SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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


For the quarterly period ended September 30, 2006  Commission File No. 000-22054


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


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


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


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



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

         Yes [X]  No [ ]


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

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


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

         Yes [ ]  No [X]


         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest practicable date: Common Stock, no par
or stated value, 4,442,220 shares outstanding on October 27, 2006.




<PAGE>


                           COMMUNITY BANKSHARES, INC.

                                    FORM 10-Q

                                      Index

                                                                            Page
PART I -    FINANCIAL INFORMATION

Item 1.     Financial Statements

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

Item 2.     Management's Discussion and Analysis of Financial Condition
             and Results of Operations ....................................    9
Item 3.     Quantitative and Qualitative Disclosures About Market Risk ....   23
Item 4.     Controls and Procedures .......................................   24

PART II -   OTHER INFORMATION

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

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




                                       2
<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1. - Financial Statements

COMMUNITY BANKSHARES, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
                                                                                                     (Unaudited)
                                                                                                     September 30,      December 31,
                                                                                                         2006               2005
                                                                                                         ----               ----
                                                                                                          (Dollars in thousands)
Assets
<S>                                                                                                    <C>                <C>
     Cash and due from banks .................................................................         $  14,220          $  19,508
     Federal funds sold ......................................................................            40,129             32,483
                                                                                                       ---------          ---------
            Total cash and cash equivalents ..................................................            54,349             51,991
     Interest bearing deposits with other banks ..............................................             1,583              1,038
     Securities available-for-sale ...........................................................            55,658             58,701
     Securities held-to-maturity (estimated fair value $1,802 for 2006
          and $1,820 for 2005) ...............................................................             1,850              1,850
     Other investments .......................................................................             2,777              2,980
     Loans held for sale .....................................................................            14,419             12,447
     Loans receivable ........................................................................           412,106            413,984
         Less, allowance for loan losses .....................................................            (9,054)           (11,641)
                                                                                                        ---------          --------
            Net loans ......................................................................             403,052            402,343
     Premises and equipment - net ............................................................            11,218              9,412
     Accrued interest receivable .............................................................             3,307              3,134
     Net deferred income tax assets ..........................................................             3,580              3,655
     Goodwill ................................................................................             4,321              4,321
     Core deposit intangible assets ..........................................................             2,653              2,837
     Prepaid expenses and other assets .......................................................             2,172              2,127
                                                                                                       ---------          ---------

            Total assets .....................................................................         $ 560,939          $ 556,836
                                                                                                       =========          =========

Liabilities
     Deposits
         Noninterest bearing .................................................................         $  59,928          $  67,146
         Interest bearing ....................................................................           410,889            397,063
                                                                                                       ---------          ---------
            Total deposits ...................................................................           470,817            464,209
     Short-term borrowings ...................................................................             7,830              8,975
     Long-term debt ..........................................................................            26,189             32,196
     Accrued interest payable ................................................................             1,628              1,212
     Accrued expenses and other liabilities ..................................................             2,624              1,252
                                                                                                       ---------          ---------
            Total liabilities ................................................................           509,088            507,844
                                                                                                       ---------          ---------

Shareholders' equity
     Common stock - no par  value; 12,000,000 shares authorized; issued and
         outstanding - 4,442,220 for 2006 and
         4,404,303 for 2005 ..................................................................            30,614             30,202
     Retained earnings .......................................................................            21,637             19,325
     Accumulated other comprehensive income (loss) ...........................................              (400)              (535)
                                                                                                       ---------          ---------
            Total shareholders' equity .......................................................            51,851             48,992
                                                                                                       ---------          ---------

            Total liabilities and shareholders' equity .......................................         $ 560,939          $ 556,836
                                                                                                       =========          =========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

                                       3

<PAGE>


COMMUNITY BANKSHARES, INC.
Consolidated Statements of Income

<TABLE>
<CAPTION>
                                                                                              (Unaudited)
                                                                                         Period Ended September 30,
                                                                                         --------------------------
                                                                                Three Months                     Nine Months
                                                                                ------------                     -----------
                                                                           2006             2005            2006             2005
                                                                           ----             ----            ----             ----
                                                                                (Dollars in thousands, except per share)

Interest and dividend income
<S>                                                                     <C>              <C>              <C>              <C>
     Loans, including fees ....................................         $  8,587         $  7,702         $ 24,426         $ 21,620
     Interest bearing deposits with other banks ...............               33               11               88               30
     Debt securities ..........................................              607              464            1,716            1,333
     Dividends ................................................               39               35              114               93
     Federal funds sold .......................................              350              192              988              355
                                                                        --------         --------         --------         --------
            Total interest and dividend income ................            9,616            8,404           27,332           23,431
                                                                        --------         --------         --------         --------
Interest expense
     Deposits
         Time deposits $100M and over .........................            1,066              818            2,864            1,975
         Other deposits .......................................            2,460            1,577            6,637            4,146
                                                                        --------         --------         --------         --------
            Total interest expense on deposits ................            3,526            2,395            9,501            6,121
     Short-term borrowings ....................................               88               53              278              140
     Long-term debt ...........................................              458              481            1,415            1,387
                                                                        --------         --------         --------         --------
            Total interest expense ............................            4,072            2,929           11,194            7,648
                                                                        --------         --------         --------         --------
Net interest income ...........................................            5,544            5,475           16,138           15,783
Provision for loan losses .....................................              665            2,300            1,955            3,335
                                                                        --------         --------         --------         --------
Net interest income after provision ...........................            4,879            3,175           14,183           12,448
                                                                        --------         --------         --------         --------
Noninterest income
     Service charges on deposit accounts ......................              852              948            2,546            2,563
     Mortgage loan brokerage income ...........................              963            1,041            2,787            2,592
     Net securities gains or (losses) .........................                -                -                1              (10)
     Other ....................................................              143              197              618              672
                                                                        --------         --------         --------         --------
            Total noninterest income ..........................            1,958            2,186            5,952            5,817
                                                                        --------         --------         --------         --------
Noninterest expenses
     Salaries and employee benefits ...........................            2,798            2,550            8,130            7,162
     Premises and equipment ...................................              648              552            1,885            1,637
     Other ....................................................            1,460            1,347            4,150            3,994
                                                                        --------         --------         --------         --------
            Total noninterest expenses ........................            4,906            4,449           14,165           12,793
                                                                        --------         --------         --------         --------
Income before income taxes ....................................            1,931              912            5,970            5,472
Income tax expense ............................................              730              330            2,195            1,979
                                                                        --------         --------         --------         --------
Net income ....................................................         $  1,201         $    582         $  3,775         $  3,493
                                                                        ========         ========         ========         ========
Per share
     Net income ...............................................         $   0.27         $   0.13         $   0.85         $   0.79
     Net income - diluted .....................................             0.27             0.13             0.84             0.78
     Cash dividends declared ..................................             0.11             0.10             0.33             0.30
</TABLE>



See accompanying notes to unaudited consolidated financial statements.


