SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D. C. 20549


                                   FORM 10-QSB


               QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended September 30, 1998         File number: 000-22054



                           COMMUNITY BANKSHARES, INC.
              (Exact Name of Small Business Issuer in its Charter)

          South Carolina                                  57-0966962
 (State or Other Jurisdiction of            (IRS Employer Identification Number)
 Incorporation or Organization)


               791 Broughton St., Orangeburg, South Carolina 29115
                (Address of Principal Executive Office, Zip Code)


                                 (803) 535-1060
                           (Issuer's telephone number)



          Check whether the issuer (1) has filed all the reports  required to be
filed by Section 13 or 15(d) of the  Securities  Exchange Act of 1934 during the
past 12 months (or for such shorter  period that the  Registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X. No _.

          State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:  3,044,668 shares of common
stock outstanding as of October 30, 1998.

<PAGE>

                                         10-QSB TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                        Part I-Financial Statements                           Page

<S>                                                                                           <C>
      Item 1       Financial Statements .................................................      3

      Item 2       Management's Discussion and Analysis of Financial Condition and             
                   Results of Operations ................................................      9


                                         Part II-Other Information

      Item 6       Exhibits and Reports on Form 8-K .....................................     19

</TABLE>





                                       2
<PAGE>



            COMMUNITY BANKSHARES, INC. - CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                                    UNAUDITED
                                                                                                   September 30         December 31,
        ASSETS                                                                                         1998                  1997
                                                                                                       ----                  ----
                                                                                                     (dollar amounts in thousands)
Cash and due from other financial institutions:
<S>                                                                                               <C>                     <C>      
    Non-interest bearing ...........................................................              $   7,230               $   4,062
    Federal funds sold .............................................................                 17,260                   1,060
                                                                                                  ---------               ---------
        Total cash and cash equivalents ............................................                 24,490                   5,122
Interest bearing deposits in other banks ...........................................                  2,156                   1,238
Investment securities:
    Securities held to maturity ....................................................                 13,545                  17,311
    Securities available for sale ..................................................                 14,427                  15,141
Loans held for resale ..............................................................                    804                     358

Loans ..............................................................................                109,610                  91,951
    Less, allowance for loan losses ................................................                 (1,364)                 (1,140)
                                                                                                  ---------               ---------
        Net loans ..................................................................                108,246                  90,811
                                                                                                  ---------               ---------

Premises and equipment .............................................................                  3,941                   2,733
Accrued interest  receivable .......................................................                  1,150                   1,168
Deferred income taxes ..............................................................                    360                     351
Other assets .......................................................................                    651                     341
                                                                                                  ---------               ---------
        Total assets ...............................................................              $ 169,770               $ 134,574
                                                                                                  =========               =========

        LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
    Non-interest bearing ...........................................................              $  20,461               $  17,003
    Interest bearing ...............................................................                116,818                 100,164
                                                                                                  ---------               ---------
        Total deposits .............................................................                137,279                 117,167
Federal funds purchased and securities
    sold under agreements to repurchase ............................................                  2,820                   2,551
Federal Home Loan Bank advances ....................................................                  9,490                   1,060
Other liabilities ..................................................................                    919                     759
                                                                                                  ---------               ---------
        Total liabilities ..........................................................                150,508                 121,537
                                                                                                  ---------               ---------
Shareholders' equity:
    Common stock
        No par, authorized shares 12,000,000, issued and ...........................                 14,626                   9,156
        outstanding 2,934,916 in 1998 and 2,634,676 in 1997
    Retained earnings ..............................................................                  4,589                   3,861
    Unrealized gain on securities available for sale ...............................                     47                      20
                                                                                                  ---------               ---------
        Total shareholders' equity .................................................                 19,262                  13,037
                                                                                                  ---------               ---------
        Total liabilities and shareholders' equity .................................              $ 169,770               $ 134,574
                                                                                                  =========               =========
</TABLE>

     THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS

                                       3
<PAGE>

        COMMUNITY BANKSHARES, INC. - CONSOLIDATED STATEMENT OF CHANGES I
                              SHAREHOLDERS' EQUITY
              for the nine months ended September 30, 1998 and 1997

<TABLE>
<CAPTION>
                                     Common        Common Stock       Retained         Accumulated            Total
                                     Shares                           Earnings            Other           Stockholders'
                                                                                      Comprehensive           Equity
                                                                                      Income (Loss)
                                                   (dollar amounts in thousands)
<S>                                  <C>                 <C>              <C>                  <C>             <C>    
Balances at Dec. 31, 1996 .......    2,626,476           $9,064           $3,040               $-              $12,104
Comprehensive income:
     Net income .................                                            872                                   872
Other comprehensive income (loss)
 net of tax:
     Unrealized gain (loss) on ..                                                               5                    5
     securities
     Cost of dividend ...........            -               (9)                                                    (9)
     reinvestment plan
     Dividends paid .............                                           (395)                                 (395)
                                     ---------          -------           ------              ---              -------
Balances at Sept. 30, 1997 ......    2,626,476           $9,055           $3,517              $ 5              $12,577
                                     =========          =======           ======              ===              =======

Balances at Dec. 31, 1997 .......    2,634,676           $9,156           $3,861              $20              $13,037
Comprehensive income:
     Net income .................                                          1,182                                 1,182
Other comprehensive income (loss)
 net of tax:
     Unrealized gain (loss) on ..                                                              27                   27
     securities
     Issuance of common .........      300,240            5,470                                                  5,470
     stock
     Dividends paid .............                                           (454)                                 (454)
                                     ---------          -------           ------              ---              -------
Balances at Sept. 30, 1998 ......    2,934,916          $14,626           $4,589              $47              $19,262
                                     =========          =======           ======              ===              =======
</TABLE>



                                       4
<PAGE>

         COMMUNITY BANKSHARES, INC. - CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>

