SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C.  20549
                ------------------------------------------------

                                FORM 10-KSB
                ------------------------------------------------

                Annual Report Pursuant to Section 13 or 15(d)
                   of the Securities Exchange Act of 1934

                 For the Fiscal Year Ended December 31, 1999
                ------------------------------------------------

                       Commission File Number 0-22517

                         COMMUNITY BANCSHARES, INC.

                         A North Carolina Corporation
                  (IRS Employer Identification No. 56-1693841)
                     1301 Westwood Lane -- Westfield Village
                         Wilkesboro, North Carolina  28697
                               (336) 903-0600
                ------------------------------------------------

                 Securities Registered Pursuant to Section 12(b)
                     of the Securities Exchange Act of 1934:

                                    None
                ------------------------------------------------

                Securities Registered Pursuant to Section 12(g)
                   of the Securities Exchange Act of 1934:

                          Common Stock, $3.00 par value
                -----------------------------------------------

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

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.  [ ]

Revenue for the fiscal year ended December 31, 1999:  $ 9,296,154
                                                       ----------

The aggregate market value of the Common Stock of the Registrant held by
nonaffiliates of the Registrant (1,467,384 shares) on March 27, 2000, was
approximately $24,945,528.  As of such date, no organized trading market existed
for the Common Stock of the registrant.  The aggregate market value was computed
by reference to the book value of the Common Stock of the Registrant as of
December 31, 1999.  For the purposes of this response, directors, officers and
holders of 5% or more of the Registrant's Common Stock are considered the
affiliates of the Registrant at that date.

The number of shares outstanding of the Registrant's Common Stock, as of March
27, 2000: 1,467,384 shares of $3.00 par value Common Stock.

                          DOCUMENTS INCORPORATED BY REFERENCE
                          -----------------------------------

Portions of the Registrant's definitive proxy statement to be delivered to
shareholders in connection with the Annual Meeting of Shareholders scheduled to
be held on May 23, 2000 are incorporated by reference to Items 9, 10, 11 and 12
of this Report.

Transitional Small Business Disclosure Format (check one)
Yes     No   X
    ---     ----

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995

	Certain statements in this Annual Report on Form 10-KSB contain "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995, which statements generally can be identified by the use of
forward-looking terminology, such as "may," "will," "expect," "estimate,"
"anticipate," "believe," "target," "plan," "project," or "continue" or the
negatives thereof or other variations thereon or similar terminology, and are
made on the basis of management's plans and current analyses of the Company,
its business and the industry as a whole.  These forward-looking statements
are subject to risks and uncertainties, including, but not limited to,
economic conditions, competition, interest rate sensitivity and exposure to
regulatory and legislative changes.  The above factors, in some cases, have
affected, and in the future could affect, the Company's financial performance
and could cause actual results for fiscal 2000 and beyond to differ materially
from those expressed or implied in such forward-looking statements.  The
Company does not undertake to publicly update or revise its forward-looking
statements even if experience or future changes make it clear that any
projected results expressed or implied therein will not be realized.


                                  PART I

Item 1.  Description of Business.
-------  ------------------------

GENERAL

	Community Bancshares, Inc. (the "Company") is a registered bank holding
company under the federal Bank Holding Company Act of 1956, as amended, and
owns 100% of the outstanding capital stock of Wilkes National Bank,
Wilkesboro, North Carolina (the "Bank").  The Company was incorporated under
the laws of the State of North Carolina on June 11, 1990 as a mechanism to
enhance the Bank's ability to serve its future customers' requirements for
financial services.  The holding company structure provides flexibility for
expansion of the Company's banking business through acquisition of other
financial institutions and the provision of additional banking-related
services which the traditional commercial bank may not provide under present
laws.

	The Bank commenced operations on January 17, 1992 in a permanent
facility located at 1600 Curtis Bridge Road in Wilkesboro, North
Carolina.  The Bank opened full-service branches in North Wilkesboro
in June 1994, in Millers Creek in February 1996, and in Taylorsville
in August 1997.

	The Bank is a full service commercial bank, without trust powers.  The
Bank offers a full range of interest bearing and non-interest bearing
accounts, including commercial and retail checking accounts, money market
accounts, individual retirement accounts, regular interest bearing statement
savings accounts, certificates of deposit, commercial loans, real estate
loans, home equity loans and consumer/installment loans.  In addition, the
Bank provides such consumer services as U.S. Savings Bonds, travelers checks,
cashier's checks, safe deposit boxes, bank by mail services, direct deposit
and automatic teller services.

	The Company's operations include two primary business segments - banking
and mortgage activities.  The Company, through the Bank, provides traditional
banking services, including a full range of commercial and consumer banking
services.  Through its Community Mortgage Corporation subsidiary, the Company
provides mortgage services, including the origination and sale of mortgage
loans to various investors, including other financial institutions.  See Note
18 to the Company's consolidated financial statements for certain financial
information relating to these two segments.


MARKET AREA AND COMPETITION

	The primary service area for the Bank encompasses approximately 756
square miles in Wilkes County, North Carolina.  Located in the Yadkin Valley
on the eastern slope of the Blue Ridge Mountains, Wilkes County has a
population of approximately 60,000.  The largest employers in Wilkes County
include Tyson Food Service, Inc. (poultry processing), Lowe's Companies, Inc.
(home improvement retailer), and Ithaca Industries, Inc. (hosiery
manufacturer).

	Competition among financial institutions in this area is intense.  There
are 20 banking offices and one savings and loan association office within the
primary service area of the Bank.  Most of these offices are branches of or
are affiliated with major bank holding companies.  Financial institutions
primarily compete with one another for deposits.  In turn, a bank's deposit
base directly affects such bank's loan activities and general growth.  Primary
methods of competition include interest rates on deposits and loans, service
charges on deposit accounts and the designing of unique financial services
products.  The Bank is competing with financial institutions which have much
greater financial resources than the Bank, and which may be able to offer more
and unique services and possibly better terms to their customers.  However,
management of the Bank believes that the Bank will be able to attract
sufficient deposits to enable the Bank to compete effectively with other area
financial institutions.  According to FDIC estimates, as of June 30, 1999,
deposits at the Bank represented approximately 14.1% of total deposits of
financial institutions in the Bank's primary service area.  This compares with
a market share of approximately 13.3% at June 30, 1998 and 12.5% at June 30,
1997.

	The Bank is in competition with existing area financial institutions
other than commercial banks and savings and loan associations, including
insurance companies, consumer finance companies, brokerage houses, credit
unions and other business entities which have recently been invading the
traditional banking markets.  Due to the growth of Wilkes County, it is
anticipated that additional competition will continue from new entrants to the
market.


DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY; INTEREST RATES
AND INTEREST DIFFERENTIAL

	The following is a presentation of the average consolidated balance
sheet of the Company for the years ended December 31, 1999 and 1998.
This presentation includes all major categories of interest-earning
assets and interest-bearing liabilities:

                       AVERAGE CONSOLIDATED ASSETS

                                             Years Ended December 31,
                                             ------------------------
                                             1999                1998
                                             ----                ----
                                                  (In thousands)

     Cash and due from banks               $  3,144            $  3,306
     Taxable securities	                     22,234              21,018
     Non-taxable securities                   2,575               1,431
     Federal funds sold	                      1,115               1,384
     Net loans                               72,804              70,207
                                            -------             -------
        Total earning assets                 98,728              94,040
     Other assets                             3,793               3,060
                                            -------             -------
        Total assets                       $105,665            $100,406
                                            =======             =======

            AVERAGE CONSOLIDATED LIABILITIES AND STOCKHOLDERS' EQUITY

                                             Years Ended December 31,
                                             ------------------------
                                             1999                1998
                                             ----                ----

     Non interest-bearing deposits         $  7,440            $  6,384
     NOW and money market deposits           17,162              15,707
     Savings deposits                         3,518               3,418
     Time deposits                           63,150              61,948
     Other borrowing                          1,427                 429
     Other liabilities                        1,106               1,307
                                            -------             -------
       Total liabilities                     93,803              89,193
     Stockholders' equity                    11,862              11,213
                                            -------             -------
       Total liabilities
        and stockholders' equity           $105,665            $100,406
                                            =======             =======

		The following is a presentation of an analysis of the net
interest earningsof the Company for the period indicated with respect
to each major category of interest-earning asset and each major category
of interest-bearing liability:

                                          Year Ended December 31, 1999
                                          ----------------------------
                                         Average       Interest     Average
           Assets                        Amount         Earned       Yield
           ------                        -------       --------     -------
                                              (Dollars in thousands)

   Taxable securities                    $22,234        $1,257        5.65%
   Non-taxable securities                  2,575           106        6.24%(3)
   Federal funds sold                      1,115            57        5.11%
   Net loans                              72,804(1)      7,236(2)     9.94%
                                          ------         -----
    Total earning assets                 $98,728        $8,656        8.82%
                                          ======         =====

                                         Average       Interest     Average
         Liabilities                     Amount          Paid       Rate Paid
         -----------                     -------       --------     ---------

   NOW and money market deposits         $17,162        $  533        3.11%
   Savings deposits                        3,518            71        2.02%
   Time deposits                          63,150         3,188        5.05%
   Other borrowings                        1,427            71        4.98%
                                          ------         -----
    Total interest-bearing liabilities   $85,257        $3,863        4.53%
                                          ======         =====

   Net yield on earning assets                                        4.85%
                                                                      ====

--------------------
(1)   At December 31, 1999, one loan with a principal balance of $103,511 was
      not accruing interest.
(2)   Interest earned on net loans includes $239 in loan fees and loan service
      fees.
(3)   The yield is tax equivalent.

                                          Year Ended December 31, 1998
                                          ----------------------------
                                         Average       Interest     Average
           Assets                        Amount         Earned       Yield
           ------                        -------       --------     -------
                                              (Dollars in thousands)

   Taxable securities                    $21,018        $1,308        6.22%
   Non-taxable securities                  1,431            63        6.70%(3)
   Federal funds sold                      1,384            75        5.42%
   Net loans                              70,207(1)      7,122(2)    10.14%
                                          ------         -----
    Total earning assets                 $94,040        $8,568        9.11%
                                          ======         =====

                                         Average       Interest     Average
         Liabilities                     Amount          Paid       Rate Paid
         -----------                     -------       --------     ---------

   NOW and money market deposits         $15,707        $  525        3.34%
   Savings deposits                        3,418            99        2.90%
   Time deposits                          61,948         3,605        5.82%
   Other borrowings                          429            18        4.20%
                                          ------         -----
    Total interest-bearing liabilities   $81,502        $4,247        5.21%
                                          ======         =====

   Net yield on earning assets                                        4.59%
                                                                      ====

----------------------
(1)   All loans were accruing interest on December 31, 1998.
(2)   Interest earned on net loans includes $254 in loan fees and loan service
      fees.
(3)   The yield is tax equivalent.


RATE/VOLUME ANALYSIS OF NET INTEREST INCOME

	The following shows the effect on interest income, interest expense and
net interest income due to changes in average balances and rates for the years
therein indicated.  The effect of a change in average balance has been
determined by multiplying the average rate in the earlier period by the
difference in average balances between both time periods.  The change in
interest due to volume and rate has been allocated in proportion to the
relationship of the absolute dollar amounts of the change in each.

                                      Year Ended December 31, 1999
                                             Compared to
                                      Year Ended December 31, 1998
                                      ----------------------------
                                       Increase (decrease) due to:
                                     Volume       Rate        Total
                                     ------       ----        -----
                                             (In thousands)
   Interest earned on:
   Taxable securities                 $ 88        $(139)      $ (51)
   Non-taxable securities               47           (4)         43
   Federal funds sold                  (15)          (3)        (18)
   Net loans                           244         (130)        114
                                       ---         ----        ----
      Total interest income           $364        $(276)      $  88
                                       ---         ----        ----

   Interest paid on:
   NOW and money market deposit         30          (22)          8
   Savings deposits                      3          (31)        (28)
   Time deposits                        72         (489)       (417)
   Federal funds
    and repurchase agreements           49            4          53
                                       ---         ----        ----
      Total interest expense           154         (538)       (384)
                                       ---         ----        ----
   Change in net interest income      $210        $ 262       $ 472
                                       ===         ====        ====



                                      Year Ended December 31, 1998
                                             Compared to
                                      Year Ended December 31, 1997
                                      ----------------------------
                                       Increase (decrease) due to:
                                     Volume       Rate        Total
                                     ------       ----        -----
                                             (In thousands)
   Interest earned on:
   Taxable securities               $  287        $ (36)       $ 251
   Non-taxable securities               62          --            62
   Federal funds sold                    8          --             8
   Net loans                           856          127          983
                                     -----         ----         ----
      Total interest income         $1,213        $  91       $1,304
                                     -----         ----        -----

   Interest paid on:
   NOW and money market deposit         98          (16)          82
   Savings deposits                     29           (5)          24
   Time deposits                       541          (76)         465
   Other borrowings                      5           (2)           3
                                       ---         ----        -----
      Total interest expense           673          (99)         574
                                       ---         ----        -----
   Change in net interest income      $540        $ 190       $  730
                                       ===         ====        =====


DEPOSITS

	The Bank offers a full range of interest bearing and non-interest
bearing accounts, including commercial and retail checking accounts,
money market accounts, individual retirement accounts, regular interest
bearing statement savings accounts and certificates of deposit with
fixed and variable rates and a range of maturity date options.  The
sources of deposits are residents, businesses and employees of
businesses within the Bank's market area, obtained through the personal
solicitation of the Bank's officers and directors, direct
mail solicitation and advertisements published in the local media.
The Bank pays competitive interest rates on time and savings deposits
up to the maximum permitted by law or regulation.  In addition, the
Bank has implemented a service charge fee schedule competitive with
other financial institutions in the Bank's market area, covering such
matters as maintenance fees on checking accounts, per item processing
fees on checking accounts, returned check charges and the like.

