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

                                  -------------
                                    FORM 10-Q

(Mark One)

   X       QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
---------     EXCHANGE ACT OF 1934

           For the quarterly period ended March 31, 2007

           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 1-5735

                      PROVIDENT COMMUNITY BANCSHARES, INC.
                      ------------------------------------
             (Exact name of registrant as specified in its Charter)

                Delaware                               57-1001177
                --------                               ----------
     (State or other Jurisdiction of                 (I.R.S. Employer
     Incorporation or Organization)                 Identification No.)


               2700 Celanese Road, Rock Hill, South Carolina 29732
               ---------------------------------------------------
                    (Address of Principal Executive Offices)

                                 (803) 325-9400
                                 --------------
              (Registrant's telephone number, including area code)

                203 West Main Street, Union, South Carolina 29379
                -------------------------------------------------
              (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
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
                                      -----      -----

The  Corporation had 1,826,844  shares,  $0.01 par value, of common stock issued
and outstanding as of May 2, 2007.
<PAGE>

<TABLE>
<CAPTION>

              PROVIDENT COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

                                      INDEX
Part I.           Financial Information                                                     Page
                  ---------------------                                                     ----

 <S>                     <C>                                                                 <C>
                  Item 1.  Financial Statements (unaudited)

                  Consolidated Balance Sheets as of March 31, 2007
                   and December 31, 2006                                                      3

                  Consolidated Statements of Income for the three
                   months ended March 31, 2007 and 2006                                       4

                  Consolidated Statements of Cash Flows for the three
                   months ended March 31, 2007 and 2006                                       5

                  Consolidated Statements of Shareholders' Equity and
                  Comprehensive Income (Loss)for the three months
                  ended March 31, 2007 and 2006                                               6

                  Notes to Consolidated Financial Statements                               7-13

                  Item 2.  Management's Discussion and Analysis of
                  Financial Condition and Results of Operations                           13-26

                  Item 3.  Quantitative and Qualitative Disclosures
                  about Market Risk                                                       26-28

                  Item 4.  Controls and Procedures                                           28

Part II.          Other Information
                  -----------------

                  Item 1.   Legal Proceedings                                                29

                  Item 1A. Risk Factors                                                      29

                  Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds      29

                  Item 3.   Defaults Upon Senior Securities                                  30

                  Item 4.   Submission of Matters to a Vote of Security Holders              30

                  Item 5.   Other Information                                                30

                  Item 6.   Exhibits                                                         30

                  Signatures                                                                 31

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

Part 1.    Financial Information
PROVIDENT COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 2007 and December 31, 2006

                                                                          March 31,                December 31,
ASSETS                                                                       2007                     2006
                                                                         (Unaudited)                (Audited)
                                                                     ---------------------     --------------------
                                                                                (DOLLARS IN THOUSANDS)
<S>                                                                            <C>                         <C>
Cash and due from banks                                            $               12,153    $               9,124
Investment and mortgage-backed securities
  Held to maturity                                                                  3,176                    3,182
  Available for sale                                                              118,033                  119,003
                                                                     ---------------------     --------------------
Total investment and mortgage-backed securities                                   121,209                  122,185
                                                                     ---------------------     --------------------
Loans, net                                                                        236,926                  231,886
Office properties and equipment, net                                                5,569                    5,708
Federal Home Loan Bank Stock, at cost                                               3,466                    3,983
Federal Reserve Stock, at cost                                                        539                      539
Accrued interest receivable                                                         2,548                    2,717
Intangible assets                                                                   3,582                    3,741
Cash surrender value of life insurance                                              8,880                    5,613
Other assets                                                                        1,959                    2,134
                                                                     ---------------------     --------------------
TOTAL ASSETS                                                       $              396,831    $             387,630
                                                                     =====================     ====================

LIABILITIES

Deposits                                                           $              264,417    $             248,440
Advances from the Federal Home Loan Bank                                           61,500                   70,000
Securities sold under agreements to repurchase                                     29,696                   28,533
Floating rate junior subordinated deferrable interest debentures                   12,372                   12,372
Accrued interest payable                                                              868                      784
Other liabilities                                                                   1,435                    1,534
                                                                     ---------------------     --------------------
TOTAL LIABILITIES                                                                 370,288                  361,663
                                                                     ---------------------     --------------------

Commitments and contingencies-Note 4

SHAREHOLDERS' EQUITY

Serial preferred stock, no par value,
  authorized - 500,000 shares, issued
  and outstanding - None                                                               --                       --
Common stock - $0.01 par value,
  authorized - 5,000,000 shares,
   issued and outstanding - 1,826,844 shares at 3/31/07
   and 1,830,528 at 12/31/06                                                           20                       20
Additional paid-in capital                                                         12,545                   12,506
Accumulated other comprehensive loss                                                 -423                     -610
Retained earnings, substantially restricted                                        19,361                   18,912
Treasury stock, at cost                                                            -4,960                   -4,861
                                                                     ---------------------     --------------------
TOTAL SHAREHOLDERS' EQUITY                                                         26,543                   25,967
                                                                     ---------------------     --------------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                         $              396,831    $             387,630
                                                                     =====================     ====================

See notes to consolidated financial statements.

</TABLE>

                                       3
<PAGE>

<TABLE>
<CAPTION>

PROVIDENT COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, 2007 and 2006 (unaudited)

                                                                                      Three Months Ended
                                                                              March 31                  March 31
                                                                                2007                      2006
                                                                        ---------------------     ---------------------
                                                                           (DOLLARS IN THOUSANDS EXCEPT PER SHARE)

<S>                                                                               <C>                         <C>
Interest Income:
  Loans                                                               $                4,776    $                3,789
  Deposits and federal funds sold                                                         27                        16
  Mortgage-backed securities                                                             290                       282
  Interest and dividends on
   investment securities                                                               1,326                     1,340
                                                                        ---------------------     ---------------------
Total Interest Income                                                                  6,419                     5,427
                                                                        ---------------------     ---------------------

Interest Expense:
  Deposit accounts                                                                     2,389                     1,705
  Floating rate junior subordinated deferrable interest debentures                       223                       168
  Advances from the FHLB and other borrowings                                          1,073                       900
                                                                        ---------------------     ---------------------
Total Interest Expense                                                                 3,685                     2,773
                                                                        ---------------------     ---------------------

Net Interest Income                                                                    2,734                     2,654
  Provision for loan losses                                                              160                       175
                                                                        ---------------------     ---------------------
Net Interest Income After
   Provision for Loan Losses                                                           2,574                     2,479
                                                                        ---------------------     ---------------------

Non-Interest Income:
  Fees for financial services                                                            701                       632
  Other fees, net                                                                         22                        41
  Net gain on sale of investments                                                         --                        13
                                                                        ---------------------     ---------------------
Total Non-Interest Income                                                                723                       686
                                                                        ---------------------     ---------------------

Non-Interest Expense:
  Compensation and employee benefits                                                   1,182                     1,087
  Occupancy and equipment                                                                583                       486
  Deposit insurance premiums                                                               7                         8
  Professional services                                                                  111                       117
  Advertising/public relations                                                            69                        36
  Loan operations                                                                         40                        14
  Intangible amortization                                                                159                       159
  Items processing                                                                        56                        51
  Telephone                                                                               45                        39
  Other                                                                                  187                       189
                                                                        ---------------------     ---------------------
Total Non-Interest Expense                                                             2,439                     2,186
                                                                        ---------------------     ---------------------

Income Before Income Taxes                                                               858                       979
Income tax expense                                                                       209                       280
                                                                        ---------------------     ---------------------
Net Income                                                            $                  649    $                  699
                                                                        =====================     =====================

Basic Net Income Per Common Share                                     $                 0.36    $                 0.37
                                                                        =====================     =====================

Diluted Net Income Per Common Share                                   $                 0.35    $                 0.36
                                                                        =====================     =====================

Dividend Per Common Share                                             $                 0.11    $                 0.10
                                                                        =====================     =====================

Weighted Average Number of
  Common Shares Outstanding

Basic                                                                              1,827,373                 1,896,210

Diluted                                                                            1,862,194                 1,917,866

See notes to consolidated financial statements.
</TABLE>


                                       4
<PAGE>

<TABLE>
<CAPTION>

PROVIDENT COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2007 and 2006 (unaudited)

                                                                            Three Months Ended
                                                                    March 31,                March 31,
                                                                       2007                     2006
                                                               ---------------------    ---------------------
                                                                              (IN THOUSANDS)

OPERATING ACTIVITIES:
<S>                                                                            <C>                       <C>
Net income                                                                     $649                     $699
Adjustments to reconcile net income to
  net cash provided (used) by operating activities:
  Provision for loan losses                                                     160                      175
  Amortization of intangibles                                                   159                      159
  Depreciation expense                                                          139                      148
  Recognition of deferred income, net of costs                                 -118                     -124
  Deferral of fee income, net of costs                                          197                      122
  Gain on investment transactions                                                --                      -13
  Changes in operating assets and liabilities:
   Decrease in accrued interest receivable                                      169                      192
   Increase in cash surrender value of life insurance                        -3,267                       --
   Decrease in other assets                                                     175                       87
   Increase (decrease) in other liabilities                                      84                     -349
   Increase (decrease) in accrued interest payable                              -99                       83
                                                               ---------------------    ---------------------

Net cash (used) provided by operating activities                             -1,752                    1,179
                                                               ---------------------    ---------------------

INVESTING ACTIVITIES:

