# UNITED STATESSECURITIES AND EXCHANGE
COMMISSION Washington, D.C. 20549

# Form 10-KSB

| | (Mark One)
| | ----------

|X | Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ------------------------------------------------------------------------------

| | For the fiscal year ended December 31, 2006
| | -------------------------------------------

| | or
| | --

| | Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934
| | ----------------------------------------------------------------------------------
| | For the transition period from __________ to ________                             

Commission file no.
000-32493

Regional Bankshares, Inc.
(Name of Small Business Issuer in Its Charter)

|South Carolina                    |  | 57-1108717         
|--------------------------------- |  | -------------------
|(State or Other Jurisdiction      |  | (I.R.S. Employer   
|of Incorporation or Organization) |  | Identification No.)

|206 South Fifth Street                   |  |           
|---------------------------------------- |  | ----------
|Hartsville, South Carolina               |  | 29550     
|(Address of Principal Executive Offices) |  | (Zip Code)

(843) 383-4333Issuers Telephone Number, Including Area Code

Securities registered pursuant to Section 12(b) of the Act:   None
Securities registered pursuant to Section 12(g) of the Act:  Common Stock

Check whether the issuer (1) filed
all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  [  X  ]    No  [  ]

Check if there is no disclosure of
delinquent filers in response to Item 405 of Regulation S-B in this form, and no
disclosure will be contained, to the best of registrants knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.[  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 issuers revenue for the year ended December 31, 2006 were $6,117,325.

The aggregate market value of the
voting stock held by non-affiliates (shareholders holding less than 5% of an outstanding
class of stock, excluding directors and executive officers), of the Company on March 1, 2007
was $3,740.953.  Because there is not an active trading market for the Common Stock, we have
used our book value of $8.17 as of February 28, 2007 to calculate our public float.

The number of shares outstanding of
the issuers common stock was 743,621 at March 23, 2007.

# DOCUMENTS INCORPORATED
BY REFERENCE

|                                           | 
|------------------------------------------ | 
|Annual Report for the Shareholders for the | 
|Year Ended December 31, 2006               | 

|                                                       | 
|------------------------------------------------------ | 
|Proxy Statement for the Annual Meeting of Shareholders | 
|to be held on May 17, 2007                             | 

Transitional Small Business Disclosure Format.   (Check one):   Yes  [  X  ]    No  [  ]

---

Part I

Item 1. Description of Business.

This
Report contains statements which constitute forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. These statements are based on many assumptions and estimates and are not
guarantees of future performance. Our actual results may differ materially from those
projected in any forward-looking statements, as they will depend on many factors about
which we are unsure, including many factors which are beyond our control. The words
may, would, could, will,
expect, anticipate, believe, intend,
plan, and estimate, as well as similar expressions, are meant to
identify such forward-looking statements. Potential risks and uncertainties include, but
are not limited to, those described below under Risk Factors as well as the
following:

| |  | significant increases in competitive pressure in the banking and financial services
industries;
| | - | -----------------------------------------------------------------------------------------------

| |  | changes in the interest rate environment which could reduce anticipated or
actual margins;
| | - | ------------------------------------------------------------------------------------------

| |  | changes in political conditions or the legislative or regulatory
environment;
| | - | -----------------------------------------------------------------------------

| |  | general economic conditions, national, regional and in our primary service
area, which may become less favorable than
| | - | ---------------------------------------------------------------------------------------------------------------------

| |  | changes occurring
in business conditions or inflation;
| | - | ------------------------------------------------------

| |  | changes in technology;
| | - | ----------------------

| |  | changes in monetary and
tax policies;
| | - | -------------------------------------

| |  | the level of allowance for loan losses;
| | - | ---------------------------------------

| |  | the rate of delinquencies and
amounts of charge-offs;
| | - | -----------------------------------------------------

| |  | the rate of loan growth
| | - | -----------------------

| |  | adverse changes in asset quality and
resulting credit risk-related losses;
| | - | --------------------------------------------------------------------------

| |  | loss of consumer confidence and economic
disruptions resulting in terrorist activities;
| | - | ---------------------------------------------------------------------------------------

| |  | changes in the securities market; and
| | - | -------------------------------------

| |  | other risks and uncertainties
detailed from time to time in our filings with the
Securities and Exchange Commission.
| | - | --------------------------------------------------------------------------------------------------------------------

General

On June 15, 1999, Hartsville
Community Bank (the Bank) completed its organization and began operations in
temporary facilities in Hartsville, South Carolina. On January 1, 2001, the Bank became a
wholly-owned subsidiary of Regional Bankshares, Inc. (the Company), when the Company
acquired 100% of the outstanding common stock of the Bank. The Company was formed to serve
as a holding company for the Bank. On January 10, 2001, the Bank converted from a national
bank charter to a state bank charter. On June 27, 2005 the Bank changed its name to
Heritage Community Bank.

The
principal business activity of the Bank is to provide banking services to domestic
markets, principally in Darlington County, Chesterfield County, and Kershaw County, South
Carolina. The deposits of the Bank are insured up to legal limits by the Federal Deposit
Insurance Corporation. In addition to providing traditional banking services, the Bank has
a mortgage loan division. The mortgage loan division originates loans to purchase existing
homes or construct new homes and to refinance existing mortgages on behalf of
correspondent banks. During 2001, the Bank began to offer investment and brokerage
services to its customers through Raymond James Financial Services, Inc., a registered
broker-dealer firm.

On May 28, 2003 the Bank opened the
doors of its new branch office in McBee, South Carolina, an area in which the Bank saw a
need for a community bank that could provide full service banking. The McBee branch offers
deposit and loan services to many consumers and local industries in the area.

In December 2005, the Bank moved its
operations center to 125 Westfield Street in Hartsville. The operation center now houses
deposit operations and loan operations.

2

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The bank opened its Camden, South
Carolina office on November 15, 2006. The office provides full service banking, including
deposit and loan services to the surrounding area.

# BUSINESS OF THE BANK

# Market Area

The
Banks primary market areas are the communities of Hartsville and McBee, South
Carolina and the surrounding areas within a 15 mile radius of Hartsville. This market area
comprises most of Darlington County, South Carolina, as well as the incorporated areas of
Bishopville in Lee County and McBee in Chesterfield County. Most of the Banks
business is drawn from the cities of Hartsville and McBee and the greater Hartsville area,
with significant additional business being drawn from the area outside greater Hartsville
but within the designated market area.

# Competition

South
Carolina law permits statewide branching by banks and savings and loan associations.
Consequently, many financial institutions have branches located in several communities.
Currently, in addition to the Bank, 33 other financial institutions and branches of
financial institutions are located in the Banks market areas. The principal areas
and methods of competition in the banking industry are the services offered, pricing of
those services, the convenience and availability of the services, and the degree of
expertise and personal manner with which those services are offered.

The
Bank encounters strong competition from most of the financial institutions in its extended
market area. In the conduct of certain areas of its business, the Bank also competes with
credit unions, insurance companies, money market mutual funds and other financial
institutions, some of which are not subject to the same degree of regulation and
restrictions as the Bank. Most of these competitors have substantially greater resources
and lending abilities than the Bank and offer certain services, such as international
banking, investment banking, and trust services, that the Bank does not presently provide.

# Deposits

The
Bank offers the full range of deposit services typically available in most banks and
savings and loan associations, including checking accounts, NOW accounts, and savings and
other time deposits of various types, ranging from daily money market accounts to
longer-term certificates of deposit. The transaction accounts and time certificates are
tailored to the principal market area at rates competitive with those offered in the area.
In addition, retirement accounts such as IRAs (Individual Retirement Accounts) are
offered. All deposit accounts are insured by the FDIC up to the maximum amount permitted
by law. The Bank solicits these accounts from individuals, businesses, associations and
organizations, and government authorities.

