# UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

# FORM 10-QSB

(Mark One)

|[X] | QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------

| | For the Quarterly Period Ended September 30, 2004
| | -------------------------------------------------

|[   ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|----- | ----------------------------------------------------------------------------------------

| | For the Transition Period from ___________ to _____________
| | -----------------------------------------------------------

Commission file number
333-117053

COMMUNITYSOUTH BANCSHARES, INC.(Exact name of registrant as specified in its charter)

|South Carolina               |  | 20-0934786         
|---------------------------- |  | -------------------
|(State or other jurisdiction |  | (I.R.S. Employer   
|of incorporation)            |  | Identification No.)

1909 East Main StreetEasley, South Carolina 29640
(Address of principal executive offices, including zip code)

(864) 306-2540(Issuer's telephone number, including area code)

______________________________

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the
past 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    NoX

State the number of shares  outstanding  of each of the  issuer's  classes of common  equity,  as of the latest
practicable  date:10 shares of common stock, par value $.01 per share, were issued and outstanding as of November 8, 2004.

Transitional Small Business Disclosure
Format (check one):        Yes    NoX

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CommunitySouth
Bancshares, Inc.(A Company in the Development Stage)

Part I - Financial Information

Item 1. Financial Statements

Balance SheetSeptember 30, 2004
(unaudited)

|                                                   | 
|-------------------------------------------------- | 
|Assets                                             | 
|Cash                                               | 
|Furniture and equipment                            | 
|Deferred stock issuance costs                      | 
|                                                   | 
|Total assets                                       | 
|                                                   | 
|Liabilities and Shareholder's Deficit              | 
|Liabilities                                        | 
|Organizer contribution deposits                    | 
|Accounts payable                                   | 
|Payroll taxes payable                              | 
|                                                   | 
|Total liabilities                                  | 
|                                                   | 
|Commitments and Contingencies - Notes 2, 3 and 4   | 
|Shareholder's Deficit                              | 
|Preferred stock, $.01 par value; 10,000,000 shares | 
|authorized; none issued and outstanding            | 
|Common stock, $.01 par value; 10,000,000 shares    | 
|authorized; 10 shares issued and outstanding       | 
|Additional paid-in capital                         | 
|Deficit accumulated in the development stage       | 
|                                                   | 
|Total shareholder's deficit                        | 
|                                                   | 
|Total liabilities and shareholder's deficit        | 
|                                                   | 

# The accompanying notes
are an integral part of this financial statement.

2

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CommunitySouth
Bancshares, Inc.(A Company in the Development Stage)

# Statement of Operations For the Quarter Ended
September 30, 2004 andFor the Period from March 30, 2004 (Inception) to September 30, 2004
(unaudited)

|                                       |  | For the period from
|-------------------------------------- |  | -------------------
|
|
|
|Expenses                               |  |                    
|Salaries, payroll taxes and benefits   |  |                    
|Professional fees                      |  |                    
|Director training                      |  |                    
|Marketing, dues and subscriptions      |  |                    
|Rent                                   |  |                    
|Telephone and supplies                 |  |                    
|Licenses and permits                   |  |                    
|Other expenses                         |  |                    
|                                       |  |                    
|Total expenses                         |  |                    
|                                       |  |                    
|Income - interest                      |  |                    
|                                       |  |                    
|Loss before provision for income taxes |  |                    
|Provision for income taxes             |  |                    
|                                       |  |                    
|Net loss                               |  |                    
|                                       |  |                    

# The accompanying notes
are an integral part of this financial statement.

3

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CommunitySouth
Bancshares, Inc.(A Company in the Development Stage)

# Statement of Changes
in Shareholders Deficit For the Period March 30,
2004 (Inception) to September 30, 2004(unaudited)

|                                     |  |  |  | Deficit | 
|------------------------------------ |  |  |  | ------- | 
|
|
|
|Proceeds from issuance of common     |  |  |  |         | 
|stock                                |  |  |  | 10      | 
|Net loss for the period              |  | 
|March 30, 2004 to September 30, 2004 |  |  |  | -       | 
|                                     |  |  |  |         | 
|Balance, September 30, 2004          |  |  |  | 10      | 
|                                     |  |  |  |         | 

# The accompanying notes
are an integral part of this financial statement.

4

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CommunitySouth
Bancshares, Inc.(A Company in the Development Stage)

