SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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


For the quarterly period ended June 30, 2005                 Commission File No.
000-22054


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


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


                              791 Broughton Street
                        Orangeburg, South Carolina 29115
--------------------------------------------------------------------------------
               (Address of principal executive offices, zip code)


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



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

         Yes [X] No [ ]


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

         Yes [ ] No [X]


         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest practicable date: Common Stock, no par
or stated value, 4,404,303 shares outstanding on August 2, 2005.



<PAGE>


                           COMMUNITY BANKSHARES, INC.

                                    FORM 10-Q

                                      Index

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

Item 1.     Financial Statements

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

Item 2.     Management's Discussion and Analysis of Financial Condition and Results of Operations ............................   10
Item 3.     Quantitative and Qualitative Disclosures About Market Risk .......................................................   20
Item 4.     Controls and Procedures ..........................................................................................   21

PART II -   OTHER INFORMATION

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds ......................................................   22
Item 4.     Submission of Matters to a Vote of Security Holders ..............................................................   22
Item 6.     Exhibits .........................................................................................................   22

SIGNATURES ...................................................................................................................   23
</TABLE>



                                       2
<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1. - Financial Statements

COMMUNITY BANKSHARES, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
                                                                                                    (Unaudited)
                                                                                                      June 30,          December 31,
                                                                                                        2005                2004
                                                                                                        -----               ----
                                                                                                          (Dollars in thousands)
Assets
<S>                                                                                                   <C>                 <C>
     Cash and due from banks ...............................................................          $  15,110           $  14,397
     Federal funds sold ....................................................................             12,601              12,571
                                                                                                      ---------           ---------
            Total cash and cash equivalents ................................................             27,711              26,968
     Interest bearing deposits with other banks ............................................                459                 852
     Securities available-for-sale .........................................................             52,182              55,471
     Securities held-to-maturity (estimated fair value $1,912 for 2005
          and $1,907 for 2004) .............................................................              1,925               1,925
     Other investments .....................................................................              2,890               2,642
     Loans held for sale ...................................................................             15,078              15,090
     Loans receivable ......................................................................            413,875             393,649
         Less, allowance for loan losses ...................................................             (4,812)             (4,347)
                                                                                                      ---------           ---------
            Net loans ......................................................................            409,063             389,302
     Premises and equipment - net ..........................................................              7,823               7,739
     Accrued interest receivable ...........................................................              2,714               2,419
     Net deferred income tax assets ........................................................              1,011                 599
     Goodwill ..............................................................................              4,321               4,321
     Core deposit intangible assets ........................................................              2,960               3,083
     Prepaid expenses and other assets .....................................................              1,060               1,966
                                                                                                      ---------           ---------

            Total assets ...................................................................          $ 529,197           $ 512,377
                                                                                                      =========           =========

Liabilities
     Deposits
         Noninterest bearing ...............................................................          $  64,094           $  67,046
         Interest bearing ..................................................................            369,324             356,412
                                                                                                      ---------           ---------
            Total deposits .................................................................            433,418             423,458
     Short-term borrowings .................................................................              7,868               6,662
     Long-term debt ........................................................................             33,569              30,573
     Accrued interest payable ..............................................................              1,056                 691
     Accrued expenses and other liabilities ................................................              1,273                 966
                                                                                                      ---------           ---------
            Total liabilities ..............................................................            477,184             462,350
                                                                                                      ---------           ---------

Shareholders' equity
     Common stock - no par value;12,000,000 shares authorized; issued and
         outstanding - 4,404,303 for 2005 and
         4,390,784 for 2004 ................................................................             30,202              30,042
     Retained earnings .....................................................................             22,106              20,075
     Accumulated other comprehensive income (loss) .........................................               (295)                (90)
                                                                                                      ---------           ---------
            Total shareholders' equity .....................................................             52,013              50,027
                                                                                                      ---------           ---------

            Total liabilities and shareholders' equity .....................................          $ 529,197           $ 512,377
                                                                                                      =========           =========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.


                                       3
<PAGE>


COMMUNITY BANKSHARES, INC.
Consolidated Statements of Income
<TABLE>
<CAPTION>
                                                                                                 (Unaudited)
                                                                                           Period Ended June 30,
                                                                                           ---------------------
                                                                               Three Months                     Six Months
                                                                               ------------                     ----------
                                                                          2005             2004            2005              2004
                                                                          ----             ----            ----              ----
                                                                                  (Dollars in thousands, except per share)
Interest and dividend income
<S>                                                                      <C>             <C>              <C>              <C>
     Loans, including fees ......................................        $  7,124        $  5,449         $ 13,738         $ 10,780
     Interest bearing deposits with other banks .................              11               4               19                8
     Debt securities ............................................             432             409              869              905
     Dividends ..................................................              34              19               58               38
     Federal funds sold .........................................              95              47              163              105
                                                                         --------        --------         --------         --------
            Total interest and dividend income ..................           7,696           5,928           14,847           11,836
                                                                         --------        --------         --------         --------

Interest expense
     Deposits
         Time deposits $100M and over ...........................             630             323            1,157              636
         Other deposits .........................................           1,361             895            2,569            1,814
                                                                         --------        --------         --------         --------
            Total interest expense on deposits ..................           1,991           1,218            3,726            2,450
     Short-term borrowings ......................................              44              64               87              169
     Long-term debt .............................................             468             380              906              683
                                                                         --------        --------         --------         --------
            Total interest expense ..............................           2,503           1,662            4,719            3,302
                                                                         --------        --------         --------         --------