                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                          (Unaudited)

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

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


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











See accompanying notes to unaudited consolidated financial statements.


                                       5
<PAGE>
COMMUNITY BANKSHARES, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                                                             (Unaudited)
                                                                                                           Nine Months Ended
                                                                                                              September 30,
                                                                                                          2006                 2005
                                                                                                          -----                ----
                                                                                                            (Dollars in thousands)
Operating activities
<S>                                                                                                     <C>               <C>
     Net income ................................................................................        $   3,775         $   3,493
     Adjustments to reconcile net income to net
         cash provided by operating activities
            Provision for loan losses ..........................................................            1,955             3,335
            Depreciation and amortization ......................................................              763               709
            Amortization of intangibles ........................................................              184               184
            Net amortization of securities .....................................................               13                60
            Net securities (gains) or losses ...................................................               (1)               10
            Proceeds of sales of loans held for sale ...........................................          183,989           159,289
            Originations of loans held for sale ................................................         (185,961)         (161,881)
            Increase in accrued interest receivable ............................................             (173)             (360)
            Decrease (increase) in other assets ................................................              640              (585)
            Losses (gains) on sale of other real estate ........................................               27               (24)
            Increase in accrued interest payable ...............................................              416               525
            Increase in other liabilities ......................................................            1,372               590
                                                                                                        ---------         ---------
                Net cash provided by operating activities ......................................            6,999             5,345
                                                                                                        ---------         ---------
Investing activities
     Net (increase) decrease in interest bearing deposits with other banks .....................             (545)                3
     Purchases of available-for-sale securities ................................................           (8,499)          (11,244)
     Maturities, calls and paydowns of available-for-sale securities ...........................           11,740             4,959
     Proceeds of sales of available-for-sale securities ........................................                -             4,412
     Net decrease (increase) in other investments ..............................................              203              (338)
     Net increase in loans made to customers ...................................................           (3,784)          (21,665)
     Purchases of premises and equipment .......................................................           (2,569)           (1,259)
     Proceeds from sales of other real estate ..................................................              408               224
                                                                                                        ---------         ---------
                Net cash used by investing activities ..........................................           (3,046)          (24,908)
                                                                                                        ---------         ---------
Financing activities
     Net increase in deposits ..................................................................            6,608            31,840
     Net (decrease) increase in short-term borrowings ..........................................           (1,145)            1,228
     Proceeds from issuing long-term debt ......................................................                -             3,000
     Repayment of long-term debt ...............................................................           (6,007)              (74)
     Exercise of employee stock options ........................................................              396               146
     Sale of common stock ......................................................................               16                14
     Cash dividends paid .......................................................................           (1,463)           (1,321)
                                                                                                        ---------         ---------
                Net cash (used) provided by financing activities ...............................           (1,595)           34,833
                                                                                                        ---------         ---------
Increase in cash and cash equivalents ..........................................................            2,358            15,270
Cash and cash equivalents, beginning of period .................................................           51,991            26,968
                                                                                                        ---------         ---------
Cash and cash equivalents, end of period .......................................................        $  54,349         $  42,238
                                                                                                        =========         =========

Supplemental Disclosures of Cash Flow Information
     Cash payments for interest, including $5 capitalized ......................................        $  10,778         $   7,128
                                                                                                        =========         =========
       during construction in 2005
     Cash payments for income taxes ............................................................        $     781         $   2,879
                                                                                                        =========         =========

Supplemental Disclosures of Non-cash Activities
     Transfers of loan receivables to other real estate ........................................        $   1,120         $       -
                                                                                                        =========         =========
     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


Organization  - Pursuant to a plan  approved by CBI's Board of  Directors in the
first quarter of 2006 and subsequently approved by regulatory authorities, CBI's
subsidiary  Orangeburg National Bank was renamed Community Resource Bank N.A. in
the third  quarter of 2006.  After the close of business of September  29, 2006,
also pursuant to those plans and approvals, the remaining three subsidiary banks
(Sumter National Bank,  Florence National Bank and Bank of Ridgeway) were merged
into Community  Resource Bank, N.A.  Community  Resource Bank, N.A. (the "Bank")
and Community Resource Mortgage, Inc. now comprise CBI's operating subsidiaries.


Accounting  Principles - A summary of  significant  accounting  policies and the
audited  financial  statements  for 2005 are included in  Community  Bankshares,
Inc.'s (the  "Company" or "CBI")  Annual  Report on Form 10-K for the year ended
December 31, 2005 filed with the  Securities  and Exchange  Commission.  Certain
amounts in the 2005 financial  statements  have been  reclassified to conform to
the current presentation.  Such reclassifications had no effect on net income or
retained earnings for any period.

Management  Opinion  - The  interim  financial  statements  in this  report  are
unaudited.  In the  opinion of  management,  all the  adjustments  necessary  to
present a fair  statement of the results for the interim  period have been made.
Such adjustments are of a normal and recurring nature. The results of operations
for any  interim  period are not  necessarily  indicative  of the  results to be
expected for an entire year. These interim  financial  statements should be read
in conjunction with the annual financial  statements and notes thereto contained
in the 2005 Annual Report on Form 10-K.

