SECURITIES
AND EXCHANGE COMMISSIONWashington,
D.C. 20549
Form 10-QSB

[X] QUARTERLY REPORT UNDER SECTION 13 AND 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

For the
quarterly period ended June 30, 2004

[
  ]
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT 1934

For the transition
period from _______ to _______

Commission
File Number: 000-25345

Community
Capital Bancshares, Inc.(Exact name of registrant as specified in its charter)

Georgia
     
     58-2413468(State or other jurisdiction of
     
     (IRS EmployerIncorporation or organization)
     
     Identification No.)




P.O. Drawer 71269, Albany, Georgia 31708(Address of principal executive offices)


| | 
| | 

(229)446-2265(Registrant's
telephone number, including area code)

Not
Applicable(Former name,
former address and former fiscal year, if changed since last report)

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

APPLICABLE
ONLY TO CORPORATE ISSUERS:

Indicate the
number of shares outstanding of each of the issuer's classes of common stock as of August
5, 2004:1,703,665 shares

Transitional
Small Business Disclosure Format (check one):    Yes          No X

---

PART I   FINANCIAL INFORMATION
	
	Page No.ITEM 1. 
 
    Financial StatementsConsolidated balance sheets as of December 31, 2003 
 and June 30, 2004 (unaudited)
	
	3Consolidated statement of operations (unaudited) 
 
      for the three and six months ended June 30, 2003 and 2004
	
	4Consolidated statement of comprehensive income (unaudited) 
 
      for the three and six months ended June 30, 2003 and 2004
	
	5Statement of cash flows (unaudited) for the     six months ended June 30, 2003 and 2004
	
	6Item 2.
Managements Discussion and Analysis of 
financial Condition and results of operations
	
	10Item 3.
Controls and procedures
	
	14PART II  OTHER INFORMATIONITEM 1.  Legal Proceedings
	
	15ITEM 2.  Changes in Securities and use of proceeds
	
	15ITEM 3.  Defaults on Senior Securities
	
	15ITEM 4.  Submission of matters to a vote of Security Holders
	
	15ITEM 5.  Other Information
	
	15ITEM 6.  Exhibits and reports on Form 8-K
	
	15


---

Community
Capital Bancshares, Inc. and SubsidiariesConsolidated Balance Sheets
(Dollars in thousands)

|                                                                          | June 30, 2004
     (Unaudited) |         | December 31, 2003
|------------------------------------------------------------------------- | ------------------------------ | ------- | -----------------
|                                                                          |                                |         |                  
|
|Assets                                                                    |                                |         |                  
|                                                                          |                                |         |                  
|Cash and due from banks                                                   | $                              | 4,526   |                  
|Federal funds sold                                                        | 1,326                          |         | 2,684            
|Securities available for sale                                             | 30,356                         |         | 31,792           
|Restricted equity securities                                              | 1,101                          |         | 1,114            
|Loans                                                                     | 114,011                        |         | 109,589          
|Less allowance for loan losses                                            | 1,809                          |         | 2,118            
|                                                                          |                                |         |                  
|Loans, net                                                                | 112,202                        |         | 107,471          
|Premises and equipment                                                    | 4,742                          |         | 4,739            
|Goodwill                                                                  | 2,138                          |         | 2,117            
|Core deposit premium                                                      | 360                            |         | 473              
|Other assets                                                              | 9,137                          |         | 4,054            
|                                                                          |                                |         |                  
|Total Assets                                                              | $                              | 165,888 |                  
|                                                                          |                                |         |                  
|Liabilities and Shareholders' Equity                                     
|Deposits                                                                 
|Non-interest bearing                                                      | $                              | 13,028  |                  
|Interest bearing                                                          | 115,245                        |         | 109,188          
|                                                                          |                                |         |                  
|Total deposits                                                            | 128,273                        |         | 123,223          
|Other borrowings                                                          | 19,357                         |         | 16,018           
|Guaranteed preferred beneficial interests in junior subordinated         
|debentures                                                                | 4,124                          |         | 4,000            
|Other liabilities                                                         | 780                            |         | 2,191            
|                                                                          |                                |         |                  
|Total Liabilities                                                         | 152,534                        |         | 145,432          
|                                                                          |                                |         |                  
|Shareholders' equity                                                     
|Preferred stock, par value not stated; 2,000,000 shares authorized;      
|no shares issued                                                          | $                              |        |                  
|Common stock, $1.00 par value, 10,000,000 shares authorized;             
|1,765,264 and 1,741,191 shares issued                                     | 1,765                          |         | 1,741            
|Capital surplus                                                           | 11,198                         |         | 11,075           
|Retained earnings                                                         | 1,253                          |         | 916              
|Accumulated other comprehensive income                                    | (438)                          |         | 17               
|Less cost of treasury stock, 61,559 and 64,149 shares as of June 30, 2004
|and December 31, 2003, respectively                                       | (424)                          |         | (452)            
|                                                                          |                                |         |                  
|Total shareholders' equity                                                | 13,354                         |         | 13,297           
|                                                                          |                                |         |                  
|Total Liabilities and Shareholders' Equity                                | $                              | 165,888 |                  
|                                                                          |                                |         |                  

