**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C.  20549**

**FORM      10-Q/A**

**Amendment      No. 1**

**QUARTERLY      REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES**

**EXCHANGE      ACT OF 1934**

**For      the quarterly period ended March 31, 2007**

**001-11663**

**(Commission      File Number)**

**COMMUNITY      BANKS, INC.**

**(Exact      name of registrant as specified in its charter)**

| **PENNSYLVANIA**                            | **23-2251762**                                                            |
|---------------------------------------------|---------------------------------------------------------------------------|
| **(State                of incorporation)** | **(I.R.S.                Employer Identification                Number)** |

| **777                East Park Dr., Harrisburg, PA**        | **17111**                     |
|-------------------------------------------------------------|-------------------------------|
| **(Address                of principal executive offices)** | **(Zip                Code)** |

**(717)      920-5800**

**(Registrant’s      telephone number, including area code)**

| Yes | X |   | No |   |   |
|-----|---|--------|----|--------|--------|

| Large                accelerated filer |   |   | Accelerated                filer | X |   | Non-accelerated                filer |   |
|----------------------------------------|--------|--------|----------------------------------|---|--------|--------------------------------------|--------|

| Yes |   |   | No | X |   |
|-----|--------|--------|----|---|--------|

----

**EXPLANATORY      NOTE REGARDING THIS FORM 10-Q/A**

**This      Amendment No. 1 on Form 10-Q/A amends our Form 10-Q for the three months ended      March 31, 2007, initially filed with the Securities and Exchange Commission      on      May 10, 2007 (“the original Form 10-Q”).**

**As      described in its Current Report on Form 8-K filed on June 18, 2007, and as      discussed in Note 2 to the Consolidated Financial Statements included herein,      Community Banks, Inc. (Community) is filing this amendment to its original      Form      10-Q to amend and restate its financial statements and other financial      information as a result of Community’s decision to reverse its application of      Statement of Financial Accounting Standards No. 159, “*The Fair value Option      for Financial Assets and Liabilities*” (SFAS No. 159) with respect to      certain investment securities.**

**The      Form 10-Q/A is presented as of the date of the original Form 10-Q and the      disclosures contained herein have not been updated for presentation as of any      later date.  Information not directly affected by the reversal of the      application of SFAS No. 159 remains substantially unchanged in this restatement      and continues to reflect the disclosures made at the time of the original      filing.**

**For      convenience, the entire Quarterly Report on Form 10-Q for the three months      ended      March 31, 2007 has been re-filed in this Form 10-Q/A.  Pursuant to SEC Rule      12b-15, Community is filing updated exhibits 31.1, 31.2, and 32 in connection      with this filing.  **

----

**COMMUNITY      BANKS, INC. AND SUBSIDIARIES**

**FORM      10-Q**

**INDEX**

| **PART                I – Financial Information** | **Page**                                                                                               |
|---------------------------------------------------------|--------------------------------------------------------------------------------------------------------|
|                                                    |                                                                                                   |   |
| Item                1.                                  | Financial                Statements                                                                    |   |
|                                                    |                                                                                                   |   |
|                                                    | Consolidated                Interim Balance                Sheets                                      | 4 |
|                                                    | Consolidated                Interim Statements of                Income                                | 5 |
|                                                    | Consolidated                Interim Statements of Changes in                Stockholders’ Equity | 6 |
|                                                    | Consolidated                Interim Statements of Cash                Flows                            | 7 |
|                                                    | Notes                to                Consolidated Interim Financial Statements                       | 8–15 |
|                                                    |                                                                                                   |   |
| Item                2.                                  | Management’s                Discussion and Analysis of Financial Condition                and    |   |
|                                                    | Results                of                Operations                                                    | 16–27 |
|                                                    |                                                                                                   |   |
| Item                3.                                  | Quantitative                and Qualitative Disclosures About Market                Risk               | 28 |
|                                                    |                                                                                                   |   |
| Item                4.                                  | Controls                and Procedures                                                                 | 29 |
|                                                    |                                                                                                   |   |
|                                                    |                                                                                                   |   |
| **PART                II – Other Information**    |                                                                                                   |
|                                                    |                                                                                                   |   |
| Item                1.                                  | Legal                Proceedings                                                                       | 30 |
|                                                    |                                                                                                   |   |
| Item                1A.                                 | Risk                Factors                                                                            | 30 |
|                                                    |                                                                                                   |   |
| Item                2.                                  | Unregistered                Sales of Equity Securities and Use of                Proceeds              | 30 |
|                                                    |                                                                                                   |   |
| 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                                                                                               | 31 |
|                                                    |                                                                                                   |   |
|                                                    |                                                                                                   |   |
| **SIGNATURES**                                          | 32                                                                                                     |
|                                                    |                                                                                                   |   |

----

**PART      I – FINANCIAL INFORMATION**

**Item      1.  Financial Statements**

**Community      Banks, Inc. and      Subsidiaries**

**CONSOLIDATED      INTERIM BALANCE SHEETS**

**(Dollars      in thousands except per share data)**

|                                                                                                                        |   | **March                31,** |      |   | **December                31,** |   |
|-----------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|-----------|--------|---------------------------------|--------|
|                                                                                                                        |   | **2007**                     |      |   | **2006**                        |   |
| **ASSETS**                                                                                                                  |   | **(Restated)**               |      |   |                            |   |
|                                                                                                                        |   |                         |      |   |                            |   |
| Cash                and due from banks                                                                                      |   | $                            | 70,128    |   |                            | $      | 73,608 |   |
| Federal                funds sold                                                                                           |   |                         | 10,199    |   |                            |   | --- |   |
| Cash                and cash equivalents                                                                                    |   |                         | 80,327    |   |                            |   | 73,608 |   |
| Interest-bearing                deposits in other banks                                                                     |   |                         | 32,964    |   |                            |   | 3,561 |   |
| Investment                securities, available for sale                                                                    |   |                         | 645,054   |   |                            |   | 636,066 |   |
| Investment                securities, held to maturity (fair valueapproximates                $23,353 and $23,415)          |   |                         | 23,080    |   |                            |   | 23,070 |   |
| Loans,                net of allowance for loan losses of $24,379 and $23,626                                               |   |                         | 2,417,939 |   |                            |   | 2,347,263 |   |
| Premises                and equipment, net                                                                                  |   |                         | 46,261    |   |                            |   | 46,335 |   |
| Goodwill                and other intangible assets                                                                         |   |                         | 258,812   |   |                            |   | 259,406 |   |
| Accrued                interest receivable and other assets                                                                 |   |                         | 123,302   |   |                            |   | 107,061 |   |
| Total                assets                                                                                                 |   | $                            | 3,627,739 |   |                            | $      | 3,496,370 |   |
|                                                                                                                        |   |                         |      |   |                            |   |   |   |
| **LIABILITIES**                                                                                                             |   |                         |      |   |                            |   |   |   |
|                                                                                                                        |   |                         |      |   |                            |   |   |   |
| Deposits                                                                                                                    |   |                         |      |   |                            |   |   |   |
| Non-interest                bearing                                                                                         |   | $                            | 367,917   |   |                            | $      | 368,329 |   |
| Interest                bearing                                                                                             |   |                         | 2,161,270 |   |                            |   | 2,144,853 |   |
| Total                deposits                                                                                               |   |                         | 2,529,187 |   |                            |   | 2,513,182 |   |
| Short-term                borrowings                                                                                        |   |                         | 67,747    |   |                            |   | 108,927 |   |
| Long-term                debt                                                                                               |   |                         | 438,196   |   |                            |   | 315,079 |   |
| Subordinated                debt                                                                                            |   |                         | 72,167    |   |                            |   | 51,548 |   |
| Accrued                interest payable and other liabilities                                                               |   |                         | 29,878    |   |                            |   | 21,473 |   |
| Total                liabilities                                                                                            |   |                         | 3,137,175 |   |                            |   | 3,010,209 |   |
|                                                                                                                        |   |                         |      |   |                            |   |   |   |
| **STOCKHOLDERS’                EQUITY**                                                                               |   |                         |      |   |                            |   |   |   |
|                                                                                                                        |   |                         |      |   |                            |   |   |   |
| Preferred                stock, no par value; 500,000 shares                                                                |   |                         |      |   |                            |   |   |   |
| authorized;                no shares issued and outstanding                                                                 |   |                         | ---       |   |                            |   | --- |   |
| Common                stock, $5.00 par value; 50,000,000 shares                                                             |   |                         |      |   |                            |   |   |   |
| authorized;                24,478,000 shares issued                                                                         |   |                         | 122,391   |   |                            |   | 122,391 |   |
| Surplus                                                                                                                     |   |                         | 373,335   |   |                            |   | 373,142 |   |
| Retained                Earnings                                                                                            |   |                         | 18,646    |   |                            |   | 17,609 |   |
| Accumulated                other comprehensive income (loss), net of tax                                                    |   |                         | 650       |   |                            |   | (1,806 | ) |
| Treasury                stock; 933,000 and 959,000 shares, at cost                                                          |   |                         | (24,458   | )      |                            |   | (25,175 | ) |
| Total                stockholders’ equity                                                                             |   |                         | 490,564   |   |                            |   | 486,161 |   |
| Total                liabilities and stockholders’ equity                                                             |   | $                            | 3,627,739 |   |                            | $      | 3,496,370 |   |
|                                                                                                                        |   |                         |      |   |                            |   |   |   |
| The                accompanying notes are an integral part of the consolidated interim                financial statements. |   |