Nonperforming  Loans - As of  September  30,  2006,  there  were  $8,668,000  in
nonaccrual  loans  and  $377,000  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 September 30,
                                                                                      --------------------------
                                                                          Three Months                          Nine Months
                                                                          ------------                          -----------
                                                                    2006               2005               2006               2005
                                                                    ----               ----               ----               ----
                                                                             (Dollars in thousands, except per share amounts)

Net income per share, basic
<S>                                                              <C>                <C>                <C>                <C>
  Numerator - net income ...............................         $    1,201         $      582         $    3,775         $    3,493
                                                                 ==========         ==========         ==========         ==========
  Denominator
    Weighted average common shares
      issued and outstanding ...........................          4,439,245          4,404,303          4,429,198          4,399,089
                                                                 ==========         ==========         ==========         ==========

        Net income per share, basic ....................         $      .27         $      .13         $      .85         $      .79
                                                                 ==========         ==========         ==========         ==========

Net income per share, assuming dilution
  Numerator - net income ...............................         $    1,201         $      582         $    3,775         $    3,493
                                                                 ==========         ==========         ==========         ==========
  Denominator
    Weighted average common shares
      issued and outstanding ...........................          4,439,245          4,404,303          4,429,198          4,399,089
    Effect of dilutive stock options ...................             78,967             97,744             71,050            100,297
                                                                 ----------         ----------         ----------         ----------
               Total shares ............................          4,518,212          4,502,047          4,500,248          4,499,386
                                                                 ==========         ==========         ==========         ==========

      Net income per share, assuming dilution ..........         $      .27         $      .13         $      .84         $      .78
                                                                 ==========         ==========         ==========         ==========
</TABLE>


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

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


Variable  Interest  Entity - On March 8, 2004,  CBI  sponsored the creation of a
Variable Interest Entity ("VIE"), SCB Capital Trust I (the "Trust"),  and is the
sole owner of the common  securities issued by the Trust. On March 10, 2004, the
Trust issued  $10,000,000 in floating rate capital  securities.  The proceeds of
this issuance, and the amount of CBI's investment in the common securities, were
used to acquire  $10,310,000  principal  amount of CBI's  floating  rate  junior
subordinated  deferrable  interest debt securities  ("Debentures")  due April 7,
2034, which  securities,  and the accrued interest  thereon,  now constitute the
Trust's sole assets.  The interest rate  associated  with the Debentures and the


                                       8
<PAGE>

capital  securities,  and the distribution  rate on the common securities of the
Trust, was established initially at 3.91% and is adjustable quarterly at 3 month
LIBOR plus 280 basis points. The index rate (LIBOR) may not be lower than 1.11%.
CBI may defer interest  payments on the Debentures for up to twenty  consecutive
quarters,  but not beyond the stated  maturity  date of the  Debentures.  In the
event that such  interest  payments  are  deferred  by CBI,  the Trust may defer
distributions  on the  common  securities.  In  such  an  event,  CBI  would  be
restricted  in its ability to pay  dividends  on its common stock and to perform
under  other  obligations  that  are  not  senior  to  the  junior  subordinated
Debentures.


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


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



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

Forward Looking Statements


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


                                       9
<PAGE>


References to our Website Address

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

Critical Accounting Policies

         CBI  has  adopted  various  accounting   policies,   which  govern  the
application of accounting  principles generally accepted in the United States of
America  in the  preparation  of CBI's  financial  statements.  The  significant
accounting policies of CBI are described in detail in the notes to CBI's audited
consolidated  financial  statements included in CBI's 2005 Annual Report on Form
10-K filed with the Securities and Exchange Commission.

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


         CBI is a bank holding company and, as a financial institution, believes
the allowance for loan losses is a critical  accounting policy that requires the
most significant judgments and estimates used in preparation of its consolidated
financial  statements.  Refer to the  sections  "Allowance  for Loan Losses" and
"Provision  for Loan  Losses" in the  Annual  Report on Form 10-K for 2005 for a
detailed  description of CBI's estimation process and methodology related to the
allowance for loan losses.

         Pursuant to a plan  approved by CBI's Board of  Directors  in the first
quarter of 2006 and  subsequently  approved  by  regulatory  authorities,  CBI's
subsidiary  Orangeburg National Bank was renamed Community Resource Bank N.A. in
the third  quarter of 2006.  After the close of business on September  29, 2006,
also pursuant to those plans and approvals, the remaining three subsidiary banks
(Sumter National Bank,  Florence National Bank and Bank of Ridgeway) were merged
into Community  Resource Bank, N.A.  Community Resource Bank, N.A. and Community
Resource Mortgage, Inc. now comprise CBI's operating subsidiaries. In accordance
with  generally  accepted  acconting  principles,  the accounting for the merger
between these  affiliated  entities was treated in a manner similar to a pooling
of interests.



CHANGES IN FINANCIAL CONDITION


         During the nine months ended September 30, 2006, long-term debt, in the
form of FHLB advances,  decreased by $6,007,000,  noninterest  bearing  deposits
decreased by $7,218,000 and interest bearing deposits  increased by $13,826,000.


                                       10
<PAGE>

Also  during the first nine  months of 2006,  loans held for sale  increased  by
$1,972,000,  gross loans receivable decreased by $1,878,000,  federal funds sold
increased  by  $7,646,000   and  securities   available-for-sale   decreased  by
$3,043,000.


         During the first nine months of 2006, net  charge-offs of loans totaled
$4,542,000,  including  $1,482,000 in the third quarter.  Those net  charge-offs
decreased both loans and the allowance for loan losses.


         During the third  quarter of 2006,  federal  funds  sold  increased  by
$23,323,000,  loans  held for sale  decreased  by  $6,373,000  and  gross  loans
receivable  decreased by  $7,064,000.  Interest  bearing  deposits  increased by
$11,830,000  during  the  2006  three-month  period  and  short-term  borrowings
decreased by  $4,590,000.  Because of high interest  rates for federal funds and
the the  pending  consolidation  of the four  banks'  charters,  planned for the
fourth  quarter,  management made a deliberate  decision to maintain  relatively
high liquidity.

         During the third quarter,  there were inconsistencies  between the four
markets in how effectively  and  efficiently  loans and deposits were attracted.
Generally,  time and savings deposit growth was relatively easy to attract. Loan
growth was challenging and was reduced by loan charge-offs.