3

---

Community Capital
Bancshares, Inc.
and Subsidiaries
Consolidated
Statements of Operations (unaudited)
For the three and six months ended
June 30, 2004 and 2003(Dollars in thousands, except earnings per share)

|                                                    |  |  | Three months ended |           | Six months ended   |  
|--------------------------------------------------- |  |  | ------------------ | --------- | ------------------ | -
|                                                    |  |  |                    |           |                    |  
|Interest Income                                     |  |  | June 30,
 2004     |           | June 30,
     2003 |  
|                                                    |  |  |                    |           |                    |  
|Loans                                               |  |  | $                  | 1,878     |                    |  
|Taxable securities                                  |  |  |                    | 277       |                    |  
|Tax exempt securities                               |  |  |                    | 15        |                    |  
|Deposits in banks                                   |  |  |                    | 1         |                    |  
|Federal funds sold                                  |  |  |                    | 15        |                    |  
|                                                    |  |  |                    |           |                    |  
|Total interest income                               |  |  |                    | 2,186     |                    |  
|                                                    |  |  |                    |           |                    |  
|Interest expense                                    |  |  |                    |           |                    |  
|Deposits                                            |  |  |                    | 540       |                    |  
|Other borrowed money                                |  |  |                    | 204       |                    |  
|                                                    |  |  |                    |           |                    |  
|Total interest expense                              |  |  |                    | 744       |                    |  
|                                                    |  |  |                    |           |                    |  
|Net interest income                                 |  |  |                    | 1,442     |                    |  
|Provision for loan losses                           |  |  |                    |          |                    |  
|                                                    |  |  |                    |           |                    |  
|                                                    |  |  |                    |          
|Net interest income after provision for loan losses |  |  |                    | 1,442     |                    |  
|                                                    |  |  |                    |           |                    |  
|Other income                                        |  | 
|Service charges on deposit accounts                 |  |  |                    | 234       |                    |  
|Financial service fees                              |  |  |                    | 31        |                    |  
|Mortgage origination fees                           |  |  |                    | 58        |                    |  
|Gain on sale of investment securities               |  |  |                    | 13        |                    |  
|Loss on sale of foreclosed properties               |  |  |                    | (8        | )                  |  
|Other income                                        |  |  |                    | 60        |                    |  
|                                                    |  |  |                    |           |                    |  
|Total other income                                  |  |  |                    | 388       |                    |  
|                                                    |  |  |                    |           |                    |  
|Other expenses                                      |  | 
|Salaries and employee benefits                      |  |  |                    | 777       |                    |  
|Equipment and occupancy expense                     |  |  |                    | 235       |                    |  
|Marketing expense                                   |  |  |                    | 51        |                    |  
|Data processing expense                             |  |  |                    | 132       |                    |  
|Stationary and supply expense                       |  |  |                    | 36        |                    |  
|Administrative expenses                             |  |  |                    | 181       |                    |  
|Other operating expenses                            |  |  |                    | 145       |                    |  
|                                                    |  |  |                    |           |                    |  
|Total other expenses                                |  |  |                    | 1,558     |                    |  
|                                                    |  |  |                    |           |                    |  
|Income before income taxes                          |  |  |                    | 272       |                    |  
|Income tax expense                                  |  |  |                    | 89        |                    |  
|                                                    |  |  |                    |           |                    |  
|Net Income                                          |  |  |                    | 183       |                    |  
|                                                    |  |  |                    |           |                    |  
|                                                    |  |  |                    |          
|Net income per common share                         |  |  | $                  | 0.10      |                    | $
|                                                    |  |  |                    |           |                    |  
|Diluted net income per common share                 |  |  | $                  | 0.09      |                    | $
|                                                    |  |  |                    |           |                    |  
|Weighted average shares outstanding                 |  |  |                    | 1,720,196 |                    |  
|Diluted average shares outstanding                  |  |  |                    |           |                    |  
|                                                    |  |  |                    | 1,895,605 |                    |  
|                                                    |  |  |                    |           |                    |  