# Statement of Cash Flows For the Period March
30, 2004 (Inception) to September 30, 2004(unaudited)

|                                              | 
|--------------------------------------------- | 
|Cash flows from operating activities          | 
|Net loss                                      | 
|Deferred stock issuance costs                 | 
|Accounts payable                              | 
|Payroll taxes payable                         | 
|                                              | 
|Cash used by operating activities             | 
|                                              | 
|Cash flows from investing activities          | 
|Purchases of furniture and equipment          | 
|                                              | 
|Cash used by investing activities             | 
|                                              | 
|Cash flows from financing activities          | 
|Proceeds from organizer contribution deposits | 
|Proceeds from issuance of stock               | 
|                                              | 
|Cash provided by financing activities         | 
|                                              | 
|Net increase in cash                          | 
|Cash balance at beginning of period           | 
|                                              | 
|Cash balance at end of period                 | 
|                                              | 

# The accompanying notes
are an integral part of this financial statement.

5

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CommunitySouth
Bancshares, Inc.(A Company in the Development Stage)

# Notes to Unaudited
Condensed Financial Statements

# NOTE 1  SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES AND ACTIVITIES

CommunitySouth
Bancshares, Inc. was formed to organize and own all of the capital stock of
CommunitySouth Bank & Trust. On June 1, 2004, our organizers filed applications with
the South Carolina Board of Financial Institutions to charter the bank as a South Carolina
state bank and with the FDIC to receive federal deposit insurance. Whether the charter is
issued and deposit insurance is granted will depend upon, among other things, compliance
with legal requirements imposed by the South Carolina Board of Financial Institutions and
the FDIC, including capitalization of the bank with at least a specified minimum amount of
capital, which is estimated to be $11,000,000. The company has now received preliminary
approval from the South Carolina Board of Financial institutions and the FDIC. The company
has also filed an application with the Federal Reserve to become a bank holding company,
and this application must be approved before we can acquire the capital stock of the bank.
The company expects to receive all final regulatory approvals by the end of the fourth
quarter of 2004.

The
company is a development stage enterprise as defined by Statement of Financial Accounting
Standard No. 7, Accounting and Reporting by Development Stage Enterprises, as
it devotes substantially all its efforts to establishing a new business. The
companys planned principal operations have not commenced and revenue has not been
recognized from the planned principal operations.

The
company filed Form SB-2 registration statement to register the issuance of 2,607,500
shares and 107,500 warrants to be sold in a public offering. The offering commenced
September 16, 2004. As of September 30, 2004, the company had received subscriptions of
$51,000, and as of November 10, 2004, the company had received subscriptions of
$12,500,000. As of November 10, 2004, escrow has not been broken and the company has not
yet issued any shares or received any proceeds from the offering.

The
company intends to sell a minimum of 1,140,000 shares and a maximum of 2,500,000 shares of
its common stock at $10 per share. The offering is estimated to raise a minimum of
$11,054,000 and a maximum of $24,654,000 net of estimated sales agents fees and
offering expenses. The directors and executive officers of the company plan to purchase
472,500 shares of common stock at $10 per share, for a total of $4,725,000. Upon purchase
of these shares, the company will issue stock warrants to the organizers to purchase one
share of common stock for $10 per share for every two shares they purchase in the
offering, up to a maximum of 10,000 shares per organizer. The company plans to use $11
million of the proceeds to capitalize the proposed bank.

The company anticipates the offering
will be completed by the end of 2004.

# NOTE 2  ORGANIZER
CONTRIBUTION DEPOSITS

Under
the Organizer Contribution and Joint Venture Agreement, organizers agreed to contribute
cash equal to ten percent of their nonbinding anticipated stock purchase. These funds will
be used to pay organizational expenses. Upon approval by regulatory authorities of the
application to organize the bank and completion of the stock offering, the company or the
bank will reimburse the organizers. If the organizing activities are abandoned, the
organizers will bear their pro-rata share of the organizing expenses. At September 30,
2004, $3,481,900 was deposited under the agreement, which is more than the 10% required by
the agreement. The excess deposited by the organizers is available to fund additional
organizational expenses during the offering period and the company or bank will either
reimburse the organizers or use these deposits to purchase stock of the company in the
offering.