Net interest income .............................................           5,193           4,266           10,128            8,534
Provision for loan losses .......................................             585             258            1,035              491
                                                                         --------        --------         --------         --------
Net interest income after provision .............................           4,608           4,008            9,093            8,043
                                                                         --------        --------         --------         --------

Noninterest income
     Service charges on deposit accounts ........................             853             822            1,615            1,667
     Mortgage loan brokerage income .............................             937             903            1,731            1,652
     Net securities gains or (losses) ...........................               -              (1)             (10)              (5)
     Other ......................................................             254             207              475              463
                                                                         --------        --------         --------         --------
            Total noninterest income ............................           2,044           1,931            3,811            3,777
                                                                         --------        --------         --------         --------

Noninterest expenses
     Salaries and employee benefits .............................           2,334           2,225            4,612            4,336
     Premises and equipment .....................................             550             473            1,085              963
     Other ......................................................           1,341           1,077            2,647            2,208
                                                                         --------        --------         --------         --------
            Total noninterest expenses ..........................           4,225           3,775            8,344            7,507
                                                                         --------        --------         --------         --------

Income before income taxes ......................................           2,427           2,164            4,560            4,313
Income tax expense ..............................................             876             769            1,649            1,533
                                                                         --------        --------         --------         --------
Net income ......................................................        $  1,551        $  1,395         $  2,911         $  2,780
                                                                         ========        ========         ========         ========

Per share
     Net income .................................................        $   0.35        $   0.32         $   0.66         $   0.64
     Net income - diluted .......................................            0.35            0.31             0.65             0.62
     Cash dividends declared ....................................            0.10            0.10             0.20             0.20
</TABLE>



See accompanying notes to unaudited consolidated financial statements.

                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                    (Unaudited)

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

<S>                                                             <C>           <C>           <C>            <C>            <C>
Balance, January 1, 2004 ..................................     4,331,460     $  29,402     $  18,610      $      58      $  48,070
                                                                                                                          ---------
Comprehensive income:
    Net income ............................................             -             -         2,780              -          2,780
                                                                                                                          ---------
    Unrealized holding gains and losses
      on available-for-sale securities arising
      during the period, net of income
      taxes of $330 .......................................             -             -             -           (584)          (584)
    Reclassification adjustment for losses (gains)
      realized in income, net of
      income taxes of $2 ..................................             -             -             -              3              3
                                                                                                                          ---------
        Total other comprehensive income ..................             -             -             -              -           (581)
                                                                                                                          ---------
          Total comprehensive income ......................             -             -             -              -          2,199
                                                                                                                          ---------
Exercise of employee stock options ........................        27,777           323             -              -            323
Cash dividends declared, $.20 per share ...................             -             -          (869)             -           (869)
                                                                ---------     ---------     ---------      ---------      ---------
Balance, June 30, 2004 ....................................     4,359,237     $  29,725     $  20,521      $    (523)     $  49,723
                                                                =========     =========     =========      =========      =========


Balance, January 1, 2005 ..................................     4,390,784     $  30,042     $  20,075      $     (90)     $  50,027
                                                                                                                          ---------
Comprehensive income:
    Net income ............................................             -             -         2,911              -          2,911
                                                                                                                          ---------
    Unrealized holding gains and losses
      on available-for-sale securities arising
      during the period, net of income
      taxes of $118 .......................................             -             -             -           (212)          (212)
    Reclassification adjustment for losses (gains)
      realized in income, net of
      income taxes of $3 ..................................             -             -             -              7              7
                                                                                                                          ---------
        Total other comprehensive income (loss) ...........             -             -             -              -           (205)
                                                                                                                          ---------
          Total comprehensive income ......................             -             -             -              -          2,706
                                                                                                                          ---------
Exercise of employee stock options ........................        12,744           146             -              -            146
Sale of common stock ......................................           775            14             -              -             14
Cash dividends declared, $.20 per share ...................             -             -          (880)             -           (880)
                                                                ---------     ---------     ---------      ---------      ---------
Balance, June 30, 2005 ....................................     4,404,303     $  30,202     $  22,106      $    (295)     $  52,013
                                                                =========     =========     =========      =========      =========
</TABLE>











See accompanying notes to unaudited consolidated financial statements.