# Lending Activities

The
Bank emphasizes a range of lending services, including real estate, commercial and
consumer loans. Consumer loans include both installment and term loans, and include loans
for automobiles, household goods, education, boats and general personal expenses.

To
address the risks inherent in making loans, management maintains an allowance for loan
losses based on, among other things, an evaluation of the Banks loan loss
experience, managements experience at other financial institutions in the market
area, the amount of past due and nonperforming loans, current and anticipated economic
changes and the values of loan collateral. Based upon such factors, management makes
various assumptions and judgments about the ultimate collectibility of

3

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the loan portfolio and provides an
allowance for potential loan losses based upon a percentage of the outstanding balances
and specific loans. However, because there are some risks that cannot be precisely
quantified, managements judgment of the allowance is necessarily approximate and
imprecise. The adequacy and methodology of the allowance for loan losses is subject to
regulatory examination and compared to a peer group of financial institutions identified
by the regulators.

# Real Estate Loans

One
of the primary components of the Banks loan portfolio is loans secured by first or
second mortgages on residential and commercial real estate. These loans generally consist
of commercial real estate loans, construction and development loans and residential real
estate loans (primarily short-term bridge loans and home equity and second mortgage
loans). Interest rates may be fixed or adjustable. Most residential mortgage loans made by
the Bank are originated for third party correspondent banks, and are funded by and closed
in the name of such banks. This arrangement allows the Bank to earn a fee for its services
while avoiding the interest rate risk of holding long-term, fixed-rate loans.

The
principal economic risk associated with all loans, including real estate loans, is the
creditworthiness of the Banks borrowers. The ability of a borrower to repay a real
estate loan depends upon a number of economic factors, including employment levels and
fluctuations in the value of real estate. In the case of a real estate construction loan,
there is generally no income from the underlying property during the construction period,
and the developers personal obligations under the loan are typically limited. Each
of these factors increases the risk of nonpayment by the borrower. In the case of a real
estate purchase loan, the borrower may be unable to repay the loan at the end of the loan
term and may thus be forced to refinance the loan at a higher interest rate, or, in
certain cases, the borrower may default as a result of its inability to refinance the
loan. In either case, the risk of nonpayment by the borrower is increased.

The
Bank also faces additional credit risks to the extent that it engages in making adjustable
rate mortgage loans (ARMs). In the case of an ARM, as interest rates increase,
the borrowers required payments increase, thus increasing the potential for default.
The marketability of all real estate loans, including ARMs, is also generally affected by
the prevailing level of interest rates.

# Commercial Loans

The
Bank makes loans for commercial purposes in various lines of business. Commercial loans
include both secured and unsecured loans for working capital (including inventory and
receivables), loans for business expansion (including acquisition of real estate and
improvements), Small Business Administration (SBA) loans for new businesses
(as well as other governmentally guaranteed business loans), and loans for purchases of
equipment and machinery. Commercial loans vary greatly depending upon the circumstances
and loan terms are structured on a case-by-case basis to better serve customer needs.

The
risks associated with commercial loans vary with many economic factors, including the
economy in the Hartsville and McBee areas. The well-established banks in the Banks
market areas make proportionately more loans to medium- to large-sized businesses than the
Bank. Many of the Banks commercial loans are made to small- to medium-sized
businesses, which are typically smaller, have shorter operating histories, and less
sophisticated record keeping systems than larger entities. As a result, these smaller
entities may be less able to withstand adverse competitive, economic and financial
conditions than larger borrowers. In addition, because payments on loans secured by
commercial property generally depend to a large degree on the results of operations and
management of the properties, repayment of such loans may be subject, to a greater extent
than other loans, to adverse conditions in the real estate market or the economy.

5

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# Consumer Loans

The
Bank makes a variety of loans to individuals for personal and household purposes,
including secured and unsecured installment and term loans, home equity loans and lines of
credit and unsecured revolving lines of credit such as credit cards. The secured
installment and term loans to consumers generally consist of loans to purchase
automobiles, boats, recreational vehicles, mobile homes and household furnishings, with
the collateral for each loan being the purchased property. The underwriting criteria for
home equity loans and lines of credit are generally the same as applied by the Bank when
making a first mortgage loan, as described above, and home equity lines of credit
typically expire 15 years or less after origination, unless renewed or extended.

Consumer
loans generally involve more credit risks than other loans because of the type and nature
of the underlying collateral or because of the absence of any collateral. Consumer loan
repayments are dependent on the borrowers continuing financial stability and are
likely to be adversely affected by job loss, divorce and illness. Furthermore, the
application of various federal and state laws, including federal and state bankruptcy and
insolvency laws, may limit the amount which can be recovered on such loans in the case of
default. In most cases, any repossessed collateral will not provide an adequate source of
repayment of the outstanding loan balance. Although the underwriting process for consumer
loans includes a comparison of the value of the security, if any, to the proposed loan
amount, the Bank cannot predict the extent to which the borrowers ability to pay,
and the value of the security, will be affected by prevailing economic and other
conditions.

# Other Services

The
Bank participates in a regional network of automated teller machines that may be used by
Bank customers in major cities throughout the Southeast. The Bank offers both VISA and
MasterCard brands of bank cards together with related lines of credit. The lines of credit
may be used for overdraft protection as well as pre-authorized credit for personal
purchases and expenses. The Bank also provides travelers checks, direct deposit of payroll
and social security checks, and automatic drafts for various accounts, but will not
provide international or trust banking services in the near future.

The
Bank offers investment and brokerage services to the Banks customers through Raymond
James Financial Services, Inc., a registered broker-dealer firm.

The
Bank also offers internet banking services, which allow customers to view accounts, make
transactions, and engage in other functions via the Internet.

# Employees

At
March 23, 2007, the Bank had 39 full time employees. The Company has no employees.

5

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# SUPERVISION AND
REGULATION

Both
Regional Bankshares, Inc. and Heritage Community Bank are subject to extensive state and
federal banking regulations that impose restrictions on and provide for general regulatory
oversight of their operations. These laws generally are intended to protect depositors and
not shareholders. The following summary is qualified by reference to the statutory and
regulatory provisions discussed. Changes in applicable laws or regulations may have a
material effect on our business and prospects. Our operations may be affected by
legislative changes and the policies of various regulatory authorities. We cannot predict
the effect that fiscal or monetary policies, economic control, or new federal or state
legislation may have on our business and earnings in the future.

The
following discussion is not intended to be a complete list of all the activities regulated
by the banking laws or of the impact of such laws and regulations on our operations. It is
intended only to briefly summarize some material provisions.

# Regional Bankshares

We
own 100% of the outstanding capital stock of the bank, and therefore we are considered to
be a bank holding company under the federal Bank Holding Company Act of 1956 (the
Bank Holding Company Act). As a result, we are primarily subject to the
supervision, examination and reporting requirements of the Board of Governors of the
Federal Reserve (the Federal Reserve) under the Bank Holding Company Act and
its regulations promulgated thereunder. As a bank holding company located in South
Carolina, the South Carolina Board of Financial Institutions also regulates and monitors
all significant aspects of our operations.