4

---

Community
Capital Bancshares, Inc.
and Subsidiaries
Consolidated
Statements of Comprehensive Income
(unaudited)Three and six months ended June 30, 2003 and 2004
(Dollars in thousands)

|                                      |  | Three Months Ended |                    | Six Months Ended |              
|------------------------------------- |  | ------------------ | ------------------ | ---------------- | -------------
|                                      |  |                    |                    |                  |              
|                                      |  |                    | June 30,
     2004 |                  | June 30, 2003
|                                      |  |                    |                    |                  |              
|                                      |  |                    |                    |                  |              
|Net Income (loss)                     |  |                    | $                  | 183              |              
|Other comprehensive Income            |  |                    |                    |                  |              
|Net unrealized holding gains (losses) |  |                    |                    |                  |              
|arising during period                 |  |                    |                    | (1,174           | )            
|Tax (expense) benefit on unrealized   |  |                    |                    |                  |              
|holding gains                         |  |                    |                    | 399              |              
|                                      |  |                    |                    |                  |              
|Reclassification adjustment for gains |  |                    |                    |                  |              
|included in net income, net of income |  |                    |                    |                  |              
|taxes of $3 and $5 respectively       |  |                    |                    | (10              | )            
|                                      |  |                    |                    |                  |              
|Comprehensive income                  |  |                    | $                  | (602             | )            
|                                      |  |                    |                    |                  |              

5

---

Community
Capital Bancshares, Inc.
and  Subsidiaries
Consolidated
Statements of Cash Flow
(unaudited)Six Months ended June 30, 2004 and 2003
(Dollars in thousands)

2004
     
     
     
     2003Cash Flows from operating activities:Net income$405
     
        
     $200Adjustments to reconcile net income to net cashprovided by (used in) operating activities:Depreciation
     
     
     196
     
        
     
     133Amortization of Core Deposit Premium
     
     22Provision for loan losses
     
     
        15
     
     
     
        215Provision for deferred taxes
     
        
     (195
        )
     
     
     (133
     )(Increase) decrease in interest receivable
     
        
     69
        
     
     
     (131
        )Net gain on sale of investments available for sale
     
        
     (15
        )
        
     
     Other operating activities
     
        
     (5,922
        )
        
     
     (152
        )Net cash provided by (used in) operating activities
     
        
     (5,425
        )
        
     
     132Cash Flows from Investing Activities:Purchase of property and equipment
     
        
     (199
        )
        
     
     (42
        )Net decrease (increase) in federal funds sold
     
        
     1,358
        
        
     
     (6,449
        )Net increase in loans
     
        
     (4,688
        )
        
     
     (11,280
        )Proceeds from maturities of securities available for sale
     
        
     2,949
        
        
     
     3,732Proceeds from sale of securities
     
        
     5,475
        
        
     
     Purchase of securities available for sale
     
        
     (7,736
        )
        
     
     (6,005
        )Other Investing activities
     
        
     (36
        )Net cash used in Investing activities
     
        
     (2,877
        )
        
     
     (20,044
        )Cash Flows from Financing Activities:Net increase in deposits
     
        
     5,050
        
        
     
     16,533Proceeds from Trust Preferred Issuance
     
        
     
        
        
     
     4,000Dividends paid to shareholders by parent
     
        
     (67
        )
        
     
     (30
        )Increase (decrease) in Fed Funds purchased
     
        
     2,271
        
        
     
     (1,705
        )Proceeds from exercise of stock warrants
     
        
     195
        
        
     
     Net Increase (decrease) in other borrowings
     
        
     1067
        
        
     
     (183
        )Treasury stock transactions, net
     
        
     27
        
        
     
     12Net cash provided by financing activities
     
        
     8,543
        
        
     
     18,627Net increase (decrease) in cash
     
        
     241
        
        
     
     (1,285)Cash and due from banks
     at beginning of period
        
     4,285
        
        
     