         Early in the fourth  quarter,  after  merger of the  banks,  management
began making its deposit products consistent between markets. The Bank has added
an attractive,  interest-bearing checking account and money market account in an
effort to improve growth in core deposits, and anticipates less emphasis on time
deposits. At the same time, the Bank has begun actively marketing certain select
loan products, and is currently focusing on home equity lines of credit.



RESULTS OF OPERATIONS

Earnings Performance

Three Months Ended September 30, 2006 and 2005

         For the quarter ended September 30, 2006, CBI recorded consolidated net
income of $1,201,000,  compared with $582,000 for the comparable period of 2005.
This  represents an increase of $619,000 or 106.4%.  Basic and diluted  earnings
per share were $.27 in the 2006 period, compared with $.13 for the 2005 quarter.

         Compared  with the third  quarter of 2005,  operating  results  for the
third  quarter of 2006 were  affected  primarily  by lower  provisions  for loan
losses in the 2006  period,  a reduction  in service  charges  assessed  against
deposit accounts,  and an increase in noninterest  expenses.  Generally,  market
interest  rates,  as well as the rates  associated  with the Company's  interest
earning  assets and its  interest-bearing  liabilities  were  higher in the 2006
period as a result of Federal Reserve  efforts to slow the nation's  economy and
control  inflation.  More  recently,  the Federal  Reserve has not increased its
federal funds rate target. The last such increase was made in June 2006.


         The  provision  for loan losses for the third quarter of 2006 was lower
than for the same period of 2005 due to  continuing  efforts to effect  positive
changes in the quality of the Company's loan portfolio. Significant progress has
been,  and  continues to be, made in  identifying  problem  loans,  meeting with
borrowers  and obtaining  liens on  additional  collateral to better secure such


                                       11
<PAGE>

loans,  and  establishing  more  realistic  plans for repayment of loans.  In an
effort  to  further  reduce  the  future  level of risk in the  loan  portfolio,
management has  implemented  more stringent  underwriting  controls  intended to
proactively  mitigate  risks in the loan  portfolio  before  loans are funded or
committed.  Such controls  include more vigorously  monitoring  established loan
officer approval authorities, developing and utilizing more detailed analyses of
positive  and  negative  factors  during  underwriting,  increased  scrutiny  of
financial and other information pertaining to potential borrowers,  and limiting
the  aggregate  amounts  of loans that can be  approved  for  various  purposes.
Management   has   implemented   different   requirements   for  conforming  and
non-conforming  loans in order to expedite the approval of credit  requests that
present  minimal risk to the Bank.  The  provision and allowance for loan losses
continue to be affected by high levels of  non-performing  and potential problem
loans and  charge-offs.  During the third quarter of 2006, net charge-offs  were
$1,482,000 compared with $454,000 during the same period of 2005.


         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.  Also, in 2006, the Company
increased  its  formula  for  matching  employees'  contributions  to the 401(k)
defined contribution retirement plan. This resulted in higher levels of employee
participation in the plan.  Expenses of premises and equipment  increased in the
2006 quarter due to the Company's moving into its newly constructed headquarters
and operations  center  building in the first quarter of 2006 and the leasing of
other  office  space to provide  for the needs of certain  management  and other
personnel  who are  located  away  from the  corporate  headquarters.  Also,  in
conjunction  with renaming one of the banking  subsidiaries  and merging all the
former four subsidiary banks into that renamed bank, the Company incurred higher
expenses for advertising and stationery and supplies.

<TABLE>
<CAPTION>
                                                                                      Summary Income Statement
                                                                                      ------------------------
                                                                                       (Dollars in thousands)
For the Three Months Ended September 30,                           2006              2005         Dollar Change    Percentage Change
                                                                   ----              ----         -------------    -----------------
<S>                                                              <C>              <C>                <C>                 <C>
Interest income ....................................             $ 9,616          $ 8,404            $ 1,212             14.4%
Interest expense ...................................               4,072            2,929              1,143             39.0%
                                                                 -------          -------            -------
Net interest income ................................               5,544            5,475                 69              1.3%
Provision for loan losses ..........................                 665            2,300             (1,635)           -71.1%
Noninterest income .................................               1,958            2,186               (228)           -10.4%
Noninterest expenses ...............................               4,906            4,449                457             10.3%
Income tax expense .................................                 730              330                400            121.2%
                                                                 -------          -------            -------
Net income .........................................             $ 1,201          $   582            $   619            106.4%
                                                                 =======          =======            =======
</TABLE>

Nine Months Ended September 30, 2006 and 2005

         For the nine months ended September 30, 2006, CBI recorded consolidated
net income of $3,775,000,  compared with $3,493,000 for the comparable period of
2005. This represents an increase of $282,000 or 8.1%.  Basic earnings per share
were $.85 in the 2006 period,  compared with $.79 for the 2005 quarter.  Diluted
earnings per share for the 2006 nine months  period were $.84 compared with $.78
for the same period of 2005.


         CBI's  consolidated  net income for the nine months ended September 30,
2006 was  positively  affected by a reduced amount of provision for loan losses,
and increased levels of net interest income, primarily related to increased loan
volumes and yields.  A significant  proportion  of the Bank's loan  portfolio is
made up of variable rate loans. Those loans have been repriced favorably several
times  during  2006.  The prime rate,  which is the index to which most of those


                                       12
<PAGE>

variable rate loans are related,  increased four times totaling 100 basis points
during 2006, and eight times totaling 200 basis points since September 30, 2005.


         Noninterest  income for the 2006 nine-months  period increased slightly
from the amount for the same period of 2005.  However,  slight  reductions  were
noted in the 2006  amounts of service  charges  on deposit  accounts  and credit
insurance sales.  Noninterest  expenses negatively affected results for the 2006
year-to-date  period because of the same factors  discussed  above for the third
quarter.