Permitted
Activities. Under the Bank Holding Company Act, a bank holding company is
generally permitted to engage in, or acquire direct or indirect control of more than 5% of
the voting shares of any company engaged in, the following activities:

| |  | banking or managing or
 controlling banks; and
| | - | ----------------------------------------------

| |  | furnishing services to or
performing services for our subsidiaries; and
| | - | -----------------------------------------------------------------------

| |  | any activity that the Federal Reserve determines to be so closely related to banking as to
be a proper incident to the business of banking.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------

Activities
that the Federal Reserve has found to be so closely related to banking as to be a proper
incident to the business of banking include:

| |  | factoring accounts receivable;
| | - | ------------------------------

| |  | making, acquiring, brokering or
servicing loans and usual related activities;
| | - | -----------------------------------------------------------------------------

| |  | leasing personal or real property;
| | - | ----------------------------------

| |  | operating a non-bank depository institution,
such as a savings association;
| | - | ---------------------------------------------------------------------------

| |  | trust company functions;
| | - | ------------------------

| |  | financial and investment advisory
activities;
| | - | ---------------------------------------------

| |  | conducting discount securities
brokerage activities;
| | - | ----------------------------------------------------

| |  | underwriting and dealing in
government obligations and money market instruments;
| | - | --------------------------------------------------------------------------------

6

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| |  | providing specified management consulting
and counseling activities;
| | - | --------------------------------------------------------------------

| |  | performing selected data processing
services and support services;
| | - | ------------------------------------------------------------------

| |  | acting as agent or broker in
selling credit life insurance and other types of insurance in connection with credit
transactions; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------

| |  | performing selected insurance
underwriting activities.
| | - | ------------------------------------------------------

As
a bank holding company we also can elect to be treated as a financial holding
company, which would allow us engage in a broader array of activities. In sum, a
financial holding company can engage in activities that are financial in nature or
incidental or complementary to financial activities, including insurance underwriting,
sales and brokerage activities, providing financial and investment advisory services,
underwriting services and limited merchant banking activities. We have not sought
financial holding company status, but may elect such status in the future as our business
matures. If we were to elect in writing for financial holding company status, each insured
depository institution we control would have to be well capitalized, well managed and have
at least a satisfactory rating under the CRA (discussed below).

The
Federal Reserve has the authority to order a bank holding company or its subsidiaries to
terminate any of these activities or to terminate its ownership or control of any
subsidiary when it has reasonable cause to believe that the bank holding companys
continued ownership, activity or control constitutes a serious risk to the financial
safety, soundness or stability of it or any of its bank subsidiaries.

Change
in Control.In addition, and subject to certain exceptions, the Bank
Holding Company Act and the Change in Bank Control Act, together with regulations
promulgated there under, require Federal Reserve approval prior to any person or company
acquiring control of a bank holding company. Moreover, the South Carolina
Board of Financial Institutions also must approve an acquisition of a South Carolina bank
holding company. Control is conclusively presumed to exist if an individual or company
acquires 25% or more of any class of voting securities of a bank holding company. Control
is rebuttably presumed to exist if a person acquires 10% or more, but less than 25%, of
any class of voting securities and either:

| |  | the company has registered
securities under Section 12 of the Securities Exchange Act of 1934; or
| | - | -------------------------------------------------------------------------------------------------

| |  | no other person owns a greater
percentage of that class of voting securities immediately after the transaction.
| | - | ---------------------------------------------------------------------------------------------------------------

Our
common stock is registered under Section 12 of the Securities Exchange Act of 1934. Any
shareholder of 10% or more, but less than 25% of any class of our voting securities would
be required to either file as a controlling shareholder of the company or rebut the
presumption of control in accordance with Federal Reserve regulations. The
regulations provide a procedure for rebutting control when ownership of any class of
voting securities is below 25%.

Source
of Strength. In accordance with Federal Reserve Board policy, we are
expected to act as a source of financial strength to the bank and to commit resources to
support the bank in circumstances in which we might not otherwise do so. Under the bank
Holding Company Act, the Federal Reserve Board may require a bank holding company to
terminate any activity or relinquish control of a nonbank subsidiary, other than a nonbank
subsidiary of a bank, upon the Federal Reserve Boards determination that such
activity or control constitutes a serious risk to the financial soundness or stability of
any depository institution subsidiary of the bank holding company. Further, federal bank
regulatory authorities have additional discretion to require a bank holding company to
divest itself of any bank or nonbank subsidiaries if the agency determines that
divestiture may aid the depository institutions financial condition.

Capital
Requirements. The Federal Reserve Board imposes certain capital
requirements on the bank holding company under the bank Holding Company Act, including a
minimum leverage ratio and a minimum ratio of qualifying capital to
risk-weighted assets.

7

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These requirements are described
below under Heritage Community Bank  Capital Regulations. Subject to our
capital requirements and certain other restrictions, we are able to borrow money to make a
capital contribution to the bank, and these loans may be repaid from dividends paid from
the bank to the Company. Our ability to pay dividends is subject to regulatory
restrictions as described below in Heritage Community Bank  Dividends.
We are also able to raise capital for contribution to the bank by issuing securities
without having to receive regulatory approval, subject to compliance with federal and
state securities laws.

South
Carolina State Regulation. As a South Carolina bank holding company under
the South Carolina Banking and Branching Efficiency Act, we are subject to limitations on
sale or merger and to regulation by the South Carolina Board of Financial Institutions. We
are not required to obtain the approval of the S.C. Board prior to acquiring the capital
stock of a national bank, but we must notify them at least 15 days prior to doing so. We
must receive the Boards approval prior to engaging in the acquisition of a South
Carolina state chartered bank or another South Carolina bank holding company.

# Heritage Community Bank

The
bank operates as a state bank incorporated under the laws of the State of South Carolina
and is subject to examination by the South Carolina Board of Financial Institutions.

The
South Carolina Board of Financial Institutions and the FDIC regulate or monitor virtually
all areas of the banks operations, including:

| |  | security devices and procedures;
| | - | --------------------------------

| |  | adequacy of capitalization and loss
reserves;
| | - | ---------------------------------------------

| |  | loans;
| | - | ------

| |  | investments;
| | - | ------------

| |  | borrowings;
| | - | -----------

| |  | deposits;
| | - | ---------

| |  | mergers;
| | - | --------

| |  | issuances of securities;
| | - | ------------------------

| |  | payment of dividends;
| | - | ---------------------

| |  | interest rates payable on deposits;
| | - | -----------------------------------

| |  | interest rates or fees chargeable on loans;
| | - | -------------------------------------------

| |  | establishment of branches;
| | - | --------------------------

| |  | corporate reorganizations;
| | - | --------------------------

| |  | maintenance of books and records; and
| | - | -------------------------------------

| |  | adequacy of staff training to carry on
safe lending and deposit gathering practices.
| | - | ------------------------------------------------------------------------------------

The
South Carolina Board of Financial Institutions requires the bank to maintain specified
capital ratios and imposes limitations on the banks aggregate investment in real
estate, bank premises, and furniture and fixtures. The South Carolina Board of Financial
Institutions also requires the bank to prepare quarterly reports on the banks
financial condition in compliance with its minimum standards and procedures.