Purchase of investment and mortgage-backed securities:
   Available for sale                                                       -21,800                   -1,656
Proceeds from sale of investment and mortgage-
    backed securities available for sale                                         --                    7,437
Proceeds from maturity of investment and mortgage-
    backed securities:
   Available for sale                                                        22,109                    2,026
   Held to maturity                                                               6                        6
Principal repayments on mortgage-backed securities:
   Available for sale                                                           848                    1,903
Net increase in loans                                                        -5,279                   -9,374
Redemption of FHLB stock                                                        517                    1,028
Purchase of office properties and equipment                                      --                     -455
                                                               ---------------------    ---------------------

Net cash (used) provided by investing activities                             -3,599                      915
                                                               ---------------------    ---------------------

FINANCING ACTIVITIES:

Proceeds from the dividend reinvestment plan                                     28                       27
Dividends paid in cash                                                         -200                     -190
Proceeds from the exercise of stock options                                      11                       15
Share repurchase program                                                        -99                     -222
Repayment of  term borrowings                                                -8,500                  -26,715
Increase in other borrowings                                                  1,163                   10,000
Increase in deposit accounts                                                 15,977                   14,615
                                                               ---------------------    ---------------------

Net cash (used)  provided by financing activities                             8,380                   -2,470
                                                               ---------------------    ---------------------

NET INCREASE (DECREASE) IN CASH
   AND CASH EQUIVALENTS                                                       3,029                     -376

CASH AND CASH EQUIVALENTS
   AT BEGINNING OF PERIOD                                                     9,124                    8,380
                                                               ---------------------    ---------------------

CASH AND CASH EQUIVALENTS
   AT END OF PERIOD                                                         $12,153                   $8,004
                                                               =====================    =====================

SUPPLEMENTAL DISCLOSURES:

Cash paid for:
  Income taxes                                                                   $9                      $38
  Interest                                                                    3,601                    2,690

Non-cash transactions:
  Loans foreclosed                                                               --                      $73

See notes to consolidated financial statements.

</TABLE>

                                       5
<PAGE>

<TABLE>
<CAPTION>

              PROVIDENT COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)
             Three Months Ended March 31, 2007 and 2006 (unaudited)



                                                                        Retained    Accumulated
                                                           Additional   Earnings,      Other      Treasury     Total
                                            Common Stock    Paid-in   Substantially Comprehensive  Stock    Shareholders'
                                           Shares   Amount  Capital    Restricted   Income (loss)  at Cost     Equity
                                         ---------- ------ ---------- ------------- -------------  -------- -------------
                                                            (Dollars in Thousands, Except Share Data)

<S>                                          <C>       <C>    <C>             <C>            <C>    <C>           <C>
BALANCE AT DECEMBER 31, 2005             1,905,897    $20    $12,346       $16,916         -$612  -$3,337       $25,333

Net income                                                                     699                                  699

  Other comprehensive income, net of tax
   on unrealized holding losses on
   securities available for sale arising
   during period                                                                            -839                   -839
  Less reclassification adjustment for                                                         9                      9
   gains included in net income                                                     -------------          -------------

  Comprehensive loss                                                                                               -131

Stock option activity, net                   2,086                15                                                 15

Dividend reinvestment plan contributions     1,628                27                                                 27

Share repurchase program                   -12,352                                                   -222          -222

Cash dividend ($.10 per share)                                                -190                                 -190

                                         ---------- ------ ---------- ------------- ------------- -------- -------------

BALANCE AT MARCH 31, 2006                1,897,259    $20    $12,388       $17,425       -$1,442  -$3,559       $24,832
                                         ========== ====== ========== ============= ============= ======== =============

BALANCE AT DECEMBER 31, 2006             1,830,528    $20    $12,506       $18,912         -$610  -$4,861       $25,967

Net income                                                                     649                                  649

  Other comprehensive income, net of tax
   on unrealized holding gains on
   securities available for sale arising
   during period                                                                             187                    187
  Less reclassification adjustment for                                                        --                     --
   gains included in net income                                                     -------------          -------------

  Comprehensive income                                                                                              836

Stock option activity, net                      --                11                                                 11

Dividend reinvestment plan contributions     1,377                28                                                 28

Share repurchase program                    -5,061                                                    -99           -99

Cash dividend ($.11 per share)                                                -200                                 -200

                                         ---------- ------ ---------- ------------- ------------- -------- -------------

BALANCE AT MARCH 31, 2007                1,826,844    $20    $12,545       $19,361         -$423  -$4,960       $26,543
                                         ========== ====== ========== ============= ============= ======== =============
</TABLE>

                                       6
<PAGE>


              PROVIDENT COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.       Presentation of Consolidated Financial Statements
         -------------------------------------------------

The  accompanying  unaudited  consolidated  financial  statements  of  Provident
Community  Bancshares,  Inc. (the "Corporation" or "Provident") were prepared in
accordance with  instructions for Form 10-Q and,  therefore,  do not include all
disclosures  necessary for a complete  presentation  of  consolidated  financial
condition,  results of operations,  and cash flows in conformity with accounting
principles  generally  accepted in the United  States of America.  However,  all
adjustments  which are, in the  opinion of  management,  necessary  for the fair
presentation  of  the  interim  consolidated   financial  statements  have  been
included. All such adjustments are of a normal and recurring nature. The results
of  operations  for the three  months  ended March 31, 2007 are not  necessarily
indicative  of the results which may be expected for the entire  calendar  year.
Certain amounts in the prior year's financial  statements have been reclassified
to conform with current year classifications.

Recently Issued Accounting Standards

 The following is a summary of recent  authoritative  pronouncements that affect
accounting,   reporting,   and  disclosure  of  financial   information  by  the
Corporation:

In February  2006,  FASB issued SFAS No.  155,  "Accounting  for Certain  Hybrid
Financial  Instruments--an  amendment of FASB  Statements No. 133 and 140." This
Statement  amends SFAS No.  133,  "Accounting  for  Derivative  Instruments  and
Hedging  Activities," and SFAS No. 140,  "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities." This Statement resolves
issues addressed in SFAS No. 133  Implementation  Issue No. D1,  "Application of
Statement 133 to Beneficial Interests in Securitized  Financial Assets." FAS 155
permits  fair value  re-measurement  for any hybrid  financial  instrument  that
contains  an embedded  derivative  that  otherwise  would  require  bifurcation,
clarifies which interest  only-strips and principal-only  strips are not subject
to the  requirements  of Statement  133,  establishes a requirement  to evaluate
interests  in  securitized  financial  assets  to  identify  interests  that are
freestanding  derivatives or that are hybrid financial  instruments that contain
an embedded derivative requiring  bifurcation,  clarifies that concentrations of
credit  risk in the form of  subordination  are not  embedded  derivatives,  and
amends  Statement  140 to eliminate  the  prohibition  on a  qualifying  special
purpose entity from holding a derivative financial instrument that pertains to a
beneficial interest other than another derivative financial instrument. SFAS No.
155 is  effective  for all  financial  instruments  acquired or issued after the
beginning of an entity's first fiscal year that begins after September 15, 2006.
The  Company  does not  believe  that the  adoption  of SFAS No. 155 will have a
material impact on its financial position, results of operations and cash flows.

In March  2006,  the FASB  issued SFAS No. 156,  "Accounting  for  Servicing  of
Financial Assets--an amendment of FASB Statement No. 140." This Statement amends

                                       7
<PAGE>


FASB No. 140,  "Accounting  for Transfers and Servicing of Financial  Assets and
Extinguishments  of Liabilities,"  with respect to the accounting for separately
recognized servicing assets and servicing liabilities.  SFAS No. 156 requires an
entity to  recognize  a  servicing  asset or  servicing  liability  each time it
undertakes  an  obligation  to  service a  financial  asset by  entering  into a
servicing  contract;  requires all separately  recognized  servicing  assets and
servicing  liabilities to be initially  measured at fair value,  if practicable;
permits an entity to choose its subsequent measurement methods for each class of
separately recognized servicing assets and servicing liabilities; at its initial
adoption,  permits a one-time reclassification of available-for-sale  securities
to trading  securities by entities with  recognized  servicing  rights,  without
calling into question the treatment of other available-for-sale securities under
Statement 115, provided that the available-for-sale securities are identified in
some  manner as  offsetting  the  entity's  exposure to changes in fair value of
servicing assets or servicing liabilities that a servicer elects to subsequently
measure at fair value;  and requires  separate  presentation of servicing assets
and servicing  liabilities  subsequently measured at fair value in the statement
of financial position and additional  disclosures for all separately  recognized
servicing assets and servicing liabilities.  An entity should adopt SFAS No. 156
as of the  beginning of its first fiscal year that begins  after  September  15,
2006.  The Company  does not  believe  the  adoption of SFAS No. 156 will have a
material impact on its financial position, results of operations and cash flows.

In July 2006, the FASB issued FASB Interpretation No. 48 ("FIN 48"), "Accounting
for   Uncertainty  in  Income  Taxes."  FIN  48  clarifies  the  accounting  for
uncertainty in income taxes recognized in enterprises'  financial  statements in
accordance with FASB Statement No. 109,  "Accounting  for Income Taxes".  FIN 48
prescribes  a  recognition  threshold  and  measurement   attributable  for  the
financial  statement  recognition  and  measurement  of a tax position  taken or
expected  to be  taken  in a tax  return.  FIN  48  also  provides  guidance  on
derecognition,  classification,  interest and  penalties,  accounting in interim
periods,  disclosures  and  transitions.  FIN 48 is  effective  for fiscal years
beginning  after December 15, 2006. The adoption did not have a material  impact
on the reported results of operations or financial conditions of the Company.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements." SFAS
157 defines fair value,  establishes  a framework  for  measuring  fair value in
generally accepted  accounting  principles,  and expands  disclosures about fair
value  measurements.   This  standard  does  not  require  any  new  fair  value
measurements,  but rather  eliminates  inconsistencies  found in  various  prior
pronouncements.  SFAS 157 is effective for the Company on January 1, 2008 and is
not expected to have a significant impact on the Company's financial statements.