<TABLE>
<CAPTION>
                                                                                 Summary Income Statement
                                                                                 ------------------------
                                                                                 (Dollars in thousands)
For the Nine Months Ended September 30,                         2006               2005           Dollar Change    Percentage Change
                                                                ----               ----           -------------    -----------------

<S>                                                           <C>                 <C>                 <C>               <C>
Interest income .....................................         $27,332             $23,431             $ 3,901            16.6%
Interest expense ....................................          11,194               7,648               3,546            46.4%
                                                              -------             -------             -------
Net interest income .................................          16,138              15,783                 355             2.2%
Provision for loan losses ...........................           1,955               3,335              (1,380)          -41.4%
Noninterest income ..................................           5,952               5,817                 135             2.3%
Noninterest expenses ................................          14,165              12,793               1,372            10.7%
Income tax expense ..................................           2,195               1,979                 216            10.9%
                                                              -------             -------             -------
Net income ..........................................         $ 3,775             $ 3,493             $   282             8.1%
                                                              =======             =======             =======
</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.

Three Months Ended September 30, 2006 and 2005

         Net interest  income for the three months ended  September 30, 2006 was
$5,544,000,  an increase of $69,000,  or 1.3%,  over the amount reported for the
third quarter of 2005. Interest income and interest expense for the 2006 quarter
were both  significantly  higher than during the same period of 2005,  primarily
due to increases in the interest rates earned on, or paid for, those items.

         The average rate earned on loans,  including  loans held for sale,  was
7.95%  and  7.03% for the third  quarters  of 2006 and 2005,  respectively.  The
average  yield on  earning  assets  was  7.35% for the  third  quarter  of 2006,
compared  with 6.46% for the third  quarter of 2005.  The  average  cost of time
deposits  increased to 4.31% for the third quarter of 2006,  compared with 3.20%
for  the  same  period  of  2005.  The  average  cost  of  all  interest-bearing
liabilities  was 3.69%  for the 2006  quarter  and 2.72% for the same  period of
2005. Accordingly, the interest rate spread (interest earning assets yield minus
the rate  paid for  interest-bearing  liabilities)  for the 2006  third  quarter
narrowed to 3.66%, or 8 basis points lower than for the same period of 2005. Net
yield on earning assets (net interest income divided by average interest earning
assets) for the 2006 quarter was 4.24%,  or 3 basis  points  higher than for the
same period of 2005.

                                       13
<PAGE>

         Average   amounts  of  interest   earning  assets  were   approximately
$2,584,000  higher in the 2006 period  than in the 2005  period.  However,  more
robust growth in the average amounts of  interest-bearing  liabilities was noted
as the 2006  average  amount was  approximately  $11,454,000  more than the 2005
amount.  During  the third  quarter of 2006,  the  Company  was more  reliant on
interest-bearing  liabilities to fund earning assets than it was during the 2005
second quarter.

<TABLE>
<CAPTION>
                                                                               Average Balances, Yields and Rates
                                                                                  Quarter Ended September 30,
                                                                                  ---------------------------

                                                                            2006                              2005
                                                                            ----                              ----
                                                                         Interest                           Interest
                                                             Average      Income /    Yields /    Average    Income /     Yields /
                                                             Balances     Expense    Rates (1)    Balances   Expense     Rates (1)
                                                             --------     -------    ---------    --------   -------     ---------
                                                                                     (Dollars in thousands)
Assets
<S>                                                        <C>            <C>         <C>       <C>           <C>          <C>
Interest bearing deposits with other banks ..............  $   1,772      $    33     7.39%     $     448     $   11       9.74%
Investment securities - taxable .........................     55,848          601     4.27%        56,193        445       3.14%
Investment securities - tax exempt (2) ..................      4,917           45     3.63%         6,099         54       3.51%
Federal funds sold ......................................     27,830          350     4.99%        19,203        192       3.97%
Loans, including loans held for sale (2)(3) .............    428,544        8,587     7.95%       434,384      7,702       7.03%
                                                           ---------      -------               ---------     ------
            Total interest earning assets ...............    518,911        9,616     7.35%       516,327      8,404       6.46%
Cash and due from banks .................................     15,839                               14,844
Allowance for loan losses ...............................     (9,382)                              (5,089)
Premises and equipment, net .............................      9,699                                8,200
Intangible assets .......................................      7,004                                7,252
Other assets ............................................      8,736                                4,483
                                                           ---------                            ---------
            Total assets ................................  $ 550,807                            $ 546,017
                                                           =========                            =========

Liabilities and shareholders' equity
Interest bearing deposits
       Savings ..........................................   $ 90,231      $   674     2.96%     $  85,917     $  369       1.70%
       Interest bearing transaction accounts ............     66,453          182     1.09%        62,166        116       0.74%
       Time deposits ....................................    245,619        2,670     4.31%       236,924      1,910       3.20%
                                                           ---------      -------               ---------     ------
            Total interest bearing deposits .............    402,303        3,526     3.48%       385,007      2,395       2.47%
Short-term borrowings ...................................     11,536           88     3.03%         8,357         53       2.52%
Long-term debt ..........................................     24,501          458     7.42%        33,522        481       5.69%
                                                           ---------      -------               ---------     ------
            Total interest bearing liabilities ..........    438,340        4,072     3.69%       426,886      2,929       2.72%
Noninterest bearing demand deposits .....................     54,758                               63,260
Other liabilities .......................................      3,360                                2,340
Shareholders' equity ....................................     54,349                               53,531
                                                           ---------                            ---------
            Total liabilities and shareholders' equity ..  $ 550,807                            $ 546,017
                                                           =========                            =========

Interest rate spread ....................................                             3.66%                                3.74%
Net interest income and net yield on earning assets .....                 $ 5,544     4.24%                  $ 5,475       4.21%
</TABLE>

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



                                       14
<PAGE>


Nine Months Ended September 30, 2006 and 2005

         Net  interest  income for the nine  months  ended  September  30,  2006
increased by $355,000, or 2.2% over the amount for the same period of 2005. Both
interest income and interest expense increased  significantly in the 2006 period
due to  continued  increases  in  market  interest  rates and  higher  levels of
interest earning assets and interest-bearing liabilities.