----

**Community      Banks, Inc. and Subsidiaries**

**CONSOLIDATED      INTERIM STATEMENTS OF      INCOME**

** (Dollars      in thousands except per      share data)**

|                                                                                                                        |   | **Three                Months Ended** |   |
|-----------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                                                                                        |   | **March                31,**          |   |
|                                                                                                                        |   | **2007**                              |   |   | **2006** |   |
|                                                                                                                        |   | **(Restated)**                        |   |   |   |   |
| **INTEREST                INCOME:**                                                                                         |   |                                  |   |   |   |   |
| Loans,                including fees                                                                                        |   | $                                     | 43,520 |   |   | $ | 39,101 |   |
| Investment                securities:                                                                                       |   |                                  |   |   |   |   |   |   |
| Taxable                                                                                                                     |   |                                  | 5,400  |   |   |   | 4,413 |   |
| Tax                exempt                                                                                                   |   |                                  | 2,632  |   |   |   | 2,368 |   |
| Dividends                                                                                                                   |   |                                  | 552    |   |   |   | 614 |   |
| Other                                                                                                                       |   |                                  | 135    |   |   |   | 393 |   |
| Total                interest income                                                                                        |   |                                  | 52,239 |   |   |   | 46,889 |   |
|                                                                                                                        |   |                                  |   |   |   |   |   |   |
| **INTEREST                EXPENSE:**                                                                                        |   |                                  |   |   |   |   |   |   |
| Deposits                                                                                                                    |   |                                  | 18,886 |   |   |   | 13,421 |   |
| Short-term                borrowings                                                                                        |   |                                  | 1,564  |   |   |   | 696 |   |
| Long-term                debt                                                                                               |   |                                  | 4,500  |   |   |   | 5,111 |   |
| Subordinated                debt                                                                                            |   |                                  | 1,022  |   |   |   | 797 |   |
| Total                interest expense                                                                                       |   |                                  | 25,972 |   |   |   | 20,025 |   |
| Net                interest income                                                                                          |   |                                  | 26,267 |   |   |   | 26,864 |   |
| Provision                for loan losses                                                                                    |   |                                  | 1,300  |   |   |   | 500 |   |
| Net                interest income after provision for loan losses                                                          |   |                                  | 24,967 |   |   |   | 26,364 |   |
|                                                                                                                        |   |                                  |   |   |   |   |   |   |
| **NON-INTEREST                INCOME:**                                                                                     |   |                                  |   |   |   |   |   |   |
| Investment                management and trust services                                                                     |   |                                  | 1,445  |   |   |   | 1,013 |   |
| Service                charges on deposit accounts                                                                          |   |                                  | 2,996  |   |   |   | 2,531 |   |
| Other                service charges, commissions and fees                                                                  |   |                                  | 2,028  |   |   |   | 1,700 |   |
| Insurance                premium income and commissions                                                                     |   |                                  | 1,176  |   |   |   | 928 |   |
| Mortgage                banking activities                                                                                  |   |                                  | 548    |   |   |   | 468 |   |
| Earnings                on investment in life insurance                                                                     |   |                                  | 688    |   |   |   | 656 |   |
| Investment                security gains                                                                                    |   |                                  | 2      |   |   |   | 283 |   |
| Other                than temporary impairment of investment securities (see Note                2)                         |   |                                  | (4,390 | ) |   |   | --- |   |
| Other                                                                                                                       |   |                                  | 591    |   |   |   | 805 |   |
| Total                non-interest income                                                                                    |   |                                  | 5,084  |   |   |   | 8,384 |   |
|                                                                                                                        |   |                                  |   |   |   |   |   |   |
| **NON-INTEREST                EXPENSES:**                                                                                   |   |                                  |   |   |   |   |   |   |
| Salaries                and employee benefits                                                                               |   |                                  | 12,009 |   |   |   | 11,418 |   |
| Net                occupancy and equipment expense                                                                          |   |                                  | 3,794  |   |   |   | 3,512 |   |
| Marketing                expense                                                                                            |   |                                  | 505    |   |   |   | 575 |   |
| Telecommunications                expense                                                                                   |   |                                  | 525    |   |   |   | 551 |   |
| Amortization                of intangibles                                                                                  |   |                                  | 661    |   |   |   | 654 |   |
| Other                                                                                                                       |   |                                  | 4,647  |   |   |   | 3,823 |   |
| Total                non-interest expenses                                                                                  |   |                                  | 22,141 |   |   |   | 20,533 |   |
|                                                                                                                        |   |                                  |   |   |   |   |   |   |
| Income                before income taxes                                                                                   |   |                                  | 7,910  |   |   |   | 14,215 |   |
| Income                taxes                                                                                                 |   |                                  | 1,323  |   |   |   | 3,646 |   |
| Net                income                                                                                                   |   | $                                     | 6,587  |   |   | $ | 10,569 |   |
| **CONSOLIDATED                PER SHARE DATA**                                                                              |   |                                  |   |   |   |   |   |   |
| Basic                earnings per share                                                                                     |   | $                                     | 0.28   |   |   | $ | 0.44 |   |
| Diluted                earnings per share                                                                                   |   | $                                     | 0.28   |   |   | $ | 0.44 |   |
| Dividends                declared                                                                                           |   | $                                     | 0.21   |   |   | $ | 0.19 |   |
| The                accompanying notes are an integral part of the consolidated interim                financial statements. |   |