     6,920Cash and due from banks at end of period
     
     $4,526
     
        
     $5,635Supplemental DisclosureCash paid for interest
     
     $
     1,455
     
        
     $
     1,117Cash paid for income taxes
     
     $
     30
     
        
     $
     98Non-Cash TransactionUnrealized gains (losses) on securities available
             for sale
     $(674
        )
     
     $
     39


6

---

Community
Capital Bancshares, Inc.
and
Subsidiary
Notes
to Financial Statements



Note1.     Organization and Summary of Significant Accounting Policies

Nature of
Business

Community
Capital Bancshares, Inc. (the Company) is a multi-bank holding
company whose principal activity is the ownership and management of its
wholly-owned bank subsidiaries, Albany Bank and Trust, N.A (Albany
Bank) and First Bank of Dothan, Inc. (Dothan Bank),
collectively referred to as the Banks. Albany Banks main
office is located in Albany, Dougherty County, Georgia, with one full service
branch and one loan production office in Albany and one full service branch in
Lee County, Georgia. Dothan Bank is located in Dothan, Houston County, Alabama.
The Banks provide a full range of banking services to individual and corporate
customers in their primary market areas of Dougherty and Lee Counties, Georgia
and Houston County, Alabama.

Basis of
Presentation

The
consolidated financial statements include the accounts of the Company and its
subsidiaries. Significant intercompany transactions and accounts are eliminated
in consolidation.

The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities as of the balance sheet date and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. Material estimates that are particularly
susceptible to significant change in the near term relate to the determination
of the allowance for loan losses, the valuation of foreclosed real estate and
deferred taxes.

The
interim financial statements included herein are unaudited but reflect all
adjustments which, in the opinion of management, are necessary for a fair
presentation of the financial position and results of operations for the interim
period presented. All such adjustments are of a normal recurring nature. The
results of operations for the three and six months ended June 30, 2004 are not
necessarily indicative of the results of a full years operations, and
should be read in conjunction with the Companys annual report as filed on
Form 10-KSB.

The
accounting principles followed by the Company and the methods of applying these
principles conform with accounting principles generally accepted in the United
States of America (GAAP) and with general practices within the banking industry.

Income Taxes

Deferred
income tax assets and liabilities are determined using the balance sheet method.
Under this method, the net deferred tax asset or liability is determined based
on the tax effects of the temporary differences between the book and tax basis
of the various balance sheet assets and liabilities and gives current
recognition to changes in the tax rates and laws.

The
Company and its subsidiaries file a consolidated income tax return. Each entity
provides for income taxes based on its contribution to the income taxes
(benefits) of the consolidated group.

7

---

Stock
Compensation Plans

At
June 30, 2004, the Company had two stock-based employee compensation plans,
which are described in more detail in the 2003 annual report. The Company
accounts for those plans under the recognition and measurement principles of
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued
to Employees, and related Interpretations. No stock-based employee
compensation cost is reflected in net income, as all options granted under those
plans had an exercise price equal to the market value of the underlying stock on
the date of grant. In addition, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure in December 2002.
SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for an entity
that voluntarily changes to the fair value based method of accounting for
stock-based employee compensation. It also amends the disclosure provisions of
SFAS No. 123 to require prominent disclosure about the effects on reported net
income of an entitys accounting policy decisions with respect to
stock-based employee compensation. The Company has not elected to adopt the
recognition provisions of this Statement for stock-based employee compensation
and has elected to continue with accounting methodology in Opinion No. 25 as
permitted by SFAS No. 123.

Three months Ended
     June 30,
     
     Three months Ended
     June 30,2004
     
     
     2003
     
     
     
     2004
     
     
     2003Net income, as reported
     $
     183,000
     
     $
     131,000
     
     
     $
     405,000
     
     $
     200,000Deduct: Total stock-based employee compensationexpense determined under fair value basedmethod for all awards, net
     of related tax effects
     
     (63,000
     )
     
     (40,000
     )
     
     
     (86,000
     )
     (63,000
        )Pro forma net income
     $
     120,000
     
     $
     91,000
     
     
     $
     319,000
     
     $137,000Earnings per share:Basic - as reported
     $
     .10
     
     $
     .09
     
     
     $
     .23
     
     $
     .14Basic - pro forma
     $
     .07
     
     $
     ..07
     .
     