         For the 2006  year-to-date  period,  the  interest  rate spread and net
yield on earning assets both decreased as compared with the same period of 2005.
Interest  rate  spread  decreased  by 20 basis  points  and net yield on earning
assets  decreased by 9 basis points.  These  decreases  resulted  primarily from
higher rates paid on interest-bearing liabilities, which increased slightly more
than rates earned on earning assets. Average amounts of interest earning assets,
especially loans and federal funds sold, were higher in the 2006 period, and net
interest income increased despite the narrowing of interest margins.


                                       15
<PAGE>



<TABLE>
<CAPTION>
                                                                                  Average Balances, Yields and Rates
                                                                                    Nine Months Ended September 30,
                                                                                  ----------------------------------

                                                                                   2006                            2005
                                                                                   ----                            ----
                                                                                 Interest                        Interest
                                                                     Average     Income /   Yields /   Average    Income /  Yields /
                                                                    Balances     Expense   Rates (1)   Balances   Expense  Rates (1)
                                                                    --------     -------   ---------   --------   -------  ---------
                                                                                          (Dollars in thousands)
Assets
<S>                                                               <C>          <C>           <C>     <C>          <C>          <C>
Interest bearing deposits with other banks                        $   1,701    $     88      6.92%   $     592    $     30     6.78%
Investment securities - taxable                                      56,798       1,694      3.99%      52,925       1,262     3.19%
Investment securities - tax exempt (2)                                5,100         136      3.57%       6,388         164     3.43%
Federal funds sold                                                   27,541         988      4.80%      14,650         355     3.24%
Loans, including loans held for sale (2) (3)                        430,801      24,426      7.58%     425,127      21,620     6.80%
                                                                  ---------    --------              ---------    --------
            Total interest earning assets                           521,941      27,332      7.00%     499,682      23,431     6.27%
Cash and due from banks                                              15,503                             15,542
Allowance for loan losses                                           (10,456)                            (4,957)
Premises and equipment, net                                           9,988                              7,948
Intangible assets                                                     7,065                              7,311
Other assets                                                          8,482                              4,286
                                                                  ---------                          ---------
            Total assets                                          $ 552,523                          $ 529,812
                                                                  =========                          =========

Liabilities and shareholders' equity
Interest bearing deposits
       Savings                                                    $  88,268    $  1,701      2.58%   $  87,894    $    996     1.52%
       Interest bearing transaction accounts                         71,163         580      1.09%      61,873         308     0.67%
       Time deposits                                                240,811       7,220      4.01%     221,094       4,817     2.91%
                                                                  ---------    --------              ---------    --------
            Total interest bearing deposits                         400,242       9,501      3.17%     370,861       6,121     2.21%
Short-term borrowings                                                 9,848         278      3.77%       8,379         140     2.23%
Long-term debt                                                       29,089       1,415      6.50%      32,731       1,387     5.67%
                                                                  ---------    --------              ---------    --------
            Total interest bearing liabilities                      439,179      11,194      3.41%     411,971       7,648     2.48%
Noninterest bearing demand deposits                                  58,301                             63,927
Other liabilities                                                     2,943                              2,085
Shareholders' equity                                                 52,100                             51,829
                                                                  ---------                          ---------
            Total liabilities and shareholders' equity            $ 552,523                          $ 529,812
                                                                  =========                          =========

Interest rate spread                                                                         3.59%                             3.79%
Net interest income and net yield on earning assets                            $ 16,138      4.13%                $ 15,783     4.22%
</TABLE>

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


Provision and Allowance for Loan Losses

         The  provision  for loan  losses  for the 2006 three  month  period was
$665,000,  a decrease of  $1,635,000,  or 71.1%,  from  $2,300,000  for the same
period of 2005.  The provision for loan losses  decreased to $1,955,000  for the
2006 nine  month  period  from  $3,335,000  for the 2005 nine  month  period,  a


                                       16
<PAGE>

decrease of $1,380,000 or 41.4%.  Although the  provisions  for loan losses were
lower  in  2006  for  each  of the  periods,  high  levels  of  charge-offs  and
nonperforming  and  potential  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 nine months ended  September 30, 2006 were
$4,542,000,  compared with  $1,024,000 for the same period of 2005. The coverage
ratio (allowance for loan losses divided by nonperforming loans) was 1.00x as of
September 30, 2006 and .94x as of December 31, 2005.

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

<TABLE>
<CAPTION>
                                                                           Nine Months                                 Nine Months
                                                                               Ended              Year Ended             Ended
                                                                            September 30,         December 31,         September 30,
                                                                                2006                  2005                 2005
                                                                                ----                  ----                 ----
                                                                                             (Dollars in thousands)

<S>                                                                          <C>                   <C>                   <C>
Allowance at beginning of period .................................           $  11,641             $   4,347             $   4,347
Transfer of allowance for off-balance-sheet ......................                   -                  (305)                    -
  contingencies to other liabilities
Provision for loan losses ........................................               1,955                 9,637                 3,335
Net charge-offs ..................................................              (4,542)               (2,038)               (1,024)
                                                                             ---------             ---------             ---------
Allowance at end of period .......................................           $   9,054             $  11,641             $   6,658
                                                                             =========             =========             =========
Allowance as a percentage of loans outstanding ...................                2.20%                 2.81%                 1.61%

Loans at end of period ...........................................           $ 412,106             $ 413,984             $ 414,290
                                                                             =========             =========             =========
</TABLE>


         Following is a summary of nonperforming  loans as of September 30, 2006
and December 31, 2005:


                                                     September 30,  December 31,
                                                         2006         2005
                                                         ----         ----
                                                       (Dollars in thousands)
Nonperforming loans
  Nonaccrual loans ...................................  $ 8,668      $11,651
  Past due 90 days or more and still accruing ........      377          729
                                                        -------      -------
                Total ................................  $ 9,045      $12,380
                                                        =======      =======
Nonperforming loans as a percentage of:
  Loans outstanding ..................................     2.19%        2.99%
  Allowance for loan losses ..........................    99.90%      106.35%