In September  2006,  the FASB issued SFAS No. 158,  "Employers'  Accounting  for
Defined  Benefit  Pension and Other  Postretirement  Plans" ("SFAS 158"),  which
amends  SFAS  87 and  SFAS  106 to  require  recognition  of the  overfunded  or
underfunded  status of pension  and other  postretirement  benefit  plans on the
balance  sheet.  Under  SFAS 158,  gains and  losses,  prior  service  costs and
credits,  and any remaining  transition  amounts under SFAS 87 and SFAS 106 that
have  not  yet  been  recognized  through  net  periodic  benefit  cost  will be
recognized in accumulated other comprehensive income, net of tax effects,  until
they  are  amortized  as a  component  of net  periodic  cost.  The  measurement
date--the date at which the benefit  obligation and plan assets are measured--is
required  to be the  company's  fiscal  year  end.  SFAS  158 is  effective  for


                                       8
<PAGE>


publicly-held  companies  for fiscal years ending after  December 15, 2006,
except for the measurement date provisions, which are effective for fiscal years
ending  after  December 15,  2008.  The Company does not have a defined  benefit
pension  plan.  Therefore,  SFAS 158 will not  impact  the  Company's  financial
conditions or results of operations.

In  September,  2006,  The FASB ratified the  consensuses  reached by the FASB's
Emerging  Issues Task Force ("EITF")  relating to EITF 06-4  "Accounting for the
Deferred   Compensation  and  Postretirement   Benefit  Aspects  of  Endorsement
Split-Dollar  Life  Insurance   Arrangements".   EITF  06-4  addresses  employer
accounting for endorsement split-dollar life insurance arrangements that provide
a benefit to an employee that extends to postretirement periods should recognize
a liability  for future  benefits in accordance  with SFAS No. 106,  "Employers'
Accounting  for  Postretirement  Benefits  Other Than  Pensions",  or Accounting
Principles Board ("APB") Opinion No. 12, "Omnibus  Opinion--1967".  EITF 06-4 is
effective for fiscal years  beginning  after December 15, 2006.  Entities should
recognize  the effects of  applying  this Issue  through  either (a) a change in
accounting principle through a cumulative-effect adjustment to retained earnings
or to other  components  of equity or net assets in the  statement  of financial
position  as of the  beginning  of the  year  of  adoption  or (b) a  change  in
accounting principle through retrospective application to all prior periods. The
Company does not believe the  adoption of EITF 06-4 will have a material  impact
on its financial position, results of operations and cash flows.

In September 2006, the FASB ratified the consensus reached related to EITF 06-5,
"Accounting for Purchases of Life  Insurance--Determining  the Amount That Could
Be Realized in Accordance with FASB Technical Bulletin No. 85-4,  Accounting for
Purchases  of Life  Insurance."  EITF 06-5  states  that a  policyholder  should
consider  any  additional  amounts  included  in the  contractual  terms  of the
insurance  policy other than the cash surrender  value in determining the amount
that could be realized under the insurance contract.  EITF 06-5 also states that
a policyholder should determine the amount that could be realized under the life
insurance   contract   assuming   the   surrender  of  an   individual-life   by
individual-life  policy (or certificate by certificate in a group policy).  EITF
06-5 is  effective  for fiscal years  beginning  after  December  15, 2006.  The
Company does not believe the  adoption of EITF 06-5 will have a material  impact
on its financial position, results of operations and cash flows.

In February  2007,  the FASB issued  SFAS No.  159,  "The Fair Value  Option for
Financial  Assets and  Financial  Liabilities  - Including  an amendment of FASB
Statement No. 115." This statement  permits,  but does not require,  entities to
measure many financial  instruments  at fair value.  The objective is to provide
entities with an opportunity to mitigate  volatility in reported earnings caused
by measuring related assets and liabilities  differently without having to apply
complex hedge accounting provisions. Entities electing this option will apply it
when the  entity  first  recognizes  an  eligible  instrument  and  will  report
unrealized  gains and  losses on such  instruments  in  current  earnings.  This
statement 1) applies to all entities,  2) specifies  certain  election dates, 3)
can be applied on an instrument-by-instrument  basis with some exceptions, 4) is
irrevocable and 5) applies only to entire  instruments.  One exception is demand
deposit  liabilities which are explicitly excluded as qualifying for fair value.
With respect to SFAS 115,  available-for-sale and held-to-maturity securities at
the  effective  date are eligible for the fair value option at that date. If the
fair  value  option is  elected  for those  securities  at the  effective  date,
cumulative  unrealized  gains and losses at that date shall be  included  in the

                                       9
<PAGE>


cumulative-effect  adjustment and thereafter,  such securities will be accounted
for as trading securities.  SFAS 159 is effective for the Corporation on January
1, 2008. Earlier adoption is permitted in 2007 if the Corporation also elects to
apply the provisions of SFAS 157, "Fair Value  Measurement."  The Corporation is
currently analyzing the fair value option provided under SFAS 159.

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.

2. Income Per Share
   ----------------

 Basic  income per share  amounts for the three  months ended March 31, 2007 and
2006 were  computed  based on the  weighted  average  number  of  common  shares
outstanding during the period. Diluted income per share adjusts for the dilutive
effect of  outstanding  common stock  options  during the periods  utilizing the
treasury stock method. Common stock equivalents included in the diluted earnings
per share  calculation  for the three  months ended March 31, 2007 and 2006 were
34,821 and 21,656, respectively.

 3. Assets Pledged
    --------------

 Approximately  $72,635,000 and $74,387,000 of debt securities at March 31, 2007
and December 31, 2006,  respectively,  were pledged by Provident Community Bank,
N.A.  (the  "Bank")  as  collateral  to  secure  deposits  of the State of South
Carolina,  and Union, Laurens and York counties along with additional borrowings
and repurchase agreements.  The Bank pledges as collateral for Federal Home Loan
Bank  advances  the Bank's  Federal  Home Loan Bank stock and has entered into a
blanket  collateral  agreement  with the Federal Home Loan Bank whereby the Bank
maintains,  free of other encumbrances,  qualifying  mortgages (as defined) with
unpaid  principal  balances  equal  to,  when  discounted  at 75% of the  unpaid
principal balances, 100% of total advances. As part of the total assets pledged,
the Bank will also  pledge  securities  to cover  additional  advances  from the
Federal Home Loan Bank that exceed the qualifying  mortgages  balance along with
security repurchase lines with various brokerage houses.

4. Contingencies and Loan Commitments
   ----------------------------------

         In the  ordinary  course of  business,  the Bank enters into  financial
instruments  with  off-balance-sheet  risk to meet  the  financing  needs of its
customers.  These  instruments  expose the Bank to credit  risk in excess of the
amount recognized on the balance sheet.

         The Bank's  exposure to credit loss in the event of  nonperformance  by
the other party to the financial  instrument for commitments to extend credit is
represented by the contractual  amount of those  instruments.  The Bank uses the
same credit policies in making  commitments  and  conditional  obligations as it
does for on-balance-sheet  instruments.  Total credit exposure at March 31, 2007
related to these items is summarized below:


                                       10
<PAGE>


   Loan Commitments:                                        Contract Amount
   ----------------                                         ---------------

            Approved loan commitments                         $   2,136,000
            Unadvanced portions of loans and credit lines        55,282,000
                                                                 ----------
            Total loan commitments                            $  57,418,000
                                                                 ==========

Loan  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.  Loan
commitments  generally have fixed expiration dates or other termination  clauses
and  may  require   payment  of  a  fee.  The  Bank  evaluates  each  customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained upon
extension of credit is based on  management's  credit  evaluation of the counter
party.  Collateral  held  is  primarily  residential  and  commercial  property.
Commitments outstanding at March 31, 2007 consisted of fixed and adjustable rate
loans  at rates  ranging  from  6.5% to 8.5%.  Commitments  to  originate  loans
generally expire within 30 to 60 days.

Commitments to fund loans,  including credit lines  (principally  variable rate,
consumer  lines  secured  by  real  estate  and  overdraft  protection)  totaled
approximately  $136,233,000  at March 31, 2007. Of these lines,  the outstanding
loan balances totaled approximately $80,951,000.