----

**Community      Banks, Inc. and Subsidiaries**

**CONSOLIDATED      INTERIM STATEMENTS OF CHANGES IN STOCKHOLDERS’EQUITY**

**For      the Three Months Ended March 31, 2007 and 2006**

**(Dollars      in Thousands)**

|                                                                                                                               |   | **Outstanding****Shares** |   |   | **Common****Stock** |   |    | **Surplus** |   |   | **Retained**** Earnings** |   |   | **Accumulated****Other****Comprehensive****Income                (Loss)** |    |   | **Treasury****Stock** |   |   | **Total**** Equity** |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------|--------|--------|---------------------|--------|---------|-------------|--------|--------|--------------------------------|--------|--------|---------------------------------------------------------------------------|---------|--------|-----------------------|--------|--------|---------------------------|--------|
| **Balance,                January 1, 2006**                                                                                        |   |                      | 22,915 |   |                | $      | 116,572 |        |   | $      | 347,827                        |   |   | $                                                                         | 27,031  |   |                  | $      | (3,779 | )                         |   | $ | (10,978 | ) |   | $ | 476,673 |   |
| Comprehensive                income:                                                                                               |   |                      |   |   |                |   |    |        |   |   |                           |   |   |                                                                      |    |   |                  |   |   |                      |   |   |   |   |   |   |   |   |
| Net                income                                                                                                          |   |                      |   |   |                |   |    |        |   |   |                           |   |   |                                                                      | 10,569  |   |                  |   |   |                      |   |   |   |   |   |   | 10,569 |   |
| Unrealized                loss on securities, net of reclassification adjustment and tax                effect                     |   |                      |   |   |                |   |    |        |   |   |                           |   |   |                                                                      |    |   |                  |   | (589   | )                         |   |   |   |   |   |   | (589 | ) |
| Total                comprehensive income                                                                                          |   |                      |   |   |                |   |    |        |   |   |                           |   |   |                                                                      |    |   |                  |   |   |                      |   |   |   |   |   |   | 9,980 |   |
| Cash                dividends ($0.19 per share)                                                                                    |   |                      |   |   |                |   |    |        |   |   |                           |   |   |                                                                      | (4,545  | )      |                  |   |   |                      |   |   |   |   |   |   | (4,545 | ) |
| 5%                stock dividend                                                                                                   |   |                      | 1,133  |   |                |   | 5,820   |        |   |   | 24,162                         |   |   |                                                                      | (29,982 | )      |                  |   |   |                      |   |   |   |   |   |   | --- |   |
| Purchases                of treasury stock                                                                                         |   |                      | (264   | )      |                |   |    |        |   |   |                           |   |   |                                                                      |    |   |                  |   |   |                      |   |   | (7,349 | ) |   |   | (7,349 | ) |
| Exercise                of common stock options    and issuances under stock                purchase plan      |   |                      | 47     |   |                |   |    |        |   |   |                           |   |   |                                                                      | (653    | )      |                  |   |   |                      |   |   | 1,292 |   |   |   | 639 |   |
| Compensation                and tax benefits from employee stock transactions                                                      |   |                      |   |   |                |   |    |        |   |   | 189                            |   |   |                                                                      |    |   |                  |   |   |                      |   |   |   |   |   |   | 189 |   |
|                                                                                                                               |   |                      |   |   |                |   |    |        |   |   |                           |   |   |                                                                      |    |   |                  |   |   |                      |   |   |   |   |   |   |   |   |
| **Balance,                March 31, 2006**                                                                                         |   |                      | 23,831 |   |                | $      | 122,392 |        |   | $      | 372,178                        |   |   | $                                                                         | 2,420   |   |                  | $      | (4,368 | )                         |   | $ | (17,035 | ) |   | $ | 475,587 |   |
|                                                                                                                               |   |                      |   |   |                |   |    |        |   |   |                           |   |   |                                                                      |    |   |                  |   |   |                      |   |   |   |   |   |   |   |   |
| **Balance,                January 1, 2007**                                                                                        |   |                      | 23,519 |   |                | $      | 122,391 |        |   | $      | 373,142                        |   |   | $                                                                         | 17,609  |   |                  | $      | (1,806 | )                         |   | $ | (25,175 | ) |   | $ | 486,161 |   |
| Comprehensive                income:                                                                                               |   |                      |   |   |                |   |    |        |   |   |                           |   |   |                                                                      |    |   |                  |   |   |                      |   |   |   |   |   |   |   |   |
| Restated                net income                                                                                                 |   |                      |   |   |                |   |    |        |   |   |                           |   |   |                                                                      | 6,587   |   |                  |   |   |                      |   |   |   |   |   |   | 6,587 |   |
| Restated                unrealized gain on securities,  net of reclassification                adjustment and tax effect |   |                      |   |   |                |   |    |        |   |   |                           |   |   |                                                                      |    |   |                  |   | 2,456  |                      |   |   |   |   |   |   | 2,456 |   |
| Total                comprehensive income                                                                                          |   |                      |   |   |                |   |    |        |   |   |                           |   |   |                                                                      |    |   |                  |   |   |                      |   |   |   |   |   |   | 9,043 |   |
| Cash                dividends ($0.21 per share)                                                                                    |   |                      |   |   |                |   |    |        |   |   |                           |   |   |                                                                      | (4,944  | )      |                  |   |   |                      |   |   |   |   |   |   | (4,944 | ) |
| Purchases                of treasury stock                                                                                         |   |                      | (12    | )      |                |   |    |        |   |   |                           |   |   |                                                                      |    |   |                  |   |   |                      |   |   | (298 | ) |   |   | (298 | ) |
| Exercise                of common stock options   and issuances under stock                purchase plan            |   |                      | 38     |   |                |   |    |        |   |   |                           |   |   |                                                                      | (606    | )      |                  |   |   |                      |   |   | 1,015 |   |   |   | 409 |   |
| Compensation                and tax benefits from employee stock transactions                                                      |   |                      |   |   |                |   |    |        |   |   | 193                            |   |   |                                                                      |    |   |                  |   |   |                      |   |   |   |   |   |   | 193 |   |
|                                                                                                                               |   |                      |   |   |                |   |    |        |   |   |                           |   |   |                                                                      |    |   |                  |   |   |                      |   |   |   |   |   |   |   |   |
| **Balance,                March 31, 2007**                                                                                         |   |                      | 23,545 |   |                | $      | 122,391 |        |   | $      | 373,335                        |   |   | $                                                                         | 18,646  |   |                  | $      | 650    |                      |   | $ | (24,458 | ) |   | $ | 490,564 |   |
|                                                                                                                               |   |                      |   |   |                |   |    |        |   |   |                           |   |   |                                                                      |    |   |                  |   |   |                      |   |   |   |   |   |   |   |   |
|                                                                                                                               |   |                      |   |   |                |   |    |        |   |   |                           |   |   |                                                                      |    |   |                  |   |   |                      |   |   |   |   |   |   |   |   |
| The                accompanying notes are an integral part of the consolidated interim                financial statements.        |   |

----

**Community      Banks, Inc. and Subsidiaries**

**CONSOLIDATED      INTERIM STATEMENTS OF CASH      FLOWS**

** (Dollars      in thousands)**

|                                                                                                                        |   | **Three                Months Ended** |     |
|-----------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|----------|
|                                                                                                                        |   | **March                31,**          |     |
|                                                                                                                        |   | **2007**                              |     |   | **2006** |   |
|                                                                                                                        |   | **(Restated)**                        |     |   |   |   |
| **Operating                Activities:**                                                                                    |   |                                  |     |   |   |   |
| Net                income                                                                                                   |   | $                                     | 6,587    |   |   | $ | 10,569 |   |
| Adjustments                to reconcile net income to net cash                                                              |   |                                  |     |   |   |   |   |   |
| provided                by operating activities:                                                                            |   |                                  |     |   |   |   |   |   |
| Provision                for loan losses                                                                                    |   |                                  | 1,300    |   |   |   | 500 |   |
| Depreciation                and amortization                                                                                |   |                                  | 1,830    |   |   |   | 1,817 |   |
| Stock                option expense                                                                                         |   |                                  | 193      |   |   |   | 118 |   |
| Net                amortization (accretion) of securities                                                                   |   |                                  | 11       |   |   |   | 144 |   |
| Realized                gains on sales of available-for-sale securities, net                                                |   |                                  | (2       | ) |   |   | (283 | ) |
| Other                than temporary impairment of investment securities                                                     |   |                                  | 4,390    |   |   |   | --- |   |
| Loans                originated for sale                                                                                    |   |                                  | (7,178   | ) |   |   | (1,335 | ) |
| Proceeds                from sales of loans held for sale                                                                   |   |                                  | 5,813    |   |   |   | 711 |   |
| Gains                on loan sales                                                                                          |   |                                  | (584     | ) |   |   | (14 | ) |
| Earnings                on investment in life insurance                                                                     |   |                                  | (688     | ) |   |   | (656 | ) |
| Net                change in other assets and liabilities, net                                                              |   |                                  | (8,547   | ) |   |   | 9,384 |   |
| Net                cash provided by operating activities                                                                    |   |                                  | 3,125    |   |   |   | 20,955 |   |
|                                                                                                                        |   |                                  |     |   |   |   |   |   |
| **Investing                Activities:**                                                                                    |   |                                  |     |   |   |   |   |   |
| Net                change in interest-bearing deposits in other banks                                                       |   |                                  | (29,403  | ) |   |   | (71,447 | ) |
| Activity                in available-for-sale securities:                                                                   |   |                                  |     |   |   |   |   |   |
| Sales                                                                                                                       |   |                                  | 33,313   |   |   |   | 38,557 |   |
| Maturities,                prepayments and calls                                                                            |   |                                  | 19,400   |   |   |   | 13,030 |   |
| Purchases                                                                                                                   |   |                                  | (62,295  | ) |   |   | (12,593 | ) |
| Net                increase in total loans                                                                                  |   |                                  | (71,493  | ) |   |   | (49,726 | ) |
| Proceeds                from sale of loans                                                                                  |   |                                  | 1,441    |   |   |   | --- |   |
| Additions                to premises and equipment                                                                          |   |                                  | (1,096   | ) |   |   | (1,261 | ) |
| Net                cash used in investing activities                                                                        |   |                                  | (110,133 | ) |   |   | (83,440 | ) |
|                                                                                                                        |   |                                  |     |   |   |   |   |   |
| **Financing                Activities:**                                                                                    |   |                                  |     |   |   |   |   |   |
| Net                increase in deposits                                                                                     |   |                                  | 16,005   |   |   |   | 79,498 |   |
| Net                change in short-term borrowings                                                                          |   |                                  | (41,180  | ) |   |   | (32,249 | ) |
| Proceeds                from issuance of long-term debt                                                                     |   |                                  | 145,619  |   |   |   | 75,620 |   |
| Repayment                of long-term debt                                                                                  |   |                                  | (1,884   | ) |   |   | (42,444 | ) |
| Cash                dividends and cash paid in lieu of fractional shares                                                    |   |                                  | (4,944   | ) |   |   | (4,545 | ) |
| Purchases                of treasury stock                                                                                  |   |                                  | (298     | ) |   |   | (7,349 | ) |
| Tax                benefits from employee stock transactions                                                                |   |                                  | ---      |   |   |   | 71 |   |
| Proceeds                from issuance of common stock                                                                       |   |                                  | 409      |   |   |   | 639 |   |
| Net                cash provided by financing activities                                                                    |   |                                  | 113,727  |   |   |   | 69,241 |   |
|                                                                                                                        |   |                                  |     |   |   |   |   |   |
| Net                change in cash and cash equivalents                                                                      |   |                                  | 6,719    |   |   |   | 6,756 |   |
| Cash                and cash equivalents at beginning of period                                                             |   |                                  | 73,608   |   |   |   | 76,820 |   |
| Cash                and cash equivalents at end of period                                                                   |   | $                                     | 80,327   |   |   | $ | 83,576 |   |
|                                                                                                                        |   |
| The                accompanying notes are an integral part of the consolidated interim                financial statements. |   |