                                                                      Nine months ended Sept. 30,          Quarter ended Sept. 30,
                                                                        1998               1997            1998              1997
                                                                     UNAUDITED          UNAUDITED       UNAUDITED          UNAUDITED
                                                                     ---------          ---------       ---------          ---------
                                                                                        (dollar amounts in thousands)
Interest and dividend income:
<S>                                                                 <C>               <C>               <C>               <C>       
    Interest and fees on loans .............................        $    7,027        $    5,544        $    2,488        $    1,998
    Deposits with other financial institutions .............                98                54                30                20
    Investment securities:
      Interest - U. S. Treasury and
        U. S. Government Agencies ..........................             1,398             1,269               471               478
      Dividends ............................................                58                32                28                10
                                                                    ----------        ----------        ----------        ----------
         Total investment securities .......................             1,456             1,301               499               488
                                                                    ----------        ----------        ----------        ----------
    Federal funds sold and securities
      purchased under agreements to resell .................               328               183               184                89
                                                                    ----------        ----------        ----------        ----------
         Total interest and dividend income ................             8,909             7,082             3,201             2,595
                                                                    ----------        ----------        ----------        ----------
Interest expense:
    Deposits:
      Certificates of deposit of $100,000 or ...............               909               624               301               251
    more
      Other ................................................             2,771             2,338             1,008               858
                                                                    ----------        ----------        ----------        ----------
         Total .............................................             3,680             2,962             1,309             1,109
         deposits
    Federal funds purchased and securities
      sold under agreements to repurchase ..................                76               118                27                57
    Federal Home Loan Bank advances ........................               258                55               130                18
                                                                    ----------        ----------        ----------        ----------
         Total interest expense ............................             4,014             3,135             1,466             1,184
                                                                    ----------        ----------        ----------        ----------
Net interest income ........................................             4,895             3,947             1,735             1,411
Provision for loan losses ..................................               324               258               136                81
                                                                    ----------        ----------        ----------        ----------
Net interest income after provision for loan losses.........             4,571             3,689             1,599             1,330
                                                                    ----------        ----------        ----------        ----------
Non-interest income:
    Service charges on deposit accounts ....................               572               399               196               146
    Other ..................................................               213               160                98                50
                                                                    ----------        ----------        ----------        ----------
         Total non-interest income .........................               785               559               294               196
                                                                    ----------        ----------        ----------        ----------
Non-interest expense:
    Salaries and employee benefits .........................             2,022             1,738               711               605
    Premises and equipment .................................               480               384               204               135
    Other ..................................................             1,071               826               456               283
                                                                    ----------        ----------        ----------        ----------
         Total non-interest expense ........................             3,573             2,948             1,371             1,023
                                                                    ----------        ----------        ----------        ----------
Net income before taxes ....................................             1,783             1,300               522               503
Provision for income taxes .................................               601               428               187               178
                                                                    ----------        ----------        ----------        ----------
Net income .................................................        $    1,182        $      872        $      335        $      325
                                                                    ==========        ==========        ==========        ==========

Basic earnings per common share:
    Weighted average shares outstanding ....................         2,844,521         2,626,476         2,803,798         2,626,476
                                                                    ==========        ==========        ==========        ==========
    Net income per common share ............................        $     0.42        $     0.33        $     0.12        $     0.12
                                                                    ==========        ==========        ==========        ==========
Diluted earnings per common share:
    Weighted average shares outstanding ....................         2,902,226         2,670,299         2,882,541         2,670,299
                                                                    ==========        ==========        ==========        ==========
    Net income per common share ............................        $     0.41        $     0.33        $     0.12        $     0.12
                                                                    ==========        ==========        ==========        ==========
</TABLE>

    THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS



                                       5
<PAGE>



        COMMUNITY BANKSHARES, INC. - CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>

                                                                                                     Nine months ended September 30,
                                                                                                       1998                   1997
                                                                                                    UNAUDITED              UNAUDITED
                                                                                                    ---------              ---------
                                                                                                      (dollar amounts in thousands)
Cash flows from operating activities:                          
<S>                                                                                                 <C>                    <C>     
Net income ...........................................................................              $  1,182               $    872
Adjustments to reconcile net income
  to net cash used in operating
  activities:
        Depreciation .................................................................                   268                    227
        Provision for loan losses ....................................................                   324                    258
        Accretion of discounts and
          amortization of premiums -
          investment securities - net ................................................                   (11)                   (86)
Changes in assets and liabilities:
        Proceeds of sale of loans held for resale ....................................                 7,253                  3,614
        Origination of loans held for resale .........................................                (7,700)                (3,420)
        (Increase) decrease in interest receivable ...................................                    18                   (286)
        (Increase) decrease in other assets ..........................................                  (192)                   131
        Increase in other liabilities ................................................                   160                    101
                                                                                                    --------               --------
        Net cash provided by operating activities ....................................                 1,302                  1,411
                                                                                                    --------               --------

Cash flows from investing activities:
        Net increase in interest bearing deposits ....................................                  (918)                  (910)
        Proceeds from maturities of
          investment securities - held to maturity ...................................                17,677                  5,036
        Purchases of investment securities - held to maturity ........................               (14,125)                (7,381)
        Proceeds from maturities of
          investment securities - available for sale .................................                14,946                  3,724
        Purchases of investment securities - avail. for sale .........................               (13,979)                (6,741)
        Net (increase) in loans to customers .........................................               (17,759)               (17,924)
        Purchase of premises and equipment ...........................................                (1,412)                  (163)
        Net (increase) in other real estate ..........................................                  (191)                     -
                                                                                                    --------               --------
          Net cash (used) in investing activities ....................................               (15,761)               (24,359)
                                                                                                    --------               --------

Cash flows from financing activities:
        Net increase in demand, savings, and time deposits ...........................                20,112                 24,973
        Net increase in federal funds purchased and
          securities sold under agreements to repurchase .............................                   269                  6,216
        Increase (decrease) in Federal Home Loan Bank ................................                 8,430                    (70)
        Sale of common stock .........................................................                 5,470                      -
        Cost of stock sale ...........................................................                     -                     (9)
        Dividends paid in cash .......................................................                  (454)                  (395)
                                                                                                    --------               --------
          Net cash provided by financing activities ..................................                33,827                 30,715
                                                                                                    --------               --------
Net increase in cash and due from other
        financial institutions .......................................................                19,368                  7,767
Cash and due from other financial institutions -
        beginning of period ..........................................................                 5,122                  6,649
                                                                                                    --------               --------
Cash and due from other financial institutions -
        end of period ................................................................              $ 24,490               $ 14,416
                                                                                                    ========               ========
</TABLE>

    THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS



                                       6
<PAGE>


Summary of Significant Accounting Principles

          A summary of significant  accounting  policies is included in the 1997
Annual  Report of Community  Bankshares,  Inc. to the  Shareholders,  which also
contains the Company's audited financial statements for 1997.