5. Fixed/Floating Rate Junior Subordinated Deferrable Interest Debentures
   ----------------------------------------------------------------------

On July 18, 2006, the Corporation  sponsored the creation of Provident Community
Bancshares  Capital Trust I ("Capital Trust I"). The Corporation is the owner of
all of the common securities of Capital Trust I. On July 21, 2006, Capital Trust
I  issued  $4,000,000  in the form of  floating/fixed  rate  capital  securities
through a pooled trust  preferred  securities  offering.  The proceeds from this
issuance, along with the Corporation's $124,000 capital contribution for Capital
Trust I's common securities, were used to acquire $4,124,000 aggregate principal
amount  of  the  Corporation's  floating  rate  junior  subordinated  deferrable
interest debentures due October 1, 2036 (the "Debentures"), which constitute the
sole asset of  Capital  Trust I. The  interest  rate on the  Debentures  and the
capital securities will be equal to 7.393% for the first five years. Thereafter,
the  interest  rate is  variable  and  adjustable  quarterly  at 1.74%  over the
three-month LIBOR. The Corporation has, through the Trust Agreement establishing
Capital Trust I, the Guarantee  Agreement,  the notes and the related Debenture,
taken  together,  fully  irrevocably and  unconditionally  guaranteed all of the
Capital Trust I obligations under the capital securities. The stated maturity of
the  Debentures is October 1, 2036. In addition,  the  Debentures are subject to
redemption at par at the option of the Corporation,  subject to prior regulatory
approval,  in whole or in part on any  interest  payment  date after  October 1,
2011. The Debentures are also subject to redemption  prior to October 1, 2011 at
up to 103.7% of par after the  occurrence  of certain  events that would  either
have a negative tax effect on Capital Trust I or the Corporation or would result
in Capital Trust I being treated as an investment company that is required to be
registered  under the  Investment  Company Act of 1940.  Upon  repayment  of the
Debentures at their stated maturity or following their redemption, Capital Trust
I will use the  proceeds of such  repayment  to redeem an  equivalent  amount of
outstanding  trust  preferred  securities  and  trust  common  securities.   The
Corporation has the right,  at one or more times, to defer interest  payments on

                                       11
<PAGE>


the Debentures for up to twenty  consecutive  quarterly  periods.  All deferrals
will end on an interest payment date and will not extend beyond October 1, 2036,
the stated maturity date of the Debentures.  If the Corporation  defers interest
payments on the Debentures, Capital Trust I will also defer distributions on the
capital  securities.  During any deferral  period,  each installment of interest
that would otherwise have been due and payable will bear additional  interest at
the applicable distribution rate, compounded quarterly.

On November  28,  2006,  the  Corporation  sponsored  the  creation of Provident
Community  Bancshares Capital Trust ("Capital Trust II"). The Corporation is the
owner of all of the common  securities of the Trust.  On December 15, 2006,  the
Trust issued $8,000,000 in the form of floating rate capital  securities through
a pooled trust preferred securities  offering.  The proceeds of Capital Trust II
were utilized for the redemption of Union Financial  Bancshares  Statutory Trust
(the  "Trust")  issued on December 18, 2001.  The proceeds  from this  issuance,
along with the  Corporation's  $247,000  capital  contribution  for the  Trust's
common securities, were used to acquire $8,247,000 aggregate principal amount of
the  Corporation's   floating  rate  junior  subordinated   deferrable  interest
debentures due March 1, 2037 (the "Debentures"), which constitute the sole asset
of the Trust. The interest rate on the Debentures and the capital  securities is
variable and adjustable  quarterly at 1.74% over the three-month  LIBOR, with an
initial  rate of  7.11%.  The  Corporation  has,  through  the  Trust  agreement
establishing  the Trust,  the  Guarantee  Agreement,  the notes and the  related
Debenture,  taken together, fully irrevocably and unconditionally guaranteed all
of the Trust's obligations under the capital securities.  The stated maturity of
the  Debentures is March 1, 2037.  In addition,  the  Debentures  are subject to
redemption at par at the option of the Corporation,  subject to prior regulatory
approval,  in whole or in part on any interest payment date after March 1, 2012.
The Debentures  are also subject to redemption  prior to March 1, 2012 at 103.5%
of par after the  occurrence of certain events that would either have a negative
tax effect on the Trust or the  Corporation  or would  result in the Trust being
treated as an  investment  company that is required to be  registered  under the
Investment Company Act of 1940. Upon repayment of the Debentures at their stated
maturity or following their redemption,  the Trust will use the proceeds of such
repayment  to  redeem  an  equivalent  amount  of  outstanding  trust  preferred
securities and trust common securities. The Corporation has the right, at one or
more  times,  to defer  interest  payments  on the  Debentures  for up to twenty
consecutive  quarterly  periods.  All deferrals will end on an interest  payment
date and will not extend beyond March 1, 2037,  the stated  maturity date of the
Debentures.  If the Corporation defers interest payments on the Debentures,  the
Trust  will also  defer  distributions  on the  capital  securities.  During any
deferral period, each installment of interest that would otherwise have been due
and payable will bear additional  interest at the applicable  distribution rate,
compounded quarterly.

On November 14, 2001, the Corporation  sponsored the creation of the Trust.  The
Corporation  is the  owner of all of the  common  securities  of the  Trust.  On
December 18,  2001,  the Trust issued  $8,000,000  in the form of floating  rate
capital securities  through a pooled trust preferred  securities  offering.  The
proceeds  from this  issuance,  along with the  Corporation's  $248,000  capital
contribution for the Trust's common securities,  were used to acquire $8,247,000
aggregate   principal   amount  of  the   Corporation's   floating  rate  junior
subordinated   deferrable   interest  debentures  due  December  18,  2031  (the
"Debentures"),  which  constitute the sole asset of the Trust. The interest rate
on the  Debentures  and  the  capital  securities  is  variable  and  adjustable

                                       12
<PAGE>


quarterly at 3.60% over the  three-month  LIBOR,  with an initial rate of 5.60%.
The  Debentures  are  subject  to  redemption  at  par  at  the  option  of  the
Corporation,  subject to prior regulatory  approval,  in whole or in part on any
interest  payment date after  December 18, 2006. On December 18, 2006, the Trust
was redeemed with the proceeds from Capital Trust II.

A  summary  of  the  Subordinated  Deferrable  Interest  Debentures  issued  and
outstanding follows:

<TABLE>
<CAPTION>

                                 Amount Outstanding at
                                        March 31,
                                 ------------------------                                              Distribution
                                                                    Prepayment                            Payment
             Name                   2007        2006       Rate    Option Date         Maturity         Frequency
-------------------------------- ---------- ------------- ------ ----------------- ------------------- --------------
    <S>                               <C>        <C>        <C>         <C>               <C>               <C>
Union Financial Statutory
Trust I                                $--   $8,000,000   8.53%  December 18, 2006  December 18, 2031    Quarterly
-------------------------------- ---------- ------------- ------ ----------------- ------------------- --------------
Provident Community
Bancshares Capital Trust I       4,000,000       B        7.39%    October 1, 2011    October 1, 2036    Quarterly
-------------------------------- ---------- ------------- ------ ----------------- ------------------- --------------
Provident Community
Bancshares Capital Trust II      8,000,000       B        7.10%      March 1, 2012      March 1, 2037    Quarterly
-------------------------------- ---------- ------------- ------ ----------------- ------------------- --------------

         Total                 $12,000,000
                               ============
</TABLE>


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

Critical Accounting Policies
----------------------------
The  Corporation  has  adopted  various  accounting  policies  which  govern the
application of accounting  principles generally accepted in the United States of
America in the preparation of financial statements.

Certain  accounting  policies involve  significant  judgments and assumptions by
management  which,  if incorrect,  could 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 assumptions 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  the
Corporation.

The Corporation  believes the allowance for loan losses is a critical accounting
policy that requires significant judgments and estimates used in the preparation
of  consolidated  financial  statements.  Management  reviews  the  level of the
allowance on a monthly basis and establishes the provision for loan losses based
on the composition and volume of the loan portfolio,  overall portfolio quality,

                                       13
<PAGE>


delinquency  levels,  a review  of  specific  problem  loans,  loss  experience,
economic conditions, and other factors related to the collectibility of the loan
portfolio. A portion of the allowance is established by segregating the loans by
residential  mortgage,  commercial and consumer  loans and assigning  allocation
percentages  based on historical  loss experience and  delinquency  trends.  The
applied allocation percentages are reevaluated at least annually to ensure their
relevance in the current  economic  environment.  Accordingly,  increases in the
size of the loan portfolio and the increased  emphasis on commercial real estate
and commercial  business  loans,  which carry a higher degree of risk of default
and,   thus,  a  higher   allocation   percentage,   increases  the   allowance.
Additionally,  a portion of the allowance is  established  based on the level of
classified assets.

Although the Corporation believes that it uses the best information available to
establish the allowance for loan losses,  future  additions to the allowance may
be necessary  based on estimates  that are  susceptible to change as a result of
changes in economic conditions and other factors. In addition, the Office of the
Comptroller  of the Currency,  as an integral part of its  examination  process,
will  periodically  review the  Corporation's  allowance  for loan losses.  Such
agency may require the  Corporation  to recognize  adjustments  to the allowance
based on its  judgments  about  information  available  to it at the time of its
examination.

Forward Looking Statements
--------------------------

Management's  discussion  and  analysis of  financial  condition  and results of
operations   and  other   portions  of  this  Form  10-Q  may  contain   certain
"forward-looking statements" concerning the future operations of the Corporation
and the Bank. These  forward-looking  statements are generally identified by the
use  of the  words  "believe,"  "expect,"  "intend,"  "anticipate,"  "estimate,"
"project," or similar  expressions.  Management intends to take advantage of the
safe harbor provisions of the Private  Securities  Litigation Reform Act of 1995
and is  including  this  statement  for the  express  purpose  of  availing  the
Corporation  of  the  protections  of  such  safe  harbor  with  respect  to all
forward-looking statements contained in this report to describe future plans and
strategies.  Management's  ability  to  predict  results or the effect of future
plans or strategies is inherently  uncertain.  Factors which could effect actual
results  include  interest  rate  trends,  the general  economic  climate in the
Corporation's and the Bank's market area and the country as a whole, the ability
of the  Corporation  and the Bank to  control  costs and  expenses,  competitive
products and pricing, loan delinquency rates, the quality and composition of the
loan and investment portfolios,  changes in accounting principles and guidelines
and changes in federal and state regulation.  These factors should be considered
in evaluating the forward-looking  statements,  and undue reliance should not be
placed on such statements.