----

**Community      Banks, Inc. and Subsidiaries**

**NOTES      TO CONSOLIDATED INTERIM FINANCIAL      STATEMENTS**

**(Unaudited)**

**1.  Basis      of Presentation**

**2.      Restatement and Fair Value Measurements**

*Fair Value Measurements*

*The Fair Value Option for Financial Assets and Financial Liabilities*

----

**Community      Banks, Inc. and Subsidiaries**

**NOTES      TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS**

**(Unaudited)**

**2.      Restatement and Fair Value Measurements (continued)**

----

**Community      Banks, Inc. and Subsidiaries**

**NOTES      TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS**

**(Unaudited)**

**2.      Restatement and Fair Value Measurements (continued)**

|                                                                                                                                             |   | **As                    of and for the****Three                    Months Ended****March                    31, 2007** |      |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------|-----------|
|                                                                                                                                             |   | **Previously                    reported**                                                                             |      |   | **Restated** |   |
| **Consolidated                    Interim Balance Sheet Data:**                                                                                  |   |                                                                                                                   |      |   |   |   |
| Trading                    assets                                                                                                                |   | $                                                                                                                      | 146,094   |   |   | $ | --- |   |
| Investment                    securities, available for sale                                                                                     |   |                                                                                                                   | 499,747   |   |   |   | 645,054 |   |
| Accrued                    interest receivable and other assets                                                                                  |   |                                                                                                                   | 124,162   |   |   |   | 123,302 |   |
| Total                    assets                                                                                                                  |   |                                                                                                                   | 3,629,386 |   |   |   | 3,627,739 |   |
| Accrued                    interest payable and other liabilities                                                                                |   |                                                                                                                   | 31,525    |   |   |   | 29,878 |   |
| Total                    liabilities                                                                                                             |   |                                                                                                                   | 3,138,822 |   |   |   | 3,137,175 |   |
| Total                    liabilities and stockholders’ equity                                                                              |   |                                                                                                                   | 3,629,386 |   |   |   | 3,627,739 |   |
|                                                                                                                                             |   |                                                                                                                   |      |   |   |   |   |   |
| **Consolidated                    Interim Statement of Income:**                                                                                 |   |                                                                                                                   |      |   |   |   |   |   |
| Interest                    income on taxable investment securities                                                                              |   |                                                                                                                   | 3,701     |   |   |   | 5,400 |   |
| Interest                    income on trading account securities                                                                                 |   |                                                                                                                   | 1,869     |   |   |   | --- |   |
| Total                    interest income                                                                                                         |   |                                                                                                                   | 52,409    |   |   |   | 52,239 |   |
| Net                    interest income                                                                                                           |   |                                                                                                                   | 26,437    |   |   |   | 26,267 |   |
| Net                    interest income after provision for loan losses                                                                           |   |                                                                                                                   | 25,137    |   |   |   | 24,967 |   |
| Trading                    activities gain                                                                                                       |   |                                                                                                                   | 146       |   |   |   | --- |   |
| Other                    than temporary impairment of investment securities                                                                      |   |                                                                                                                   | ---       |   |   |   | (4,390 | ) |
| Total                    non-interest income                                                                                                     |   |                                                                                                                   | 9,620     |   |   |   | 5,084 |   |
| Income                    before income taxes                                                                                                    |   |                                                                                                                   | 12,616    |   |   |   | 7,910 |   |
| Income                    taxes                                                                                                                  |   |                                                                                                                   | 2,970     |   |   |   | 1,323 |   |
| Net                    income                                                                                                                    |   |                                                                                                                   | 9,646     |   |   |   | 6,587 |   |
|                                                                                                                                             |   |                                                                                                                   |      |   |   |
| **Consolidated                    Interim Statement of Changes in Stockholders’                    Equity**                                |   |                                                                                                                   |      |   |   |
| Unrealized                    gain (loss) on securities, net of reclassification adjustment                    and tax                    effect |   |                                                                                                                   | (603      | ) |   |   | 2,456 |   |
|                                                                                                                                             |   |                                                                                                                   |      |   |   |   |   |   |
| **Consolidated                    Interim Statement of Cash Flows**                                                                              |   |                                                                                                                   |      |   |   |   |   |   |
| Net                    income                                                                                                                    |   |                                                                                                                   | 9,646     |   |   |   | 6,587 |   |
| Net                    amortization (accretion) of securities                                                                                    |   |                                                                                                                   | (41       | ) |   |   | 11 |   |
| Other                    than temporary impairment of investment securities                                                                      |   |                                                                                                                   | ---       |   |   |   | 4,390 |   |
| Net                    change in fair value of trading assets                                                                                    |   |                                                                                                                   | (312      | ) |   |   | --- |   |
| Net                    change in other assets and liabilities, net                                                                               |   |                                                                                                                   | (6,852    | ) |   |   | (8,547 | ) |
| Maturities                    and prepayments in trading assets                                                                                  |   |                                                                                                                   | 5,171     |   |   |   | --- |   |
| Maturities,                    prepayments and calls (in available-for-sale securities)                                                          |   |                                                                                                                   | 14,229    |   |   |   | 19,400 |   |
|                                                                                                                                             |   |                                                                                                                   |      |   |   |   |   |   |
| **Consolidated                    Per Share Data:**                                                                                              |   |                                                                                                                   |      |   |   |   |   |   |
| Basic                    earnings per share                                                                                                      |   | $                                                                                                                      | 0.41      |   |   | $ | 0.28 |   |
| Diluted                    earnings per share                                                                                                    |   | $                                                                                                                      | 0.41      |   |   | $ | 0.28 |   |
|                                                                                                                                             |   |                                                                                                                   |      |   |   |   |   |   |

----

**Community      Banks, Inc. and Subsidiaries**

**NOTES      TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS**

**(Unaudited)**

**2.      Restatement and Fair Value Measurements (continued)**

| Description                                  | Level                I | Level                II | Total    |
|----------------------------------------------|------------------------|-------------------------|----------|
| Available-for-sale                securities | $145,307               | $499,747                | $645,054 |

**3.      Summary of Significant Accounting Policies**

***Earnings      Per Share -***

|                                                                    |   | **Three                Months Ended****March                31,** |   |
|-------------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|
|                                                                    |   | **2007**                                                          |   |   | **2006** |   |
|                                                                    |   | **(Restated)**                                                    |   |   |   |   |
| Net                income                                               |   | $                                                                 | 6,587  |   |   | $ | 10,569 |   |
|                                                                    |   |                                                              |   |   |   |   |   |   |
| Weighted                average shares outstanding  (basic)   |   |                                                              | 23,535 |   |   |   | 23,974 |   |
| Effect                of dilutive stock options                         |   |                                                              | 148    |   |   |   | 215 |   |
| Weighted                average shares outstanding  (diluted) |   |                                                              | 23,683 |   |   |   | 24,189 |   |
|                                                                    |   |                                                              |   |   |   |   |   |   |
| Per                share information:                                   |   |                                                              |   |   |   |   |   |   |
| Basic                earnings per share                                 |   | $                                                                 | 0.28   |   |   | $ | 0.44 |   |
| Diluted                earnings per share                               |   |                                                              | 0.28   |   |   |   | 0.44 |   |

----

**Community      Banks, Inc. and Subsidiaries**

**NOTES      TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS**

**(Unaudited)**

**3.      Summary of Significant Accounting Policies (continued)**

***Comprehensive      Income (Loss)***

|                                                                                      |   | **Three                Months Ended****March                31,** |   |
|-------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|
|                                                                                      |   | **2007**                                                          |   |   | **2006** |   |
|                                                                                      |   | **(Restated)**                                                    |   |   |   |   |
| Unrealized                holding losses on available-for-sale securities                 |   | $                                                                 | (610   | ) |   | $ | (623 | ) |
| Reclassification                adjustments for net (gains) losses included in net income |   |                                                              | 4,388  |   |   |   | (283 | ) |
| Net                unrealized gains (losses)                                              |   |                                                              | 3,778  |   |   |   | (906 | ) |
| Tax                effect                                                                 |   |                                                              | (1,322 | ) |   |   | 317 |   |
|                                                                                      |   |                                                              |   |   |   |   |   |   |
| Net-of-tax                amount                                                          |   | $                                                                 | 2,456  |   |   | $ | (589 | ) |

|                                                                |   | **March                31,****2007** |   |   | **December                31,****2006** |   |
|---------------------------------------------------------------------|--------|--------------------------------------|--------|--------|-----------------------------------------|--------|
| Net                unrealized gain on available-for-sale securities |   | $                                    | 4,212  |   |                                    | $      | 434 |   |
| Tax                effect                                           |   |                                 | (1,474 | )      |                                    |   | (152 | ) |
| Net-of-tax                amount                                    |   |                                 | 2,738  |   |                                    |   | 282 |   |
|                                                                |   |                                 |   |   |                                    |   |   |   |
| Underfunded                pension liability                        |   |                                 | (3,213 | )      |                                    |   | (3,213 | ) |
| Tax                effect                                           |   |                                 | 1,125  |   |                                    |   | 1,125 |   |
| Net-of-tax                amount                                    |   |                                 | (2,088 | )      |                                    |   | (2,088 | ) |
|                                                                |   |                                 |   |   |                                    |   |   |   |
| Accumulated                other comprehensive income (loss)        |   | $                                    | 650    |   |                                    | $      | (1,806 | ) |