Principles of Consolidation

          The  consolidated   financial   statements  include  the  accounts  of
Community  Bankshares,  Inc. (CBI), the parent company,  and Orangeburg National
Bank,  Sumter  National  Bank,  and Florence  National  Bank,  its  wholly-owned
subsidiaries. The consolidated financial statements also include the pre-opening
activities for Florence National Bank. All significant  intercompany  items have
been eliminated in the consolidated statements.

Management Opinion

          The financial statements in this report are unaudited.  In the opinion
of management,  all the adjustments necessary to present a fair statement of the
results for the interim period have been made. Such  adjustments are of a normal
and recurring nature.

          The results of operations for any interim  period are not  necessarily
indicative  of the  results to be expected  for an entire  year.  These  interim
financial  statements  should be read in conjunction  with the annual  financial
statements and notes thereto contained in the 1997 Annual Report.

Changes in Comprehensive Income Components

          The Financial  Accounting Standards Board recently issued Statement of
Financial  Accounting  Standards  No.  130,  "Reporting  Comprehensive  Income,"
effective for fiscal years  beginning  after  December 15, 1997.  This Statement
establishes  standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements.  Disclosure as
required by the Statement is as follows:

                  Nine Months Ended September 30, 1997 and 1998
<TABLE>
<CAPTION>

                                                                                    Before-Tax       Tax (Expense)        Net-of-Tax
                                                                                      Amount           or Benefit           Amount
                                                                                      ------           ----------           ------
                                                     
Unrealized gains (losses) on securities:
<S>                                                                                  <C>                <C>                  <C>    
Unrealized holding gains (losses) arising ...............................            $ 7,575            $ (2,575)            $ 5,000
during period
Less: reclassification adjustment for gains (losses)
     Realized in net income
                                                                                     -------            --------             -------
Net unrealized gains (losses) ...........................................              7,575              (2,575)              5,000
                                                                                     -------            --------             -------
Other comprehensive income, Sept. 30, 1997 ..............................            $ 7,575            $ (2,575)            $ 5,000
                                                                                     =======            ========             =======

Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during ........................            $40,909            $(13,909)            $27,000
period
Less: reclassification adjustment for gains (losses)
     realized in net income
                                                                                     -------            --------             -------
Net unrealized gains (losses) ...........................................             40,909             (13,909)             27,000
                                                                                     -------            --------             -------
Other comprehensive income, Sept. 30, 1998 ..............................            $40,909            $(13,909)            $27,000
                                                                                     =======            ========             =======

</TABLE>






                                       7
<PAGE>



      COMMUNITY BANKSHARES, INC. - AVERAGE BALANCE SHEETS, YIELDS AND RATES

<TABLE>
<CAPTION>

    Nine months ended September 30,                               1998                                    1997
    (unaudited)                                                Interest                                 Interest
                                                  Average      Income/         Yields/       Average     Income/         Yields/
Assets                                            Balance      Expense          Rates         Balance    Expense           Rates
                                                  -------      -------          -----         -------    -------           -----
                                                                         (Dollar amounts in thousands)
<S>                                              <C>           <C>               <C>      <C>            <C>               <C>  
    Interest bearing deposits ...............    $  2,360      $   98            5.54%    $  1,251       $   54            5.76%
    Investment securities taxable ...........      29,950       1,447            6.44%      27,612        1,288            6.22%
    Investment securities--tax exempt .......         294           9            6.18%         411           13            6.39%
    Federal funds sold ......................       7,837         328            5.58%       4,543          183            5.37%
    Loans receivable ........................      99,995       7,027            9.37%      78,252        5,544            9.45%
                                                 --------      ------            ----     --------       ------            ---- 

    Total interest earning assets ...........     140,436       8,909            8.46%     112,069        7,082            8.43%

    Cash and due from banks .................       6,257                                    4,929
    Allowance for loan losses ...............      (1,238)                                    (978)
    Premises and equipment ..................       3,425                                    2,831
    Other assets ............................       1,679                                    1,543
                                                 --------                                 --------

Total assets ................................    $150,559                                 $120,394
                                                 ========                                 ========

Liabilities and Shareholders' Equity

    Interest bearing deposits
    Savings .................................    $ 20,356      $  537            3.52%    $ 19,267       $  495            3.43%
    Interest bearing transaction accounts ...      13,617         192            1.88%      11,623          164            1.88%
    Time deposits ...........................      71,821       2,951            5.48%      56,849        2,303            5.40%
                                                 --------      ------            ----     --------       ------            ---- 

    Total interest bearing deposits .........     105,794       3,680            4.64%      87,739        2,962            4.50%
    Short term borrowing ....................       2,467          76            4.11%       3,969          118            3.96%
    FHLB advances ...........................       6,043         258            5.69%       1,114           55            6.58%
                                                 --------      ------            ----     --------       ------            ---- 
    Total interest bearing liabilities ......     114,304       4,014            4.68%      92,822        3,135            4.50%

    Noninterest bearing demand deposits .....      18,697                                   14,500
    Other liabilities .......................         882                                      797
    Shareholders' equity ....................      16,676                                   12,275
                                                 --------                                 --------

Total liabilities and shareholders' equity ..    $150,559                                 $120,394
                                                 ========                                 ========

    Interest rate spread ....................                                    3.78%                                     3.92%

    Net interest income and net yield on earning assets        $4,895            4.65%                   $3,947            4.70%
                                                               ======            ====                    ======            ==== 
</TABLE>








                                       8
<PAGE>



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

Forward Looking Statements

          Statements  included  in  Management's   Discussion  and  Analysis  of
Financial Condition and Results of Operations which are not historical in nature
are intended to be, and are hereby  identified as `forward  looking  statements'
for  purposes  of the safe  harbor  provided  by Section  21E of the  Securities
Exchange Act of 1934, as amended.  The Corporation cautions readers that forward
looking  statements,   including  without  limitation,  those  relating  to  the
Corporation's future business prospects,  revenues, working capital,  liquidity,
capital  needs,  interest  costs,  and income,  are subject to certain risks and
uncertainties  that could cause actual results to differ  materially  from those
indicated in the forward looking  statements,  due to several  important factors
herein  identified,  among others,  and other risks and factors  identified from
time to time in the Corporation's reports filed with the Securities and Exchange
Commission.