	The following table presents, for the periods indicated, the average
amount of, and average rate paid on, each of the following deposit categories:

                                          Year Ended
                                       December 31, 1999
                           ------------------------------------
  Deposit Category         Average Amount     Average Rate Paid
  ----------------         --------------     -----------------
                                   (Dollars in thousands)
  Non interest bearing
    demand deposits            $ 7,440                 N/A
  NOW and money
    market deposits             17,162                3.11%
  Savings deposits               3,518                2.02%
  Time deposits                 63,150                5.05%
  Other borrowings               1,427                4.98%


                                          Year Ended
                                       December 31, 1998
                           ------------------------------------
  Deposit Category         Average Amount     Average Rate Paid
  ----------------         --------------     -----------------
                                   (Dollars in thousands)
  Non interest bearing
    demand deposits            $ 6,384                 N/A
  NOW and money
    market deposits             15,707                3.34%
  Savings deposits               3,418                2.90%
  Time deposits                 61,948                5.82%
  Other borrowings                 429                4.20%

	The following table indicates amounts outstanding of time certificates
of deposit of $100,000 or more and respective maturities for the year
ended December 31, 1999:

                                         Time Certificate
                                           of Deposits
                                         ----------------
                                          (In thousands)

             3 months or less                $10,498
             3-6 months                        7,677
             6-12 months                       4,401
             over 12 months                    1,989
                                              ------
               Total                         $24,565
                                              ======

LOAN PORTFOLIO

	The Bank engages in a full complement of lending activities, including
commercial, consumer/ installment and real estate loans.  As of December 31,
1999, the Bank had a legal lending limit for unsecured loans of up to
$1,504,870 to any one person.  See "- Supervision and Regulation."

	Commercial lending is directed principally towards businesses whose
demands for funds fall within the Bank's legal lending limits and which are
potential deposit customers of the Bank.  This category of loans includes
loans made to individual, partnership or corporate borrowers, and obtained for
a variety of business purposes.  Particular emphasis is placed on loans to
small and medium-sized businesses.  The Bank's real estate loans consist of
residential first and second mortgage loans as well as residential
construction loans.

	The Bank's consumer loans consist primarily of installment loans to
individuals for personal, family and household purposes, including automobile
loans to individuals and pre-approved lines of credit.

        While risk of loss in the Bank's loan portfolio is primarily tied to the
credit quality of the various borrowers, risk of loss may also increase due to
factors beyond the Bank's control, such as local, regional and/or national
economic downturns.  General conditions in the real estate market may also
impact the relative risk in the Bank's real estate portfolio.  Of the Bank's
target areas of lending activities, commercial loans are generally considered
to have greater risk than real estate loans or consumer installment loans.

	Management of the Bank intends to originate loans and to participate
with other banks with respect to loans which exceed the Bank's lending
limits.  Management of the Bank does not believe that loan
participations will necessarily pose any greater risk of loss than
loans which the Bank originates.

	The following is a description of each of the major categories of loans
in the Bank's loan portfolio:

        COMMERCIAL, FINANCIAL AND AGRICULTURAL.  These loans are customarily
granted to local business customers on a fully collateralized basis to meet
local credit needs.  The loans can be extended for periods of between one year
and five years and are usually structured to fully amortize over the term of
the loan or balloon after the third year or fifth year of the loan with an
amortization up to 10 years.  The terms and loan structure are dependent on
the collateral and strength of the borrower.  The loan to value ratios range
from 50% to 80%.  The risks of these types of loans depend on the general
business conditions of the local economy and the local business borrower's
ability to sell its products and services in order to generate sufficient
business profits to repay the Bank under the agreed upon terms and conditions.
The value of the collateral held by the Bank as a measure of safety against
loss is most volatile in this loan category.

        REAL ESTATE - CONSTRUCTION.  These loans are made for the construction
of single family residences in the Bank's market area.  The loans are
granted to qualified individuals with down payments of at least 20%
of the appraised value or contract price, whichever is less.  The
interest rates fluctuate at 1% to 2% above the Bank's prime interest
rate during the six month construction period.  The Bank charges a fee
of 1% to 2% in addition to the normal closing costs.  These loans
generally command higher rates and fees commensurate with the risk
warranted in the construction lending field.  The risk in construction
lending is dependent upon the performance of the builder in
building the project to the plans and specifications of the borrower and
the Bank's ability to administer and control all phases of
the construction disbursements.  Upon completion of the construction period,
the mortgage is converted to a permanent loan and normally sold to an investor
in the secondary mortgage market.

        REAL ESTATE - MORTGAGE.  These loans are granted to qualified
individuals for the purchase of existing single family residences
in the Bank's market area.  Both fixed and variable rate loans are
offered with competitive terms and fees consistent with national
mortgage investor guidelines.  For mortgage loans held for sale,
the Bank sells the mortgages within a period of 30 days
to 365 days to a pre-determined mortgage investor and retains the origination
fees.  The risk of this type of activity depends on the salability of the loan
to national investors and interest rate changes.  Delivering these loans to
the end investor on a mandatory basis and meeting the investor's quality
control procedures limits the Bank's risk of making adjustable rate mortgage
loans.  The risk assumed by the Bank is conditioned upon the Bank's internal
controls, loan underwriting and market conditions in the national mortgage
market.  The Bank retains loans for its portfolio when it has sufficient
liquidity to fund the needs of its established customers and when rates are
favorable to retain the loans.  The loan underwriting standards and policies
are generally the same for both loans sold in the secondary market and those
retained in the Bank's portfolio.

	The Bank's adjustable rate mortgages include lifetime interest rate
caps.  All such loans are qualified and underwritten to meet FHLMC
guidelines and no  negative amortized loans are offered.  No loans
carry a prepayment penalty clause and therefore can be paid out or
refinanced at a fixed rate, thus reducing the default risk.  These
loans are priced according to proper index and margin, and should
not lag behind funding costs.

	The Company provides mortgage services through its Community Mortgage
Corporation subsidiary, including the origination and sale of mortgage loans
to various investors, including other financial institutions.

        INSTALLMENT LOANS.  These loans are granted to individuals for the
purchase of personal goods such as automobiles, recreational vehicles, mobile
homes and for the improvement of single family real estate in the form of
second mortgages.  The Bank obtains a lien against the item purchased by the
consumer and holds title until the loan is repaid in full.  These loans are
generally granted for periods ranging between one and five years at fixed
rates of interest 1% to 4% above the Bank's prime interest rate.  The loan to
value ratios range from 60% to 80%.  Loss or decline of income by the borrower
due to layoffs, divorce or unexpected medical expenses represent unplanned
occurrences that may represent risk of default to the Bank.  In the event of
default, a shortfall in the value of the collateral may pose a loss to the
Bank in this loan category.

	The Bank also offers home equity loans to qualified borrowers.  The
interest rate floats at one to two percent above the prime interest rate
quoted in The Wall Street Journal and it is capped at 16%.  The loan to
appraised value cannot exceed 80% and the maturity is limited to ten years.
Credit quality reviews are conducted every two years to determine if the
credit is still warranted.  Monthly payments are required with the minimum
payment equaling 2% of the outstanding loan balance.  The Bank requires a
first or second mortgage position and loans are made on principal residences
only.

        LEASE FINANCING.  The Bank offers leases to qualified individuals,
businesses and municipalities to lease machinery, rolling stock and equipment.
Terms and fees are consistent with local market competition.  Leases are at
fixed terms with "fair market value residuals" assigned at the maturity of the
lease.  The Bank works with qualified outside agents who originate leases and
obtain useful life estimates and market values of equipment based on national
averages.  Terms of leases generally range from two (2) to five (5) years.
The Bank arranges competitive purchases of specified equipment and retains
title to it during the lease.  Monthly payments are required, normally in the
amount of 3% of the outstanding balance.  The Bank avoids limited-use equipment
with limited resale value and frequently arranges buyback agreements with
manufacturers to reduce risks resulting from reselling equipment.