Except as required by applicable law or  regulation,  the  Corporation  does not
undertake,  and specifically  disclaims any obligation,  to release publicly the

                                       14
<PAGE>


result of any revisions  that may be made to any forward  looking  statements to
reflect events or circumstances after the date of these statements or to reflect
the occurrence of anticipated or unanticipated events.



                                       15
<PAGE>


Financial Condition
-------------------

Assets
------

Total assets of the Corporation increased $9,201,000,  or 2.37%, to $396,831,000
at March 31,  2007 from  $387,630,000  at December  31,  2006.  Investments  and
mortgage-backed  securities  decreased  approximately  $976,000,  or 0.80%, from
December 31, 2006 to March 31, 2007, due to the maturity of government sponsored
enterprise  securities,  offset  by the  purchase  of  Freddie  Mac  securities.
Proceeds from the maturity of investment securities were utilized to fund growth
in  higher-yielding  loans.  Cash and due from banks  increased  $3,029,000,  or
33.2%, to $12,153,000 at March 31, 2007 from $9,124,000 at December 31, 2006 due
to an increase in fed funds sold as a result of deposit growth.

Investment and Mortgage-backed Securities
-----------------------------------------

 Held to  Maturity-Securities  classified  as held to maturity  consisted of the
following (in thousands):

                                 March 31, 2007            December 31, 2006
                                ---------------           ------------------
                            Amortized          Fair      Amortized      Fair
                              Cost             Value       Cost         Value
                              ----             -----       ----         -----

Municipal Securities         $3,176           $3,239      $3,182        $3,239
                             ======           ======      ======        ======






                                       16
<PAGE>

Available for Sale-Securities  classified as available for sale consisted of the
following (in thousands):
<TABLE>
<CAPTION>
                                                                                  March 31, 2007      December 31, 2006
                                                                                -------------------  -------------------
                                                                                Amortized   Fair     Amortized    Fair
                                                                                  Cost      Value      Cost      Value
                                                                                ---------  --------  ---------  --------
<S>                                                                            <C>             <C>        <C>  <C>
Investment Securities:
  U.S. Agency Obligations                                                      $     511  $    496  $     515  $    500
  Government Sponsored Enterprises                                                66,907    66,270     73,511    72,638
  Municipal Securities                                                            10,291    10,660     10,594    10,970
  Other                                                                           14,310    14,424     14,533    14,644
                                                                                --------- --------- ---------- ---------
Total Investment Securities                                                       92,019    91,850     99,153    98,752
                                                                                --------- --------- ---------- ---------
Mortgage-backed Securities:
  Fannie Mae                                                                      12,717    12,319     13,243    12,813
  Ginnie Mae                                                                       1,207     1,214         55        57
  Freddie Mac                                                                      8,569     8,564      3,111     3,109
  Collateralized Mortgage Obligations                                              4,171     4,086      4,380     4,272
                                                                                --------- --------- ---------- ---------
Total Mortgage-backed Securities                                                  26,664    26,183     20,789    20,251
                                                                                --------- --------- ---------- ---------
Total Available for Sale                                                       $ 118,683  $118,033  $ 119,942  $119,003
                                                                               ========== ========= ========== =========
</TABLE>

Loans

Loans  increased  $5,040,000,  or 2.17%,  to $236,926,000 at March 31, 2007. The
Corporation   continues  to  focus  on  consumer  and  commercial  lending  with
specialized loan officers and products.

                                       17
<PAGE>

Loans receivable consisted of the following (in thousands):
<TABLE>
<CAPTION>

                                                                                             March 31,     December 31,
                                                                                           -------------- --------------
                                                                                               2007           2006
                                                                                           -------------- --------------
<S>                                                                                        <C>            <C>
Mortgage loans:
  Fixed rate residential                                                                   $      17,673  $      19,187
  Adjustable-rate residential                                                                      9,581         10,295
  Commercial real estate                                                                          67,103         62,450
  Construction                                                                                     4,819          5,787
Total mortgage loans                                                                              99,176         97,719
Commercial loans:
  Commercial non-real estate                                                                      30,895         42,093
  Commercial lines of credit                                                                      65,217         51,469
Total commercial loans                                                                            96,112         93,562
Consumer loans:
  Home equity                                                                                     15,394         15,936
  Consumer and installment                                                                        31,611         29,827
  Consumer lines of credit                                                                           340            373
Total consumer loans                                                                              47,345         46,136
Total loans                                                                                      242,633        237,417
Less:
  Undisbursed portion of interim
  construction loans                                                                              (2,238)        (2,238)
  Unamortized loan discount                                                                         (546)          (607)
  Allowance for loan losses                                                                       (2,906)        (2,754)
  Net deferred loan origination costs                                                                (17)            68

Total, net                                                                                 $     236,926  $     231,886
                                                                                           -------------- --------------

Weighted-average interest rate of loans                                                             8.23%          8.14%
</TABLE>

Cash  surrender  value of life  insurance  increased  $3,267,000,  or 58.2%,  to
$8,880,000  at March 31, 2007 from  $5,613,000  at December  31, 2006 due to the
purchase of additional bank-owned life insurance that will be utilized to offset
the rapidly rising costs of providing our employee benefits.

Liabilities
-----------

Total liabilities increased  $8,625,000,  or 2.38%, to $370,288,000 at March 31,
2007 from $361,663,000 at December 31, 2006. Deposits increased $15,977,000,  or
6.43%, to $264,417,000 at March 31, 2007 from $248,440,000 at December 31, 2006.
The increase  was due  primarily  to growth in accounts  generated  from the new
banking center openings.  The Corporation  continues to target lower cost demand
deposit accounts through media advertising.

                                       18
<PAGE>

Deposit accounts were as follows (in thousands):
<TABLE>
<CAPTION>

                                                                             March 31, 2007         December 31, 2006
                                                                         ----------------------- -----------------------
                                                                         Rate   Balance     %    Rate   Balance     %
                                                                         ----- --------- ------- ----- --------- -------

<S>                                                                            <C>         <C>         <C>         <C>
Account Type
NOW accounts:
  Commercial non-interest-bearing                                          --  $ 18,036    6.82%   --  $ 16,718    6.73%
  Non-commercial                                                         2.75%   56,886   21.51% 2.82%   52,512   21.14%
Money market checking accounts
                                                                         4.67%   22,087    8.35% 4.22%   14,178    5.71%
Regular savings                                                          0.75%   15,666    5.93% 0.76%   14,930    6.00%
Total demand and savings deposits
                                                                         2.42%  112,675   42.61% 2.20%   98,338   39.58%
Savings certificates:
  Up to 3.00%                                                                    10,142    3.84%         15,557    6.26%
  3.01 %- 4.00%                                                                  26,707   10.10%         23,491    9.46%
  4.01 %- 5.00%                                                                  19,961    7.55%         31,086   12.51%
  5.01 %- 6.00%                                                                  94,907   35.89%         79,943   32.18%
  6.01 %- 7.00%                                                                      25    0.01%             25    0.01%
                                                                                -------- -------        -------- -------
Total savings certificates                                               4.62%  151,742   57.39% 4.47%  150,102   60.42%
                                                                                -------- -------        -------- -------

Total deposit accounts                                                   3.68% $264,417  100.00% 3.56% $248,440  100.00%
                                                                               --------- -------       --------- -------
</TABLE>

At  March  31,  2007 and  December  31,  2006,  the  Bank  had  $61,500,000  and
$70,000,000,  respectively,  of advances outstanding from the FHLB. The maturity
of the advances from the FHLB is as follows (in thousands):
<TABLE>
<CAPTION>

                                                                               March 31, 2007       December 31, 2006
                                                                            --------------------- ----------------------
                                                                                Wtd Avg Rate           Wtd Avg Rate
                                                                            --------------------- ----------------------

<S>                                                                         <C>             <C>   <C>              <C>
Contractual Maturity:
Within one year - fixed rate                                                $   8,000       4.77% $    21,500      5.18%
Within one year - adjustable rate                                              10,000       5.33%      15,000      5.36%
After one but within three years - fixed rate
                                                                                5,000       4.93%           B         B%
After one but within three years - adjustable rate
                                                                                7,500       5.30%      12,500      5.33%
After three but within five years - adjustable rate                             5,000       4.92%           B         B%
Greater than five years - adjustable rate                                      26,000       4.16%      21,000      4.33%
                                                                             ---------             -----------
Total advances                                                              $  61,500       4.69% $    70,000      5.00%
                                                                            ==========            ============
</TABLE>

                                       19
<PAGE>

The Bank pledges as collateral  for the advances its  investment  securities and
has entered into a blanket  collateral  agreement with the FHLB whereby the Bank
maintains, free of other encumbrances, qualifying loans (as defined) with unpaid
principal  balances  equal  to,  when  discounted  at 50%  to 75% of the  unpaid
principal  balances,  100% of total  advances.  Borrowings from the Federal Home
Loan Bank (the "FHLB") decreased $8,500,000,  or 12.14%, to $61,500,000 at March
31, 2007 from $70,000,000 at December 31, 2006.  Securities sold under agreement
to  repurchase  increased  $1,163,000  to  $29,696,000  at March  31,  2007 from
$28,533,000  at December 31, 2006.  During this  period,  securities  sold under
agreement to  repurchase  provided a lower cost funding  alternative  to Federal
Home Loan Bank advances.  The reduction in borrowings was funded with the excess
deposit growth.

Shareholders' Equity
--------------------

Shareholders'  equity increased $576,000,  or 2.22%, to $26,543,000 at March 31,
2007 from  $25,967,000  at  December  31,  2006 due  primarily  to net income of
$649,000 and a $187,000  decrease in unrealized  losses on securities  available
for sale,  offset by the  repurchase  of 5,061  shares at a cost of $99,000  and
dividend payments of $0.11 per share at a cost of $200,000.