# NOTE 3 
COMMITMENTS AND CONTINGENCIES

The
company has engaged a law firm to assist in preparing and filing all organizational,
incorporation, and bank applications and to assist in preparing stock offering documents
and consummating the companys initial offering. The aggregate cost of the services
is expected to approximate $40,000 to $65,000. Through September 30, 2004, $54,519 has
been included in the balance sheet as deferred stock issuance costs.

6

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CommunitySouth
Bancshares, Inc.(A Company in the Development Stage)

The
company leases temporary office space under a month-to-month operating lease requiring
monthly payments of $1,162. Through September 30, 2004, $7,740 has been expensed.

The
company has entered into an agreement with a sales agent who will assist in the selling of
the common stock. The agreement requires the payment of an amount equal to 1.5% of the
gross minimum offering ($171,000), a fixed fee of $37,500 per month, an engagement fee of
$10,000, and reimbursement for out of pocket expenses. The sales agreement is expected to
be in effect for at least ninety days. As of September 30, 2004, the company has paid
$104,500 under this agreement.

On
August 18, 2004, the company entered into a purchase option agreement for the purchase of
land on which the headquarters office will be constructed. The $10,000 option expires six
months from closing with one extension for ninety days available for an additional $5,000.
The purchase option price on the land will be based upon the average of two MAI
appraisals. The company also intends to lease an adjoining site on a month-to-month basis
for $3,443 per month. This site will house the temporary modular banking facility during
the construction of the main office.

The
company has entered into a Master Loan Purchase Agreement with a third party which
requires that within ninety days after the bank receives its charter and FDIC insurance it
will purchase all loans allowable by law and conforming with loan policy which are
outstanding and funded by the third party. The purchase commitment will not exceed $15
million in loans.

The
company has entered into a lease agreement for its Spartanburg office. The lease term is
for six months with monthly rental payments of $2,528, beginning in October 2004.

The
company has engaged a bank consultant to assist in establishing the bank and bank holding
company. The aggregate cost of the services is expected to approximate $75,000. Through
September 30, 2004, $50,000 has been expensed.

The
company has entered into employment agreements with its president/chief lending officer;
its chief executive officer and its chief financial officer. The agreements include
provisions regarding term, compensation, benefits, annual bonus, incentive program, stock
option plan and non-compete upon early termination.

# NOTE 4  UNUSED
LINE OF CREDIT

The
company has an unused line of credit agreement with a bank to borrow up to $700,000. The
line matures July 18, 2005 with the outstanding principal amount due at maturity. Interest
on the outstanding balance is payable monthly at the prime interest rate less .50 percent.
The line is guaranteed by the organizers.

# NOTE 5  RELATED
PARTY TRANSACTIONS

One
of the organizers of the company owns the land the company plans to buy under the purchase
option agreement, owns the adjoining property which will be leased as the site for the
temporary facility, and also owns the facility being leased as temporary office space.

# NOTE 6  RECENTLY
ISSUED ACCOUNTING STANDARDS

No
recent authoritative pronouncements that affect accounting, reporting, and disclosure of
financial information by us have occurred during the quarter ended September 30, 2004,
other than the items described below.

In
November 2003, the Emerging Issues Task Force (EITF) reached a consensus that
certain quantitative and qualitative disclosures should be required for debt and
marketable equity securities classified as available for sale or held to maturity under
SFAS No. 115 and SFAS No. 124 that are impaired at the balance sheet date but for which
other-than-temporary impairment has not been recognized. Accordingly EITF issued EITF No.
03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments. This issue addresses the meaning of other-than-

7

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CommunitySouth
Bancshares, Inc.(A Company in the Development Stage)

temporary impairment and its application to investments classified as either
available for sale or held to maturity under SFAS No. 115 and provides guidance determining the amount of impairment and
additional quantitative and qualitative disclosures. The guidance for determining the
amount of impairment was scheduled to be effective for periods ending after June 15, 2004,
but has been delayed indefinitely pending implementation guidance by the FASB. The
disclosure provisions of EITF No. 03-1 were effective for fiscal years ending after
December 15, 2003. Adopting the disclosure provisions of EITF No. 03-1 did not have any
impact on the companys financial position or results of operations.