     $
     .18
     
     $
     10
        .Diluted - as reported
     $
     .09
     
     $
     .08
     
     
     $
     .21
     
     $
     .12Diluted - pro forma
     $
     .06
     
     $
     .05
     
     
     $
     .17
     
     $
     .08


Accounting
Standards

In
January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51 and, on
December 24, 2003, the FASB issued FASB Interpretation No. 46 (Revised December
2003), Consolidation of Variable Interest Entities which replaced
FIN 46. The interpretation addresses consolidation by business enterprises of
variable interest entities. A variable interest entity is defined as an entity
subject to consolidation according to the provisions of the interpretation. The
revised interpretation provided for special effective dates for entities that
had fully or partially applied the original interpretation as of December 24,
2003. Otherwise, application of the interpretation is required in financial
statements of public entities that have interests in special-purpose entities,
or SPEs, for periods ending after December 15, 2003. Application by public
entities, other than small business issuers, for all other types of variable
interest entities (i.e., non-SPEs) is required in financial statements for
periods ending after March 15, 2004. Application by small business issuers to
variable
interest entities other than SPEs and by nonpublic entities to all

8

---

types of
variable interest entities is required at various dates in 2004 and 2005. The
Company adopted the provisions of FIN 46 as of January 1, 2004. As required by
the provisions of the Interpretation, the Company deconsolidated its investment
in its subsidiary trust which issued subordinated trust preferred securities.
The adoption of FIN 46 and related provisions had the effect of increasing
assets by $124,000 and liabilities by the same amount. The adoption of the
provisions had no effect on net income.

9

---

Management's
Discussion and Analysis of Financial Condition and Results of Operations

This
discussion is intended to assist in an understanding of the Companys
financial condition and results of operations. This analysis should be read in
conjunction with the financial statements and related notes appearing in Item 1
of the June 30, 2004 Form 10-QSB and Managements Discussion and Analysis
of Financial Condition and Results of Operations appearing in the Companys
Form 10-KSB for the year ended December 31, 2003.

Financial
Condition

As of
June 30, 2004 the Companys total assets were $165,888,000 representing an
increase of $7,159,000 or 4.51% from December 31, 2003. Earning assets consist
of Federal funds sold, investment securities and loans. These assets provide the
majority of the Companys earnings. The mix of earning assets(87% of total
assets) is a reflection of managements philosophy regarding earnings
versus risk.

Federal
funds sold represent an overnight investment of funds and can be converted
immediately to cash. At June 30, 2004, federal funds sold were $1,326,000. At
December 31, 2003, the Company had $2,684,000 in federal funds sold.

Investment
securities consist of U.S. Government and Agency securities and municipal bonds.
These investments are used to provide fixed maturities and as collateral for
advances and large public fund deposits. From December 31, 2003 to June 30,
2004, investment securities decreased by $1,436,000. All securities are
classified as available for sale, and are carried at current market values.

The
loan portfolio is the largest earning asset and is the primary source of
earnings for the Company. At June 30, 2004 net loans were $112,202,000. The loan
portfolio increased $4,731,000 or 4.40% over the year-end amount. At June 30,
2004, the allowance for loan losses was $1,809,000 or 1.59% of total loans.
Management believes this is an adequate but not excessive amount based upon the
composition of the current loan portfolio and current economic conditions. The
relationship of the allowance to total loans will vary over time based upon
managements evaluation of the loan portfolio. Management evaluates the
adequacy of the allowance on a monthly basis and adjusts it accordingly by a
monthly charge to earnings using the provision for loan losses. During the first
two quarters of 2004, the provision for potential loan losses was $15,000 as
compared to $215,000 for the same period in 2003.

Non-earning
assets consist of premises and equipment, and other assets. Premises and
equipment increased during the year as a result of expenditures for the recently
completed branch in downtown Albany. Other assets consist primarily of
Bank-Owned Life Insurance, which increased $4,529,000 during the second quarter
as a result of the purchase of Bank-Owned Life Insurance.

The
Company funds its assets primarily through deposits from customers. The Company
must pay interest on the majority of these funds and attempts to price these
funds competitively in the market place but at a level that it can safely
re-invest the funds profitably. At June 30, 2004, total deposits were
$128,273,000 as compared to the year-end amount of $123,223,000. This is an
increase of $5,050,000 or 4.10%. Additionally, it borrows funds from other
sources to provide longer term fixed rate funding for its assets.