Corporate Form

          Community  Bankshares,  Inc. (CBI) is a bank holding company organized
under the laws of South Carolina.  It presently  conducts  business  through its
three  banking  subsidiaries.  On July 1, 1993,  Orangeburg  National  Bank (the
Orangeburg  bank)  became a wholly  owned  subsidiary  of CBI. On June 10, 1996,
Sumter National Bank (the Sumter bank) became a wholly owned  subsidiary of CBI.
(It also commenced banking  operations on that date.) On July 6, 1998,  Florence
National Bank (the Florence  bank) became a wholly owned  subsidiary of CBI. (It
also  commenced  banking  operations on that date.)  Accordingly,  the financial
statements  for the quarter and period ended  September  30,  1998,  are for the
consolidated  operations  of the  holding  company  and  the  three  banks.  All
significant intercompany transactions have been eliminated.

Florence National Bank

          Community  Bankshares,  Inc.  entered into an agreement with six local
business  people in the  Florence,  South  Carolina  community  to  sponsor  the
formation  of a new  national  bank to be owned by CBI.  CBI has assisted in and
advanced  the funds for plans for the new bank.  The bank opened for business on
Monday, July 6, 1998.

          From March to July 1998 CBI sold to the public  300,000  shares of its
common  stock.  This public sale raised $4.6  million.  The company  also raised
additional  capital  through the sale of restricted  shares to the organizers of
the Florence  bank. In total,  the company  raised $5.4  million,  of which $4.5
million was used to capitalize the new bank.

Year 2000 Readiness Disclosure

          The change in date from 1999 to 2000 poses potential problems for many
computer systems around the world.  Certain of the Corporation's  systems may be
affected by this so-called  millennium bug. CBI is  investigating  the extent to
which its  systems  are  affected  and  communicating  with all of its  computer
vendors  concerning timely completion of remedies for those systems that require
modification.  The Corporation is also communicating with third parties on which
it relies to assess their progress in evaluating  their systems and implementing
any  corrective  measures and has formed a committee to coordinate its Year 2000
activities.  The  Corporation  has been  taking  and  will  continue  to  pursue
reasonably necessary steps to protect its operations and assets.

          Management  estimates  that the  costs of Year  2000  compliance  will
approximate $200,000 and will be funded with internally generated resources. The
majority of these costs have  already  been  expended  and the  remaining  items
relate primarily to the  Corporation's  testing plans. Most of the Corporation's
local and wide area network computer and communications  equipment is relatively
new. For this reason,  the overall  financial impact of the Year 2000 problem is
fairly limited.

                                       9
<PAGE>

          The  Corporation  has been  devoting  significant  time and  energy to
management  of the Year 2000 problem.  It formed a Year 2000 steering  committee
comprised  of  senior  officers  from each of the  three  banks and the  holding
company to oversee the process.  The boards of directors of the  Corporation and
its  subsidiaries  receive regular  detailed  progress  reports on the Year 2000
project.  The  national  bank  regulators,  which  supervise  the three  banking
subsidiaries,  have devoted a substantial  amount of their time and  supervisory
attention to the Year 2000 problems and related issues.

          The Corporation has  concentrated  its internal  efforts toward making
its own  mission  critical  systems  fully  Year 2000  compliant  as  quickly as
practical.  Management  expects its efforts to be successful and,  consequently,
has no  immediate  plans to  implement  any  major  changes  in the  information
technology systems prior to January 2000.

          The  Corporation  is currently  substantially  complete in testing its
core information system, Banker 2. Test results have been successful. Management
expects to be substantially complete with testing of mission critical systems by
the end of 1998.  Management  expects to engage its outside  auditor  during the
first quarter of 1999 to evaluate the reasonableness and validity of its testing
program.

          Nevertheless,   the  Corporation's   ability  to  avoid   experiencing
difficulty as a result of the Year 2000 problem  could be adversely  affected by
the  availability of skilled  personnel,  the success of vendors,  customers and
providers  of services in dealing  with their own Year 2000  problems and by the
difficulty of identifying  all the possible  causes of the Year 2000 problem and
interrelationships between various mission critical systems.



RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997

Synopsis

          The 1998 third quarter  statement of operations  reflects  substantial
expenses related to commencement of operations by CBI's new subsidiary, Florence
National Bank.  Consolidated net income has been reduced by $161,000 as a result
of the first three months of operations by the Florence  bank, and by $49,000 as
a result of expenses paid during 1998 by CBI directly  associated with the start
up of the new bank.

          Management  views this reduction in earnings as the expected result of
a major investment in a new marketplace.  In many ways, the current situation in
Florence parallels the 1996-1997 initial operating periods for the Sumter bank.

          Management of CBI is,  nonetheless,  pleased with the Florence  bank's
steady  progress.  At September 30, 1998,  after  approximately  three months of
operation,  the Florence bank had a loan portfolio of $2.3 million,  deposits of
$6.5 million, and total assets of $10.9 million.


Net Income

          For  the  nine  months  ended   September  30,  1998,   CBI  earned  a
consolidated  profit of  $1,182,000,  compared  to $872,000  for the  comparable
period of 1997,  an increase of 35.5% or  $310,000.  Diluted  earnings per share
were $.42 in the 1998 period, compared to $.33 for the 1997 period..