Liquidity
---------

Liquidity  is the  ability  to  meet  demand  for  loan  disbursements,  deposit
withdrawals,  repayment  of debt,  payment of  interest  on  deposits  and other
operating  expenses.  The  primary  sources  of  liquidity  are  deposits,  loan
repayments, borrowings, maturity and sale of securities and interest payments.

While  maturities  and  scheduled  amortization  of  loans  and  securities  are
predictable  sources of funds,  deposit  outflows and mortgage  prepayments  are
greatly   influenced  by  general  interest  rates,   economic   conditions  and
competition.  The  primary  investing  activities  of the  Corporation  are  the
origination of commercial and consumer loans, and the purchase of investment and
mortgage-backed  securities.  These activities are funded primarily by principal
and  interest  payments  on loans and  investment  securities,  deposit  growth,
securities  sold under  agreements to  repurchase  and the  utilization  of FHLB
advances.

At March 31, 2007, the Corporation's investment in marketable securities totaled
$121,209,000,   nearly  all  of  which  is  available  for  sale.  Approximately
$72,635,000  and  $74,387,000 of debt  securities at March 31, 2007 and December
31,  2006,  respectively,  were  pledged  by the Bank as  collateral  to  secure
deposits of the State of South  Carolina,  and Union,  Laurens and York counties
along with additional borrowings and repurchase agreements.

Outstanding  loan  commitments  (including  commitments  to fund  credit  lines)
totaled   $136,233,000  at  March  31,  2007.   Management  of  the  Corporation
anticipates  that it will have  sufficient  funds  available to meet its current
loan commitments.

The  Corporation  closely  monitors  its  liquidity  position on a daily  basis.
Certificates of deposit,  which are scheduled to mature in one year or less from
March 31,  2007,  totaled  $109,953,000.  The  Corporation  relies  primarily on
competitive  rates,  customer  service,  and  long-standing  relationships  with
customers to retain deposits. From time to time, the Corporation will also offer
special  products  to its  customers  to increase  retention  and to attract new
deposits.  Based upon the  Corporation's  experience with deposit  retention and
current  retention  strategies,  management  believes  that,  although it is not
possible to predict  future terms and  conditions  upon  renewal,  a significant
portion of such deposits will remain with the  Corporation.  If the  Corporation
requires  funds  beyond its  ability to  generate  them  internally,  additional
sources of funds are  available  through FHLB  advances,  securities  sold under
agreements to repurchase and lines of credit. At March 31, 2007, the Corporation
had  outstanding  $61,500,000 of FHLB  borrowings and  $29,696,000 of securities
sold under  agreements to  repurchase.  At March 31, 2007, the  Corporation  had
unused short-term lines of credit to purchase federal funds from unrelated banks
totaling  $20,000,000 and the ability to borrow an additional  $19,000,000  from
FHLB and secured borrowing lines.  Lines of credit are available on a one-to-ten
day basis for general  purposes  of the  Corporation.  All of the  lenders  have
reserved the right to withdraw these lines at their option.

                                       20
<PAGE>

Capital Management
------------------

The  Bank  and  the  Corporation  are  subject  to  various  regulatory  capital
requirements administered by banking regulators. Failure to meet minimum capital
requirements   can  initiate  certain   mandatory  -  and  possibly   additional
discretionary - actions by regulators  that, if undertaken,  could have a direct
material effect on the Corporation's  consolidated  financial statements.  Under
capital adequacy  guidelines and the regulatory  framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve quantitative
measures of the Bank's assets, liabilities,  and certain off-balance-sheet items
as calculated under regulatory accounting practices.  The Bank's capital amounts
and classifications are also subject to qualitative  judgments by the regulators
about components, risk weights and other factors.

Quantitative  measures  established by  regulations  to ensure capital  adequacy
require the Bank and the  Corporation to maintain  minimum amounts and ratios of
total and Tier 1  capital  to  risk-weighted  assets,  and of Tier 1 capital  to
average assets (as defined in the regulations). Management believes, as of March
31,  2007,  that  the  Bank  and  the  Corporation  meet  the  capital  adequacy
requirements to which they are subject.

As of March 31,  2007,  the Bank was  "well  capitalized"  under the  regulatory
framework for prompt corrective action based on its capital ratio  calculations.
In  order  to be  "well  capitalized",  the Bank  must  maintain  minimum  total
risk-based,  Tier 1 risk-based,  and Tier 1 leverage  ratios as set forth in the
following table.

Under present regulations of the Office of the Comptroller of the Currency,  the
Bank must have core capital (leverage  requirement)  equal to 4.0% of assets, of
which 1.5% must be tangible capital,  excluding intangible assets. The Bank must
also maintain risk-based regulatory capital as a percent of risk weighted assets
at least equal to 8.0%. In measuring compliance with capital standards,  certain
adjustments must be made to capital and total assets.

                                       21
<PAGE>

The following tables present the total risk-based,  Tier 1 risk-based and Tier 1
leverage requirements for the Corporation and the Bank (dollars in thousands).
<TABLE>
<CAPTION>
                                                                           March 31, 2007
                                                 -------------------------------------------------------------------
                                                        Actual          Regulatory Minimum      Well Capitalized
                                                 -------------------- ---------------------- -----------------------
                                                   Amount     Ratio     Amount      Ratio       Amount       Ratio
                                                 ----------- -------- ---------- ----------- ------------  ---------
                                                      $         %         $           %           $            %
<S>                                                  <C>        <C>      <C>           <C>        <C>          <C>
Leverage ratio

Corporation                                          32,447     8.34%    15,557        4.00%         n/a        n/a

Bank                                                 35,199     9.06%    15,544        4.00%      19,430       5.00%

Tier 1 capital ratio

Corporation                                          32,447    11.67%    11,115        4.00%         n/a        n/a

Bank                                                 35,199    12.68%    11,106        4.00%      16,658       6.00%

Total risk-based capital ratio

Corporation                                          38,289    13.77%    22,231        8.00%         n/a        n/a

Bank                                                 38,105    13.72%    22,211        8.00%      27,764      10.00%
</TABLE>

During fiscal 2003, the Corporation implemented a share repurchase program under
which the Board of Directors of the Corporation  authorized the repurchase of up
to 5% of the outstanding shares or 98,000 shares. The program was expanded by an
additional 5%, or 98,000 shares,  in fiscal 2004, by an additional 5%, or 95,000
shares in fiscal 2005 and by an additional  5%, or 92,000 shares in fiscal 2006.
The shares  are to be  repurchased  either  through  open  market  purchases  or
privately  negotiated  transactions,  depending on market  conditions  and other
factors.  Repurchased  shares will be held in treasury and will be available for
the Corporation's  benefit plans.  During the three months ended March 31, 2007,
the Corporation  repurchased 5,061 shares. As of March 31, 2007, the Corporation
had  repurchased a total of 281,202  shares under these  authorizations  and had
101,798 shares available for repurchase under these authorizations.

Off-Balance Sheet Risk
----------------------

In the normal  course of  operations,  the  Corporation  engages in a variety of
financial  transactions that, in accordance with generally  accepted  accounting
principles,  are not recorded in its financial  statements.  These  transactions
involve,  to varying  degrees,  elements of credit,  interest rate and liquidity
risk. Such  transactions  are used primarily to manage  customer's  requests for
funding  and  take the  form of  legally  binding  agreements  to lend  money to
customers  at  predetermined  interest  rates  for a  specified  period of time.
Outstanding  loan  commitments  (including  commitments  to fund  credit  lines)
totaled  $136,233,000 at March 31, 2007. Each  customer's  credit  worthiness is
evaluated on a case-by-case basis. The amount of collateral obtained,  if deemed
necessary by the  Corporation  upon extension of credit,  is based on the credit
evaluation  of  the  borrower.   Collateral  varies  but  may  include  accounts
receivable, inventory, property, plant and equipment, commercial and residential
real estate.  The credit risk on these commitments is managed by subjecting each
customer to normal underwriting and risk management processes.

                                       22
<PAGE>

For the period  ended  March 31,  2007,  the  Corporation  did not engage in any
off-balance  sheet  transactions  reasonably likely to have a material effect on
its financial condition, results of operation and cash flows.

Results of operations for the three months ended March 31, 2007 and 2006
------------------------------------------------------------------------

General
-------

Net income decreased  $50,000,  or 7.15%, to $649,000 for the three months ended
March  31,  2007 as  compared  to  $699,000  for the same  period  in 2006 as an
increase in net interest income and  non-interest  income along with a reduction
in the  provision  for loan  losses  were more than  offset  by an  increase  in
non-interest  expense.  The increase in non-interest expense from the prior year
quarter reflects the additional  expenses  associated with opening three banking
centers in the previous twelve months.