In
March 2004, the Financial Accounting Standards Board (FASB) issued an exposure
draft on Share-Based Payment. The proposed Statement addresses the accounting
for transactions in which an enterprise receives employee services in exchange for (a)
equity instruments of the enterprise or (b) liabilities that are based on the fair value
of the enterprises equity instruments or that may be settled by the issuance of such
equity instruments. This proposed Statement would eliminate the ability to account for
share-based compensation transactions using Accounting Principles Board (APB)
Opinion No. 25, Accounting for Stock Issued to Employees, and generally would
require instead that such transactions be accounted for using a fair-value-based method.
This Statement, if approved, was scheduled to be effective for awards that are granted,
modified, or settled in fiscal years beginning after a) December 15, 2004 for public
entities and nonpublic entities that used the fair-value-based method of accounting under
the original provisions of Statement 123 for recognition or pro forma disclosure purposes
and b) December 15, 2005 for all other nonpublic entities. On October 16, 2004, the FASB
delayed the effective date of this proposal by six months and anticipates it will be
effective for by the third quarter of 2005. Retrospective application of this Statement is
not permitted. The adoption of this Statement, if approved, could have an impact on the
companys financial position or results of operations.

Other
accounting standards that have been issued or proposed by the FASB or other
standards-setting bodies that do not require adoption until a future date are not expected
to have a material impact on the consolidated financial statements upon adoption.

8

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CommunitySouth
Bancshares, Inc.(A Company in the Development Stage)

# Item 2.
Managements Discussion and Analysis or Plan of Operations

The following is a discussion of our
financial condition as of September 30, 2004, and the results of operations for the period
March 30 (Inception) through September 30, 2004. These comments should be read in
conjunction with our condensed financial statements and accompanying footnotes appearing
in this report. This report contains forward-looking statements relating to,
without limitation, future economic performance, plans and objectives of management for
future operations, and projections of revenues and other financial items that are based on
the beliefs of our management, as well as assumptions made by and information currently
available to our management. The words expect, estimate,
anticipate, and believe, as well as similar expressions, are
intended to identify forward-looking statements. Our actual results may differ materially
from the results discussed in the forward-looking statements, and our operating
performance each quarter is subject to various risks and uncertainties that are discussed
in detail in our filings with the Securities and Exchange Commission.

Our principal activities to date have
related to our organization, the conducting of our initial public offering, the pursuit of
approvals from the South Carolina State Board of Financial Institutions for our
application to charter the bank, our pursuit of approvals from the FDIC for our
application for deposit insurance, and our pursuit of approvals from the Federal Reserve
Board to form a holding company. We have received preliminary approval from the State
Board and the FDIC. We are awaiting preliminary approval from the Federal Reserve Board.

At September 30, 2004, we had total
assets of $3,210,579, consisting of cash of $2,988,253, furniture and equipment of
$24,911, and deferred stock issuance costs of $197,415.

Our liabilities at September 30, 2004
were $3,541,137, consisting of organizer contribution deposits totaling $3,481,900,
accounts payable of $51,501, and payroll taxes payable of $7,736. We had a
shareholders deficit of $330,558 at September 30, 2004. In the offering, common
stock will be issued at $10 per share to the organizers in exchange for their organizer
contribution deposits.

We had a net loss of $330,658 for the
period March 30, 2004 (inception) to September 30, 2004. These losses resulted from
expenses incurred in connection with activities related to our organization and that of
the bank. These activities included the preparation and filing of an application with the
State Board to charter the bank, the preparation and filing of an application with the
FDIC to obtain insurance of the deposits of the bank, the preparation and filing of an
application with the Federal Reserve Board to form a holding company, responding to
questions and providing additional information to the State Board, the FDIC, and the
Federal Reserve in connection with the application process, the selling of our common
stock in the offering, meetings and discussions among various organizers regarding
application information, target markets, and capitalization issues, and planning and
organizing for the opening of the bank. Because we are in the organizational stage, we
have had no operations from which to generate revenues. Operations have been funded
through contributions from our organizers.

We intend to devote the remainder of
this fiscal year to conducting the offering, completing the organization of the bank, and
organizing and developing our business activities. These organizational activities will
include, with respect to the bank, completing all required steps for final approval from
the State Board for the bank to open for business, hiring qualified personnel to work in
the bank, conducting public relations activities on behalf of the bank, developing
prospective business contacts for the bank and taking other actions necessary for a
successful bank opening. With respect to the company, these activities will include the
pursuit of approval from the Federal Reserve to become a holding company by acquiring all
of the capital stock to be issued by the bank.