	The following table presents various categories of loans contained in
the Bank's loan portfolio for the period indicated and the total amount
of all loans for such period:

                Type of Loan                As of December 31,
                ------------                ------------------
                                            1999          1998
                                            ----          ----
                                              (In thousands)
   Domestic:
     Commercial, financial
      and agricultural                     $32,472       $29,133
     Real estate-construction                7,484         7,699
     Real estate-mortgage                   21,236        20,831
     Installment and other loans
      to individuals                        12,960        15,405
     Lease financing                            13           159
                                            ------        ------
       Subtotal                             74,165        73,227
     Less: Allowance for possible
            loan losses                     (1,229)       (1,107)
                                            ------        ------
   Total (net of allowances)               $72,936       $72,120
                                            ======        ======

	The following is a presentation of an analysis of maturities of loans
as of December 31, 1999:

                            Due in 1     Due after 1    Due After
    Type of Loan           year or less  to 5 years      5 years     Total
    ------------           ------------  -----------    ---------    -----
                                               (In thousands)
 Commercial, financial
   and agricultural           $26,297       $4,987       $1,188    $32,472
 Real estate-construction       5,542        1,942         --        7,484
                               ------        -----        -----     ------
   Total                      $31,839       $6,929       $1,188    $39,956
                               ======        =====        =====     ======

	For the above loans, the following is a presentation of an analysis of
sensitivities to changes in interest rates as of December 31, 1999:

                            Due in 1     Due after 1    Due After
    Type of Loan           year or less  to 5 years      5 years     Total
    ------------           ------------  -----------    ---------    -----
                                               (In thousands)
 Predetermined
   interest rate              $ 2,243       $2,696       $  968    $ 5,907
 Floating interest rate        29,956        4,233          220     34,049
                               ------        -----        -----     ------
   Total                      $31,839       $6,929       $1,188    $39,956
                               ======        =====        =====     ======

	As of December 31, 1999, one loan with a principal amount of $103,511
was on non-accrual status and no loans were defined as "troubled debt
restructurings."  At December 31, 1999, there were no loans which were
accruing interest and contractually past due 90 days or more.  No significant
interest income has been recognized during 1999 on loans that have been
accounted for on a non-accrual basis. At December 31, 1999, impaired loans,
which include non-accruing loans, amounted to $861,833.

	As of December 31, 1998, all loans were accruing interest and no loans
were defined as "troubled debt restructurings."  At December 31, 1999, there
were no loans which were accruing interest and contractually past due 90 days
or more.  No interest income has been recognized during 1999 on loans that
have been accounted for on a non-accrual basis.

	As of December 31, 1999, there are no loans not disclosed above that are
classified for regulatory purposes as doubtful, substandard or special mention
which (i) represent or result from trends or uncertainties which management
reasonably expects will materially impact future operating results, liquidity,
or capital resources, or (ii) represent material credits about which
management is aware of any information which causes management to have serious
doubts as to the ability of such borrowers to comply with the loan repayment
terms.  There are no loans not disclosed above where known information about
possible credit problems of borrowers causes management to have serious doubts
as to the ability of such borrowers to comply with the present loan repayment
terms.

	Accrual of interest is discontinued on a loan when management of the
Bank determines upon consideration of economic and business factors
affecting collection efforts that collection of interest is doubtful.
No significant interest income has been recognized during 1999 or 1998
on loans that have been accounted for on a non-accrual basis.


SUMMARY OF LOAN LOSS EXPERIENCE

        An analysis of the Bank's loss experience is furnished in the following
table for the periods indicated, as well as a breakdown of the allowance for
possible loan losses:

               Analysis of the Allowance for Possible Loan Losses

                                                      Year ended
                                                      December 31,
                                                    ----------------
                                                   1999          1998
                                                   ----          ----
                                                 (Dollars in thousands)

   Balance at beginning of period                 $1,107        $1,033
                                                   -----         -----

   Charge-offs:
    Installment and other loans to individuals    $  (49)       $  (91)
    Commercial, financial, agricultural               68           (37)
    Real estate-mortgage                             --            (72)
    Real estate-construction                         --            --
    Lease financing                                  --            --
                                                   -----         -----
                                                  $ (117)       $ (200)
                                                   -----         -----

   Recoveries:
    Installment and other loans to individuals    $   24        $   16
    Commercial, financial, agricultural              --            --
    Real estate-mortgage                             --            --
    Real estate-construction                         --            --
    Lease financing                                  --            --
                                                   -----         -----
                                                  $   24        $   16
                                                   -----         -----

   Net charge-offs                                   (93)         (184)
   Additions charged to operations                   215           258
                                                   -----         -----

   Balance at end of period                       $1,229        $1,107
                                                   =====         =====

   Ratio of net charge-offs during the
    period to average loans outstanding
    during the period                              0.13%         0.26%
                                                   =====         =====

	At December 31, 1999 the allowance was allocated as follows:

                                                 Percent of loans in each
                                       Amount    category to total loans
                                       ------    ------------------------
                                              (Dollars in thousands)
   Commercial, financial
    and agricultural                   $  560            43.8%
   Real estate-construction               170            10.1%
   Real estate-mortgage                   240            28.6%
   Installment and other loans
    to individuals                        230            17.5%
   Lease financing                         --             --
   Unallocated                             29             N/A
                                        -----           ------
     Total                             $1,229           100.0%
                                        =====           ======

	At December 31, 1998 the allowance was allocated as follows:

                                                 Percent of loans in each
                                       Amount    category to total loans
                                       ------    ------------------------
                                              (Dollars in thousands)
   Commercial, financial
    and agricultural                   $  485            39.8%
   Real estate-construction               125            10.5%
   Real estate-mortgage                   260            28.5%
   Installment and other loans
    to individuals                        209            21.0%
   Lease financing                          4             0.2%
   Unallocated                             24             N/A
                                        -----           ------
     Total                             $1,107           100.0%
                                        =====           ======


LOAN LOSS RESERVE

		In considering the adequacy of the Company's allowance for
possible loan losses, management has focused on the fact that as of December
31, 1999, 43.8% of outstanding loans are in the category of commercial loans,
which includes commercial real estate loans and agricultural loans.  Commercial
loans are generally considered by management as having greater risk than other
categories of loans in the Company's loan portfolio.  However, over 95% of
these commercial loans at December 31, 1999 were made on a secured basis.
Management believes that the secured condition of the preponderant portion of
its commercial loan portfolio greatly reduces any risk of loss inherently
present in commercial loans.

		The Company's consumer loan portfolio is also well secured.  At
December 31, 1999 the majority of the Company's consumer loans were secured by
collateral primarily consisting of automobiles, boats and other personal
property.  Management believes that these loans involve less risk than
commercial loans.

		Real estate mortgage loans constituted 28.6% of outstanding
loans at December 31, 1999.  All loans in this category represent residential
real estate mortgages where the amount of the original loan generally does not
exceed 80% of the appraised value of the collateral.  These loans are
considered by management to be well secured with a low risk of loss.

		A review of the loan portfolio by an independent firm is
conducted annually.  The purpose of this review is to assess the risk in the
loan portfolio and to determine the adequacy of the allowance for loan losses.
The review includes analyses of historical performance, the level of non-
conforming and rated loans, loan volume and activity, review of loan files and
consideration of economic conditions and other pertinent information.  Upon
completion, the report is approved by the Board and management of the Bank.
In addition to the above review, the Bank's primary regulator, the
Comptroller, also conducts an annual examination of the loan portfolio.  Upon
completion, the Comptroller presents their report of findings to the Board and
management of the Bank.  Information provided from the above two independent
sources, together with information provided by the management of the Bank and
other information known to members of the Board are utilized by the Board to
monitor, on a quarterly basis, the loan portfolio.  Specifically, the Board
attempts to identify risks inherent in the loan portfolio (e.g., problem
loans, potential problem loans and loans to be charged-off), assess the
overall quality and collectibility of the loan portfolio, and determine
amounts of the allowance for loan losses and the provision for loan losses to
be reported based on the results of their review.