                                       23
<PAGE>

Average Yields and Rates
------------------------
(dollars in thousands)
<TABLE>
<CAPTION>

                                                                        Three Months Ended March 31,
                                                                   2007                              2006
                                                    ----------------------------------- --------------------------------

                                                      Average                Average     Average              Average
                                                      Balance    Interest  Yield/Cost    Balance  Interest  Yield/Cost
                                                    ------------ -------- ------------- --------- -------- -------------
<S>   <C>                                           <C>          <C>              <C>   <C>       <C>              <C>
Interest-earning assets:
Loans (1)                                           $   235,666  $ 4,776          8.11% $197,481  $ 3,789          7.67%
Mortgage-backed securities                               24,636      290          4.70%   26,810      282          4.21%
Investment securities                                   100,541    1,326          5.28%  118,276    1,340          4.53%
Other interest-earning assets                             2,240       27          4.78%    1,500       16          4.26%
                                                     -----------  ------- -------------  --------  ------- -------------
Total interest-earning assets                           363,083    6,419          7.07%  344,067    5,427          6.31%
                                                                  ------- =============            ------- =============
Non-interest-earning assets                              29,421                           26,832
Total assets                                        $   392,504                         $370,899
                                                    ============                        =========
Interest-bearing liabilities:
Deposits                                                261,388    2,389          3.66%  244,745    1,705          2.79%
Floating rate junior subordinated deferrable
 interest debentures                                     12,372      223          7.20%    8,247      168          8.17%
FHLB advances and other borrowings
                                                         89,654    1,073          4.79%   91,291      900          3.95%
                                                     -----------  ------- -------------  --------  ------- -------------
Total interest-bearing liabilities                      363,414    3,685          4.06%  344,283    2,773          3.22%
                                                                  ------- =============            ------- =============
Non-interest-bearing liabilities                          2,696                            1,533
                                                     -----------                         --------
Total liabilities                                       366,110                          345,816
Shareholders = equity                                    26,394                           25,083
Total liabilities and shareholders= equity
                                                    $   392,504                         $370,899
                                                    ============                        =========
Net interest income/spread                                       $ 2,734          3.02%           $ 2,654          3.09%
                                                                 ========                         ========
Net yield on earning assets                                                       3.01%                            3.09%

(1) Average balances of loans include non-accrual loans.
</TABLE>

Interest Income
---------------

Interest  income  increased  $992,000,  or 18.28%,  to $6,419,000  for the three
months  ended March 31,  2007 as  compared to the same period in 2006.  Interest
income on loans  increased by 26.05%,  or $987,000,  to $4,776,000 for the three
months ended March 31, 2007 from $3,789,000 for the three months ended March 31,
2006,  due  primarily to a higher  average  balance of loans and higher  average
rates due to increasing market interest rates along with our increased  emphasis
on commercial and consumer loan  originations.  Interest on deposits and federal
funds  sold,   combined  with   interest  and   dividends  on   investment   and
mortgage-backed securities increased $5,000 for the three months ended March 31,
2007 to $1,643,000 from $1,638,000  during the same period in 2006 due to higher
yields from higher market interest rates offset by lower average balances.

                                       24
<PAGE>

Interest Expense
----------------

Interest  expense  increased  $912,000,  or 32.89%,  to $3,685,000 for the three
months  ended March 31, 2007 as  compared  to the three  months  ended March 31,
2006.  Interest expense on deposit accounts  increased  $684,000,  or 40.12%, to
$2,389,000 for the three months ended March 31, 2007 from $1,705,000  during the
same  period in 2006 due to higher  average  balances  and cost of deposits as a
result of higher market rates.  The  Corporation  continues to target lower cost
demand deposit accounts versus  traditional higher cost certificates of deposits
in order to  reduce  overall  funding  costs.  Interest  expense  on  borrowings
increased  $173,000,  or 19.22%,  for the three  months  ended March 31, 2007 as
compared to the same period in the previous year due to higher  market  interest
rates. Interest expense on floating rate junior subordinated deferrable interest
debentures  increased $55,000, or 32.74%, to $223,000 for the three months ended
March  31,  2007  from  $168,000  during  the same  period in 2006 due to higher
average  balances,  offset by lower  rates due to the  repayment  of older trust
preferred  with the  proceeds  of newer trust  preferred  with lower  rates.  In
addition,  on July 21, 2006, the Corporation completed a private placement of $4
million in trust preferred securities thereby increasing outstanding balances to
$12 million at March 31, 2007 compared to $8 million at March 31, 2006.

Provision for Loan Losses
-------------------------

During the three months ended March 31, 2007,  the provision for loan losses was
$160,000 as compared to $175,000 for the same period in the previous year due to
a decrease  in  nonperforming  loans and loans  charged-off  that was  partially
offset by loan growth.  The provision also reflects the Corporation's  continued
movement   from   longer-term,   fixed-rate   residential   mortgage   loans  to
shorter-term,   floating-rate   consumer  and  commercial  loans.  Consumer  and
commercial loans carry higher risk weighted rates in the reserve  calculation as
compared to residential  mortgage loans.  Nonperforming loans decreased $206,000
from $1,295,000 at December 31, 2006 to $1,089,000 at March 31, 2007. During the
three months ended March 31, 2007, bad debt charge-offs,  net of recoveries, was
$8,000 as  compared to $28,000 for the same  period in the  previous  year.  The
Corporation's  loan loss allowance at March 31, 2007 was approximately  1.21% of
the Corporation's outstanding loan portfolio and 266.85% of non-performing loans
compared to 1.17% of the Corporation's outstanding loan portfolio and 212.66% of
non-performing loans at December 31, 2006.

The changes in the  allowance  for loan losses  consisted of the  following  (in
thousands):

                 Balance at beginning of period         $   2,754
                 Provision for loan losses                    160
                 Charge-offs, net                              (8)
                                                        ---------
                 Balance at end of period               $   2,906
                                                        =========

                                       25
<PAGE>

The  following  table  sets  forth   information  with  respect  to  the  Bank's
non-performing assets at the dates indicated (dollars in thousands):
<TABLE>
<CAPTION>

                                                                                   March 31, 2007   December 31, 2006
                                                                                  ----------------- -----------------
<S>                                                                                            <C>               <C>
Non-accruing loans which are
 contractually past due 90 days
 or more:

Real estate                                                                       $             68  $            459
Commercial                                                                                     826               631
Consumer                                                                                       195               205
                                                                                  ----------------- -----------------
Total                                                                             $          1,089  $          1,295
                                                                                  ================= =================

Percentage of loans receivable                                                                0.44%             0.56%
                                                                                  ================= =================

Percentage of allowance for loan losses
to total loans outstanding                                                                    1.21%             1.17%
                                                                                  ================= =================

Allowance for loan losses                                                         $          2,906  $          2,754
                                                                                  ================= =================
Real estate acquired through
foreclosure and repossessed assets                                                $            148  $            148
                                                                                  ================= =================

</TABLE>

Non-performing  loans for the  three  months  ended  March  31,  2007  decreased
$206,000 from December 31, 2006 due primarily to a reduction in residential real
estate loans. The allowance for loan loss calculation includes a segmentation of
loan  categories  subdivided by  residential  mortgage,  commercial and consumer
loans.  Each category is rated for all loans including  performing  groups.  The
weight  assigned to each  performing  group is developed from previous loan loss
experience and as the loss experience  changes,  the category weight is adjusted
accordingly. In addition to loan loss experience, management's evaluation of the
loan portfolio  includes the market value of the underlying  collateral,  growth
and  composition  of  the  loan  portfolio,   delinquency  trends  and  economic
conditions.  Management  evaluates the carrying value of loans  periodically and
the allowance for loan loss calculation will adjust accordingly.

Non-Interest Income
-------------------

Total non-interest income increased $37,000, or 5.39%, to $723,000 for the three
months  ended March 31, 2007 from  $686,000  for the same period in the previous
year. Fees from financial services increased $69,000, or 10.92%, to $701,000 for
the three months  ended March 31, 2007 from  $632,000 for the same period in the
previous  year.  The change was from an  increase  in service  charges due to an
increase in the number of transaction accounts.

                                       26
<PAGE>

Non-Interest Expense
--------------------

For the three months ended March 31, 2007, total non-interest  expense increased
$253,000,  or 11.57%, to $2,439,000 from $2,186,000 for the same period in 2006.
The increase was due primarily to higher operating costs associated with banking
centers  opened in  Simpsonville,  South  Carolina  and two in Rock Hill,  South
Carolina during the previous twelve months.  Compensation and employee  benefits
increased $95,000,  or 8.74%, to $1,182,000 for the three months ended March 31,
2007  from  $1,087,000  for the same  period  in 2006 due  primarily  to  higher
compensation and benefits costs for normal merit salary increases and additional
staff due to the new banking center  openings.  Occupancy and equipment  expense
increased  $97,000,  or 19.96%, to $583,000 for the three months ended March 31,
2007 from  $486,000 for the same period in 2006,  due  primarily to higher lease
expense from the new locations.  Advertising/public  relations expense increased
$33,000,  or 91.67%,  to $69,000 for the three  months ended March 31, 2007 from
$36,000  for the same  period in 2006 due  primarily  to product  and  promotion
expenses for the new banking center locations and product promotion expenses for
business  checking  accounts.  Loan operations  expense  increased  $26,000,  or
185.71%,  to $40,000 for the three  months ended March 31, 2007 from $14,000 for
the same period in 2006, due to higher costs associated with loan foreclosures.

Item 3. Quantitative and Qualitative Disclosures about Market Risk
        ----------------------------------------------------------

The  Corporation  is  committed  to  following a program of asset and  liability
management  in an  effort to  manage  the  fluctuations  in  earnings  caused by
movements in interest rates. A significant  portion of the Corporation's  income
results  from the spread  between  the yield  realized  on its  interest-earning
assets  and the rate of  interest  paid on its  deposits  and other  borrowings.
Differences  in the timing and volume of repricing  assets versus the timing and
volume of repricing  liabilities  expose the  Corporation to interest rate risk.
Management's  policies  are  directed  at  minimizing  the impact on earnings of
movements in interest rates.