          For the nine months ended September 30, 1998, Orangeburg National Bank
reported a profit of  $1,236,000,  compared  to  $1,028,000  for the  comparable
period of 1997, an increase of 20.2% or $208,000.

          For the nine months ended  September  30, 1998,  Sumter  National Bank
reported a profit of $105,000, compared to a loss of $169,000 for the comparable
period of 1997, an improvement of $274,000.

          For the nine months ended September 30, 1998,  Florence  National Bank
reported a net after tax loss of $161,000. The Florence bank began operations on
July 6, 1998.

                                       10
<PAGE>

          As noted  above,  consolidated  net income for the nine  months  ended
September  30, 1998,  increased  from the prior year by 35.5% or  $310,000.  The
major  components  of this  increase are discussed  below.  Net interest  income
before  provision for loan losses for the nine months ended  September 30, 1998,
increased to $4,895,000,  compared to $3,947,000 for the same period in 1997, an
increase of 24% or $948,000.  For the 1998 period, the provision for loan losses
was $324,000,  compared to $258,000 for the 1997 period, an increase of 25.6% or
$66,000.  Non-interest  income for the 1998 period  increased  to $785,000  from
$559,000 for the 1997 period, a 40.4% or $226,000 increase. Non-interest expense
increased to $3,573,000 from $2,948,000, a 21.2% or $625,000 increase.

          Results for the first nine months of 1998 include results of the start
up of initial operations for Florence National Bank for the last three months of
the  period.  Accordingly,  many of the dollar and  percentage  comparisons  and
changes between periods discussed in this report are unusually large.


Profitability

          One of the best ways to review  earnings is through the ROA (return on
average assets) and the ROE (return on average equity).  Return on assets is the
income for the period divided by the average assets for the period,  annualized.
Return on equity is the income for the period  divided by the average equity for
the period,  annualized.  Based on  operating  results for the nine months ended
September 30, 1998 and 1997, the following table is presented.

                                 Nine months ended Sept. 30,
                                    1998               1997
                                     (dollarsinthousands)
Average assets                       $150,559        $120,394
ROA                                     1.05%           0.97%
Average equity                        $16,676         $12,275
ROE                                     9.45%           9.47%
Net income                             $1,182            $872

          Average equity and average assets were  substantially  greater in 1998
than they  were in 1997 as the  result  of the sale of stock to  capitalize  the
Florence bank and the deposit taking activities of the Florence bank, as well as
continued strong asset growth in Sumter and Orangeburg.

Net interest income

          Net  interest  income,  the major  component of CBI's  income,  is the
amount by which interest and fees on interest earning assets exceed the interest
paid on interest bearing  deposits and other interest bearing funds.  During the
first nine months of 1998, net interest  income after  provision for loan losses
increased to $4,571,000 from $3,689,000,  a 23.9% or $882,000  increase over the
comparable  period of 1997.  This  improvement  was  primarily  the result of an
increase in the volume of earning assets at each bank.





                                       11
<PAGE>



Interest Income

          Elsewhere in this report is a table  comparing  the average  balances,
yields,  and rates for the interest  rate  sensitive  segments of the  company's
balance sheet for the period ended  September 30, 1998 and 1997. A discussion of
that table follows.

          Total  interest  income for the nine months ended  September 30, 1998,
was $8,909,000  compared with $7,082,000 for the same period in 1997, a 25.8% or
$1,827,000 increase.  The yield on earning assets for the 1998 period was 8.46%,
up from 8.43% for the 1997 period. Total average interest earning assets for the
nine months ended September 30, 1998, were  $140,436,000,  up from  $112,069,000
for the same period in 1997, an increase of 25.3% or $28,367,000.

          The  loan  portfolio  earned  $7,027,000  for the  nine  months  ended
September 30, 1998, up from  $5,544,000  for the same period of 1997, a 26.7% or
$1,483,000  increase.  The 1998 yield decreased to 9.37% from 9.45% for the 1997
period.  The average size of the loan  portfolio  was  $99,995,000  for the 1998
period, up from $78,252,000 for the same period of 1997, an increase of 27.8% or
$21,743,000.  During most of these periods,  the prime rate remained constant at
8.5%. On October 1, 1998, the banks reduced their prime rates to 8.25%,  several
weeks later their rate was reduced to 8%.

          The taxable investment portfolio earned $1,447,000 for the nine months
ended  September 30, 1998, up from  $1,288,000  for the 1997 period,  a 12.3% or
$159,000 increase. The yield increased to 6.44% in the 1998 period from 6.22% in
the 1997 period.  The average size of the portfolio  increased to $29,950,000 in
the 1998  period from  $27,612,000  in the 1997  period,  an increase of 8.5% or
$2,338,000.

          The tax exempt investment portfolio continues to be a relatively small
part of the portfolio  and it earned $9,000 for the nine months ended  September
30, 1998, down from $13,000 for the comparable  period in 1997. The yield on the
portfolio was 6.18% (on a fully taxable equivalent  basis),  down from the prior
year's 6.39%.  The average size of the  portfolio  decreased to $294,000 for the
1998 period from $411,000 in the 1997 period, a decrease of 28.5% or $117,000.

          Interest bearing deposits in other banks  contributed  $98,000 for the
nine months ended September 30, 1998, compared to $54,000 during the prior year,
an increase of 81.5% or $44,000.  The yield on these deposits decreased to 5.54%
for the 1998 period from 5.76% in the 1997 period.  CBI averaged  $2,360,000  in
interest  bearing balances in the 1998 period compared to $1,251,000 in the 1997
period, an increase of 88.6% or $1,103,000.

          Federal funds sold earned $328,000 for the nine months ended September
30, 1998, compared to $183,000 the prior year, an increase of 79.2% or $145,000.
Yields  increased to 5.58% for the period ended  September 30, 1998,  from 5.37%
for the 1997 period.  For the 1998 period,  CBI increased its average  volume in
federal funds sold to $7,837,000 from $4,543,000 for the 1997 period, a 72.5% or
$3,294,000 increase.