INVESTMENTS

		As of December 31, 1999, investment securities comprised
approximately 18.6% of the Bank's assets and net loans comprised approximately
64.1% of the Bank's assets.  The Bank invests primarily in obligations of the
United States or obligations guaranteed as to principal and interest by the
United States, including mortgage-backed securities, and other taxable
securities.  In addition, the Bank enters into Federal Funds transactions with
its principal correspondent banks, and acts as a net seller of such funds.
The sale of Federal Funds amounts to a short-term loan from the Bank to
another bank.

		The following table presents, for the periods indicated, the
book value of the Bank's investments, reported by those available for-sale and
those held-to-maturity:

            Investment Category                    December 31,
            -------------------                    ------------
                                               1999            1998
                                               ----            ----
                                                   (In thousands)
Available-for-Sale:
------------------
  Obligations for U.S. Treasury
    and other U.S. Agencies                   $14,794         $19,648
  Tax-exempt securities                         2,516           2,300
  Federal Reserve and
    Federal Home Loan Bank stock                  625             191
  Other securities                              1,437           2,149
                                               ------          ------
  Total                                       $19,372         $24,288
                                               ======          ======

Held-to-Maturity:
----------------
  Mortgage backed securities                  $   443         $ 1,001
  Other securities                              1,364           1,384
                                               ------          ------
  Total                                       $ 1,807         $ 2,385
                                               ======          ======

		The following table indicates for the year ended December 31,
1999 the amount of investments due in (i) one year or less, (ii) one to five
years, (iii) five to ten years, and (iv) over ten years:

                                                       Weighted Average
   Investment Category                    Amount           Yield(1)
   -------------------                    ------       ----------------
                                              (Dollars in thousands)
Available-for-Sale:
------------------
  Obligation of U.S. Treasury
   and other U.S. Agencies:
     0 through 1 years                    $ 1,967              5.90%
     Over 1 through 5 years                11,417              6.10%
     Over 5 through 10 years                1,410              6.23%

  Tax-exempt securities(1):
     Over 1 through 5 years                 1,657              6.11%
     Over 5 through 10 years                  859              6.52%

  Mortgage Pools:
     0 through 1 years                         78              5.55%
     Over 1 through 5 years                   906              5.80%
     Over 5 through 10 years                  195              5.91%

  Other securities:
     0 through 1 years                         15              6.00%
     Over 5 through 10 years                  243              5.55%

  FRB Stock (no maturity)                     625              6.43%
                                           ------

  Total                                   $19,372              6.07%
                                           ======              =====

------------------
 (1)	The Company has invested in tax-exempt securities.  The yield on tax-
exempt securities is reported at the tax- equivalent rate.


                                                       Weighted Average
   Investment Category                    Amount           Yield(1)
   -------------------                    ------       ----------------
                                              (Dollars in thousands)
Held-to-Maturity:
----------------
  Obligation of U.S. Treasury
   and other U.S. Agencies:
     0 through 1 years                    $    21              7.91%
     Over 1 through 5 years                   160              6.79%
     Over 10 years                            262              6.38%

Mortgage Pools:
     0 - 1 years                             --                 --
     Over 1 through 5 years                   580              6.65%
     Over 5 through 10 years                  784              6.89%
                                           ------

  Total                                   $ 1,807              6.63%
                                           ======              =====


RETURN ON EQUITY AND ASSETS

	Returns on average consolidated assets and average consolidated equity
for the periods indicated are as follows:


                                         Years ended December 31,
                                         ------------------------
                                            1999          1998
                                            ----          ----
Return on Average Assets                    1.38%         0.97%
Return on Average Equity                   12.25%         8.70%
Average Equity to Average Assets Ratio     11.23%        11.17%
Dividend Payout Ratio                       --            --


ASSET/LIABILITY MANAGEMENT

	It is the objective of the Bank to manage assets and liabilities to
provide a satisfactory, consistent level of profitability within the framework
of established cash, loan, investment, borrowing and capital policies.
Certain of the officers of the Bank will be responsible for monitoring
policies and procedures that are designed to ensure acceptable composition of
the asset/liability mix, stability and leverage of all sources of funds while
adhering to prudent banking practices.  It is the overall philosophy of
management to support asset growth primarily through growth of core deposits,
which include deposits of all categories made by individuals, partnerships and
corporations.  Management of the Bank seeks to invest the largest portion of
the Bank's assets in commercial, consumer and real estate loans.

	The Bank's asset/liability mix is monitored on a daily basis with a
monthly report reflecting interest-sensitive assets and interest-sensitive
liabilities being prepared and presented to the Bank's Board of Directors.
The objective of this policy is to control interest-sensitive assets and
liabilities so as to minimize the impact of substantial movements in interest
rates on the Bank's earnings.


CORRESPONDENT BANKING

	Correspondent banking involves the providing of services by one bank to
another bank which cannot provide that service for itself from an economic or
practical standpoint.  The Bank purchases correspondent services offered by
larger banks, including check collections, purchase of Federal Funds, security
safekeeping, investment services, coin and currency supplies, overline and
liquidity loan participations and sales of loans to or participations with
correspondent banks.

	The Bank sells loan participations to correspondent banks with respect
to loans which exceed the Bank's lending limit.  As compensation for services
provided by a correspondent, the Bank may maintain certain balances with such
correspondents in non-interest bearing accounts.  At December 31, 1999 the
Bank had outstanding participations totaling $2,639,305.


DATA PROCESSING

	The Bank has entered into a data processing servicing agreement with
Central Service Corp.  This servicing agreement provides for the Bank to
receive a full range of data processing services, including an automated
general ledger, deposit accounting, commercial, real estate and installment
lending data processing, payroll, central information file and ATM processing
and investment portfolio accounting.


FACILITIES

	The Bank's main office is located in an approximately 1,800 square foot
facility located at 1600 Curtis Bridge Road in Wilkesboro, North Carolina.
The facility includes four teller stations, one office, a vault, a night
depository, and a drive-in window.  The Bank opened a full service branch,
located in North Wilkesboro, in June 1994.  This 1,700 square foot facility
contains five teller stations, a drive-in window and an operations area.  Both
facilities are owned by the Bank.  The Company's Millers Creek branch office
opened in February 1996.  This 2,000 square foot leased facility contains five
teller stations, two drive-in windows, a vault, a night depository and safe
deposit boxes.

	On August 15, 1997, the Bank opened a full service branch in
Taylorsville, North Carolina.  In connection with the opening of this branch,
the Company purchased 1.6 acres of land and a 22,000 square foot facility in
Taylorsville at the intersection of Highway 90 and Highway 16.  The Company
renovated 5,600 square feet of this facility to house the operations of the
Taylorsville branch and intends to renovate and lease the remaining space to
other businesses.  Approximately 3,600 square feet of the facility is used for
the Bank's branch facility and contains six teller stations, two drive-in
windows, four offices, a vault, safe deposit boxes, a night depository and an
automated teller machine.  The remaining 2,000 square feet will be used for
future expansion of the Bank.