8

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All
insured institutions must undergo regular on site examinations by their appropriate
banking agency. The cost of examinations of insured depository institutions and any
affiliates may be assessed by the appropriate agency against each institution or affiliate
as it deems necessary or appropriate. Insured institutions are required to submit annual
reports to the FDIC, their federal regulatory agency, and their state supervisor when
applicable. The FDIC has developed a method for insured depository institutions to provide
supplemental disclosure of the estimated fair market value of assets and liabilities, to
the extent feasible and practicable, in any balance sheet, financial statement, report of
condition or any other report of any insured depository institution. The FDIC Improvement
Act also requires the federal banking regulatory agencies to prescribe, by regulation,
standards for all insured depository institutions and depository institution holding
companies relating, among other things, to the following:

| |  | internal controls;
| | - | ------------------

| |  | information systems and audit systems;
| | - | --------------------------------------

| |  | loan documentation;
| | - | -------------------

| |  | credit underwriting;
| | - | --------------------

| |  | interest rate risk exposure; and
| | - | --------------------------------

| |  | asset quality.
| | - | --------------

Prompt
Corrective Action.As an insured depository institution, the bank is
required to comply with the capital requirements promulgated under the Federal Deposit
Insurance Act and the regulations thereunder, which set forthfive capital
categories, each with specific regulatory consequences. Under these regulations, the
categories are:

| |  | Well Capitalized  The institution exceeds the required minimum level for each
relevant capital measure. A well capitalized institution is one (i) having a total
capital ratio of 10% or greater, (ii) having a tier 1 capital ratio of 6% or greater,
(iii) having a leverage capital ratio of 5% or greater and (iv) that is not
subject to any order or written directive to meet and maintain a specific capital level
for any capital measure.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Adequately Capitalized  The institution meets the required minimum level for each
relevant capital measure. No capital distribution may be made that would result in the
institution becoming undercapitalized. An adequately capitalized institution is one
(i) having a total capital ratio of 8% or greater, (ii) having a tier 1 capital
ratio of 4% or greater and (iii) having a leverage capital ratio of 4% or greater or
a leverage capital ratio of 3% or greater if the institution is rated composite 1 under
the CAMELS (Capital, Assets, Management, Earnings, Liquidity and Sensitivity to market
risk) rating system.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Undercapitalized  The institution fails to meet the required minimum level for any
relevant capital measure. An undercapitalized institution is one (i) having a total
capital ratio of less than 8% or (ii) having a tier 1 capital ratio of less than 4%
or (iii) having a leverage capital ratio of less than 4%, or if the institution is rated a
composite 1 under the CAMELS rating system, a leverage capital ratio of less than 3%.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Significantly Undercapitalized  The institution is significantly below the required
minimum level for any relevant capital measure. A significantly undercapitalized
institution is one (i) having a total capital ratio of less than 6% or
(ii) having a tier 1 capital ratio of less than 3% or (iii) having a leverage
capital ratio of less than 3%.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9

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| |  | Critically Undercapitalized  The institution fails to meet a critical capital level
set by the appropriate federal banking agency. A critically undercapitalized institution
is one having a ratio of tangible equity to total assets that is equal to or less than 2%.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If
the FDIC determines, after notice and an opportunity for hearing, that the bank is in an
unsafe or unsound condition, the regulator is authorized to reclassify the bank to the
next lower capital category (other than critically undercapitalized) and require the
submission of a plan to correct the unsafe or unsound condition.

If
the bank is not well capitalized, it cannot accept brokered deposits without prior FDIC
approval and, if approval is granted, cannot offer an effective yield in excess of 75
basis points on interests paid on deposits of comparable size and maturity in such
institutions normal market area for deposits accepted from within its normal market
area, or national rate paid on deposits of comparable size and maturity for deposits
accepted outside the banks normal market area. Moreover, if the bank becomes less
than adequately capitalized, it must adopt a capital restoration plan acceptable to the
FDIC. The bank also would become subject to increased regulatory oversight, and is
increasingly restricted in the scope of its permissible activities. Each company having
control over an undercapitalized institution also must provide a limited guarantee that
the institution will comply with its capital restoration plan. Except under limited
circumstances consistent with an accepted capital restoration plan, an undercapitalized
institution may not grow. An undercapitalized institution may not acquire another
institution, establish additional branch offices or engage in any new line of business
unless determined by the appropriate Federal banking agency to be consistent with an
accepted capital restoration plan, or unless the FDIC determines that the proposed action
will further the purpose of prompt corrective action. The appropriate federal banking
agency may take any action authorized for a significantly undercapitalized institution if
an undercapitalized institution fails to submit an acceptable capital restoration plan or
fails in any material respect to implement a plan accepted by the agency. A critically
undercapitalized institution is subject to having a receiver or conservator appointed to
manage its affairs and for loss of its charter to conduct banking activities.

An
insured depository institution may not pay a management fee to a bank holding company
controlling that institution or any other person having control of the institution if,
after making the payment, the institution, would be undercapitalized. In addition, an
institution cannot make a capital distribution, such as a dividend or other distribution
that is in substance a distribution of capital to the owners of the institution if
following such a distribution the institution would be undercapitalized. Thus, if payment
of such a management fee or the making of such would cause the bank to become
undercapitalized, it could not pay a management fee or dividend to us.

As
of December 31, 2006, the bank was deemed to be well capitalized.

FDIC
Assessments. Deposits at the bank are insured by the Deposit Insurance
Fund (the DIF) as administered by the FDIC, up to the applicable limits
established by law  generally $100,000 per accountholder and $250,000 for certain
retirement accountholders. In accordance with regulations adopted to implement the Federal
Deposit Insurance Reform Act of 2005 (FDIRA), deposit insurance premium
assessments are based upon perceived risks to the DIF, by evaluating an institutions
supervisory ratios and other financial ratios and then determining insurance premiums
based upon the likelihood an institution could be downgraded to a CAMELS 3 or worse in the
succeeding year. As a result, institutions deemed to pose less risk, pay lower premiums
than those institutions deemed to pose more risk, which pay more.

FDIRA
caps the amount of the DIF at 1.50% of domestic deposits. The FDIC must issue cash
dividends, awarded on a historical basis, for the amount of the DIF over the 1.50% ratio.
Additionally, if the DIF exceeds 1.35% of domestic deposits at year-end, the FDIC is
required to issue cash dividends, awarded on a historical basis, for half of the amount of
the excess. Pursuant to the FDIRA, the FDIC will begin indexing deposit insurance coverage
levels for inflation beginning in 2012. Moreover, if we become undercapitalized we cannot
accept employee benefit plan deposits.

Transactions
with Affiliates and Insiders. The bank is subject to the provisions of
Section 23A of the Federal Reserve Act, which places limits on the amount of loans or
extensions of credit to, or investments in, or certain other transactions with, affiliates
and on the amount of advances to third parties collateralized by the securities or
obligations of affiliates. The aggregate of all covered transactions is limited in amount,

10

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as to any one affiliate, to 10% of the banks capital and surplus and, as to all
affiliates combined, to 20% of the banks capital and surplus. Furthermore, within
the foregoing limitations as to amount, each covered transaction must meet specified
collateral requirements. Compliance is also required with certain provisions designed to
avoid the taking of low quality assets.

The
bank also is subject to the provisions of Section 23B of the Federal Reserve Act which,
among other things, prohibits an institution from engaging in certain transactions with
certain affiliates unless the transactions are on terms substantially the same, or at
least as favorable to such institution or its subsidiaries, as those prevailing at the
time for comparable transactions with nonaffiliated companies. The bank is subject to
certain restrictions on extensions of credit to executive officers, directors, certain
principal shareholders, and their related interests. Such extensions of credit (i) must be
made on substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with third parties and (ii) must not
involve more than the normal risk of repayment or present other unfavorable features.