***Accounting      Developments***

**FIN      48 – **
*Accounting for Uncertainty in Income Taxes *
* *

**EITF      06-11 - **

**EITF      06-10 - **

----

**Community      Banks, Inc. and Subsidiaries**

**NOTES      TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS**

**(Unaudited)**

**4.      Subsequent Event / Pending Merger:**

**5.      **
**Subsequent Event      / Acquisitions:**
** **

----

**Community      Banks, Inc. and Subsidiaries**

**NOTES      TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS**

**(Unaudited)**

**6.   Guarantees:**

**7.   Long-Term      Debt:**

| (in                thousands)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | **March                31,****2007** |        |   | **December                31, 2006** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|-------------|--------|--------------------------------------|--------|
| Outstanding                advances from the FHLB of Pittsburgh mature from 2007 to                2017.  The advances are collateralized by FHLB stock, certain                first mortgage loans and both agency and mortgage-backed                securities.  The advance rates range from 2.70% to 6.35%, with a                weighted average interest rate of 4.58%.  Advances totaling $354                million are convertible advances.  Convertible advances with an                initial fixed-rate period are convertible to variable rate at the                option                of the FHLB.  Convertible advances with an initial variable-rate                period at LIBOR-100 basis points are convertible to fixed-rate or                to a                variable rate tied to a spread over LIBOR. Under the terms of the                arrangements, if the FHLB opts to convert advances to variable rate,                Community has the ability to prepay the advances at no                penalty.  At the current time no advances have been converted,                and remain at the initial period rate. |   | **$**                                | **438,196** |   |                                 | $      | 315,079 |   |

| March                31, 2008 |   | $      | 52,439  |   |
|-------------------------------|--------|--------|---------|--------|
| March                31, 2009 |   |   | 41,822  |   |
| March                31, 2010 |   |   | 89      |   |
| March                31, 2011 |   |   | 30,090  |   |
| March                31, 2012 |   |   | 5,088   |   |
| Thereafter                    |   |   | 308,668 |   |
|                          |   | $      | 438,196 |   |

----

**Community      Banks, Inc. and Subsidiaries**

**NOTES      TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS**

**(Unaudited)**

**8.      Stock-Based Plans:**

| Dividend                yield                  | 3.1%                  |
|------------------------------------------------|-----------------------|
| Volatility                                     | 29.2%                 |
| Risk-free                interest rate         | 4.5%                  |
| Expected                life (years)           | 6.0                   |
| Resulting                grant-date fair value | $                6.33 |

----

**COMMUNITY      BANKS, INC. AND SUBSIDIARIES**

**Part      1 - Item      2.   Management’s Discussion and Analysis of Financial Condition      and Results of Operations**

**INTRODUCTION**

**GAAP      REPORTING ISSUES**

**Forward-Looking      Statements**

**Critical      Accounting Policies**

| §   | Allowance                for Loan Losses:  Adequacy of                Allowance |
|--------------------|-------------------------------------------------------------------------------------------|

| §   | Purchase                Accounting for Business                Combinations |
|--------------------|-----------------------------------------------------------------------------|

| §   | “Other                than Temporary” Impairment of Investment                Securities |
|--------------------|------------------------------------------------------------------------------------------------------|

| §   | Adoption                of Fair Value Accounting |
|--------------------|--------------------------------------------------|

| ·   | *Adequacy                of Allowance* |
|--------------------|----------------------------------------|

----

| *·  * | *Purchase                Accounting for Business                Combinations* |
|----------------------|-------------------------------------------------------------------------------|

| ·   | * Other                than Temporary Impairment of Investment                Securities* |
|--------------------|------------------------------------------------------------------------------------------------|

| ·   | *Adoption                of Fair Value Accounting* |
|--------------------|----------------------------------------------------|

**GAAP      versus Non-GAAP**

----

**SUMMARY      OF FINANCIAL AND OPERATING RESULTS**

**Overview**

----

**MERGERS**

----

**BALANCE      SHEET**

|                                                            |   | **March****31,** |      |   | **Change** |   |
|-----------------------------------------------------------------|--------|------------------|-----------|--------|------------|--------|
|                                                            |   | **2007**         |      |   | **2006**   |   |   | **Volume** |   |   | **%** |   |
| Cash                and due from banks                          |   | $                | 55,542    |   |       | $      | 59,253 |   |   | $ | (3,711 | )) |   |   | (6 | )% |
| Federal                funds sold and interest-bearing deposits |   |             | 10,701    |   |       |   | 34,885 |   |   |   | (24,184 | ) |   |   | (69 | )% |
| Investments                                                     |   |             | 682,592   |   |       |   | 613,891 |   |   |   | 68,701 |   |   |   | 11 | % |
| Loans                                                           |   |             | 2,404,530 |   |       |   | 2,289,979 |   |   |   | 114,551 |   |   |   | 5 | % |
| Allowance                for loan losses                        |   |             | (24,022   | )      |       |   | (23,172 | ) |   |   | (850 | ) |   |   | 4 | % |
| Net                loans                                        |   |             | 2,380,508 |   |       |   | 2,266,807 |   |   |   | 113,701 |   |   |   | 5 | % |
| Goodwill                and identifiable intangible assets      |   |             | 259,083   |   |       |   | 258,689 |   |   |   | 394 |   |   |   | --- |   |
| Other                assets                                     |   |             | 155,763   |   |       |   | 149,686 |   |   |   | 6,077 |   |   |   | 4 | % |
|                                                            |   |             |      |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Total                assets                                     |   | $                | 3,544,189 |   |       | $      | 3,383,211 |   |   | $ | 160,978 |   |   |   | 5 | % |
|                                                            |   |             |      |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest                bearing deposits                    |   | $                | 340,580   |   |       | $      | 373,637 |   |   | $ | (33,057 | ) |   |   | (9 | )% |
| Interest-bearing                deposits                        |   |             | 2,121,561 |   |       |   | 1,928,261 |   |   |   | 193,300 |   |   |   | 10 | % |
| Short-term                borrowings                            |   |             | 124,985   |   |       |   | 68,524 |   |   |   | 56,461 |   |   |   | 82 | % |
| Long-term                debt                                   |   |             | 391,196   |   |       |   | 467,010 |   |   |   | (75,814 | ) |   |   | (16 | )% |
| Subordinated                debt                                |   |             | 56,817    |   |       |   | 44,674 |   |   |   | 12,143 |   |   |   | 27 | % |
| Other                liabilities                                |   |             | 22,122    |   |       |   | 22,598 |   |   |   | (476 | ) |   |   | (2 | )% |
|                                                            |   |             |      |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Total                liabilities                                |   |             | 3,057,261 |   |       |   | 2,904,704 |   |   |   | 152,557 |   |   |   | 5 | % |
|                                                            |   |             |      |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Stockholders’                equity                       |   |             | 486,928   |   |       |   | 478,507 |   |   |   | 8,421 |   |   |   | 2 | % |
|                                                            |   |             |      |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Total                liabilities and stockholders’ equity |   | $                | 3,544,189 |   |       | $      | 3,383,211 |   |   | $ | 160,978 |   |   |   | 5 | % |

|                                   |   |     |      |   | **Change** |   |
|----------------------------------------|--------|----------|-----------|--------|------------|--------|
|                                   |   | **2007** |      |   | **2006**   |   |   | **Amount** |   |   | **%** |   |
| Commercial                             |   | $        | 895,114   |   |       | $      | 808,108 |   |   | $ | 87,006 |   |   |   | 11 | % |
| Commercial                real estate  |   |     | 810,424   |   |       |   | 799,505 |   |   |   | 10,919 |   |   |   | 1 | % |
| Residential                real estate |   |     | 151,141   |   |       |   | 153,282 |   |   |   | (2,141 | ) |   |   | (1 | )% |
| Consumer                               |   |     | 547,851   |   |       |   | 529,084 |   |   |   | 18,767 |   |   |   | 4 | % |
| Total                                  |   | $        | 2,404,530 |   |       | $      | 2,289,979 |   |   | $ | 114,551 |   |   |   | 5 | % |

----

|                                      |   |     |      |   |     |   |      | **Change** |   |
|-------------------------------------------|--------|----------|-----------|--------|----------|--------|-----------|------------|--------|
| (in                thousands)             |   | **2007** |      |   | **2006** |   |      | **Amount** |   |   | **%** |   |
| Demand                                    |   | $        | 340,580   |   |     | $      | 373,637   |       |   | $ | (33,057 | ) |   |   | (9 | )% |
| Savings                & NOW accounts |   |     | 858,469   |   |     |   | 826,742   |       |   |   | 31,727 |   |   |   | 4 | % |
| Time                                      |   |     | 994,824   |   |     |   | 900,698   |       |   |   | 94,126 |   |   |   | 10 | % |
| Time                $100,000 or more      |   |     | 268,268   |   |     |   | 200,821   |       |   |   | 67,447 |   |   |   | 34 | % |
|                                      |   | $        | 2,462,141 |   |     | $      | 2,301,898 |       |   | $ | 160,243 |   |   |   | 7 | % |