                                       5
<PAGE>

COMMUNITY BANKSHARES, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                                                                 (Unaudited)
                                                                                                             Six Months Ended
                                                                                                                  June 30,
                                                                                                          2005                 2004
                                                                                                          ----                 ----
                                                                                                            (Dollars in thousands)
Operating activities
<S>                                                                                                      <C>               <C>
     Net income ................................................................................         $  2,911          $  2,780
     Adjustments to reconcile net income to net
         cash provided by operating activities
            Provision for loan losses ..........................................................            1,035               491
            Depreciation and amortization ......................................................              581               566
            Net amortization of securities .....................................................               50               113
            Net losses on sales of securities ..................................................               10                 5
            Proceeds of sales of loans held for sale ...........................................           96,500            90,620
            Originations of loans held for sale ................................................          (96,488)          (94,039)
            (Increase) decrease in accrued interest receivable .................................             (295)               34
            Decrease (increase) in other assets ................................................              409              (631)
            Gains on sales of other real estate ................................................              (24)               (9)
            Increase in accrued interest payable ...............................................              365               117
            Increase in other liabilities ......................................................              307                 5
                                                                                                         --------          --------
                Net cash provided by operating activities ......................................            5,361                52
                                                                                                         --------          --------
Investing activities
     Net decrease in interest bearing deposits with other banks ................................              393               159
     Purchases of available-for-sale securities ................................................           (5,745)          (18,771)
     Maturities, calls and paydowns of available-for-sale securities ...........................            4,242            20,054
     Proceeds of sales of available-for-sale securities ........................................            4,412             8,926
     Net purchases of other investments ........................................................             (248)               (2)
     Net increase in loans made to customers ...................................................          (20,796)          (23,078)
     Purchases of premises and equipment .......................................................             (542)             (386)
     Proceeds from sales of other real estate ..................................................              224                59
                                                                                                         --------          --------
                Net cash used by investing activities ..........................................          (18,060)          (13,039)
                                                                                                         --------          --------
Financing activities
     Net increase in deposits ..................................................................            9,960             2,063
     Net increase (decrease) in short-term borrowings ..........................................            1,206            (9,476)
     Proceeds from issuing long-term debt ......................................................            3,000            10,507
     Repayment of long-term debt ...............................................................               (4)                -
     Exercise of employee stock options ........................................................              146               323
     Sale of common stock ......................................................................               14                 -
     Cash dividends paid .......................................................................             (880)             (869)
                                                                                                         --------          --------
                Net cash provided by financing activities ......................................           13,442             2,548
                                                                                                         --------          --------
Increase (decrease) in cash and cash equivalents ...............................................              743           (10,439)
Cash and cash equivalents, beginning of period .................................................           26,968            41,875
                                                                                                         --------          --------
Cash and cash equivalents, end of period .......................................................         $ 27,711          $ 31,436
                                                                                                         ========          ========

Supplemental Disclosures of Cash Flow Information
     Cash payments for interest ................................................................         $  4,354          $  3,185
                                                                                                         ========          ========
     Cash payments for income taxes ............................................................         $  1,690          $  1,624
                                                                                                         ========          ========

Supplemental Disclosures of Non-cash Activities
     Transfers of loans receivable to other real estate ........................................         $      -          $     87
                                                                                                         ========          ========
     Transfer to net deferred income tax assets from prepaid current income taxes ..............         $    297          $      -
                                                                                                         ========          ========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

                                       6
<PAGE>


COMMUNITY BANKSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

Accounting  Principles - A summary of  significant  accounting  policies and the
audited  financial  statements  for 2004 are included in  Community  Bankshares,
Inc.'s (the  "Company" or "CBI")  Annual  Report on Form 10-K for the year ended
December 31, 2004.

Management  Opinion  - The  interim  financial  statements  in this  report  are
unaudited.  In the  opinion of  management,  all the  adjustments  necessary  to
present a fair  statement of the results for the interim  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 2004 Annual Report on Form 10-K.

Nonperforming  Loans - As of June 30, 2005,  there were $5,259,000 in nonaccrual
loans  and  $343,000  of  loans 90 or more  days  past  due and  still  accruing
interest.

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


                                       7
<PAGE>

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

Net income per share, basic
<S>                                                                 <C>               <C>               <C>               <C>
  Numerator - net income ...................................        $    1,551        $    1,395        $    2,911        $    2,780
                                                                    ==========        ==========        ==========        ==========
  Denominator
    Weighted average common shares
      issued and outstanding ...............................         4,404,045         4,348,905         4,399,089         4,341,325
                                                                    ==========        ==========        ==========        ==========

      Net income per share, basic ..........................        $      .35        $      .32        $      .66        $      .64
                                                                    ==========        ==========        ==========        ==========

Net income per share, assuming dilution
  Numerator - net income ...................................        $    1,551        $    1,395        $    2,911        $    2,780
                                                                    ==========        ==========        ==========        ==========
  Denominator
    Weighted average common shares
      issued and outstanding ...............................         4,404,045         4,348,905         4,399,089         4,341,325
    Effect of dilutive stock options .......................           100,142           112,304           101,360           124,051
                                                                    ----------        ----------        ----------        ----------
               Total shares ................................         4,504,187         4,461,209         4,500,449         4,465,376
                                                                    ==========        ==========        ==========        ==========

      Net income per share, assuming dilution ..............        $      .35        $      .31        $      .65        $      .62
                                                                    ==========        ==========        ==========        ==========
</TABLE>


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

                                       8
<PAGE>

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

<S>                                                                  <C>               <C>               <C>               <C>
Net income, as reported ....................................         $   1,551         $   1,395         $   2,911         $   2,780
Deduct:  Total stock-based employee
     compensation expense determined under
     fair value based method for all awards,
     net of any related tax effects ........................                49               214               132               428
                                                                     ---------         ---------         ---------         ---------
Pro forma net income .......................................         $   1,502         $   1,181         $   2,779         $   2,352
                                                                     =========         =========         =========         =========

Net income per share, basic
     As reported ...........................................         $    0.35         $    0.32         $    0.66         $    0.64
     Pro forma .............................................              0.34              0.27              0.63              0.55
Net income per share, assuming dilution
     As reported ...........................................         $    0.35         $    0.31         $    0.65         $    0.62
     Pro forma .............................................              0.33              0.26              0.62              0.53
</TABLE>