The
Federal Reserve Board has issued Regulation W, which codifies prior regulations under
Sections 23A and 23B of the Federal Reserve Act and interpretative guidance with respect
to affiliate transactions. Regulation W incorporates the exemption from the affiliate
transaction rules but expands the exemption to cover the purchase of any type of loan or
extension of credit from an affiliate. In addition, under Regulation W:

| |  | a bank and its
subsidiaries may not purchase a low-quality asset from an affiliate;
| | - | -----------------------------------------------------------------------------------

| |  | covered transactions and other specified transactions between a bank or its subsidiaries
and an affiliate must be on terms and conditions that are consistent with safe and sound
banking practices; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | with some exceptions, each loan or extension of credit by a bank to an affiliate must be
secured by collateral with a market value ranging from 100% to 130%, depending on the type
of collateral, of the amount of the loan or extension of credit.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Regulation
W generally excludes all non-bank and non-savings association subsidiaries of banks from
treatment as affiliates, except to the extent that the Federal Reserve Board decides to
treat these subsidiaries as affiliates. The regulation also limits the amount of loans
that can be purchased by a bank from an affiliate to not more than 100% of the banks
capital and surplus.

Branching.       
          Under current South Carolina law, we may open branch offices throughout South
          Carolina with the prior approval of the South Carolina Board of Financial
          Institutions. In addition, with prior regulatory approval, the bank will be able
          to acquire existing banking operations in South Carolina. Furthermore, federal
          legislation has been passed that permits interstate branching by banks if
          allowed by state law, and interstate merging by banks.

Community
Reinvestment Act. The Community Reinvestment Act requires that, in
connection with examinations of financial institutions within their respective
jurisdictions, a financial institutions primary regulator, which is the FDIC for the
bank, shall evaluate the record of each financial institution in meeting the credit needs
of its local community, including low and moderate income neighborhoods. These factors are
also considered in evaluating mergers, acquisitions, and applications to open a branch or
facility. Failure to adequately meet these criteria could impose additional requirements
and limitations on our bank. Additionally, we must publicly disclose the terms of various
Community Reinvestment Act-related agreements.

Finance
Subsidiaries. Under the Gramm-Leach-Bliley Act (the GLBA),
subject to certain conditions imposed by their respective banking regulators, national and
state-chartered banks are permitted to form financial subsidiaries that may
conduct financial or incidental activities, thereby permitting bank subsidiaries to engage
in certain activities that previously were impermissible. The GLBA imposes several
safeguards and restrictions on financial subsidiaries, including that the parent
banks equity investment in the financial subsidiary be deducted from the banks
assets and tangible equity for purposes of calculating the

11

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banks capital adequacy. In
addition, the GLBA imposes new restrictions on transactions between a bank and its
financial subsidiaries similar to restrictions applicable to transactions between banks
and non-bank affiliates.

Other
Regulations. Interest and other charges collected or contracted for by the
bank are subject to state usury laws and federal laws concerning interest rates. The
banks loan operations are also subject to federal laws applicable to credit
transactions, such as the:

| |  | The federal Truth-In-Lending Act,
governing disclosures of credit terms to consumer borrowers;
| | - | ----------------------------------------------------------------------------------------------

| |  | The Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide
information to enable the public and public officials to determine whether a financial
institution is fulfilling its obligation to help meet the housing needs of the community
it serves;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed
or other prohibited factors in extending credit;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------

| |  | The Fair Credit Reporting Act of 1978, as amended by the Fair and Accurate Credit
Transactions Act, governing the use and provision of information to credit reporting
agencies, certain identity theft protections and certain credit and other disclosures;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The Fair Debt Collection Act,
governing the manner in which consumer debts may be collected by collection agencies; and
| | - | -----------------------------------------------------------------------------------------------------------------------

| |  | The Rules and regulations of the various federal agencies charged with the responsibility
of implementing these federal laws.
| | - | -----------------------------------------------------------------------------------------------------------------------------

The deposit operations of the bank
also are subject to:

| |  | the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of
consumer financial records and prescribes procedures for complying with administrative
subpoenas of financial records; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve Board to
implement that Act, which governs automatic deposits to and withdrawals from deposit
accounts and customers rights and liabilities arising from the use of automated
teller machines and other electronic banking services.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Enforcement
Powers. The bank and its institution-affiliated parties,
including its management, employees, agents, independent contractors, and consultants such
as attorneys and accountants and others who participate in the conduct of the financial
institutions affairs, are subject to potential civil and criminal penalties for
violations of law, regulations or written orders of a government agency. These practices
can include the failure of an institution to timely file required reports or the filing of
false or misleading information or the submission of inaccurate reports. Civil penalties
may be as high as $1,000,000 a day for such violations. Criminal penalties for some
financial institution crimes have been increased to twenty years. In addition, regulators
are provided with greater flexibility to commence enforcement actions against institutions
and institution-affiliated parties. Possible enforcement actions include the termination
of deposit insurance. Furthermore, banking agencies power to issue cease-and-desist
orders were expanded. Such orders may, among other things, require affirmative action to
correct any harm resulting from a violation or practice, including restitution,
reimbursement, indemnifications or guarantees against loss. A financial institution may
also be ordered to restrict its growth, dispose of certain assets, rescind agreements or
contracts, or take other actions as determined by the ordering agency to be appropriate.

USA
PATRIOT Act.The USA PATRIOT Act became effective on
October 26, 2001, amended, in part, the bank Secrecy Act, and provides, in part, for
the facilitation of information sharing among governmental entities and financial
institutions for the purpose of combating terrorism and money laundering by enhancing
anti-money laundering and financial transparency laws, as well as enhanced information
collection tools and enforcement mechanics for the U.S. government, including:
(i) requiring standards for verifying

12

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customer identification at account
opening; (ii) rules to promote cooperation among financial institutions, regulators,
and law enforcement entities in identifying parties that may be involved in terrorism or
money laundering; (iii) reports by nonfinancial trades and businesses filed with the
Treasury Departments Financial Crimes Enforcement Network for transactions exceeding
$10,000; and (iv) filing suspicious activities reports by brokers and dealers if they
believe a customer may be violating U.S. laws and regulations and requires enhanced due
diligence requirements for financial institutions that administer, maintain, or manage
private bank accounts or correspondent accounts for non-U.S. persons.

Under
the USA PATRIOT Act, the Federal Bureau of Investigation (FBI) can send our
banking regulatory agencies lists of the names of persons suspected of involvement in
terrorist activities. The bank can be requested, to search its records for any
relationships or transactions with persons on those lists. If the bank finds any
relationships or transactions, it must file a suspicious activity report and contact the
FBI.

The
Office of Foreign Assets Control (OFAC), which is a division of the U.S.
Department of the Treasury, is responsible for helping to insure that United States
entities do not engage in transactions with enemies of the United States, as
defined by various Executive Orders and Acts of Congress. OFAC has sent, and will send,
our banking regulatory agencies lists of names of persons and organizations suspected of
aiding, harboring or engaging in terrorist acts. If the bank finds a name on any
transaction, account or wire transfer that is on an OFAC list, it must freeze such
account, file a suspicious activity report and notify the FBI. The bank has appointed an
OFAC compliance officer to oversee the inspection of its accounts and the filing of any
notifications. The bank actively checks high-risk OFAC areas such as new accounts, wire
transfers and customer files. The bank performs these checks utilizing software, which is
updated each time a modification is made to the lists provided by OFAC and other agencies
of Specially Designated Nationals and Blocked Persons.

Privacy
and Credit Reporting.Financial institutions are required to disclose their
policies for collecting and protecting confidential information. Customers generally may
prevent financial institutions from sharing nonpublic personal financial information with
nonaffiliated third parties except under narrow circumstances, such as the processing of
transactions requested by the consumer or when the financial institution is jointly
sponsoring a product or service with a nonaffiliated third party. Additionally, financial
institutions generally may not disclose consumer account numbers to any nonaffiliated
third party for use in telemarketing, direct mail marketing or other marketing to
consumers. It is the banks policy not to disclose any personal information unless
required by law.