**RESULTS      OF OPERATIONS**

**Net      Interest Income**

----

| **Net                Interest Margin – Quarter to Date**                          |   |
|-----------------------------------------------------------------------------------------|--------|
|                                                                                    |   |   |   |   |   |   |
| (in                thousands)                                                           |   | March                31, 2007 |   |   | March                31, 2006 |   |
|                                                                                    |   | Average                Balance |   |   | FTE                Interest Income/ Expense |   |   | Average                Rate Earned/Paid |   |   | Average                Balance |   |   | FTE                Interest Income/ Expense |   |   | Average                Rate Earned/Paid |   |
| Federal                funds sold and interest-bearing                deposits in banks |   | $ | 10,701 |   |   | $ | 135 |   |   |   | 5.12 | % |   | $ | 34,885 |   |   | $ | 393 |   |   |   | 4.57 | % |
| Investments                                                                             |   |   | 682,592 |   |   |   | 10,209 |   |   |   | 6.07 | % |   |   | 613,891 |   |   |   | 8,901 |   |   |   | 5.88 | % |
| Loans                - commercial                                                       |   |   | 895,114 |   |   |   | 17,792 |   |   |   | 8.06 | % |   |   | 808,108 |   |   |   | 15,145 |   |   |   | 7.60 | % |
|  -                commercial real estate                                           |   |   | 810,424 |   |   |   | 14,174 |   |   |   | 7.09 | % |   |   | 799,505 |   |   |   | 13,605 |   |   |   | 6.90 | % |
|  -                residential real estate                                          |   |   | 151,141 |   |   |   | 2,397 |   |   |   | 6.43 | % |   |   | 153,282 |   |   |   | 2,297 |   |   |   | 6.08 | % |
|  -                consumer                                                         |   |   | 547,851 |   |   |   | 9,785 |   |   |   | 7.24 | % |   |   | 528,976 |   |   |   | 8,526 |   |   |   | 6.54 | % |
| Total                earning assets                                                     |   | $ | 3,097,823 |   |   | $ | 54,492 |   |   |   | 7.13 | % |   | $ | 2,938,647 |   |   | $ | 48,867 |   |   |   | 6.74 | % |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                – savings and NOW accounts                                |   | $ | 858,469 |   |   | $ | 4,835 |   |   |   | 2.28 | % |   | $ | 826,742 |   |   | $ | 3,501 |   |   |   | 1.72 | % |
| -  time                                                                       |   |   | 1,263,092 |   |   |   | 14,051 |   |   |   | 4.51 | % |   |   | 1,101,519 |   |   |   | 9,920 |   |   |   | 3.65 | % |
| Short-term                borrowings                                                    |   |   | 124,985 |   |   |   | 1,564 |   |   |   | 5.07 | % |   |   | 68,524 |   |   |   | 696 |   |   |   | 4.12 | % |
| Long-term                debt                                                           |   |   | 391,196 |   |   |   | 4,500 |   |   |   | 4.67 | % |   |   | 467,010 |   |   |   | 5,111 |   |   |   | 4.44 | % |
| Subordinated                debt                                                        |   |   | 56,817 |   |   |   | 1,022 |   |   |   | 7.29 | % |   |   | 44,674 |   |   |   | 797 |   |   |   | 7.24 | % |
| Total                interest-bearing liabilities                                       |   | $ | 2,694,559 |   |   | $ | 25,972 |   |   |   | 3.91 | % |   | $ | 2,508,469 |   |   | $ | 20,025 |   |   |   | 3.24 | % |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                income to earning assets                                        |   |   |   |   |   |   |   |   |   |   | 7.13 | % |   |   |   |   |   |   |   |   |   |   | 6.74 | % |
| Interest                expense to paying liabilities                                   |   |   |   |   |   |   |   |   |   |   | 3.91 | % |   |   |   |   |   |   |   |   |   |   | 3.24 | % |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                spread                                                          |   |   |   |   |   |   |   |   |   |   | 3.22 | % |   |   |   |   |   |   |   |   |   |   | 3.50 | % |
| Impact                of non-interest funds                                             |   |   |   |   |   |   |   |   |   |   | 0.51 | % |   |   |   |   |   |   |   |   |   |   | 0.48 | % |
| Net                interest margin                                                      |   |   |   |   |   | $ | 28,520 |   |   |   | 3.73 | % |   |   |   |   |   | $ | 28,842 |   |   |   | 3.98 | % |

| **o  ** | The                existence of a generally higher level of short-term interest rates                since                the first quarter of 2006 and the prolonged presence of an inverted                yield                curve throughout most of 2006 and into the opening quarter of 2007.                Interest rate trends contributed to a 39 basis point increase in                earning                asset yields between the two periods shown, but were more than offset                by a                more substantial 67 basis point increase in the cost of interest-bearing                liabilities. Consequently, interest spread declined by 28 basis points                while net interest margin declined by 25 basis points in the above                quarterly comparison. |
|-------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | A                less robust pace of loan growth since mid-year                2006. |
|---------------|--------------------------------------------------------------------------------------|

| **o  ** | Some                favorable influence from enhanced investment yields and higher portfolio                balances in the first quarter of                2007. |
|-------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **o  ** | A                steady increase in short-term interest rate offerings on time deposits                that commenced in the first half of 2006, which contributed to the                increase in the cost of funds through the end of the first quarter                of                2007. |
|-------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **o  ** | Ongoing                competitive pressure to sustain higher short-term time deposit pricing                to                maintain and increase funding balances necessary to meet the current                level                of earning asset growth. |
|-------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **o  ** | Consumer                preferences for higher-cost rate offerings on time deposits and the                increased relative weighting of these deposits as a funding                source. |
|-------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **o  ** | The                Federal Open Market Committee’s (FOMC) suspension of further tightening of                the benchmark Federal Funds rate since June 30,                2006. |
|-------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **o  ** | The                pause in the re-pricing of rate sensitive assets since mid-year 2006,                while time deposits continued to price upward. The pause was influenced                by                the suspension of increases in the benchmark rate indices that are                the                primary influence on the pricing of those assets. At the same time,                older,                lower-cost time deposits continued to reprice at higher                levels. |
|-------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Provision      for Loan Losses**

**Non-Interest      Income**

----

|                                                                                                                                             |   | **Three                Months Ended March 31,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|--------|
| (in                thousands)                                                                                                                    |   | **2007**                                        |   |   | **2006** |   |   | **Increase****(Decrease)** |   |
| Investment                management and trust services                                                                                          |   | $                                               | 1,445  |   |   | $ | 1,013 |   |   | $ | 432 |   |
| Service                charges on deposit accounts                                                                                               |   |                                            | 2,996  |   |   |   | 2,531 |   |   |   | 465 |   |
| Other                service charges, commissions and fees                                                                                       |   |                                            | 2,028  |   |   |   | 1,700 |   |   |   | 328 |   |
| Insurance                premium income and commissions                                                                                          |   |                                            | 1,176  |   |   |   | 928 |   |   |   | 248 |   |
| Mortgage                banking activities                                                                                                       |   |                                            | 548    |   |   |   | 468 |   |   |   | 80 |   |
| Earnings                on investment in life insurance                                                                                          |   |                                            | 688    |   |   |   | 656 |   |   |   | 32 |   |
| Other                                                                                                                                            |   |                                            | 591    |   |   |   | 805 |   |   |   | (214 | ) |
| Total                non-interest income, excluding investment securities gains and other                than                temporaryimpairment |   | $                                               | 9,472  |   |   | $ | 8,101 |   |   | $ | 1,371 |   |

----

**Non-Interest      Expenses**

|                                          |   | **Three                Months Ended March 31,** |   |
|-----------------------------------------------|--------|-------------------------------------------------|--------|
| (in                thousands)                 |   | **2007**                                        |   |   | **2006** |   |   | **Increase****(Decrease)** |   |
| Salaries                and employee benefits |   | $                                               | 12,009 |   |   | $ | 11,418 |   |   | $ | 591 |   |
| Net                occupancy                  |   |                                            | 3,794  |   |   |   | 3,512 |   |   |   | 282 |   |
| Marketing                expense              |   |                                            | 505    |   |   |   | 575 |   |   |   | (70 | ) |
| Telecommunications                expense     |   |                                            | 525    |   |   |   | 551 |   |   |   | (26 | ) |
| Amortization                of intangibles    |   |                                            | 661    |   |   |   | 654 |   |   |   | 7 |   |
| Other                                         |   |                                            | 4,647  |   |   |   | 3,823 |   |   |   | 824 |   |
| Total                non-interest expenses    |   | $                                               | 22,141 |   |   | $ | 20,533 |   |   | $ | 1,608 |   |