Through the bank we will offer a full
range of commercial banking services to individuals and small business customers in our
primary service area. These services will include personal and business loans, checking
accounts, savings, and time certificates of deposit. The loans, transaction accounts, and
time certificates will be at rates competitive with those offered in the banks
primary service area. Customer deposits with the bank will be insured to the maximum
extent provided by law through the FDIC. The bank intends to offer night depository and
bank-by-mail services and to sell travelers checks (issued by an independent entity) and
cashiers checks. We do not anticipate offering trust and fiduciary services initially and
will rely on trust and fiduciary services offered by correspondent banks.

Initially, we anticipate deriving
income principally from interest charged on loans and, to a lesser extent, from interest
earned on investments, from fees received in connection with the origination of loans, and
from other services. Our principal expenses are anticipated to be interest expense on
deposits and operating expenses.

9

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CommunitySouth
Bancshares, Inc.(A Company in the Development Stage)

Following the offering we believe we
can satisfy future cash requirements for at least the first several years of operations
and will not have to raise additional capital during the first twelve months of
operations.

Currently, we have six employees and
expect this number to increase to approximately 15 employees by the end of 2004.

# Item 3. Controls and
Procedures

As
of the end of the period covered by this report, we carried out an evaluation, under the
supervision and with the participation of our management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and
procedures as defined in Exchange Act Rule 15d-15(e). Based upon that evaluation, our
Chief Executive Officer and Chief Financial Officer have concluded that our current
disclosure controls and procedures are effective as of September 30, 2004. There have been
no significant changes in our internal controls over financial reporting during the fiscal
quarter ended September 30, 2004 that have materially affected, or are reasonably likely
to materially affect, our internal controls over financial reporting.

The
design of any system of controls and procedures is based in part upon certain assumptions
about the likelihood of future events. There can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions, regardless of
how remote.

10

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CommunitySouth
Bancshares, Inc.(A Company in the Development Stage)

# Part II  Other
Information

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

Our Registration Statement on Form
SB-2 (file no. 333-117053), which registered the issuance of the shares to be sold in our
initial public offering, was declared effective on September 10, 2004. The offering
commenced on September 16, 2004. We plan to raise a minimum of $11,400,000 by offering for
sale at least 1,140,000 shares of our common stock. The maximum offering size is
$25,000,000, or 2,500,000 shares. We registered the issuance of a total of 2,607,500
shares in the offering and 107,500 warrants. The warrants will be issued to the organizers
of the bank.

We will use $11,000,000 of the
proceeds to capitalize the proposed bank. The organizers, directors, executive officers,
and members of their immediate families expect to purchase a total of 472,500 shares at an
aggregate purchase price of approximately $4,725,000. The offering period is expected to
expire on December 15, 2004.

Through September 30, 2004, we
incurred $197,415 in expenses in connection with the proposed issuance and distribution of
the common stock in the offering. All of these expenses were paid directly or indirectly
to persons or entities other than directors, officers, persons owning 10% or more of the
companys securities, or affiliates of the company.

As of September 30, 2004, we had
received subscriptions for $51,000 in the offering. We have not broken escrow and have not
yet issued any shares or received any net proceeds in the offering.

# Item 6. Exhibits

31.1        Rule 15d-14(a) Certification of the Chief Executive Officer.

31.2        Rule 15d-14(a) Certification of the Chief Financial Officer.

32           Section 1350
Certifications.

11

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CommunitySouth
Bancshares, Inc.(A Company in the Development Stage)

# SIGNATURES

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

|                         |  |                                
|------------------------ |  | -------------------------------
|                         |  |                                
|Date:  November 12, 2004 |  | By:   /s/  C. Allan Ducker, III
|                         |  | C. Allan Ducker, III           
|                         |  | Chief Executive Officer        

|                         |  |                         
|------------------------ |  | ------------------------
|                         |  |                         
|Date:  November 12, 2004 |  | By:   /s/  John W. Hobbs
|                         |  | John W. Hobbs           
|                         |  | Chief Financial Officer 

12

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# EXHIBIT INDEX

ExhibitNumber      Description

31.1          Rule 15d-14(a) Certification of the Chief Executive Officer.

31.2          Rule 15d-14(a) Certification of the Chief Financial Officer.

32             Section 1350
Certifications.

13