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

                                       17
<PAGE>


<TABLE>
<CAPTION>
                                                         90 Days or
                                                        More Past Due      Total           Percentage                     Percentage
                                        Nonaccrual        and Still    Nonperforming        of Total      Potential        of Total
                                            Loans         Accruing         Loans              Loans     Problem Loans       Loans
                                            -----         --------         -----              -----     -------------       -----
                                                                            (Dollars in thousands)
<S>                                      <C>             <C>             <C>                   <C>       <C>                 <C>
December 31, 2004 ................       $  4,941        $    137        $  5,078              1.29%     $  4,628            1.18%
Net change .......................            118             215             333                           2,972
                                         --------        --------        --------                        --------
March 31, 2005 ...................          5,059             352           5,411              1.33%        7,600            1.87%
Net change .......................            200              (9)            191                          10,400
                                         --------        --------        --------                        --------
June 30, 2005 ....................          5,259             343           5,602              1.35%       18,000            4.35%
Net change .......................          4,954              74           5,028                          (4,107)
                                         --------        --------        --------                        --------
September 30, 2005 ...............         10,213             417          10,630              2.57%       13,893            3.35%
Net change .......................          1,438             312           1,750                          15,420
                                         --------        --------        --------                        --------
December 31, 2005 ................         11,651             729          12,380              2.99%       29,313            7.08%
Net change .......................          3,128             949           4,077                          (2,767)
                                         --------        --------        --------                        --------
March 31, 2006 ...................         14,779           1,678          16,457              3.94%       26,546            6.36%
Net change .......................         (3,628)         (1,476)         (5,104)                         (3,461)
                                         --------        --------        --------                        --------
June 30, 2006 ....................         11,151             202          11,353              2.71%       23,085            5.51%
Net change .......................         (2,483)            175          (2,308)                           (219)
                                         --------        --------        --------                        --------
September 30, 2006 ...............       $  8,668        $    377        $  9,045              2.19%     $ 22,866            5.55%
                                         ========        ========        ========                        ========
</TABLE>

         During  the  second  quarter  of  2006,   management   settled  a  loan
relationship of $1,450,000 that was included in nonaccrual loans as of March 31,
2006,  realizing a recovery  of  approximately  $350,000.  During the first nine
months of 2006,  management  focused on reviewing  and  establishing  workout or
collection  plans or providing  other credit  enhancements  for all  significant
nonperforming and potential problem loans.

         During the 2006 third  quarter,  approximately  $829,000  of loans were
first  recognized  as  nonaccrual  loans.  Of the  $2,483,000  net  decrease  in
nonaccrual loans during the third quarter of 2006,  approximately $1,357,000 was
attributable  to  writedowns or  charge-offs.  The remainder of the net decrease
represents  payments  received,   amounts  refinanced  with  significant  credit
enhancements and returned to accruing status,  and loans paid in full during the
period.


         Management will continue to monitor the levels of  nonperforming  loans
and address the  weaknesses in these credits to enhance the ultimate  collection
or  recovery  of these  assets.  Management  considers  the levels and trends in
nonperforming  assets  and  potential  problem  loans  in  determining  how  the
provision  and  allowance  for loan losses is  estimated  and  adjusted.  In the
opinion of management,  the Company's allowance for loan losses at September 30,
2006 is  adequate  to  provide  for  losses  that  may be  inherent  in the loan
portfolio.

Noninterest Income

         Noninterest  income for the 2006 third quarter decreased  $228,000,  or
10.4%,  from the  $2,186,000  reported for the same 2005 period.  Mortgage  loan
brokerage  income for the 2006 quarter  decreased by $78,000,  or 7.5%, from the


                                       18
<PAGE>

$1,041,000  recorded in the 2005 period as a result of declining  market demand.
Service charges on deposit  accounts were $96,000,  or 10.1%,  less than for the
2005 three-month period,  primarily as a result of increases in earnings credits
applied to commercial accounts.


         For the nine months ended  September 30, 2006,  noninterest  income was
$135,000,  or 2.3% more than for the first nine  months of 2005.  Mortgage  loan
brokerage income increased $195,000.


Noninterest Expenses


         Noninterest  expenses for the third quarter of 2006 were  $457,000,  or
10.3%,  higher than the amounts  reported for the same period of 2005.  Salaries
and  employee  benefits  expenses  were  $248,000,  or 9.7%,  higher in the 2006
period, due to additions made to the Company's  executive  management.  Expenses
related to  premises  and  equipment  increased  by $96,000 in the 2006  period,
primarily due to the Company's  occupancy of its new headquarters and operations
center building during the first quarter of 2006.


         Noninterest expenses for the first nine months of 2006 were $1,372,000,
or 10.7%, more than for the same period of 2005.  Salaries and employee benefits
for the 2006 nine month period were $968,000,  or 13.5%,  more than for the same
period of 2005.  This expense  increased  due to higher  levels of mortgage loan
brokerage  commission-based  compensation incurred in the 2006 period, additions
made to the Company's executive management,  increased employee participation in
the Company's  401(k) plan,  and normal  periodic  wage and salary  adjustments.
Expenses associated with premises and equipment were $248,000,  or 15.1%, higher
in the  2006  period,  primarily  due  to the  Company's  occupancy  of its  new
headquarters and operations center building during the first quarter of 2006.


Income Taxes

         Income tax expense was $400,000 more in the 2006 third quarter than for
the 2005 period.  Income tax expense for the 2006 nine month period was $216,000
more than for the same period of 2005.


LIQUIDITY


         Liquidity is the ability to meet current and future obligations through
liquidation  or maturity of existing  assets or the  acquisition  of  additional
liabilities.  Adequate  liquidity  is  necessary  to meet  the  requirements  of
customers for loans and deposit  withdrawals in a timely and economical  manner.
The most manageable  sources of liquidity are composed of liabilities,  with the
primary  focus of  liquidity  management  being the ability to attract  deposits
within CBI's market areas.  Individual and  commercial  deposits are the primary
source of funds for lending 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.

                                       19
<PAGE>

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

         Total deposits as of September 30, 2006 were $470,817,000,  an increase
of $6,608,000, or 1.4%, from the amount as of December 31, 2005. During the nine
months  ended  September  30, 2006,  there was a notable  movement of funds from
noninterest  bearing demand deposit  accounts and  interest-bearing  transaction
accounts into savings and  certificate  of deposit  accounts.  Such transfers of
funds are the expected  result of the higher rates of interest  currently  being
paid for longer-term  fixed-rate deposits, and the larger difference between the
rates  currently being paid for such fixed rate deposits and the rates currently
being paid for more highly liquid interest bearing deposits. As of September 30,
2006 the loan to  deposit  ratio,  excluding  loans  held for sale,  was  87.5%,
compared with 89.2% at December 31, 2005 and 91.0% at September 30, 2005.