Like
other lending institutions, the bank utilizes credit bureau data in its underwriting
activities. Use of such data is regulated under the Federal Credit Reporting Act on a
uniform, nationwide basis, including credit reporting, prescreening, sharing of
information between affiliates, and the use of credit data. The Fair and Accurate Credit
Transactions Act of 2003 (the FACT Act) authorizes states to enact identity
theft laws that are not inconsistent with the conduct required by the provisions of the
FACT Act.

Payment
of Dividends. A South Carolina state bank may not pay dividends from its
capital. All dividends must be paid out of undivided profits then on hand, after deducting
expenses, including reserves for losses and bad debts. The bank is authorized to pay cash
dividends up to 100% of net income in any calendar year without obtaining the prior
approval of the South Carolina Board of Financial Institutions, provided that the bank
received a composite rating of one or two at the last federal or state regulatory
examination. The bank must obtain approval from the South Carolina Board of Financial
Institutions prior to the payment of any other cash dividends. In addition, under the
FDICIA, the bank may not pay a dividend if, after paying the dividend, the bank would be
undercapitalized.

Check
21. The Check Clearing for the 21st Century Act gives substitute
checks, such as a digital image of a check and copies made from that image, the same
legal standing as the original paper check. Some of the major provisions include:

| |  | allowing check truncation without making it mandatory;
| | - | ------------------------------------------------------

| |  | demanding that every financial institution communicate to accountholders in writing a
description of its substitute check processing program and their rights under the law; | 
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 

13

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| |  | legalizing substitutions for and replacements of paper checks without agreement from consumers;
| | - | -----------------------------------------------------------------------------------------------

| |  | retaining in place the previously mandated electronic collection and return of checks
between financial institutions only when individual agreements are in place; | 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 

| |  | requiring that when accountholders request verification, financial institutions produce
the original check (or a copy that accurately represents the original) and demonstrate
that the account debit was accurate and valid; and | 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 

| |  | requiring the re-crediting of funds to an individuals account on the next business
day after a consumer proves that the financial institution has erred. | 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------- | 

Effect
of Governmental Monetary Policies. Our earnings are affected by domestic economic
conditions and the monetary and fiscal policies of the United States government and its
agencies. The Federal Reserve banks monetary policies have had, and are likely to
continue to have, an important impact on the operating results of commercial banks through
its power to implement national monetary policy in order, among other things, to curb
inflation or combat a recession. The monetary policies of the Federal Reserve Board have
major effects upon the levels of bank loans, investments and deposits through its open
market operations in United States government securities and through its regulation of the
discount rate on borrowings of member banks and the reserve requirements against member
bank deposits. It is not possible to predict the nature or impact of future changes in
monetary and fiscal policies.

Proposed
Legislation and Regulatory Action. New regulations and statutes are regularly
proposed that contain wide-ranging proposals for altering the structures, regulations, and
competitive relationships of the nations financial institutions. We cannot predict
whether or in what form any proposed regulation or statute will be adopted or the extent
to which our business may be affected by any new regulation or statute.

# Risk Factors

Our decisions regarding
credit risk and allowances for loan losses may materially and adversely affect our
business.

Making
loans and other extensions of credit is an essential element of our business. Although we
seek to mitigate risks inherent in lending by adhering to specific underwriting practices,
our loans and other extensions of credit may not be repaid. The risk of nonpayment is
affected by a number of factors, including:

| |  | the duration of the credit;
| | - | ---------------------------

| |  | credit risks of a particular customer;
| | - | --------------------------------------

| |  | changes in economic and industry conditions; and
| | - | ------------------------------------------------

| |  | in the case of a collateralized loan, risks resulting from uncertainties about the future
value of the collateral.
| | - | ------------------------------------------------------------------------------------------------------------------

We
attempt to maintain an appropriate allowance for loan losses to provide for potential
losses in our loan portfolio. We periodically determine the amount of the allowance based
on consideration of several factors, including:

| |  | an ongoing review of the quality, mix, and size of our overall loan portfolio;
| | - | ------------------------------------------------------------------------------

| |  | our historical loan loss experience;
| | - | ------------------------------------

| |  | evaluation of economic conditions;
| | - | ----------------------------------

| |  | regular reviews of
loan delinquencies and loan portfolio quality; and
| | - | ---------------------------------------------------------------------

| |  | the amount and quality of collateral,
including guarantees, securing the loans.
| | - | -------------------------------------------------------------------------------

14

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There
is no precise method of predicting credit losses. Therefore, we face the risk that
charge-offs in future periods will exceed our allowance for loan losses and that
additional increases in the allowance for loan losses will be required. Additions to the
allowance for loan losses would result in a decrease of our net income, and possibly our
capital.

We are dependent on key
individuals and the loss of one or more of these key individuals could curtail our growth
and adverselyaffect our prospects.

Curtis
Tyner, our chief executive officer and president, has extensive and long-standing ties
within our market area and substantial experience with our operations which has
contributed significantly to our growth. If we lose the services of Mr. Tyner, he would be
difficult to replace and our business and development could be materially and adversely
affected. We maintain key man life insurance policies in the amount of $1.0 million on Mr.
Tyner.

Our
success also depends, in part, on our continued ability to attract and retain experienced
loan originators, as well as other management personnel. Competition for personnel is
intense, and we may not be successful in attracting or retaining qualified personnel. Our
failure to compete for these personnel, or the loss of the services of several of such key
personnel, could adversely affect our growth strategy and seriously harm our business,
results of operations, and financial condition.

A significant portion of
our loan portfolio is secured by real estate, and events that negatively impact the real
estate market couldhurt our business.

A significant portion of our loan
portfolio is secured by real estate. As of December 31, 2006, approximately 81% of our
loans had real estate as a primary or secondary component of collateral. The real estate
collateral in each case provides an alternate source of repayment in the event of default
by the borrower and may deteriorate in value during the time the credit is extended. A
weakening of the real estate market in our primary market area could result in an increase
in the number of borrowers who default on their loans and a reduction in the value of the
collateral securing their loans, which in turn could have an adverse effect on our
profitability and asset quality. If we are required to liquidate the collateral securing a
loan to satisfy the debt during a period of reduced real estate values, our earnings and
capital could be adversely affected. Acts of nature, including hurricanes, tornados,
earthquakes, fires and floods, which may cause uninsured damage and other loss of value to
real estate that secures these loans, may also negatively impact our financial condition.

The costs of being an SEC
registered company are proportionately higher for small companies such as Regional
Bankshares, Inc.,because of the requirements imposed by the Sarbanes-Oxley Act.

The
Sarbanes-Oxley Act of 2002 and the related rules and regulations promulgated by the
Securities and Exchange Commission have increased the scope, complexity, and cost of
corporate governance, reporting, and disclosure practices. These regulations are
applicable to our company. We expect to experience increasing compliance costs, including
costs related to internal controls, as a result of the Sarbanes-Oxley Act. These necessary
costs are proportionately higher for a company of our size and will affect our
profitability more than that of some of our larger competitors.

Lack of seasoning of our
loan portfolio may increase the risk of credit defaults in the future.