	The Company also leases 5,000 square feet of office space in the
Westfield Village Shopping Center in Wilkesboro, North Carolina.  This
facility houses certain of the Company's administrative and operational
functions.


EMPLOYEES

	The Bank presently employs 37 persons on a full-time basis, including 14
officers and 5 persons on a part-time basis.  The Bank will hire additional
persons as needed, including additional tellers and financial service
representatives.


MONETARY POLICIES

	The results of operations of the Bank will be affected by credit
policies of monetary authorities, particularly the Federal Reserve Board.  The
instruments of monetary policy employed by the Federal Reserve Board include
open market operations in U.S. Government securities, changes in the discount
rate on member bank borrowings, changes in reserve requirements against member
bank deposits and limitations on interest rates which member banks may pay on
time and savings deposits.  In view of changing conditions in the national
economy and in the money markets, as well as the effect of action by monetary
and fiscal authorities, including the Federal Reserve Board, no prediction can
be made as to possible future changes in interest rates, deposit levels, loan
demand or the business and earnings of the Bank.


SUPERVISION AND REGULATION

	The Company and the Bank operate in a highly regulated environment, and
their business activities are governed by statute, regulation and
administrative policies.  The business activities of the Company and the Bank
are closely supervised by a number of regulatory agencies, including the
Federal Reserve Board, the Office of the Comptroller of the Currency ("OCC")
and the Federal Deposit Insurance Corporation ("FDIC").

	The Company is regulated by the Federal Reserve Board under the federal
Bank Holding Company Act of 1956, which requires every bank holding company to
obtain the prior approval of the Federal Reserve Board before acquiring more
than 5% of the voting shares of any bank or all or substantially all of the
assets of a bank, and before merging or consolidating with another bank
holding company.  The Federal Reserve Board (pursuant to regulation and
published policy statements) has maintained that a bank holding company must
serve as a source of financial strength to its subsidiary banks.  In adhering
to the Federal Reserve Board policy the Company may be required to provide
financial support to a subsidiary bank at a time when, absent such Federal
Reserve Board policy, the Company may not deem it advisable to provide such
assistance.

	Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994, the Company or any other bank holding company located in North Carolina,
is able to acquire a bank located in any other state, and a bank holding
company located outside North Carolina can acquire any North Carolina-based
bank, in either case subject to certain deposit percentage and other
restrictions.  The legislation also provides that, unless an individual state
has elected to prohibit out-of-state banks from operating interstate branches
within its territory, adequately capitalized and managed bank holding
companies may consolidate their multistate bank operations into a single bank
subsidiary and to branch interstate through acquisitions.

	De novo branching by an out-of-state bank would be permitted only if it
is expressly permitted by the laws of the host state.  The authority of a bank
to establish and operate branches within a state remains subject to applicable
state branching laws.  The State of North Carolina permits out-of-state banks
to operate branches in North Carolina.

	On November 12, 1999, the Gramm-Leach-Bliley Financial Services
Modernization Act was signed into law.  The Financial Services Modernization
Act eliminates the barriers erected by the 1933 Glass-Steagall Act and amends
the Bank Holding Company Act of 1956, among other statutes.  Further, it
allows for the affiliation of banking, securities and insurance activities in
new financial services organizations.

	A dominant theme of the new legislation is functional regulation of
financial services, with the primary regulator of the Company being the agency
which traditionally regulates the activity in which the Company wishes to
engage.  For example, the Securities and Exchange Commission will regulate
bank securities transactions, and the various banking regulators will oversee
banking activities.

	The principal provisions of the Financial Services Modernization Act
will permit the Company, if it meets the standards for a "well- managed" and
"well-capitalized" institution and has at least a "satisfactory" Community
Reinvestment Act performance, to engage in any activity that is "financial in
nature," including security and insurance underwriting, investment banking,
and merchant banking investing in commercial and industrial companies.  The
Company, if it satisfies the above criteria, can file a declaration of its
status as a "financial holding company" ("FHC") with the Federal Reserve, and
thereafter engage directly or through nonbank subsidiaries in the expanded
range of activities which the Financial Services Modernization Act identifies
as financial in nature.  Further, the Company, if it elects FHC status, will
be able to pursue additional activities which are incidental or complementary
in nature to a financial activity, or which the Federal Reserve subsequently
determines to be financial in nature.  The Financial Services Modernization
Act will also allow the Bank, with OCC approval, to control or hold an
interest in a "financial subsidiary" which may engage in, among other things,
the activities specified in the Financial Services Modernization Act as being
financial in nature.  Such a subsidiary, though, is not permitted to engage in
insurance underwriting or annuity issuance, real estate development,
investment activities, or merchant banking activities.  Further, any financial
subsidiary that the Bank created would generally be treated as an affiliate of
the Bank, rather than as a subsidiary for purposes of affiliate transaction
restrictions of Sections 23A and 23B of the Federal Reserve Act.

	It is expected that the Financial Services Modernization Act will
facilitate further consolidation in the financial services industry on both a
national and international basis, and will cause existing bank holding
companies to restructure their existing activities in order to take advantage
of the new powers granted and comply with their attendant requirements and
conditions.

	A bank holding company which has not elected to become a FHC will
generally be prohibited from acquiring control of any company which is not a
bank and from engaging in any business other than the business of banking or
managing and controlling banks. However, these non-FHC bank holding companies
will still be able to engage in certain activities which have been identified
by the Federal Reserve Board to be so closely related to banking as to be a
proper incident thereto and thus permissible for bank holding companies.

	These activities, including those listed below, are left unchanged by
the Financial Services Modernization Act which does not prohibit non-FHC
bank holding companies from engaging in these activities.  The list of
permissible nonbanking activities, which includes the following
activities: extending credit and servicing loans; acting as investment
or financial advisor to any person, with certain limitations; leasing
personal and real property or acting as a broker with respect thereto;
providing management and employee benefits consulting advice and career
counseling services to nonaffiliated banks and nonbank depository
institutions; operating certain nonbank depository institutions; performing
certain trust company functions; providing certain agency transactional
services, including securities brokerage services, riskless principal
transactions, private placement services, and acting as a futures
commission merchant; providing data processing and data transmission
services; acting as an insurance agent or underwriter with respect to limited
types of insurance; performing real estate appraisals; arranging commercial
real estate equity financing; providing check-guaranty, collection agency and
credit bureau services; engaging in asset management, servicing and collection
activities; providing real estate settlement services; acquiring certain debt
which is in default; underwriting and dealing in obligations of the United
States, the states and their political subdivisions; engaging as a principal
in foreign exchange trading and dealing in precious metals; providing other
support services such as courier services and the printing and selling of
checks; and investing in programs designed to promote community welfare.

	In determining whether an activity is so closely related to banking as
to be permissible for bank holding companies, the Federal Reserve Board is
required to consider whether the performance of such activities by a bank
holding company or its subsidiaries can reasonably be expected to produce
benefits to the public such as greater convenience, increased competition and
gains in efficiency, that outweigh such possible adverse effects as undue
concentration of resources, decreased or unfair competition, conflicts of
interest and unsound banking practices.  Generally, bank holding companies are
required to obtain prior approval of the Federal Reserve Board to engage in
any activity not previously approved by the Federal Reserve Board or to modify
in any material respect an activity for which Federal Reserve Board approval
has been obtained.

