of brokered  deposits,  long and  short-term  advances from the Federal Home
Loan Bank, federal funds purchased,  and targeted deposit products. In addition,
during  the  fourth  quarter  of 2007,  management  is  considering  the sale of
approximately  $16  million  in  assets  from the loan  portfolio,  representing
approximately 60 real estate secured loans. If completed,  this sale is expected
to have a positive impact on liquidity, reduce the potential problem loan totals
by approximately $8 million, and have only a nominal impact on earnings.

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

CAPITAL RESOURCES

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


                                       20
<PAGE>

       During the first  quarter of 2004,  CBI sponsored the creation of a Trust
that issued  $10,000,000 in trust preferred  securities.  The Trust invested the
proceeds  of  this  issuance  and  $310,000  of  capital  provided  by CBI  into
$10,310,000 of junior subordinated  debentures due in 2034 ("Debentures") issued
by CBI.  Interest  payments on the  Debentures  are due  quarterly at a variable
interest  rate.  CBI used  the  proceeds  of the  Debentures  to  repay  certain
pre-existing  debt  obligations,  to enhance the capital  position of two of its
former  subsidiary  banks,  to provide an additional  funding  mechanism for its
mortgage loan brokerage  activities,  and for other general corporate  purposes.
Under current regulatory  guidelines,  the trust preferred  securities issued by
the Trust are includible in the Company's Tier 1 capital for risk-based  capital
purposes.

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

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

Community Bankshares, Inc. ....................  12.85%     14.11%     10.03%
Community Resource Bank, N.A. .................  11.39%     12.64%      8.91%
Minimum "well capitalized" requirement ........   6.00%     10.00%      6.00%
Minimum requirement ...........................   4.00%      8.00%      5.00%

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

         During  the third  quarter  of 2007 the Board of  Directors  approved a
stock repurchase program that authorizes the Company to buy up to 500,000 shares
of its common stock. During the quarter, the plan repurchased 42,100 shares at a
total cost of $607,000.  Shares  purchased  under the program are  cancelled and
become authorized but unissued. Management anticipates that the judicious use of
this program will have a positive impact on earnings per share and will not have
a material adverse effect on capital.


OFF-BALANCE-SHEET ARRANGEMENTS

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


                                       21
<PAGE>

Variable Interest Entity

         As discussed  under  "Capital  Resources" and in the notes to unaudited
consolidated  financial  statements  under  "Variable  Interest  Entity,"  as of
September  30,  2007,  CBI  held an  equity  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 are used
for on-balance-sheet instruments.

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

                                                              September 30, 2007
                                                              ------------------
                                                                  (Dollars in
                                                                  thousands)
Loan commitments ..........................................        $71,683
Standby letters of credit .................................          2,095

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

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

         The  Company  entered  into a contract  for the  construction  of a new
branch office to be located on Clemson Road in the northeast Columbia,  SC area.
Construction  was begun in the second quarter of 2007 and the office is expected
to open for  business  early in 2008.  Approximately  $643,000 of the  estimated
$830,000 construction cost has been expended through early November 2007.

Derivative Financial Instruments

         In  April,  2003,  the  Financial  Accounting  Standards  Board  issued
Statement No. 149,  "Amendment of Statement  133 on Derivative  Instruments  and


                                       22
<PAGE>

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 the
Bank's accounting for such commitments.  The Bank issues mortgage loan rate lock
commitments  to  potential  borrowers  to  facilitate  its  origination  of home
mortgage  loans that are  intended  to be sold.  Between  the time that the Bank
issues its  commitments and the time that the loans close and are sold, the Bank
is subject to variability in the selling prices related to those commitments due
to  changes  in  market  rates  of  interest.  However,  the Bank  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.  The Bank generally  enters
into such forward  sales  contracts at the same time that rate lock  commitments
are issued. These arrangements effectively insulate the Bank 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, 2007,  and the  estimated  fair values of those  financial
instruments  included in other assets and liabilities in the balance sheet as of
that date.

<TABLE>
<CAPTION>
                                                                                                      September 30, 2007
                                                                                                      ------------------
                                                                                                                       Estimated
                                                                                                                       Fair Value
                                                                                                    Notional              Asset
                                                                                                     Amount            Liability)
                                                                                                     ------            ----------
                                                                                                        (Dollars in thousands)
<S>                                                                                                  <C>               <C>
Rate lock commitments to potential borrowers
  to originate mortgage loans to be held for sale ..................................                 $13,341           $    37
Forward sales contracts with investors
  of mortgage loans to be held for sale ............................................                  13,341                37
</TABLE>


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.


                                       23
<PAGE>

         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, 2007,  CBI is positioned so
that net interest  income would increase  $192,000 and net income would increase
$120,000 in the next twelve months if interest  rates declined 100 basis points.
Conversely,  net  interest  income  would  decline  $8,000 and net income  would
decline $5,000 in the next twelve months if interest  rates  increased 100 basis
points. Computation of prospective effects of hypothetical interest rate changes
are based on numerous assumptions,  including relative levels of market interest
rates and loan prepayment, and should not be relied upon as indicative of actual
results.  Further,  the  computations do not contemplate any actions CBI and its
customers could undertake in response to changes in interest rates.

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


Item 4T.  Controls and Procedures

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

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




                                       24
<PAGE>


                           PART II--OTHER INFORMATION

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


         On July 30, 2007,  the Board of Directors  authorized the repurchase of
up to 500,000 shares of the Company's  common stock. The program expires on July
30, 2008.


                      ISSUER PURCHASES OF EQUITY SECURITIES

<TABLE>
<CAPTION>
          Period             (a) Total number     (b) Average price     (c) Total number     (d) Maximum number
                            of shares purchased     paid per share          of shares        of shares that may
                                                                        purchased as part     yet be purchased
                                                                           of publicly       under the plans or
                                                                       announced plans or         programs
                                                                            programs

<S>                               <C>                   <C>                  <C>                  <C>
          8/1/07 - 8/31/07        42,100                $14.41               42,100               457,900
          9/1/07 - 9/30/07             -                $    -                    -               457,900
                                  ------                ------               ------               -------
Total                             42,100                $14.41               42,100               457,900
</TABLE>



Item 6.  Exhibits

         3-2      Amended  Bylaws  (incorporated  by reference to Form 8-K filed
                  August 28, 2007)
         31-1     Rule 13a-14(a)/15d-14(a)  Certification of principal executive
                  officer
         31-2     Rule 13a-14(a)/15d-14(a)  Certification of principal financial
                  officer
         32       Certifications Pursuant to 18 U.S.C. Section 1350












                                       25
<PAGE>

SIGNATURES

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

                                                        DATED: November 13, 2007

COMMUNITY BANKSHARES, INC.

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

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




                                  EXHIBIT INDEX


3-2      Amended Bylaws  (incorporated by reference to Form 8-K filed August 28,
         2007)

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

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

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








                                       26