----

**Income      Taxes**

**CAPITAL**

|                                          | **March                31,****2007** | **Regulatory****Minimum** | **“Well****Capitalized”** |
|-----------------------------------------------|--------------------------------------|---------------------------|---------------------------------------|
| Leverage                ratio                 |                                 |                      |                                  |
| Community                Banks, Inc.          | 9.18%                                | 4%                        | 5%                                    |
| CommunityBanks                                | 8.37%                                | 4%                        | 5%                                    |
|                                          |                                 |                      |                                  |
| Tier                1 capital ratio           |                                 |                      |                                  |
| Community                Banks, Inc.          | 11.20%                               | 4%                        | 6%                                    |
| CommunityBanks                                | 10.25%                               | 4%                        | 6%                                    |
|                                          |                                 |                      |                                  |
| Total                risk-based capital ratio |                                 |                      |                                  |
| Community                Banks, Inc.          | 12.10%                               | 8%                        | 10%                                   |
| CommunityBanks                                | 11.16%                               | 8%                        | 10%                                   |

**CONTRACTUAL      OBLIGATIONS**

| Significant                contractual obligations at March 31, 2007, are summarized as                follows: |
|-----------------------------------------------------------------------------------------------------------------|

|                                       |   | **Payments                due by period** |      |
|--------------------------------------------|--------|-------------------------------------------|-----------|
|   (in                thousands)  |   | **Total**                                 |      |   | **Less                than****1                year** |   |   | **1-3****years** |   |   | **3-5****years** |   |   | **More                than****5                years** |   |
|                                       |   |                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Long-term                debt              |   | $                                         | 438,196   |   |   | $ | 52,439 |   |   | $ | 41,911 |   |   | $ | 35,178 |   |   | $ | 308,668 |   |
| Operating                lease obligations |   |                                      | 39,589    |   |   |   | 2,210 |   |   |   | 4,263 |   |   |   | 4,073 |   |   |   | 29,043 |   |
| Subordinated                debt           |   |                                      | 72,167    |   |   |   | --- |   |   |   | --- |   |   |   | --- |   |   |   | 72,167 |   |
| Time                deposits               |   |                                      | 1,278,667 |   |   |   | 926,621 |   |   |   | 289,074 |   |   |   | 60,380 |   |   |   | 2,592 |   |
|                                       |   |                                      |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                      |   | $                                         | 1,828,619 |   |   | $ | 981,270 |   |   | $ | 335,248 |   |   | $ | 99,631 |   |   | $ | 412,470 |   |

----

**COMMUNITY      BANKS, INC. AND SUBSIDIARIES**

**PART      I - Item 2.     Management’s Discussion and Analysis of      Financial Condition and Results of Operations      (continued)**

***Table      1: Reconciliation of GAAP to Non-GAAP Measures:(1)***

| (in                thousands)                                                          |   | **Three                Months Ended****March                31,** |      |
|----------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|-----------|
|                                                                                   |   | **2007**                                                          |      |   | **2006** |   |
| **Income                statement data:**                                              |   |                                                              |      |   |   |   |
|                                                                                   |   |                                                              |      |   |   |   |
| **Net                income**                                                          |   |                                                              |      |   |   |   |
| Net                income                                                              |   | $                                                                 | 6,587     |   |   | $ | 10,569 |   |
| Amortization                of core deposit and other intangible assets  (1) |   |                                                              | 429       |   |   |   | 425 |   |
| Net                operating (tangible) income                                         |   | $                                                                 | 7,016     |   |   | $ | 10,994 |   |
|                                                                                   |   |                                                              |      |   |   |   |   |   |
| **Balance                sheet data:**                                                 |   |                                                              |      |   |   |   |   |   |
|                                                                                   |   |                                                              |      |   |   |   |   |   |
| **Average                assets**                                                      |   |                                                              |      |   |   |   |   |   |
| Average                assets                                                          |   | $                                                                 | 3,544,189 |   |   | $ | 3,383,211 |   |
| Goodwill                                                                               |   |                                                              | (246,400  | ) |   |   | (244,775 | ) |
| Core                deposit and other intangible assets                                |   |                                                              | (12,683   | ) |   |   | (13,914 | ) |
|      Average                tangible assets                   |   | $                                                                 | 3,285,106 |   |   | $ | 3,124,522 |   |
|                                                                                   |   |                                                              |      |   |   |   |   |   |
| **Operating                return on average tangible assets**                         |   |                                                              | 0.87      | % |   |   | 1.43 | % |
|                                                                                   |   |                                                              |      |   |   |   |   |   |
| **Average                equity**                                                      |   |                                                              |      |   |   |   |   |   |
| Average                equity                                                          |   | $                                                                 | 486,929   |   |   | $ | 478,507 |   |
| Goodwill                                                                               |   |                                                              | (246,400  | ) |   |   | (244,775 | ) |
| Core                deposit and other intangible assets                                |   |                                                              | (12,683   | ) |   |   | (13,914 | ) |
| Deferred                taxes                                                          |   |                                                              | 1,546     |   |   |   | 1,734 |   |
|      Average                tangible equity                   |   | $                                                                 | 229,392   |   |   | $ | 221,552 |   |
|                                                                                   |   |                                                              |      |   |   |   |   |   |
| **Operating                return on average tangible equity**                         |   |                                                              | 12.40     | % |   |   | 20.12 | % |
|                                                                                   |   |                                                              |      |   |   |   |   |   |
| **At                end of quarter:**                                                  |   |                                                              |      |   |   |   |   |   |
| **Total                assets**                                                        |   |                                                              |      |   |   |   |   |   |
| Total                assets                                                            |   | $                                                                 | 3,627,739 |   |   | $ | 3,421,562 |   |
| Goodwill                                                                               |   |                                                              | (246,449  | ) |   |   | (244,760 | ) |
| Core                deposit and other intangible assets                                |   |                                                              | (12,363   | ) |   |   | (13,599 | ) |
|      Total                tangible assets                     |   | $                                                                 | 3,368,927 |   |   | $ | 3,163,203 |   |
|                                                                                   |   |                                                              |      |   |   |   |   |   |
| **Total                equity**                                                        |   |                                                              |      |   |   |   |   |   |
| Total                equity                                                            |   | $                                                                 | 490,564   |   |   | $ | 475,587 |   |
| Goodwill                                                                               |   |                                                              | (246,449  | ) |   |   | (244,760 | ) |
| Core                deposit and other intangible assets                                |   |                                                              | (12,363   | ) |   |   | (13,599 | ) |
| Deferred                taxes                                                          |   |                                                              | 1,482     |   |   |   | 1,854 |   |
|      Total                tangible equity                     |   | $                                                                 | 233,234   |   |   | $ | 219,082 |   |
|                                                                                   |   |                                                              |      |   |   |   |   |   |
| **Tangible                book value at end of period**                                |   | $                                                                 | 9.91      |   |   | $ | 9.19 |   |
|                                                                                   |   |                                                              |      |   |   |   |   |   |
|  (1)  Net                of related tax effect                          |   |                                                              |      |   |   |   |   |   |