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


CAPITAL RESOURCES


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

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

         Immediately  prior to the  consolidation  of the banking  subsidiaries,
each bank was "well  capitalized"  under applicable  regulatory  definitions and
guidelines.  The September 30, 2006  risk-based  capital  ratios for CBI and its
banking subsidiaries, prior to the merger, are presented in the following table,
compared with the "well  capitalized"  and minimum  ratios under the  regulatory
definitions and guidelines:

                                       20
<PAGE>


<TABLE>
<CAPTION>
                                                                                               September 30, 2006
                                                                                               ------------------
                                                                                 Tier 1           Total Capital      Leverage
                                                                                 ------           -------------      --------

<S>                                                                               <C>                 <C>              <C>
Community Bankshares, Inc. .............................................          13.64%              14.87%           10.32%
Community Resource Bank, N.A. - pre-merger .............................          11.73%              12.84%            8.57%
Sumter National Bank ...................................................          11.42%              12.72%            7.92%
Florence National Bank .................................................          10.33%              11.59%            8.67%
Bank of Ridgeway .......................................................          10.65%              11.83%            8.24%
Minimum "well capitalized" requirement .................................           6.00%              10.00%            6.00%
Minimum requirement ....................................................           4.00%               8.00%            5.00%
</TABLE>

         The  following  table  shows the pro  forma  capital  positions  of the
Company  and the  Bank  immediately  after  the  merger  of the  former  banking
subsidiaries.


                                                   October 1, 2006
                                                   ---------------
                                          Tier 1    Total Capital      Leverage
                                          ------    -------------      --------

Community Bankshares, Inc. .............  13.64%       14.87%           10.32%
Community Resource Bank, N.A. -
     pro forma post-merger .............  11.73%       12.84%            8.57%


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  "Capital  Resources" and in the notes to unaudited
consolidated  financial  statements  under  "Variable  Interest  Entity,"  as of
September  30,  2006,  CBI  held an  equity  interest  in,  and  guarantees  the
liabilities of, a non-consolidated variable interest entity.

Commitments

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

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

                                       21
<PAGE>



                                                  September 30, 2006
                                                  ------------------
                                                     (Dollars in
                                                      thousands)
Loan commitments ..................................   $ 66,478
Standby letters of credit .........................      2,693

         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.


         In  mid-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.  The  cost of this  core  system  conversion  is
approximately  $1,000,000,  substantially all of which had been expended through
September 30, 2006. The agreement  also requires CBI to pay various  support and
maintenance costs throughout the licensing 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.  The Company
completed  the  process  of  converting  to the new  system  early in the fourth
quarter of 2006.


Derivative Financial Instruments

         In  April,  2003,  the  Financial  Accounting  Standards  Board  issued
Statement No. 149,  "Amendment of Statement  133 on Derivative  Instruments  and
Hedging Activities." Among other requirements, this Statement provides that loan
commitment contracts entered into or modified after June 30, 2003 that relate to
the  origination of mortgage loans that will be held for sale shall be accounted
for as derivative  instruments by the issuer of the loan  commitment.  In March,
2004,  the SEC issued  its Staff  Accounting  Bulletin  No 105  "Application  of
Accounting  Principles  to Loan  Commitments,"  which  resulted in no changes in
CBI's  accounting  for such  commitments.  CBI  issues  mortgage  loan rate lock
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


                                       22
<PAGE>

fair value hedges.  These  derivative  financial  instruments are carried in the
balance sheet at estimated  fair value and changes in the estimated  fair values
of these  derivatives  are  recorded in the  statement of income in net gains or
losses on loans held for sale.

         Derivative financial  instruments are written in amounts referred to as
notional  amounts.  Notional  amounts  only  provide  the basis for  calculating
payments  between  counterparties  and do not represent  amounts to be exchanged
between parties or a measure of financial risk. The following table includes the
notional  principal amounts of rate lock commitments and forward sales contracts
as of  September  30, 2006,  and the  estimated  fair values of those  financial
instruments  included in other assets and liabilities in the balance sheet as of
that date.



                                                           September 30, 2006
                                                           ------------------
                                                                      Estimated
                                                                      Fair Value
                                                        Notional        Asset
                                                         Amount      (Liability)
                                                         ------      -----------
                                                        (Dollars in thousands)
Rate lock commitments to potential borrowers
  to originate mortgage loans to be held for sale ....  $ 46,407         $ 168
Forward sales contracts with investors
  of mortgage loans to be held for sale ..............    46,407          (168)


Item 3. Quantitative and Qualitative Disclosures about Market Risk

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


         CBI's  Asset/Liability  Committee uses a simulation  model to assist in
achieving  consistent growth in net interest income while managing interest rate
risk.  According to the model,  as of September  30, 2006,  CBI is positioned so
that net interest  income would increase  $178,000 and net income would increase
$107,000 in the next  twelve  months if  interest  rates rose 100 basis  points.
Conversely,  net  interest  income would  decline  $178,000 and net income would
decline  $107,000 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  September  30,  2006 there was no  significant  change  from the
interest rate  sensitivity  analysis for the various  changes in interest  rates


                                       23
<PAGE>

calculated  as of December 31, 2005.  The foregoing  disclosures  related to the
market risk of CBI should be read in connection with Management's Discussion and
Analysis of Financial  Position and Results of  Operations  included in the 2005
Annual Report on Form 10-K.


Item 4.  Controls and Procedures

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

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


                                       24
<PAGE>


                           PART II--OTHER INFORMATION


Item 6.  Exhibits

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

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

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






                                       25
<PAGE>


SIGNATURES

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

                                                        DATED: November 13, 2006

COMMUNITY BANKSHARES, INC.

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

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



                                       26
<PAGE>


                                  EXHIBIT INDEX

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

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

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






                                       27