Interest expense

          Interest  expense  increased  for the nine months ended  September 30,
1998,  to  $4,014,000  from  the  prior  year's  $3,135,000,  a 28% or  $879,000
increase.  The volume of interest bearing liabilities  increased to $114,304,000
for the period ended September 30, 1998, from $92,822,000 for the 1997 period, a
23.1% or $21,482,000  increase.  The average rate CBI paid for interest  bearing
liabilities during the 1998 period was 4.68%, up from 4.50% for the 1997 period.

          The cost of savings accounts increased to $537,000 for the nine months
ended  September 30, 1998 from  $495,000 in the 1997 period,  an 8.5% or $42,000
increase.  Average  savings  deposit  balances  increased to $20,356,000 for the
period  ended  September  30, 1998,  from  $19,267,000  for the 1997 period,  an
increase of 5.6% or $1,089,000.  The average rate paid on these funds  increased
to 3.52% from 3.43%.



                                       12
<PAGE>

          Interest  bearing  transaction  accounts  cost  $192,000  for the nine
months ended September 30, 1998, up from the prior year's $164,000,  an increase
of 17% or $28,000. The volume of these deposits increased to $13,617,000 for the
period ended September 30, 1998, from  $11,623,000 for the 1997 period,  a 17.1%
or  $1,994,000  increase.  The  average  rate paid on these funds for the period
ended September 30, 1998, was 1.88%, unchanged from the 1997 period.

          Time deposits cost  $2,951,000 for the nine months ended September 30,
1998, up from  $2,303,000 in the 1997 period,  an increase of 28.1% or $648,000.
The volume  increased to  $71,821,000  for the period ended  September 30, 1998,
from  $56,849,000  for the 1997 period,  a 26.3% or  $14,972,000  increase.  The
average rate paid on these funds  increased  to 5.48% for the 1998 period,  from
5.40% for the 1997 period.

          Short  term  borrowing   consists  of  federal  funds   purchased  and
securities sold under  agreements to repurchase.  This is a relatively small and
volatile  part of the balance  sheet.  It cost $76,000 for the nine months ended
September 30, 1998,  down from $118,000 for the 1997 period,  a 35.6% or $42,000
increase.  The volume of these funds  decreased to $2,467,000 in the 1998 period
from  $3,969,000  in the 1997  period,  a decrease of 37.8% or  $1,502,000.  The
average rate paid on these funds was 4.11% for the 1998 period and 3.96% for the
1997 period.

          Borrowings  from the Federal Home Loan Bank cost $258,000 for the nine
months ended September 30, 1998, compared to $55,000 for the 1997 period, a 369%
or $203,000 increase.  The advances averaged  $6,043,000 during the 1998 period,
compared to $1,114,000 for the prior year period, a 442% or $4,929,000 increase.
All  these  balances  were   attributable  to  Orangeburg   National  Bank.  The
substantial  increase in the  balance  was related to the bank's  effort to take
advantage of relatively low cost long-term  funding  available through the FHLB.
The average rate paid on these funds decreased to 5.69% from 6.58%.


          Results for the nine months ended  September 30, 1998 include  results
of  operations  for  Florence  National  Bank for the final three  months of the
period.  Accordingly,  many of the dollar and percentage comparisons and changes
between periods  discussed in the non-interest  income and non-interest  expense
sections are unusually large.

Non-Interest Income

          Non-interest  income for the nine months ended September 30, 1998 grew
to $785,000  from  $559,000 in the 1997 period,  a 40.4% or $226,0000  increase.
Most of the increase was  attributable  to increased  volumes of returned  check
fees in Orangeburg and Sumter.

Non-Interest Expense

          For the nine months ended  September  30, 1998  non-interest  expenses
increased to $3,573,000 from $2,948,000 for the 1997 period, a 21.2% or $625,000
increase.  Of  this  increase,   approximately  $233,000  or  37%  was  directly
attributable to the first three months of operation of the new bank in Florence.

          For the 1998  period  personnel  costs  were  $2,022,000  compared  to
$1,738,000 for the 1997 period, a 16.3% or $284,000 increase.

          For the 1998 period  premises  and  equipment  expense  were  $480,000
compared to $384,000 for the 1997 period, an increase of 25% or $96,000.

          For the 1998 period other costs were  $1,071,000  compared to $826,000
for the 1997 period, an increase of 29.7% or $245,000.

                                       13
<PAGE>

Income Taxes

          CBI  provided  $601,000  for federal and state income taxes during the
nine months ended  September 30, 1998,  compared to $428,000 for the same period
in 1997, a 40.4% or $173,000 increase.


RESULTS OF OPERATIONS FOR THE QUARTERS ENDED SEPTEMBER 30, 1998 AND 1997

Net Income

          For the quarter ended  September 30, 1998,  CBI earned a  consolidated
profit of $335,000,  compared to $325,000 for the comparable  period of 1997, an
increase of 3.1% or $10,000.  Diluted  earnings  per share were $.12 in the 1998
and 1997 periods.  This minimal increase in earnings  reflects the impact of the
first quarter of operation of the company's new bank in Florence, which resulted
in an after tax loss of $161,000.

          As  noted  above,  consolidated  net  income  for  the  quarter  ended
September 30, 1998,  increased from the prior year by 3.1% or $10,000. The major
components  of this  increase are discussed  below.  Net interest  income before
provision for loan losses for the quarter ended September 30, 1998, increased to
$1,735,000,  compared to $1,411,000  for the same period in 1997, an increase of
23% or  $324,000.  For the  same  period,  the  provision  for loan  losses  was
$136,000,  compared  to $81,000  for the 1997  period,  an  increase of 67.9% or
$55,000.  Non-interest  income for the 1998 period  increased  to $294,000  from
$196,000 for the 1997 period, a 50% or $98,000  increase.  Non-interest  expense
increased to $1,371,000 from $1,023,000, a 34% or $348,000 increase.

          Results for the third quarter of 1998 include results of operation for
Florence  National  Bank for the  entire  quarter,  the first  full  quarter  of
operation for the Florence bank. Florence National Bank's net after tax loss for
the quarter ended  September 30, 1998,  was $161,000.  Accordingly,  many of the
dollar and percentage comparisons and changes between quarters discussed in this
report are unusually large.