10

---

Interest
bearing deposits are comprised of the following categories:

June 30, 2004
        
     December 31, 2003Interest bearing demand and savings
     
     $  41,346,000
        
     $  36,159,000Certificates of deposit indenominations
     of $100,000 or greater
     
     25,516,000
        
     23,396,000Other Certificates of deposit
     
     48,383,000
        
     49,633,000Total
     
     $115,245,000
        
     $109,188,000


Other
borrowings consist primarily of Federal Home Loan Bank advances and are secured
by investment securities and loans of the Company. No new advances were obtained
during the current quarter. The Company also has borrowings from a correspondent
bank and debt incurred through the issuance of Trust preferred securities.

Capital
Adequacy

The
following table presents the Companys regulatory capital position as of
June 30, 2004.

|                                   |       
|---------------------------------- | ------
|Tier 1 Capital Ratio, actual       | 11.97%
|Tier 1 Capital minimum requirement | 4.00% 
|                                   |       
|Tier 2 Capital Ratio, actual       | 13.65%
|Tier 2 Capital minimum requirement | 8.00% 
|                                   |       
|Leverage Ratio                     | 8.78% 
|Leverage Ratio minimum requirement | 4.00% 

The
Companys ratios are well above the required regulatory minimums and
provide a sufficient basis to support future growth of the Company.

The
Company is currently in the process of registering stock for a secondary public
offering. It anticipates issuing stock and raising an additional $10,000,000 in
capital. The majority of the additional capital will be used to strengthen
Dothans capital position and allow this bank to open a branch in Auburn,
Alabama. Additionally, these funds will be used to reduce the debt incurred by
the Company in conjunction with the acquisition of the Dothan bank.

Results of
operations

Net
income for the six months ended June 30, 2004 was $405,000 as compared to
$200,000 for the same period in 2003. Although net interest income increased by
$1,012,000 or 48% in 2004 as compared to the first six months of 2003,
non-interest expense increased $1,051,000 or 51% in 2004 as compared to the
first six months of 2003.

Total
interest income increased $1,125,000 for the six months ended June 30 2004 or
33.01% from the same period in the previous year. This was the result of
increased interest income on loans, which increased $845,000 and investment
income, which increased $281,000 over the same period in the previous year. The
increase in interest income was the direct result of the larger loan portfolio
in the current year combined with having the Dothan Banks loans added to
the portfolio in November 2003. In addition, a larger investment portfolio over
the same period last year contributed to the increase in interest income.

11

---

Interest
expense for the six months ended June 30, 2004 was $1,432,000. This is the major
expense item for the Company and increased $115,000 from the previous year. This
increase is the direct result of the addition of the Dothan Bank.

Net
interest income after the provision for loan losses was $3,087,000 for the six
months ended June 30, 2004 as compared to the 2003 amount of $1,876,000. This is
an increase of $1,211,000 or 64.55%. This increase is the combined result of the
increased level of earning assets, and the lower cost of funds during the
current year. Also, the addition of the Dothan Bank attributed to the growth
rate.

Other
income increased $135,000 to $614,000 for the six months ended June 30, 2004 as
compared to the same period in 2003. Service charges on deposit accounts
increased $176,000 or 72% due to the larger number of deposit accounts and
increases in fees charged to customers. Mortgage origination fees decreased
$60,000 as compared to the same period in the previous year. These fees are
generated by facilitating mortgage loans for customers, which are sold in the
secondary market. The decrease in volumes and higher interest rate levels led to
decreases in this area of activity.

Non-interest
expense increased $1,051,000 to $3,104,000 for the six months ended June 30,
2004 as compared to the same period in 2003. This is an increase of 51.19%. The
largest area of increase was in the salary and employee benefits category. This
expense item was $1,529,000 for the six months ended June 30, 2004 as compared
to $975,000 for the same period in the previous year. This is an increase of
$554,000 or 56.82%. The growth in this expense item is due to the increased
staffing required to properly serve the Companys customers as well as the
addition of Dothan Bank and slightly higher levels of pay during the current
year.

Equipment
and Occupancy expenses increased $158,000 or 53.57% for the six months ended
June 30, 2004 from the same period in 2003. The increase is due to the expansion
of the Albany Bank and the addition of Dothan Bank. Other expenses increased
$97,000 to $338,000 in the current year. The majority of this increase is the
result of the addition of the Dothan Bank.

Diluted
earnings per share for the six months ended June 30, 2004 were $0.21 and
increased $0.09 or 75% as compared to the first six months of the previous year.