Due
to our relatively short operating history, many of the loans in our loan portfolio and our
lending relationships are of relatively recent origin. In general, loans do not begin to
show signs of credit deterioration or default until they have been outstanding for some
period of time, a process we refer to as seasoning. As a result, a portfolio
of older loans will usually behave more predictably than a newer portfolio. Because our
loan portfolio is relatively new, the current level of delinquencies and defaults may not
be representative of the level that will prevail when the portfolio becomes more seasoned,
which may be higher than current levels. If delinquencies and defaults increase, we may be
required to increase our provision for loan losses, which would

15

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adversely affect our results of
operations and financial condition.

An economic downturn, especially
one affecting Chesterfield, Darlington and Kershaw Counties, could reduce our customer
base, ourlevel of deposits, and demand for financial products such as loans.

Our
success will significantly depend upon the growth in population, income levels, deposits,
and housing starts in our market of Chesterfield, Darlington, and Kershaw Counties. If the
community in which we operate does not grow or if prevailing economic conditions locally
or nationally are unfavorable, our business may not succeed. An economic downturn would
likely contribute to the deterioration of the quality of our loan portfolio and reduce our
level of deposits, which in turn would hurt our business. If an economic downturn occurs
in the economy as a whole, or in Chesterfield, Darlington, and Kershaw Counties, borrowers
may be less likely to repay their loans as scheduled. Moreover, the value of real estate
or other collateral that may secure our loans could be adversely affected. Unlike many
larger institutions, we are not able to spread the risks of unfavorable local economic
conditions across a large number of diversified economies. An economic downturn could,
therefore, result in losses that materially and adversely affect our business.

Changes in prevailing
interest rates may reduce our profitability.

Our
results of operations depend in large part upon the level of our net interest income,
which is the difference between interest income from interest-earning assets, such as
loans and mortgage-backed securities, and interest expense on interest-bearing
liabilities, such as deposits and other borrowings. Depending on the terms and maturities
of our assets and liabilities, a significant change in interest rates could have a
material adverse effect on our profitability. Many factors cause changes in interest
rates, including governmental monetary policies and domestic and international economic
and political conditions. While we intend to manage the effects of changes in interest
rates by adjusting the terms, maturities, and pricing of our assets and liabilities, our
efforts may not be effective and our financial condition and results of operations could
suffer.

We are subject to
extensive regulation that could limit or restrict our activities.

We
operate in a highly regulated industry and are subject to examination, supervision, and
comprehensive regulation by various regulatory agencies. Our compliance with these
regulations is costly and restricts certain of our activities, including payment of
dividends, mergers and acquisitions, investments, loans and interest rates charged,
interest rates paid on deposits, and locations of offices. We are also subject to
capitalization guidelines established by our regulators, which require us to maintain
adequate capital to support our growth.

The
laws and regulations applicable to the banking industry could change at any time, and we
cannot predict the effects of these changes on our business and profitability. Because
government regulation greatly affects the business and financial results of all commercial
banks and bank holding companies, our cost of compliance could adversely affect our
ability to operate profitably.

The
Sarbanes-Oxley Act of 2002, and the related rules and regulations promulgated by the
Securities and Exchange Commission that are now applicable to us, have increased the
scope, complexity, and cost of corporate governance, reporting, and disclosure practices.
We have experienced, and we expect to continue to experience, greater compliance costs,
including costs related to internal controls, as a result of the Sarbanes-Oxley Act..

Our pace of growth may require
us to raise additional capital in the future, and that capital may not be available when
it is needed.

We
are required by our regulators to maintain adequate levels of capital to support our
operations. To support continued growth, we may need to raise additional capital in the
future. Our ability to raise additional capital, if needed, will depend in part on
conditions in the capital markets at that time, which are beyond our control. We cannot
make assurances as to our ability to raise additional capital, if needed, on terms
acceptable to us. If we cannot raise additional capital when needed, our ability to

16

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expand our operations through
internal growth and acquisitions could be materially affected. In addition, if we decide
to raise additional capital, your interest could be diluted.

We will face risks with
respect to future expansion and acquisitions or mergers.

Although
we do not have any current plans to do so, we may seek to acquire other financial
institutions or parts of those institutions. We may also expand into new markets or lines
of business or offer new products or services. These activities would involve a number of
risks, including:

| |  | taking additional time and creating expense associated with identifying and evaluating
potential acquisitions and merger partners;
| | - | ----------------------------------------------------------------------------------------------------------------------------------

| |  | using inaccurate estimates and judgments to evaluate credit, operations, management, and
market risks with respect to the target institution or assets;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | diluting our existing shareholders in an acquisition;
| | - | -----------------------------------------------------

| |  | taking additional time and creating expense associated with evaluating new markets for
expansion, hiring experienced local management, and opening new offices, as there may be a
substantial time lag between these activities before we generate sufficient assets and
deposits to support the costs of the expansion;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | taking a significant amount of time negotiating a transaction or working on expansion
plans, resulting in managements attention being diverted from the operation of our
existing business;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | taking time and creating expense integrating the operations and personnel of the combined
businesses;
| | - | -----------------------------------------------------------------------------------------------------

| |  | creating an adverse short-term effect on our results of operations; and
| | - | -----------------------------------------------------------------------

| |  | losing key employees and customers as a result of an acquisition that is poorly received.
| | - | -----------------------------------------------------------------------------------------

We have never acquired another
institution before, so we lack experience in handling any of these risks. There is also a
risk that any expansion effort will not be successful.

Our common stock is not listed
on any exchange and has no trading market, so you may have to hold the common stock
indefinitely.

Our
common stock is not traded or listed on any national securities exchange or market, and
currently there is no trading market for our stock. It is not likely that an active and
liquid trading market will develop or be maintained in the foreseeable future. The
development of an active public trading market depends upon the existence of willing
buyers and sellers and is not within our control. For these reasons, our common stock may
not be appropriate as a short-term investment, and you should be prepared to hold our
common stock indefinitely. We also cannot assure you that you will be able to resell your
shares of common stock for a price that is equal to or greater than the current price.

# Item 2. Description of
Property.

The
Bank owns its office building, which is located at 206 South Fifth Street in Hartsville
and comprises approximately 8,000 square feet. The property is at a corner location one
block from the geographic center of Hartsville. This area of town is undergoing extensive
redevelopment, and is likely to be a center for retail, professional and service business
growth in the future. The Bank also owns its operations center, which is located at 125
Westfield Street in Hartsville and comprises approximately 3,840 square feet.

The
Bank also owns property located at 7 N. 7th Street in McBee, South Carolina, where it
operates a branch office. The facility comprises approximately 2,000 square feet.

The
Company leased its operations center from an entity controlled by a director of the
Company at a rate of $1,000 per month. On December 16, 2005, the operations center moved
from the leased facility to a building purchased by the Bank. The lease

17

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was terminated, effective December
31, 2005. Rental expense associated with the property was $12,000 for the year ended
December 31, 2005. There was no rental expense associated with the lease in 2006.

The
Company entered into a lease agreement with a third party for the lease of its temporary
branch site in Camden, SC. The site serves as a temporary location during construction of
a permanent building. The lease term is for the twelve (12) months beginning on September
1, 2006 and ending August 31, 2007. The monthly lease rate is $600 per month. Rental
expense associated with the property was $2,400 for the year ended December 31, 2006.
There was no rental expense associated with the lease in 2005. Future minimum lease
payments under noncancellable operating leases totaled $4,800 and are all in 2007.

# Item 3. Legal
Proceedings.

In
the ordinary course of operations, we may be a party to various legal proceedings from
time to time. We do not believe that there is any pending or threatened proceeding against
us, which, if determined adversely, would have a material effect on our business, results
of operations, or financial condition.