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

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

                                       9
<PAGE>

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

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

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

Forward Looking Statements

         Statements  included in this report which are not  historical in nature
are intended to be, and are hereby  identified as "forward  looking  statements"
for  purposes  of the safe  harbor  provided  by Section  21E of the  Securities
Exchange Act of 1934, as amended.  Forward-looking statements include statements
concerning plans, objectives,  goals,  strategies,  future events or performance
and underlying  assumptions and other statements which are other than statements
of historical facts. Such forward-looking statements may be identified,  without
limitation,  by the use of the  words  "anticipates,"  "believes,"  "estimates,"
"expects," "intends," "plans," "predicts,"  "projects," and similar expressions.
The Company's expectations,  beliefs, estimates and projections are expressed in
good faith and are believed by the Company to have a reasonable basis, including
without  limitation,  management's  examination of historical  operating trends,
data  contained in the  Company's  records and other data  available  from third
parties, but there can be no assurance that management's expectations,  beliefs,
estimates or projections will result or be achieved or accomplished. The Company
cautions readers that forward-looking statements,  including without limitation,
those  relating to the Company's  recent and  continuing  expansion,  its future
business  prospects,   revenues,  working  capital,  liquidity,  capital  needs,
interest  costs,  income,  and adequacy of the  allowance  for loan losses,  are
subject to risks and  uncertainties  that could cause  actual  results to differ
materially  from  those  indicated  in the  forward-looking  statements,  due to
several important factors herein  identified,  among others, and other risks and
factors  identified  from time to time in the  Company's  reports filed with the
Securities  and Exchange  Commission.  The Company  undertakes  no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.

References to our Website Address

         References to our website address  throughout this Quartertly 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.

                                       10
<PAGE>

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 Annual Report on Form 10-K.

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

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


CHANGES IN FINANCIAL CONDITION

         During  the  six  months  ended  June  30,  2005,  loans  increased  by
$20,226,000, or 5.1%, over the amount as of December 31, 2004. This increase was
funded primarily by increases in interest bearing deposits totaling  $12,912,000
and  additional  short-term and long-term  borrowings  totaling  $4,202,000.

RESULTS OF OPERATIONS

Earnings Performance

Three Months Ended June 30, 2005 and 2004

         For the quarter ended June 30, 2005, CBI earned consolidated net income
of $1,551,000,  compared with $1,395,000 for the comparable period of 2004. This
represents an increase of $156,000 or 11.2%.  Basic earnings per share were $.35
in the 2005 period,  compared with $.32 for the 2004 quarter.  Diluted  earnings
per share were $.35 for the 2005 period and $.31 for the 2004 period.

         Operating  results  for the  second  quarter  of 2005  were  positively
affected  primarily by an increase in net interest  income caused by strong loan
growth and increasing  yields.  Deposit growth was significantly  less than loan
growth  during the 2005  second  quarter.  The  Company  uses a  combination  of
short-term  and long-term  debt to fund the  difference  between loan growth and
deposit  growth.   The  Company's   normal   liquidity,   comprised  of  deposit


                                       11
<PAGE>

liabilities,  short-term and long-term debt issuances and proceeds from sales of
loans  originated  for sale,  continues to be  sufficient to fund demand for new
loans.

         Increases in the  provision  for loan losses and  noninterest  expenses
partially  offset the gains made in net interest income and noninterest  income.
The  provision  for loan losses  continues to be affected by several loans which
have not performed as agreed and by the significant growth in the Company's loan
portfolio.  During the second  quarter of 2005,  net  charge-offs  were $495,000
compared with net charge-offs of $178,000 during the same period of 2004. Growth
in the amount of potential  problem loans was also a factor  contributing to the
increased provision for loan losses.

         Noninterest  expenses  increased  in part  because  of  changes  in the
corporate  management structure designed to enhance controls and risk management
activities  particularly  in the  lending  function,  and to meet the  increased
corporate  governance   responsibilities  placed  on  public  companies  by  the
Sarbanes-Oxley  Act of 2002.  In  addition,  in  January of 2005,  the  Florence
National  Bank  subsidiary  opened  a branch  office,  contributing  further  to
increased noninterest expenses in the 2005 periods.

<TABLE>
<CAPTION>
                                                                                      Summary Income Statement
                                                                                      ------------------------
                                                                                       (Dollars in thousands)
                                                                                                          Dollar          Percentage
For the Three Months Ended June 30,                                2005                2004               Change            Change
-----------------------------------                                ----                ----               ------            ------
<S>                                                               <C>                 <C>                 <C>               <C>
Interest income ....................................              $7,696              $5,928              $1,768             29.8%
Interest expense ...................................               2,503               1,662                 841             50.6%
                                                                  ------              ------              ------
Net interest income ................................               5,193               4,266                 927             21.7%
Provision for loan losses ..........................                 585                 258                 327            126.7%
Noninterest income .................................               2,044               1,931                 113              5.9%
Noninterest expenses ...............................               4,225               3,775                 450             11.9%
Income tax expense .................................                 876                 769                 107             13.9%
                                                                  ------              ------              ------
Net income .........................................              $1,551              $1,395              $  156             11.2%
                                                                  ======              ======              ======
</TABLE>

Six Months Ended June 30, 2005 and 2004

         CBI's  consolidated  net income for the six months  ended June 30, 2005
was positively  affected by increased levels of net interest  income,  primarily
related to increased  loan volumes and yields.  A significant  proportion of the
banking  subsidiaries' loan portfolios are made up of variable rate loans, which
have repriced  favorably several times during 2005. The prime rate, which is the
index to which most of those variable rate loans are related, has increased four
times and 100 basis  points  during  2005,  and nine times and 225 basis  points
since June 30, 2004.  The  provision  for loan losses and  noninterest  expenses
negatively  affected  results  for the  2005  year-to-date  period  for the same
reasons discussed above for the second quarter.