Off-Balance
Sheet Arrangements

To
meet the financing needs of its customers, the Company is a party to financial
instruments with off-balance sheet risk in the normal course of business. In the
event of nonperformance by the other party to the off-balance sheet financial
instrument, the Companys exposure to credit loss is the contractual amount
of those instruments. The Company uses the same credit policies in making
commitments as it does for on-balance sheet instruments. A summary of the
contractual amounts of the Companys financial instruments with off-balance
sheet risk at June 30, 2004 follows:

12

---

Commitments to extend credit
     
     $  3,640,000Unused lines of credit
     
     9,955,000Standby letters of credit
     
     1,527,000$15,122,000


Forward-Looking
Statements

This
document contains statements that constitute forward-looking
statements within the meaning of Sections 27A of the Securities Act of
1933, as amended, and Sections 21E of the Securities Exchange Act of 1934, as
amended. The words believe, estimate,
expect, intend, anticipate and similar
expressions and variations thereof identify certain of such forward-looking
statements, which speak only as of the dates that they were made. 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.
Users are cautioned that any such forward-looking statements are not guarantees
of future performance and involve risks and uncertainties that the actual
results may differ materially from those indicated in the forward-looking
statements as a result of various factors, including governmental monetary and
fiscal policies, deposit levels, loan demand, loan collateral values, the
failure of assumptions underlying the establishment of reserves for loan losses,
securities portfolio values, interest rate risk management, the effects of
industry competition, difficulties in integrating acquisitions, and changes in
governmental regulation of the banking industry, including regulations relating
to branching and acquisitions. Users are therefore cautioned not to place undue
reliance on these forward-looking statements.

13

---

As of
June 30, 2004 the Company carried out an evaluation, under the supervision and
with the participation of the Companys management, including the
Companys Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of the Companys disclosure
controls and procedures pursuant to Exchange Act Rule 13a-15(b). Based upon that
evaluation, the Companys Chief Executive Officer and Chief Financial
Officer concluded that the Companys disclosure controls and procedures are
effective in timely alerting them to material information relating to the
Company (including its consolidated subsidiaries) that is required to be
included in the Companys periodic filings with the Securities and Exchange
Commission. There have been no changes in the Companys internal control
over financial reporting or, to managements knowledge, in other factors
that could significantly affect those internal controls subsequent to the date
of such evaluation, and  there have been no corrective actions with respect to
significant deficiencies or material weaknesses.















14

---

PART
II

ITEM
2.     CHANGES IN SECURITIES AND SMALL BUSINESS ISSURE PURCHASES OF EQUITY
SECURITIES

|(a)
     (b)
     (c)                                                                                                                                                                                                                                                                                                                   |  | None
     None
     None
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------
|(d)       The Company does not have a
     publicly announced stock repurchase plan and did not repurchase any of its
     shares of common stock during the period covered by this report, either
     under such a plan or otherwise. No stock purchase plan expired or was
     terminated during the period covered by this report.

ITEM
4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On
April 26, 2004, the Company held its annual meeting of shareholders at which the
following director nominees were elected to a three-year term by the votes
indicated:

Directors
     
     Votes For
        
     Votes WithheldRobert M. Beauchamp
     
     1,453,381
        
     0Glenn A. Dowling
     1,453,381
        
     0Mary Helen Dykes
     1,453,381
        
     0Mark M. Shoemaker
     1,453,381
        
     0Lawrence B. Willson
     1,453,381
        
     0


The
following directors whose three year terms expire in 2006 continued on the Board:  C.
Richard Langley, Bennett D.  Cotten, Jr., Jane Anne D. Sullivan, John P. Ventulett, Jr.,
James D. Woods.  The following directors whose three year terms  expire in 2005,
continued on the Board: Robert M. Beauchamp, Glenn A. Dowling, Mary Helen Dykes, Mark M.
Shoemaker, Lawrence  B. Willson.

ITEM
6.     Exhibits and Reports on Form 8-K

|(a) | Reports on
Form 8-K
|--- | -------------------
|    | (1)                
|(b) | Exhibits           
|    | 31.1               
|    | 31.2               
|    | 32.1               



15

---



SIGNATURES

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

|                | Community Bancshares, Inc.                                                                                                                              
|--------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|                |                                                                                                                                                         
|August 13, 2004 | /s/ Robert E. Lee
    Robert E. Lee,
    President                                                                                                      
|                |                                                                                                                                                         
|August 13, 2004 | /s/ David J. Baranko
    David J. Baranko,
    Chief Financial Officer
    (Duly authorized officer and
    principal financial / accounting
    officer



16