	As a national bank, the Bank is subject to the supervision of the OCC
and, to a limited extent, the FDIC and the Federal Reserve Board.  With
respect to expansion, national banks situated in the State of North Carolina
may establish branches anywhere within the state provided that the proposed
branch will meet the needs and promote the convenience of the community in
which it is to be located, the probable volume of business is sufficient to
assure and maintain the solvency of the branch, and certain minimum capital
requirements are met.  The Bank also will be subject to the North Carolina
banking and usury laws restricting the amount of interest which it may charge
in making loans or other extensions of credit.

	Loans and extensions of credit by national banks are subject to legal
lending limitations.  Under federal law, a national bank may grant unsecured
loans and extensions of credit in an amount up to 15% of its unimpaired
capital and surplus to any one person if the loans and extensions of credit
are not fully secured by collateral having a market value at least equal to
their face amount.  In addition, a national bank may grant loans and
extensions of credit to any one single person up to 10% of its unimpaired
capital and surplus, provided that the transactions are fully secured by
readily marketable collateral having a market value determined by reliable and
continuously available price quotations at least equal to the amount of funds
outstanding.  This 10% limitation is separate from, and in addition to, the
15% limitation for unsecured loans.  Loans and extensions of credit may exceed
the general lending limit if they qualify under one of several exceptions.
Such exceptions include certain loans or extensions of credit arising from the
discount of commercial or business paper, the purchase of bankers'
acceptances, loans secured by documents of title, loans secured by U.S.
obligations, loans to or guaranteed by the federal government and loans or
extensions of credit that have the approval of the OCC and that are made to a
financial institution or to any agent in charge of the business and property
of the financial institution.

	Both the Company and the Bank are subject to regulatory capital
requirements imposed by the Federal Reserve Board and the OCC.  Both the
Federal Reserve Board and the OCC have issued risk-based capital guidelines
for bank holding companies and banks which make regulatory capital
requirements more sensitive to differences in risk profiles of various banking
organizations.  The capital adequacy guidelines issued by the Federal Reserve
Board are applied to bank holding companies on a consolidated basis with the
banks owned by the holding company.  The OCC's risk capital guidelines apply
directly to national banks regardless of whether they are a subsidiary of a
bank holding company.  Both agencies' requirements provide that banking
organizations must have capital equivalent to at least 8% of weighted risk
assets.  The risk weights assigned to assets are based primarily on credit
risks.  Depending upon the riskiness of a particular asset, it is assigned to
a risk category.  For example, securities with an unconditional guarantee by
the United States government are assigned to the lowest risk category, while a
risk weight of 50% is assigned to loans secured by owner-occupied one to four
family residential mortgages, provided that certain conditions are met.  The
aggregate amount of assets assigned to each risk category is multiplied by the
risk weight assigned to that category to determine the weighted values, which
are added together to determine total risk-weighted assets.  At December 31,
1998, the Company's total risk-based capital and tier-one ratios were 17.0%
and 15.7%, respectively.  Both the Federal Reserve Board and the OCC have also
implemented minimum capital leverage ratios to be used in tandem with the
risk-based guidelines in assessing the overall capital adequacy of banks and
bank holding companies.  Under these rules, banking institutions are required
to maintain a ratio of at least 3% "Tier 1" capital to total assets (net of
goodwill, certain intangible assets and certain deferred tax assets).  Tier 1
capital includes common stockholders equity, noncumulative perpetual preferred
stock and surplus and minority interests in the equity accounts of
consolidated subsidiaries.

	Both the risk-based capital guidelines and the leverage ratio are
minimum requirements.  They are applicable to all banking institutions unless
the applicable regulating authority determines that different minimum capital
ratios are appropriate for a particular institution based upon its
circumstances.  Institutions operating at or near these ratios are expected to
have well-diversified risk, excellent control systems, high asset quality,
high liquidity, good earnings, and in general must be considered strong
banking organizations, rated composite 1 under the CAMELS rating system for
banks or the BOPEC rating system for bank holding companies.  The OCC requires
that all but the most highly-rated banks and all banks with high levels of
risk or experiencing or anticipating significant growth will maintain ratios
at least 100 to 200 basis points above the stated minimums.  The Federal
Reserve Board requires bank holding companies without a BOPEC-1 rating to
maintain a ratio of at least 4% Tier 1 capital to total assets; furthermore,
banking organizations with supervisory, financial, operational, or managerial
weaknesses, as well as organizations that are anticipating or experiencing
significant growth, are expected to maintain capital ratios well above the 3%
and 4% minimum levels.
	The FDIC adopted a rule substantially similar to that issued by the
Federal Reserve Board, establishing a minimum leverage ratio of 3% and
providing that FDIC-regulated banks with anything less than a CAMELS-1 rating
must maintain a ratio of at least 4%.  In addition, the FDIC rule specifies
that a depository institution operating with less than the applicable minimum
leverage capital requirement will be deemed to be operating in an unsafe and
unsound manner unless the institution is in compliance with a plan, submitted
to and approved by the FDIC, to increase the ratio to an appropriate level.
Finally, the FDIC requires any insured depository institution with a leverage
ratio of less than 2% to enter into and be in compliance with a written
agreement between it and the FDIC (or the primary regulator, with the FDIC as
a party to the agreement). Such an agreement will nearly always contemplate
immediate efforts to acquire the capital required to increase the ratio to an
appropriate level.  Institutions that fail to enter into or maintain
compliance with such an agreement will be subject to enforcement action by the
FDIC.

	The OCC's guidelines provide that intangible assets are generally
deducted from Tier 1 capital in calculating a bank's risk-based capital ratio.
However, certain intangible assets which meet specified criteria ("qualifying
intangibles") are retained as a part of Tier 1 capital.  The OCC has modified
the list of qualifying intangibles, currently including only purchased credit
card relationships and mortgage and non-mortgage servicing assets, whether
originated or purchased and excluding any interest-only strips receivable
related thereto.  Furthermore, the OCC's guidelines formerly provided that the
amount of such qualifying intangibles that may be included in Tier 1 capital
was limited to a maximum of 50% of total Tier 1 capital.  The OCC has amended
its guidelines to increase the limitation on such qualifying intangibles from
50% to 100% of Tier 1 capital, of which no more than 25% may consist of
purchased credit card relationships and non-mortgage servicing assets.
Furthermore, banks may now deduct from Tier 1 capital disallowed servicing
assets on a basis that is net of any associated deferred tax liability.
Deferred tax liabilities netted this way may not also be netted against
deferred tax assets when determining the amount of deferred tax assets that
are dependent upon future taxable income.

	In addition, the OCC has adopted rules which clarify treatment of asset
sales with recourse not reported on a bank's balance sheet.  Among assets
affected are mortgages sold with recourse under Fannie Mae, Freddie Mac and
Farmer Mac programs.  The rules clarify that even though those transactions
are treated as asset sales for bank Call Report purposes, those assets will
still be subject to a capital charge under the risk-based capital guidelines.