                                       12
<PAGE>
<TABLE>
<CAPTION>
                                                                                      Summary Income Statement
                                                                                      ------------------------
                                                                                       (Dollars in thousands)
                                                                                                          Dollar          Percentage
For the Six Months Ended June 30,                                  2005                2004               Change            Change
---------------------------------                                  ----                ----               ------            ------
<S>                                                               <C>                 <C>                 <C>                 <C>
Interest income .....................................             $14,847             $11,836             $ 3,011              25.4%
Interest expense ....................................               4,719               3,302               1,417              42.9%
                                                                  -------             -------               -----
Net interest income .................................              10,128               8,534               1,594              18.7%
Provision for loan losses ...........................               1,035                 491                 544             110.8%
Noninterest income ..................................               3,811               3,777                  34               0.9%
Noninterest expenses ................................               8,344               7,507                 837              11.1%
Income tax expense ..................................               1,649               1,533                 116               7.6%
                                                                  -------             -------               -----
Net income ..........................................             $ 2,911             $ 2,780             $   131               4.7%
                                                                  =======             =======               =====
</TABLE>

Net Interest Income

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

         Interest income  increased by $1,768,000,  or 29.8%, in the 2005 second
quarter compared with the same 2004 period. Interest and fees on loans increased
to $7,124,000 for the 2005 quarter from  $5,449,000 for the same period of 2004,
primarily  due to higher  levels of  commercial,  consumer and mortgage  lending
activity and the higher interest rate environment in the 2005 period. Amounts of
interest  earned on other  categories of interest  earning assets also increased
due to increases in the average  yields  earned on those assets  resulting  from
increasing market rates of interest during the 2005 period.

         Interest expense for the second quarter of 2005 increased to $2,503,000
from  $1,662,000  for the 2004 period as a result of larger  average  amounts of
time  deposits  and  higher  interest  rates paid in the 2005  period.  Interest
expense  associated with long-term debt increased in the 2005 three month period
to  $468,000  from  $380,000  for  the  same  period  of 2004  primarily  due to
contractual changes in the variable interest rates paid for such borrowings.

         Interest  income for the six months  ended June 30, 2005  increased  by
$3,011,000,  or 25.4% from the same period of 2004, due to increases in interest
rates and a 19.7% increase in the average amount of loans outstanding.  Interest
and fee  income on loans  for the 2005 six  month  period  was  $13,738,000,  an
increase of  $2,958,000 or 27.4% over the same period of 2004.  Interest  income
from other  earning  assets  categories  during the 2005  six-month  period were
slightly  higher  than in the same period of 2004  primarily  due to a 170 basis
point increase in the rate earned on federal funds sold.

         Interest  expense for the 2005 six month period was  $1,417,000  higher
than in the  same  2004  period  due to  higher  rates  paid  for  deposits  and
significantly  higher average  amounts of interest  bearing time deposits in the
2005 period.  Higher  deposit  rates  primarily are  attributable  to the higher
interest rate environment in 2005. Average short-term borrowings decreased,  and
long-term  debt  increased,  for the 2005  period,  primarily as a result of the
Company's issuance of $10,000,000 of long-term subordinated  debentures in March
2004.

                                       13
<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 the
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.

<TABLE>
<CAPTION>
                                                                               Average Balances, Yields and Rates
                                                                                   Six Months Ended June 30,
                                                                                   -------------------------

                                                                         2005                                    2004
                                                                         ----                                    ----
                                                                       Interest                                Interest
                                                            Average     Income /   Yields /         Average     Income /   Yields /
                                                           Balances     Expense     Rates *        Balances     Expense     Rates *
                                                           --------     -------     -------        --------     -------     -------
                                                                                  (Dollars in thousands)
Assets
<S>                                                      <C>           <C>           <C>         <C>           <C>           <C>
Interest earning deposits ...........................    $     665     $    19       5.71%       $   1,057     $     8       1.51%
Investment securities - taxable .....................       51,264         817       3.19%          52,270         779       2.98%
Investment securities - tax exempt ..................        6,535         110       3.37%           9,811         164       3.34%
Federal funds sold ..................................       12,336         163       2.64%          22,353         105       0.94%
Loans, including loans held for sale ................      420,422      13,738       6.54%         351,261      10,780       6.14%
                                                         ---------     -------                   ---------     -------
         Total interest earning assets ..............      491,222      14,847       6.04%         436,752      11,836       5.42%
Cash and due from banks .............................       15,897                                  16,277
Allowance for loan losses ...........................       (4,890)                                 (4,237)
Premises and equipment, net .........................        7,820                                   7,080
Intangible assets ...................................        7,341                                   7,588
Other assets ........................................        4,185                                   3,936
                                                         ---------                               ---------
         Total assets ...............................    $ 521,575                               $ 467,396
                                                         =========                               =========