The  Corporation's   Asset/Liability   Committee  makes  pricing  and  marketing
decisions  on  deposit  and loan  products  in  conjunction  with  managing  the
Corporation's  interest rate risk. In addition,  the  Asset/Liability  Committee
reviews  the  Corporation's  securities  portfolio,   FHLB  advances  and  other
borrowings as well as the Corporation's asset and liability policies.

The primary  objective of  Asset/Liability  management at the  Corporation is to
manage  interest  rate risk and achieve  reasonable  stability  in net  interest
income throughout  interest rate cycles in order to maintain adequate liquidity.
This is achieved by  maintaining  the proper balance of  rate-sensitive  earning
assets   and   rate-sensitive   costing   liabilities.   The   relationship   of
rate-sensitive  earning  assets to  rate-sensitive  costing  liabilities  is the
principal factor in projecting the effect that  fluctuating  interest rates will
have on future net interest income.  Rate-sensitive  assets and interest-bearing
liabilities  are those that can be repriced  to current  market  rates  within a
relatively  short time  period.  Management  monitors  the rate  sensitivity  of
interest-earning assets and interest-bearing liabilities over the entire life of
these instruments.

                                       27
<PAGE>

The  Corporation  has  established  policies  and  monitors  results  to control
interest rate  sensitivity.  Although the Corporation  utilizes measures such as
static  gap,  which  is  simply  the  measurement  of  the  difference   between
interest-sensitive  assets and  interest-sensitive  liabilities  repricing for a
particular  time period,  just as important a process is the  evaluation  of how
particular  assets and  liabilities are impacted by changes in interest rates or
selected  indices  as they  reprice.  Asset/liability  modeling  techniques  are
utilized by the  Corporation to assess  varying  interest rate and balance sheet
mix assumptions.

Net Interest Income Simulation  Analysis.  The Corporation analyzes its interest
rate  sensitivity  position to manage the risk  associated  with  interest  rate
movements through the use of interest income simulation.  The matching of assets
and liabilities may be analyzed by examining the extent to which such assets and
liabilities  are  "interest  sensitive."  An  asset or  liability  is said to be
interest  rate  sensitive  within a specific  time  period if it will  mature or
reprice within that time period.

The Corporations goal is to manage asset and liability positions to moderate the
effects of interest rate  fluctuations on net interest  income.  Interest income
simulations utilizing interest rate shocks are completed quarterly and presented
to the  Asset/Liability  Committee.  The simulations  provide an estimate of the
impact of changes in  interest  rates on net  interest  income  under a range of
assumptions.  The  interest  rate shocks are compared to board  approved  policy
limits and are reviewed by the  Asset/Liability  Committee on a quarterly basis.
The simulation  incorporates  assumptions  regarding the potential timing in the
repricing  of certain  assets and  liabilities  when market rates change and the
changes in spreads  between  different  market rates.  The  simulation  analysis
incorporates  management's  current  assessment of the risk that pricing margins
will change adversely over time due to competition or other factors.

Simulation analysis is only an estimate of the Corporation's  interest rate risk
exposure at a particular point in time. The Corporation  continually reviews the
potential  effect  changes in interest rates could have on the repayment of rate
sensitive assets and funding requirements of rate sensitive liabilities.

The table below sets forth an approximation of the  Corporation's  exposure as a
percentage  of estimated  net  interest  income for the next twelve month period
using interest income  simulation.  The simulation  uses projected  repricing of
assets  and  liabilities  on the basis of  contractual  maturities,  anticipated
repayments  and  scheduled  rate  adjustments.   Prepayment  rates  can  have  a
significant  impact on interest  income  simulation.  When interest  rates rise,
prepayments tend to slow. When interest rates fall, prepayments tend to rise.

                                       28
<PAGE>

The following table reflects  changes in estimated net interest income from rate
shocks of (+) or (-) 100 and 200 basis  points in a rising and falling  interest
rate environment for the Corporation.

                                          March 31,    December 31,
Change in Rates (Basis Points)              2007           2006
---------------------------------------- -----------  ---------------
+200                                          +1.68%           +3.76%
+100                                          +1.05%           +2.06%
-100                                          -0.91%           -2.42%
-200                                          -8.68%           -5.91%

The Corporation  decreased slightly in rising interest rate environments for the
period ending March 31, 2007 as compared to the period ending  December 31, 2006
due primarily to significant growth in prime-based loan products that was offset
by an increase in short-term borrowings.

The 200 and 100 basis  point  change in rates in the above  table is  assumed to
occur evenly over the following twelve months.  Based on the scenario above, net
interest  income would be  positively  affected in the  twelve-month  periods if
rates rose by 100 and 200 basis points, but would be adversely affected if rates
declined by 100 and 200 basis points.

Item 4. Controls and Procedures
        -----------------------

The Corporation's  management,  including the Corporation's  principal executive
officer and principal financial officer, have evaluated the effectiveness of the
Corporation's  "disclosure  controls and procedures," as such term is defined in
Rule  13a-15(e)  promulgated  under  the  Securities  Exchange  Act of 1934,  as
amended,  (the  "Exchange  Act").  Based upon their  evaluation,  the  principal
executive officer and principal  financial officer concluded that, as of the end
of the period covered by this report, the Corporation's  disclosure controls and
procedures  were  effective  for the  purpose of ensuring  that the  information
required to be disclosed in the reports  that the  Corporation  files or submits
under the Exchange Act with the Securities and Exchange  Commission  (the "SEC")
(1) is recorded,  processed,  summarized  and  reported  within the time periods
specified in the SEC's rules and forms,  and (2) is accumulated and communicated
to the Corporation's management, including its principal executive and principal
financial officers,  as appropriate to allow timely decisions regarding required
disclosure.

There has been no change in the  Corporation's  internal  control over financial
reporting  identified  in  connection  with  the  evaluation  required  by  Rule
13(a)-15(e) that occurred during the Corporation's  last fiscal quarter that has
materially   affected  or  is  reasonably  likely  to  materially   affect,  the
Corporation's internal control over financial reporting.


                                       29
<PAGE>

PART II - OTHER INFORMATION

Item  1.  Legal Proceedings
          -----------------

The Corporation is not involved in any legal  proceedings.  The Bank is involved
in various  claims and legal  actions  arising in the normal course of business.
Management  believes that these  proceedings are immaterial to the Corporation's
financial condition and results of operations.

Item  1A.  Risk Factors
           ------------

In  addition  to the other  information  set forth in this  report,  you  should
carefully  consider the factors  discussed in Part I, "Item 1A. Risk Factors" in
our Annual Report on Form 10-K for the year ended December 31, 2006, which could
materially affect our business, financial condition or future results. The risks
described in our Annual Report on Form 10-K are not the only risks that we face.
Additional  risks  and  uncertainties  not  currently  known  to us or  that  we
currently  deem to be  immaterial  also  may  materially  adversely  affect  our
business, financial condition and/or operating results.

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

The  following  table  provides  certain   information  with  regard  to  shares
repurchased by the Corporation during the first quarter of 2007.
<TABLE>
<CAPTION>
                                                                (c)                     (d)
                         (a)                               Total Number of        Maximum Number of
                     Total Number           (b)            Shares Purchased      Shares that may be
                      of Shares      Average Price Paid  as part of Publicly       purchased under
      Period          Purchased          per share        Announced Programs           Program
------------------ ---------------- -------------------- -------------------- -------------------------
<S>                      <C>                <C>                  <C>                    <C>
January 1, 2007
through January
31, 2007                2,700             $19.40                2,700                 104,159
------------------ ---------------- -------------------- -------------------- -------------------------
February 1, 2007
through February
28, 2007                1,751             $20.16                1,751                 102,408
------------------ ---------------- -------------------- -------------------- -------------------------
March 1, 2007
through March 31,
2007                      610             $20.09                  610                  101,798
------------------ ---------------- -------------------- -------------------- -------------------------
  Total                 5,061             $19.75                5,061                   N/A
------------------ ---------------- -------------------- -------------------- -------------------------
</TABLE>

In May 2005, the Corporation  implemented a share repurchase program under which
the  Corporation  may  repurchase up to 5% of the  outstanding  shares or 98,000


                                       30
<PAGE>


shares.  In August 2006,  the program was expanded by an additional 5% or 92,000
shares. The repurchase program will continue until it is completed or terminated
by the Board of Directors.

Item  3. Defaults upon Senior Securities
         -------------------------------

                Not applicable.

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

                None

Item  5. Other Information
         -----------------

                None

Item  6. Exhibits
         --------

         10(a) Provident  Community   Bank,  Supplemental  Executive  Retirement
         Plan with Dwight V. Neese

         10(b) Provident  Community  Bank,  Supplemental   Executive  Retirement
         Plan #2 with Dwight V. Neese

         10(c) Provident  Community  Bank,  National   Association  Supplemental
         Executive Retirement Plan with Richard H. Flake

         10(d) Provident  Community Bank,  National    Association  Supplemental
         Executive Retirement Plan #2 with Richard H. Flake

         31(a) Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

         31(b) Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

         32(a) Chief Executive Officer Certification Pursuant to Section 906 of
         the Sarbanes-Oxley Act of 2002

         32(b) Chief Financial Officer Certification Pursuant to  Section 906 of
         the Sarbanes-Oxley Act of 2002





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<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.

                      PROVIDENT COMMUNITY BANCSHARES, INC.
                      ------------------------------------
                                  (Registrant)


Date:  May 14, 2007            By:  /s/ Dwight V. Neese
      ------------------           ----------------------------------------
                                    Dwight V. Neese, President and
                                    Chief Executive Officer


Date:  May 14, 2007            By:   /s/ Richard H. Flake
      -------------------           ---------------------------------------
                                     Richard H. Flake, Executive Vice President
                                     and Chief Financial Officer









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