Net interest income

          Net  interest  income,  the major  component of CBI's  income,  is the
amount  by which  interest  and fees on  interest  earning  assets  exceeds  the
interest paid on interest  bearing  deposits and other  interest  bearing funds.
During the quarter ended September 30, 1998, net interest income after provision
for loan losses  increased to $1,599,000  from  $1,330,000,  a 20.2% or $269,000
increase over the comparable  period of 1997. This improvement was the result of
an increase in the volume of earning assets.

Interest Income

          Total  interest  income  for the  third  quarter  1998 was  $3,201,000
compared  with  $2,595,000  for the same  period  in 1997,  a 23.4% or  $606,000
increase.

          The loan portfolio earned $2,488,000 for the third quarter in 1998, up
from $1,998,000 for the same period of 1997, a 24.5% or $490,000 increase.

          The  investment  portfolio  earned  $499,000 for the third  quarter in
1998, up from $488,000 for the 1997 period, a 2.2% or $11,000 increase.

          Interest bearing deposits in other banks  contributed  $30,000 for the
third  quarter 1998,  compared to $20,000  during the prior year, an increase of
50% or $10,000.

                                       14
<PAGE>

          Federal funds sold earned  $184,000 the third quarter of 1998 compared
to $89,000 the prior year, an increase of 106.7% or $95,000.

Interest expense

          Interest expense increased for the third quarter of 1998 to $1,466,000
from the prior year's $1,184,000, a 23.8% or $282,000 increase.


          Results for the quarter ended  September  30, 1998 include  results of
operations  for  Florence  National  Bank for the entire  period,  however,  the
quarter ended September 30, 1998 was the first full quarter of operation for the
Sumter bank.  Accordingly,  many of the dollar and  percentage  comparisons  and
changes between periods  discussed in the  non-interest  income and non-interest
expense sections are unusually large.

Non-Interest Income

          Non-interest  income for the third  quarter 1998 grew to $294,000 from
$196,000 in the third quarter of 1997, a 50% or $98,0000 increase.

Non-Interest Expense

          For the third  quarter  of 1998  non-interest  expenses  increased  to
$1,371,000  from  $1,023,000  for the third  quarter of 1997,  a 34% or $348,000
increase.

Income Taxes

          CBI  provided  $187,000  for federal and state income taxes during the
third quarter of 1998, compared to $178,000 for the same period in 1997, a 5% or
$9,000 increase.


CHANGES IN FINANCIAL POSITION

Investment portfolio

          The  investment  portfolio  is  comprised of a held to maturity and an
available for sale portion.  CBI and its three banks usually purchase short term
issues of U. S Treasury and U. S.  Government  agency  securities for investment
purposes.  At  September  30,  1998,  the  held to  maturity  portfolio  totaled
$13,545,000 compared to $17,311,000 at December 31, 1997, a decrease of 21.7% or
$3,766,000.  At September 30, 1998,  the available  for sale  portfolio  totaled
$14,427,000  compared to $15,141,000 at December 31, 1997, a decrease of 4.7% or
$714,000.  The following chart summarizes the investment portfolios at September
30, 1998, and December 31, 1997.


                                       15
<PAGE>
<TABLE>
<CAPTION>

                                                      September 30, 1998
                                                       Held to maturity                   Available for sale
                                                 Amortized cost      Fair value       Amortized cost     Fair value
                                                 --------------      ----------       --------------     ----------
                                                                      (dollars in thousands)
<S>                                                      <C>           <C>                   <C>            <C>    
U. S. Government and federal agencies .......            $13,293       $13,348               $12,513        $12,588
Tax exempt securities .......................                252           254                   227            227
Other equity securities .....................                  -             -                 1,612          1,612
                                                         -------       -------               -------        -------
Total .......................................            $13,545       $13,602               $14,352        $14,427
                                                         =======       =======               =======        =======

Unrealized gain or (loss) ...................            $    57                             $    75
                                                         =======                             =======

                                                      December 31, 1997
                                                       Held to maturity                   Available for sale
                                                 Amortized cost      Fair value       Amortized cost     Fair value
                                                 --------------      ----------       --------------     ----------
                                                                      (dollars in thousands)
U. S. Government and federal agencies .......            $16,906         $16,923              $14,413      $14,444
Tax exempt securities .......................                405             408                    -            -
Other equity securities .....................                  -               -                  697          697
                                                         -------         -------              -------      -------
Total .......................................            $17,311         $17,331              $15,110      $15,141
                                                         =======         =======              =======      =======

Unrealized gain or (loss) ...................            $    20                              $    31
                                                         =======                              =======

</TABLE>


Loan portfolio

          The loan portfolio is primarily  consumer and small business oriented.
At  September  30,  1998,  the loan  portfolio  was  $109,610,000,  compared  to
$91,951,000 at December 31, 1997, a 19.2% or $17,659,000 increase. The following
chart  summarizes  the loan  portfolio at September  30, 1998,  and December 31,
1997.


                                          Sept. 30, 1998          Dec. 31, 1997
                                              (dollars in thousands)
Real estate ..........................        $ 63,184              $ 53,297
Commercial ...........................          28,305                22,306
Loans to individuals .................          18,121                16,348
                                              --------               -------
Total ................................        $109,610               $91,951
                                              ========               =======

Past Due and Non-Performing Assets and the Allowance for Loan Losses

          CBI closely  monitors past due loans and loans that are in non-accrual
status  and  other  real  estate  owned.  Below  is a  summary  of past  due and
non-performing assets at September 30, 1998 and December 31, 1997.


                                       16
<PAGE>





                                               Sept. 30, 1998      Dec. 31, 1997
                                                 (dollars in thousands)
Accruing loans past due 90 days or more .....      $ 76               $  -
Non-accrual loans ...........................      $ 40               $ 81
Impaired loans (included in nonaccrual) .....      $ 40               $ 81
Other real estate owned .....................      $274               $132

          Management considers the past due and non-accrual amounts in September
1998 to be reasonable and manageable in the normal course of business.

          CBI had no restructured loans during any of the above listed periods.