Liabilities and shareholders' equity
Interest bearing deposits
     Savings ........................................    $  88,899     $   627       1.41%       $  78,473     $   371       0.95%
     Interest bearing transaction accounts ..........       61,724         192       0.62%          55,822         114       0.41%
     Time deposits ..................................      213,048       2,907       2.73%         182,816       1,965       2.15%
                                                         ---------     -------                  ----------     -------
         Total interest bearing deposits ............      363,671       3,726       2.05%         317,111       2,450       1.55%
Short-term borrowings ...............................        8,390          87       2.07%          13,262         169       2.55%
Long-term debt ......................................       32,329         906       5.60%          26,608         683       5.13%
                                                         ---------     -------                  ----------     -------
         Total interest bearing liabilities .........      404,390       4,719       2.33%         356,981       3,302       1.85%
Noninterest bearing demand deposits .................       64,266                                  59,542
Other liabilities ...................................        1,955                                   1,710
Shareholders' equity ................................       50,964                                  49,163
                                                         ---------                               ---------
         Total liabilities and
             shareholders' equity ...................    $ 521,575                               $ 467,396
                                                         =========                               =========


Interest rate spread ................................                                3.71%                                   3.57%
Net interest income and net yield
     on earning assets ..............................                  $10,128       4.12%                     $ 8,534       3.91%
</TABLE>

* Yields and rates are annualized.


                                       14
<PAGE>

Provision and Allowance for Loan Losses

         The  provision  for loan  losses  for the 2005 three  month  period was
$585,000,  an increase of $327,000, or 126.7%, from $258,000 for the same period
of 2004. The provision for loan losses  increased to $1,035,000 for the 2005 six
month  period  from  $491,000  for the 2004 six month  period,  an  increase  of
$544,000 or 110.8%.  Ongoing  developments  associated  with a few large problem
loans  continue to affect the Company's  allowance and provision for loan losses
negatively.  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  charge-offs  during  the six  months  ended  June  30,  2005  were
$570,000,  compared with $412,000 for the same period of 2004. The allowance for
loan losses as of June 30, 2005 was 1.16% of loans  outstanding,  compared  with
1.10% as of  December  31,  2004 and 1.21% as of June 30,  2004.  Non-performing
loans  totaled  $5,602,000 as of June 30, 2005,  compared with  $5,078,000 as of
December  31,  2004,  an  increase  of $524,000  or 10.3%.  The  coverage  ratio
(allowance for loan losses divided by non-performing  loans) was .86x as of both
June 30, 2005 and December 31, 2004.

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

<TABLE>
<CAPTION>
                                                                             Six Months           Year Ended              Six Months
                                                                               Ended              December 31,              Ended
                                                                            June 30, 2005             2004             June 30, 2004
                                                                            -------------             ----             -------------
                                                                                              (Dollars in thousands)
<S>                                                                          <C>                   <C>                   <C>
Allowance at beginning of period .................................           $   4,347             $   4,206             $   4,206
Provision for loan losses ........................................               1,035                 5,102                   491
Net charge-offs ..................................................                (570)               (4,961)                 (412)
                                                                             ---------             ---------             ---------
Allowance at end of period .......................................           $   4,812             $   4,347             $   4,285
                                                                             =========             =========             =========
Allowance as a percentage of loans outstanding ...................                1.16%                 1.10%                 1.21%

Loans at end of period ...........................................           $ 413,875             $ 393,649             $ 354,772
                                                                             =========             =========             =========
</TABLE>


         Following is a summary of non-performing  loans as of June 30, 2005 and
December 31, 2004:


                                                                    December 31,
                                                     June 30, 2005      2004
                                                     -------------      ----
                                                       (Dollars in thousands)
Non-performing loans
  Nonaccrual loans ...................................      $5,259     $4,941
  Past due 90 days or more and still accruing ........         343        137
                                                            ------     ------
                  Total ..............................      $5,602     $5,078
                                                            ======     ======
Nonperforming loans as a percentage
  of loans outstanding ...............................        1.35%      1.29%


         Included  in  nonaccrual  loans  as of  June  30,  2005,  is  one  loan
relationship   totaling   $2,444,000,   or  46.5%  of  nonaccrual   loans.  This
relationship  originated  in  2004  to  finance  the  borrower's  purchase  of a


                                       15
<PAGE>

business. The business did not perform as expected and the borrower subsequently
discovered  problems with  information  supporting an appraisal of the business.
Because of deterioration of the borrower's  financial  condition,  proceeds from
the sale of the  business are  expected to be the primary  source of  repayment.
During the fourth  quarter  of 2004,  a partial  charge-off  of  $1,001,000  was
recorded.  The borrower is  cooperating  with  management  to maximize  ultimate
collection by actively pursuing sale of the business as an operating concern. If
the business cannot be sold for a sufficient price within a reasonable period of
time,  further  write-downs  might be necessary which could decrease net income.
Approximately  $367,000 of the  allowance  for loan losses is  allocated to this
credit as of June 30, 2005.

         Risk  taking is  inherent  in the  granting  of credit.  To control the
amounts and types of risks  incurred,  and to minimize  losses,  management  has
established loan policies and practices.  On an ongoing basis,  management seeks
to better  manage risk and improve  internal  control  systems.  As part of this
continuous process,  management hired a Chief Credit Officer for the Corporation
in the second quarter of 2005. This officer has specific loan approval authority
over major loan relationships and also assists the subsidiary banks and mortgage
company in other areas of loan operations and  administration.  Also, during the
second quarter of 2005,  management changed its outside  independent loan review
provider.