----

**COMMUNITY      BANKS, INC. AND SUBSIDIARIES**

**PART      I - Item 3.     Quantitative and      Qualitative Disclosures About Market Risk**

| **Interest                Rate Sensitivity**                        |   |             |      |   |               |   |    |                |   |   |                                 |   |   |      |      |
|---------------------------------------------------------------------|--------|------------------|-----------|--------|--------------------|--------|---------|---------------------|--------|--------|--------------------------------------|--------|--------|-----------|-----------|
|  **(in                thousands)**                             |   | **1-90****days** |      |   | **90-180****days** |   |    | **180-365****days** |   |   | **1                year or****more** |   |   | **Total** |      |
|                                                                |   |             |      |   |               |   |    |                |   |   |                                 |   |   |      |      |
| **Assets**                                                          |   |             |      |   |               |   |    |                |   |   |                                 |   |   |      |      |
| Federal                funds sold                                   |   | $                | 10,199    |   |               |   | ---     |                |   |   | ---                                  |   |   |      | ---       |   |   | $ | 10,199 |   |
| Interest-bearing                deposits in other banks             |   |             | 32,964    |   |               |   | ---     |                |   |   | ---                                  |   |   |      | ---       |   |   |   | 32,964 |   |
| Investment                securities                                |   |             | 208,829   |   |               |   | 20,608  |                |   |   | 23,595                               |   |   |      | 415,102   |   |   |   | 668,134 |   |
| Loans(1)                                                            |   |             | 749,291   |   |               |   | 102,502 |                |   |   | 190,591                              |   |   |      | 1,399,934 |   |   |   | 2,442,318 |   |
| Earning                assets                                       |   |             | 1,001,283 |   |               |   | 123,110 |                |   |   | 214,186                              |   |   |      | 1,815,036 |   |   |   | 3,153,615 |   |
| Non-earning                assets                                   |   |             | 630       |   |               |   | 571     |                |   |   | 1,142                                |   |   |      | 471,781   |   |   |   | 474,124 |   |
| Total                assets                                         |   | $                | 1,001,913 |   |               | $      | 123,681 |                |   | $      | 215,328                              |   |   | $         | 2,286,817 |   |   | $ | 3,627,739 |   |
| ** Liabilities**                                               |   |             |      |   |               |   |    |                |   |   |                                 |   |   |      |      |   |   |   |   |   |
| Savings                                                             |   | $                | 241,737   |   |               | $      | 38,419  |                |   | $      | 76,806                               |   |   | $         | 525,641   |   |   | $ | 882,603 |   |
| Time                                                                |   |             | 289,165   |   |               |   | 170,478 |                |   |   | 251,062                              |   |   |      | 283,410   |   |   |   | 994,115 |   |
| Time                in denominations of  $100,000 or more |   |             | 112,924   |   |               |   | 45,991  |                |   |   | 57,001                               |   |   |      | 68,636    |   |   |   | 284,552 |   |
| Short-term                borrowings                                |   |             | 67,747    |   |               |   | ---     |                |   |   | ---                                  |   |   |      | ---       |   |   |   | 67,747 |   |
| Long-term                debt                                       |   |             | 12,990    |   |               |   | 41,952  |                |   |   | 22,405                               |   |   |      | 360,849   |   |   |   | 438,196 |   |
| Subordinated                debt                                    |   |             | 23,196    |   |               |   | ---     |                |   |   | ---                                  |   |   |      | 48,971    |   |   |   | 72,167 |   |
| Interest                bearing liabilities                         |   |             | 747,759   |   |               |   | 296,840 |                |   |   | 407,274                              |   |   |      | 1,287,507 |   |   |   | 2,739,380 |   |
| Other                liabilities and equity                         |   |             | 11,038    |   |               |   | 11,038  |                |   |   | 22,075                               |   |   |      | 844,208   |   |   |   | 888,359 |   |
| Total                liabilities and equity                         |   | $                | 758,797   |   |               | $      | 307,878 |                |   | $      | 429,349                              |   |   | $         | 2,131,715 |   |   | $ | 3,627,739 |   |

| **Interest                Sensitivity GAP**                                 |   |             |    |   |               |   |     |                |   |
|-----------------------------------------------------------------------------|--------|------------------|---------|--------|--------------------|--------|----------|---------------------|--------|
| **(in                thousands)**                                           |   | **1-90****days** |    |   | **90-180****Days** |   |     | **180-365****days** |   |
|                                                                        |   |             |    |   |               |   |     |                |   |
| Periodic                                                                    |   | $                | 243,116 |   |               | $      | (184,197 | )                   |   | $ | (214,021 | ) |
| Cumulative                                                                  |   |             |    |   |               |   | 58,919   |                |   |   | (155,102 | ) |
| Cumulative                GAP as a percentageof                total assets |   |             | 6.7     | %      |               |   | 1.6      | %                   |   |   | (4.3 | )% |

----

**COMMUNITY      BANKS, INC. AND SUBSIDIARIES**

**PART      I - Item 4.  Controls and      Procedures**

----

**COMMUNITY      BANKS, INC. AND SUBSIDIARIES**

| **PART                II - OTHER INFORMATION** |
|------------------------------------------------|

|   | **Item                1 – Legal                Proceedings** |
|--------|--------------------------------------------------------------------|

**Item      1A – Risk Factors**

|   | **Item                2– Unregistered Sales of Equity Securities and Use of                Proceeds** |
|--------|-------------------------------------------------------------------------------------------------------------|

|             |   | **Total                Number of Shares****Purchased** |   |   | **Average                Price****Paid****Per                Share** |   |   | **Total                Number of Shares Purchased****as                Part of****Publicly                Announced Plans or Programs** |   |   | **Capacity                to****Purchase****More                Shares Under Repurchase Program** |   |
|------------------|--------|--------------------------------------------------------|--------|--------|----------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------------------------------|--------|
|             |   |                                                   |   |   |                                                                 |   |   |                                                                                                                                         |   |   |                                                                                              |   |
| 01/1/07-01/31/07 |   |                                                   | 13,069 |   |                                                                 | $      | 24.33  |                                                                                                                                         |   |   | 13,069                                                                                            |   |   |   | 41,600 |   |
| 02/1/07-02/28/07 |   |                                                   | 4,511  |   |                                                                 |   | 25.69  |                                                                                                                                         |   |   | 4,511                                                                                             |   |   |   | 41,600 |   |
| 03/1/07-03/31/07 |   |                                                   | 536    |   |                                                                 |   | 24.51  |                                                                                                                                         |   |   | 536                                                                                               |   |   |   | 41,600 |   |

|   | **Item                3 – Defaults Upon Senior                Securities** |
|--------|----------------------------------------------------------------------------------|

|   | **Item                4 – Submission of Matters to a Vote of Security                Holders** |
|--------|------------------------------------------------------------------------------------------------------|

**Item      5 – Other Information**

----

|   | **COMMUNITY                BANKS, INC. AND                SUBSIDIARIES** |
|--------|--------------------------------------------------------------------------|

| **PART                II - OTHER INFORMATION** |
|------------------------------------------------|

| **(continued)** |
|-----------------|

|   | **Item                6 –Exhibits** |
|--------|-------------------------------------------|

| 3.1  | Amended                and Restated Articles of Incorporation  (Incorporated by                reference to Appendix A to Community’s 2006 Proxy Statement filed with the                Commission on March 31, 2006)                                                                                                                                                                                                                                                                         |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.2  | Amended                Bylaws (Incorporated by reference to Exhibit 3(ii), attached to                Community’s Current Report on Form 8-K filed with the Commission on                December 14, 2006)                                                                                                                                                                                                                                                                                              |
| 4    | Instruments                defining the rights of the holders of trust capital securities sold                by                Community in March, 2007, are not attached, as the amount of such                securities is less than 10% of the consolidated assets of Community                and                its subsidiaries, and the securities have not been                registered.  Community agrees to provide copies of such                instruments to the SEC upon request. |
| 10.1 | Form                of First Amendment to Stock Option Agreement (Incorporated by reference                to                Exhibit 10.1 attached to Community’s Current Report on Form 8-K filed with                the Commission onJanuary                31, 2007)*                                                                                                                                                                                                                                |
| 31.1 | Rule                13a-14(a)/15d-14(a) Certification (Chief Executive                Officer)                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 31.2 | Rule                13a-14(a)/15d-14(a) Certification (Chief Financial                Officer)                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 32   | Section                1350 Certifications (Chief Executive Officer and Chief Financial                Officer)                                                                                                                                                                                                                                                                                                                                                                                                |

----

| **SIGNATURES** |
|----------------|

| COMMUNITY                BANKS, INC. |
|--------------------------------------|

| (Registrant) |
|--------------|

| Date   | June                21, 2007 |   | /s/    | Eddie                L. Dunklebarger     |
|--------|------------------------------|--------|--------|------------------------------------------|
|   |                         |   |   | Eddie                L. Dunklebarger     |
|   |                         |   |   | Chairman                and President    |
|   |                         |   |   | (Chief                Executive Officer) |
|   |                         |   |   |                                     |
| Date   | June                21, 2007 |   | /s/    | Donald                F. Holt            |
|   |                         |   |   | Donald                F. Holt            |
|   |                         |   |   | Executive                Vice President  |
|   |                         |   |   | (Chief                Financial Officer) |

|   | **EXHIBIT                INDEX** |
|--------|----------------------------------|

| 3.1  | Amended                and Restated Articles of Incorporation  (Incorporated by                reference to Appendix A to Community’s 2006 Proxy Statement filed with the                Commission on March 31, 2006)                                                                                                                                                                                                                                                                         |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.2  | Amended                Bylaws (Incorporated by reference to Exhibit 3(ii), attached to                Community’s Current Report on Form 8-K filed with the Commission on                December 14, 2006)                                                                                                                                                                                                                                                                                              |
| 4    | Instruments                defining the rights of the holders of trust capital securities sold                by                Community in March, 2007, are not attached, as the amount of such                securities is less than 10% of the consolidated assets of Community                and                its subsidiaries, and the securities have not been                registered.  Community agrees to provide copies of such                instruments to the SEC upon request. |
| 10.1 | Form                of First Amendment to Stock Option Agreement (Incorporated by reference                to                Exhibit 10.1 attached to Community’s Current Report on Form 8-K filed with                the Commission on January 31, 2007)*                                                                                                                                                                                                                                              |
| 31.1 | Rule                13a-14(a)/15d-14(a) Certification (Chief Executive                Officer)                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 31.2 | Rule                13a-14(a)/15d-14(a) Certification (Chief Financial                Officer)                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 32   | Section                1350 Certifications (Chief Executive Officer and Chief Financial                Officer)                                                                                                                                                                                                                                                                                                                                                                                                |

----