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

No
matter was submitted to a vote of security holders during the fourth quarter of the fiscal
year covered by this report.

18

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# Part II

# Item 5. Market for
Common Equity and Related Stockholder Matters.

Although
the common stock of the Company may be traded from time to time on an individual basis, no
established trading market has developed and none is expected to develop in the
foreseeable future. The common stock is not listed on any exchange nor is it traded on the
NASDAQ National Market System, nor are there any market makers known to management. In
2006, management was aware of a few transactions in which the Companys common stock
traded at $12.38 per share. However, management has not ascertained that any of these
transactions are the result of arms length negotiations between the parties, and
because of the limited number of shares involved, these prices may not be indicative of
the market value of the common stock. The Company issued a 5% common stock dividend in
2006. The share prices above have been restated to reflect this dividend.

As
of December 31, 2006, there were approximately 873 holders of record of the Companys
common stock, excluding individual participants in security position listings.

We
have not declared or paid any cash dividends on our common stock since our inception. For
the foreseeable future we do not intend to declare cash dividends. We intend to retain
earnings to grow our business and strengthen our capital base. Our ability to pay
dividends depends on the ability of our subsidiary, Heritage Community Bank, to pay
dividends to us. As a South Carolina state bank, Heritage Community Bank may only pay
dividends out of its net profits, after deducting expenses, including losses and bad
debts.

Issuance of Unregistered
Securities

In
connection with the Banks initial public offering, each of its organizers received a
warrant to purchase 6,000 shares of the Banks common stock. Upon acquisition of the
Bank by the Company, the warrants were converted into warrants to purchase common stock of
the Company. The exercise price for the warrants is $7.93 per share and they may be
exercised over a ten-year period. All of the warrants have vested. In 2006, 13,528 of such
warrants were exercised for an aggregate purchase price of $107,277. Issuance of shares
upon the exercise of warrants was registered under the Securities Act of 1933 in reliance
on the exemption provided by Section 4(2) thereof on the grounds that no public offering
was involved. The numbers of shares and exercise prices above have been adjusted to
reflect the 5% stock dividend issued in 2006.

Additionally,
in 2006, the Company issued an aggregate of 2057 shares of common stock for an aggregate
purchase price of $10.31 to a former employee upon exercise of options issued pursuant to
the Companys 2001 Stock Option Plan. Issuance of these shares was also exempt from
registration under Section 4(2) of the Securities Act of 1933 because no public offering
was involved.

See
Item 11 for the information required by Item 201(d) of Regulation S-B.

# Item 6.
Managements Discussion and Analysis or Plan of Operation.

The
information required by Item 6 is hereby incorporated by reference from our annual report
to shareholders for the year ended December 31, 2006.

# Item 7. Financial
Statements.

The
information required by Item 7 is hereby incorporated by reference from our annual report
to shareholders for the year ended December 31, 2006.

# Item 8. Changes in and
Disagreements with Accountants on Accounting and Financial Disclosure.

None

19

---

# Item 8A. Controls and
Procedures.

As
of the end of the period covered by this report, we carried out an evaluation, under the
supervision and with the participation of our management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and
procedures as defined in Exchange Act Rule 13a-15(e). Based upon that evaluation, our
Chief Executive Officer and Chief Financial Officer have concluded that our current
disclosure controls and procedures are effective as of December 31, 2006. There have been
no significant changes in our internal controls over financial reporting during the fourth
fiscal quarter ended December 31, 2006 that have materially affected, or are reasonably
likely to materially affect, our internal controls over financial reporting.

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

# Part III

# Item 9. Directors,
Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the
Exchange Act.

The
information required by Item 9 is hereby incorporated by reference from our proxy
statement for our 2007 annual meeting of shareholders to be held on May 17, 2007.

# Item 10. Executive
Compensation.

The
information required by Item 10 is hereby incorporated by reference from our proxy
statement for our 2007 annual meeting of shareholders to be held on May 17, 2007.

# Item 11. Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The
information required by Item 11 is hereby incorporated by reference from our proxy
statement for our 2007 annual meeting of shareholders to be held on May 17, 2007.

# Item 12. Certain
Relationships and Related Transactions.

The
information required by Item 12 is hereby incorporated by reference from our proxy
statement for our 2007 annual meeting of shareholders to be held on May 17, 2007.

# Item 13. Exhibits.

|    | 
|--- | 
|3.1 | 
|    | 
|3.2 | 
|    | 
|4.1 | 
|    | 

19

---

|     | 
|---- | 
|4.2  | 
|     | 
|4.3  | 
|     | 
|10.1 | 
|     | 
|10.2 | 
|     | 
|10.3 | 
|     | 
|13   | 
|21.1 | 
|24.1 | 
|31.1 | 
|31.2 | 
|32   | 

_________________

| | * | Management contract of compensatory plan or arrangement required to be filed as an Exhibit
to this Annual Report on Form 10-KSB.
| | - | --------------------------------------------------------------------------------------------------------------------------------

# Item 14. Principal
Accountant Fees and Services.

The
information required by Item 14 is hereby incorporated by reference from our proxy
statement for our 2007 annual meeting of shareholders to be held on May 17, 2007.

21

---

# SIGNATURES

In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

| |  | REGIONAL BANKSHARES, INC.
| |  | -------------------------

|Date:  March 22,2007 |  | By:   /s/  Curtis A. Tyner, Sr.                                      
|-------------------- |  | ---------------------------------------------------------------------
|                     |  | Curtis A. Tyner, Sr.                                                 
|                     |  | President and Chief Executive Officer         Chief Financial Officer

KNOW
ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Curtis A. Tyner, Sr., his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments to this Annual Report on Form 10-KSB,
and to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto attorney-in-fact and
agent full power and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.

In
accordance with the Exchange Act, this report has been signed below by the following
persons on behalf of the registrant in the capacities and on the dates indicated.

|                            |  | 
|--------------------------- |  | 
|Signature                   |  | 
|/s/ Gosnold G. Segars, Jr   |  | 
|Gosnold G. Segars, Jr       |  | 
|                            |  | 
|/s/ Curtis A. Tyner, Sr     |  | 
|Curtis A. Tyner, Sr         |  | 
|                            |  | 
|                            |  | 
|/s/ Francine P. Bachman     |  | 
|Francine P. Bachman         |  | 
|                            |  | 
|T. James Bell, Jr           |  | 
|/s/ Peter C. Coggeshall, Jr |  | 
|Peter C. Coggeshall, Jr     |  | 
|                            |  | 
|Franklin Hines              |  | 
|/s/ J. Richard Jones        |  | 
|J. Richard Jones            |  | 

22

---

|                       |  | 
|---------------------- |  | 
|Signature              |  | 
|                       |  | 
|Woodward H. Morgan     |  | 
|/s/ Randolph G. Rogers |  | 
|Randolph G. Rogers     |  | 
|                       |  | 
|                       |  | 
|Howard W. Tucker, Jr   |  | 
|                       |  | 
|/s/ Patricia M. West   |  | 
|Patricia M. West       |  | 

23

---

# Exhibit Index

|     | 
|---- | 
|4.2  | 
|     | 
|4.3  | 
|     | 
|10.1 | 
|     | 
|10.2 | 
|     | 
|10.3 | 
|     | 
|13   | 
|21.1 | 
|24.1 | 
|31.1 | 
|31.2 | 
|32   | 

_________________

| | * | Management contract of compensatory plan or arrangement required to be filed as an Exhibit
to this Annual Report on Form 10-KSB.
| | - | --------------------------------------------------------------------------------------------------------------------------------

24