         The  new  loan  review  firm  is  in  the  process  of   conducting   a
comprehensive  review of the major credits in the Corporation's  loan portfolio.
Based on that review,  which was  substantially  completed in early August,  the
Corporation had identified $17 to $18 million in loans, approximately 4%, of the
loan  portfolio,  as  potential  problem  loans where  information  about credit
attributes of borrowers had caused  management to have more than normal  concern
about the ability of the borrowers to comply with original  repayment terms. The
amount  identified  does not  represent  management's  estimate of the potential
losses since a large portion of these loans are secured by real estate and other
collateral  or could be repaid  under  different  terms.  This is an increase of
approximately  $12 to $13 million over the amount  identified as of December 31,
2004 by the previous loan review process.

         Management will continue to monitor the levels of non-performing  loans
and address the  weaknesses in these credits to enhance the ultimate  collection
or  recovery  of these  assets.  Management  considers  the levels and trends in
non-performing  assets  and  potential  problem  loans  in  determining  how the
provision  and  allowance  for loan losses is  estimated  and  adjusted.  In the
opinion of management,  the Corporation's  allowance for loan losses at June 30,
2005 is  adequate  to  provide  for  losses  that  may be  inherent  in the loan
portfolio.


Noninterest Income

         Noninterest income for the 2005 second quarter increased  $113,000,  or
5.9%,  over the  $1,931,000  reported  for the same 2004 period.  Mortgage  loan
brokerage  income for the 2005 quarter  increased by $34,000,  or 3.8%, over the


                                       16
<PAGE>

$903,000 in the 2004 period.  Service charge income totaled $853,000 in the 2005
quarter, an increase of $31,000, or 3.8%.

         For the six months ended June 30, 2005, noninterest income was $34,000,
or .9% more than for the  first six  months  of 2004.  Mortgage  loan  brokerage
income increased $79,000, but this was offset partially by a $52,000 decrease in
service charge income.


Noninterest Expenses

         Noninterest  expenses for the second quarter of 2005 were $450,000,  or
11.9%,  higher than the amounts  reported for the same period of 2004.  Salaries
and  employee  benefits  expenses  were  $109,000,  or 4.9%,  higher in the 2005
period,  due to increased activity in mortgage lending and additions made to the
Company's  executive  managment.  Expenses  related to  premises  and  equipment
increased by $77,000 in the 2005 period,  primarily  due to the opening of a new
branch office of Florence National Bank during the first quarter of 2005.

         Noninterest  expense for the first six months of 2005 was $837,000,  or
11.1%, more than for the same period of 2004. Salaries and employee benefits for
the 2005 six month period were $276,000,  or 6.4%, more than for the same period
of 2004. This expense  increased due to higher levels of mortgage loan brokerage
activity  in  the  2005  period,  additions  made  to  the  Company's  executive
management, and normal periodic wage and salary adjustments. Expenses associated
with premises and equipment were $122,000,  or 12.7%, higher in the 2005 period,
primarily  due to the opening of a new branch  office of Florence  National Bank
during the first quarter of 2005. Other expenses were $439,000, or 19.9%, higher
in the  2005  period  due in part to  expenses  related  to  complying  with the
provisions of Sarbanes-Oxley Act Section 404 and the new Florence office.


Income Taxes

         Income tax expense was  $107,000  more in the 2005 second  quarter than
for the 2004 period,  as a result of higher net income before taxes.  Income tax
expense for the 2005 six month period was $116,000 more than for the same period
of 2004.


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 service areas.  Individual and commercial  deposits are the primary
source of funds for credit activities,  along with long-term borrowings from the
Federal  Home Loan Bank of Atlanta and the  proceeds of issuing  $10,000,000  of
subordinated debentures.  Cash and amounts due from banks and federal funds sold
are CBI's  primary  sources of asset  liquidity.  These funds  provide a cushion
against  short-term  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 its  subsidiaries
also maintain various federal funds lines of credit with correspondent banks and
are able to borrow  from the  Federal  Home Loan Bank of Atlanta and the Federal
Reserve Bank's discount window.

         Total  deposits as of June 30, 2005 were  $433,418,000,  an increase of
$9,960,000,  or 2.4%,  over the amount as of December 31,  2004.  During the six
months ended June 30, 2005,  there was a notable movement of funds from interest
bearing  transaction  accounts into savings and certificate of deposit accounts.
As of June 30, 2005 the loan to deposit ratio was 95.5%,  compared with 93.0% at
December 31, 2004 and 93.2% at June 30, 2004.

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

                                       17
<PAGE>

CAPITAL RESOURCES

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

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

                                                       June 30, 2005
                                                       -------------
                                                Tier 1  Total Capital   Leverage
                                                ------  -------------   --------

Community Bankshares, Inc. ..................   13.65%     14.84%       10.83%
Orangeburg National Bank ....................   12.12%     13.29%        9.10%
Sumter National Bank ........................    9.86%     10.93%        8.39%
Florence National Bank ......................    9.94%     11.01%        8.79%
Bank of Ridgeway ............................   12.92%     13.97%        8.79%
Minimum "well capitalized" requirement ......    6.00%     10.00%        6.00%
Minimum requirement .........................    4.00%      8.00%        4.00%


         As shown in the table  above,  each of the capital  ratios  exceeds the
regulatory  requirement to be considered  "well  capitalized." In the opinion of
management,  the current and projected  capital positions of CBI and its banking
subsidiaries are adequate. The Company's issuance of $10,000,000 of subordinated
debentures  during the first  quarter of 2004 is  includible in Tier 1 and Total
Capital for regulatory risk-based capital purposes.