          CBI's   activity  with  its  allowance  for  loan  losses  reserve  is
summarized below.

                                                Sept. 30, 1998     Dec. 31, 1997
                                                     (dollars in thousands)

Allowance at beginning of period ................     $1,140           $  876
Provision expense ...............................        323              359
Net charge offs .................................        (99)             (95)
                                                      ------           ------
Allowance at end of period ......................     $1,364           $1,140
                                                      ======           ======
Allowance as a percent of outstanding loans .....      1.24%            1.24%

          In reviewing  the adequacy of the allowance for loan losses at the end
of each period,  management considers  historical loan loss experience,  current
economic condition,  loans outstanding,  trends in non-performing and delinquent
loans, and the quality of collateral  securing problem loans. After charging off
all known losses,  management  considers  the allowance  adequate to provide for
estimated  future losses  inherent in the loan  portfolio at September 30, 1998.
However,  changes in general  economic  conditions  and changes in the  economic
conditions of specific borrowers may cause management's belief to be erroneous.


Premises and Equipment

          At September  30,  1998,  premises and  equipment  totaled  $3,941,000
compared  to  $2,733,000  at  December  31,  1997,  for an  increase of 44.2% or
$1,208,000.  The major components of this change were the building and equipment
for the new Florence bank, which were $711,000 and $513,000,  respectively.  The
site for the new bank is held under a long term lease.

Deposits

          Deposits  were  $137,279,000  at  September  30,  1998,   compared  to
$117,167,000 at December 31, 1997, an increase of 17.2% or $20,112,000.

          Time deposits  greater than $100,000 were $22,710,000 at September 30,
1998,  compared  to  $21,428,000  at  December  31,  1997,  an increase of 6% or
$1,282,000.


                                       17
<PAGE>

Liquidity

          Liquidity  is the  ability  to meet  current  and  future  obligations
through  liquidation  or  maturity  of  existing  assets or the  acquisition  of
additional liabilities. Adequate liquidity is necessary to meet the requirements
of  customers  for loans and  deposit  withdrawals  in a timely  and  economical
manner.  The most  manageable  sources of liquidity are composed of liabilities,
with the  primary  focus of  liquidity  management  being the ability to attract
deposits within the Orangeburg National Bank, Sumter National Bank, and Florence
National Bank service areas.  Core deposits (total deposits less certificates of
deposit  of  $100,000  or  more)  provide  a  relatively  stable  funding  base.
Certificates  of deposit of $100,000 or more are  generally  more  sensitive  to
changes  in rates,  so they must be  monitored  carefully.  Asset  liquidity  is
provided by several  sources,  including  amounts due from banks,  federal funds
sold, and investments available for sale.

          CBI and its banks maintain an available-for-sale investment and a held
to maturity  investment  portfolio.  While all these  investment  securities are
purchased with the intent to be held to maturity, such securities are marketable
and  occasional  sales may occur  prior to  maturity  as part of the  process of
asset/liability and liquidity management.  Such sales will generally be from the
available for sale  portfolio.  Management  deliberately  maintains a short-term
maturity  schedule for its  investments so that there is a continuing  stream of
maturing investments.  CBI intends to maintain a short-term investment portfolio
in order to continue to be able to supply  liquidity to its loan  portfolio  and
for customer withdrawals.

          CBI has substantially more liabilities (mostly deposits,  which may be
withdrawn) which mature in the next 12 months than it has assets maturing in the
same period.  However, based on its historical  experience,  and that of similar
financial  institutions,  CBI believes that it is unlikely that so many deposits
would be withdrawn,  without being replaced by other deposits, that CBI would be
unable to meet its liquidity needs with the proceeds of maturing assets.

          CBI through its banking  subsidiaries  also  maintains  federal  funds
lines of credit with correspondent banks, and is able to borrow from the Federal
Home Loan Bank and from the Federal Reserve's discount window.

          CBI through its banking  subsidiaries  has a  demonstrated  ability to
attract deposits from its markets.  Deposits have grown from $30 million in 1989
to over $137  million  in 1998.  This base of  deposits  is the major  source of
operating liquidity.

          CBI's long term liquidity needs are expected to be primarily  affected
by the maturing of long term certificates of deposit. At September 30, 1998, CBI
had approximately $9.1 million and $0 in certificates of deposit maturing in one
to five  years and over five  years,  respectively.  CBI's  assets  maturing  or
repricing  in  the  same  periods   were  $56.4   million  and  $28.9   million,
respectively.  CBI  expects  to be able to  manage  its  current  balance  sheet
structure without experiencing any unusual liquidity problems.

          In the opinion of  management,  CBI's current and projected  liquidity
position is adequate.



Capital resources

          As  summarized  in the table below,  CBI  maintained a strong  capital
position.

                                               Sept. 30, 1998      Dec. 31, 1997
Tier 1 capital to average total assets ......      12.91%              9.60%
Tier 1 capital to risk weighted assets ......      16.98%             14.10%
Total capital to risk weighted assets .......      18.18%             15.30%

The  increase  in  capital  ratios is the  anticipated  effect of the stock sale
conducted earlier in the year and increasing earnings in Orangeburg and Sumter.

                                       18
<PAGE>

          In the opinion of  management,  the  Company's  current and  projected
capital positions are adequate.


Shareholders' equity

          At September  30, 1998 the common stock account  totaled  $14,626,000,
compared to $9,156,000 at December 31, 1997.  This  $5,470,000  increase was the
result of stock sales  conducted  during the first and second  quarters of 1998.
The stock  sale was  primarily  designed  to  generate  capital  needed to start
Florence National Bank.


Part II--Other Information

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibit Index

Exhibit No.(from                  Description
item 601 of S-B)
(27)                              Financial Data Schedule

b)  Reports on Form 8-K.  None.

Signatures

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

DATED: November 10, 1998

COMMUNITY BANKSHARES, INC.

By:  s/  Hugo S. Sims, Jr.,
          Hugo S. Sims, Jr.,
          Chief Executive Officer

By:  s/  William W. Traynham
          William W. Traynham
          President and Chief Financial Officer
          (Principal Accounting Officer)