OFF-BALANCE-SHEET ARRANGEMENTS

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

Variable Interest Entity

         As discussed under "Results of Operations - Net Interest Income" and in
the  notes  to  unaudited  consolidated  financial  statements  under  "Variable
Interest  Entity,"  as of June 30,  2005,  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


                                       18
<PAGE>

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

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

                                                               June 30, 2005
                                                               -------------
                                                                (Dollars in
                                                                 thousands)
Loan commitments ..........................................       $53,748
Standby letters of credit .................................         3,011


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

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

         On March 22, 2005, CBI entered into a contract for the  construction of
an approximately 16,000 square foot two-story brick office building to house its
corporate  headquarters  and  operations  center.  The  contract  price for this
project is $1,476,000.  Through  August 2, 2005,  $341,000 has been expended for
this  project.  Management  expects  completion  of the  building  in the fourth
quarter of 2005 and the Company will relocate at that time.

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

Derivative Financial Instruments

         In  April,  2003,  the  Financial  Accounting  Standards  Board  issued
Statement No. 149,  "Amendment of Statement  133 on Derivative  Instruments  and
Hedging Activities." Among other requirements, this Statement provides that loan
commitment contracts entered into or modified after June 30, 2003 that relate to
the  origination of mortgage loans that will be held for sale shall be accounted


                                       19
<PAGE>

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

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

                                                                June 30, 2005
                                                                -------------
                                                                      Estimated
                                                                      Fair Value
                                                          Nominal       Asset
                                                          Amount     (Liability)
                                                          ------     -----------
                                                          (Dollars in thousands)
Rate lock commitments to potential borrowers
  to originate mortgage loans to be
  held for sale .....................................      $27,722      $    48
Forward sales contracts with investors
  of mortgage loans to be held for sale .............       27,722          (48)


Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

         CBI's  Asset/Liability  Committee uses a simulation  model to assist in
achieving  consistent growth in net interest income while managing interest rate
risk. According to the model, as of June 30, 2005, CBI is positioned so that net
interest income would increase  $214,000 and net income would increase  $129,000


                                       20
<PAGE>

in the next twelve months if interest  rates rose 100 basis points.  Conversely,
net interest income would decline $214,000 and net income would decline $129,000
in the  next  twelve  months  if  interest  rates  declined  100  basis  points.
Computation of  prospective  effects of  hypothetical  interest rate changes are
based on numerous  assumptions,  including  relative  levels of market  interest
rates and loan prepayment, and should not be relied upon as indicative of actual
results.  Further,  the  computations do not contemplate any actions CBI and its
customers could undertake in response to changes in interest rates.

         As of June 30, 2005 there was no  significant  change from the interest
rate  sensitivity  analysis for the various changes in interest rates calculated
as of December 31, 2004. The foregoing disclosures related to the market risk of
CBI should be read in connection  with  Management's  Discussion and Analysis of
Financial Position and Results of Operations  included in the 2004 Annual Report
on Form 10-K.


Item 4.  Controls and Procedures

         Based on the evaluation required by 17 C.F.R. Section  240.13a-15(b) or
240.15d-15(b) of the Company's disclosure controls and procedures (as defined in
17  C.F.R.  Sections  240.13a-15(e)  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.




                                       21
<PAGE>


                           PART II--OTHER INFORMATION

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

         On April 21,  2005,  the Company sold 775 shares of its common stock to
Samuel L. Erwin,  Chief Executive  Officer of the Company,  at a price of $18.02
per share, an aggregate of $13,965.50. Sale of these shares to Mr. Erwin was not
registered  under  the  Securities  Act of 1933  in  reliance  on the  exemption
provided under Section 4(2) of the Act because no public offering was involved.

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

         On Monday, May 16, 2005, the shareholders of Community Bankshares, Inc.
held their regular annual meeting. At the meeting, one matter was submitted to a
vote with results as follows:

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

                                                   SHARES VOTED
                                                   ------------
                                                    AGAINST OR           BROKER
         DIRECTORS                      FOR     AUTHORITY WITHHELD     NON-VOTES
         ---------                      ---     ------------------     ---------

Three-Year Terms
  Thomas B. Edmunds .............    3,042,804         12,062             0
  Martha Rose C. Carson .........    3,017,483         37,383             0
  J. M. Guthrie .................    3,009,219         45,647             0
  Wm. Reynolds Williams .........    3,019,590         35,276             0
  Charles E. Fienning ...........    3,043,230         11,636             0

Two-Year Term
  Samuel L. Erwin ...............    3,045,600          9,266             0

         The following directors continue to serve until the expiration of their
terms at the  annual  meetings  to be held in the years  indicated  and were not
voted on at the 2005 annual meeting:  E. J. Ayers, Jr., - 2006; Alvis J. Bynum -
2006;  J.  Otto  Warren,  Jr. - 2006 and J. V.  Nicholson,  Jr. - 2006;  Anna O.
Dantzler - 2007; Richard L Havekost - 2007 and Samuel F. Reid, Jr. - 2007.

Item 6.  Exhibits

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

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

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







                                       22
<PAGE>


SIGNATURES

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

                                                          DATED: August 11, 2005

COMMUNITY BANKSHARES, INC.

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

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



                                       23
<PAGE>


                                  EXHIBIT INDEX

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

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

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






                                       24