	The risk-based capital guidelines of the OCC, the Federal Reserve Board
and the FDIC explicitly include a bank's exposure to declines in the economic
value of its capital due to changes in interest rates to ensure that the
guidelines take adequate account of interest rate risk.  Interest rate risk is
the adverse effect that changes in market interest rates may have on a bank's
financial condition and is inherent to the business of banking.   The exposure
of a bank's economic value generally represents the change in the present
value of its assets, less the change in the value of its liabilities, plus the
change in the value of its interest rate off-balance sheet contracts.
Concurrently, the agencies issued a joint policy statement to bankers,
effective June 26, 1996,  to provide guidance on sound practices for managing
interest rate risk.  In the policy statement, the agencies emphasize the
necessity of adequate oversight by a bank's Board of Directors and senior
management and of a comprehensive risk management process.  The policy
statement also describes the critical factors affecting the agencies'
evaluations of a bank's interest rate risk when making a determination of
capital adequacy.  The agencies' risk assessment approach used to evaluate a
bank's capital adequacy for interest rate risk relies on a combination of
quantitative and qualitative factors.  Banks that are found to have high
levels of exposure and/or weak management practices will be directed by the
agencies to take corrective action.

	The OCC, the Federal Reserve Board and the FDIC recently added a
provision to the risk-based capital guidelines that supplements and modifies
the usual risk-based capital calculations to ensure that institutions with
significant exposure to market risk maintain adequate capital to support that
exposure.  Market risk is the potential loss to an institution resulting from
changes in market prices.  The modifications are intended to address two types
of market risk: general market risk, which includes changes in general
interest rates, equity prices, exchange rates, or commodity prices, and
specific market risk, which includes particular risks faced by the individual
institution, such as event and default risks.  The provision defines a new
category of capital, Tier 3, which includes certain types of subordinated
debt.  The provision automatically applies only to those institutions whose
trading activity, on a worldwide consolidated basis, equals either (i) 10% or
more of total assets or (ii) $1 billion or more, although the agencies may
apply the provision's requirements to any institution for which application of
the new standard is deemed necessary or appropriate for safe banking
practices.  For institutions to which the modifications apply, Tier 3 capital
may not be included in the calculation rendering the 8% credit risk ratio; the
sum of Tier 2 and Tier 3 capital may not exceed 100% of Tier 1 capital; and
Tier 3 capital is used in both the numerator and denominator of the normal
risk-based capital ratio calculation to account for the estimated maximum
amount that the value of all positions in the institution's trading account,
as well as all foreign exchange and commodity positions, could decline within
certain parameters set forth in a model defined by the statute.  Furthermore,
covered institutions must "backset," comparing the actual net trading profit
or loss for each of its most recent 250 days against the corresponding
measures generated by the statutory model.  Once per quarter, the institution
must identify the number of times the actual net trading loss exceeded the
corresponding measure and must then apply a statutory multiplication factor
based on that number for the next quarter's capital charge for market risk.

	The Federal Deposit Insurance Corporation Improvement Act of 1991 (the
"Act"), enacted on December 19, 1991, provides for a number of reforms
relating to the safety and soundness of the deposit insurance system,
supervision of domestic and foreign depository institutions and improvement of
accounting standards.  One aspect of the Act involves the development of a
regulatory monitoring system requiring prompt action on the part of banking
regulators with regard to certain classes of undercapitalized institutions.
While the Act does not change any of the minimum capital requirements, it
directs each of the federal banking agencies to issue regulations putting the
monitoring plan into effect.  The Act creates five "capital categories" ("well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized" and "critically undercapitalized") which are defined in the
Act and which will be used to determine the severity of corrective action the
appropriate regulator may take in the event an institution reaches a given
level of undercapitalization.  For example, an institution which becomes
"undercapitalized" must submit a capital restoration plan to the appropriate
regulator outlining the steps it will take to become adequately capitalized.
Upon approving the plan, the regulator will monitor the institution's
compliance.  Before a capital restoration plan will be approved, any entity
controlling a bank (i.e., holding companies) must guarantee compliance with
the plan until the institution has been adequately capitalized for four
consecutive calendar quarters.  The liability of the holding company is
limited to the lesser of five percent of the institution's total assets or the
amount which is necessary to bring the institution into compliance with all
capital standards.  In addition, "undercapitalized" institutions will be
restricted from paying management fees, dividends and other capital
distributions, will be subject to certain asset growth restrictions and will
be required to obtain prior approval from the appropriate regulator to open
new branches or expand into new lines of business.

	As an institution drops to lower capital levels, the extent of action to
be taken by the appropriate regulator increases, restricting the types of
transactions in which the institution may engage and ultimately providing for
the appointment of a receiver for certain institutions deemed to be critically
undercapitalized.

	The Act also provides that banks will have to meet new safety and
soundness standards.  In order to comply with the Act, the Federal Reserve
Board, the OCC and the FDIC have proposed rules defining operational and
managerial standards relating to internal controls, loan documentation, credit
underwriting, interest rate exposure, asset growth, director and officer
compensation, asset quality, earnings and stock valuation.

	Both the capital standards and the safety and soundness standards which
the Act seeks to implement are designed to bolster and protect the deposit
insurance fund.

	In response to the directive issued under the Act, the regulators have
established regulations which, among other things, prescribe the capital
thresholds for each of the five capital categories established under the Act.
The following table reflects the capital thresholds:

                                  Total Risk-     Tier 1 Risk-     Tier 1
                                 Based Capital    Based Capital   Leverage
                                    Ratio            Ratio          Ratio
                                 -------------    -------------   --------
Well capitalized(1)                 >=10%             >=6%          >=5%
Adequately capitalized(1)           >= 8%             >=4%          >=4%(2)
Undercapitalized(4)                 <  8%             < 4%          < 4%(3)
Significantly undercapitalized(4)   <  6%             < 3%          < 3%
Critically undercapitalized          --                --           <=2%(5)

------------------------------
(1)  An institution must meet all three minimums.
(2)  >3% for composite 1-rated institutions, subject to appropriate federal
     banking agency guidelines.
(3)  <3% for composite 1-rated institutions, subject to applicable federal
     banking agency guidelines.
(4)  An institution falls into this category if it is below the specified
     capital level for any of the three capital measures.
(5)  Ratio of tangible equity to total assets.

	As a national bank, the Bank is required to file with the OCC quarterly
reports of condition, as well as such additional reports as may be required by
the national banking laws.

	As a bank holding company, the Company is required to file with the
Federal Reserve Board an annual report of its operations at the end of each
fiscal year and such additional information as the Federal Reserve Board may
require pursuant to the Act.  The Federal Reserve Board may also make
examinations of the Company and each of its subsidiaries.

	As a bank holding company which controls a national bank situated in
North Carolina, the Company is required to register with the North Carolina
Commissioner of Banks within 180 days after becoming a bank holding company.
North Carolina law also restricts the acquisition by the Company of certain
non-bank banking institutions.

	The scope of regulation and permissible activities of the Company and
the Bank is subject to change by future federal and state legislation.


Item 2.  Description of Property.
------   -----------------------

	The Bank's main office is located in an approximately 1,800 square foot
facility located at 1600 Curtis Bridge Road in Wilkesboro, North Carolina.
The facility includes four teller stations, one office, a vault, a night
depository, and a drive-in window.  The Bank opened a full service branch,
located in North Wilkesboro, in June 1994.  This 1,700 square foot facility
contains five teller stations, a drive-in window and an operations area.  Both
facilities are owned by the Bank.  The Company's Millers Creek branch office
opened in February 1996.  This 2,000 square foot leased facility contains five
teller stations, two drive-in windows, a vault, a night depository and safe
deposit boxes.

	On August 15, 1997, the Bank opened a full service branch in
Taylorsville, North Carolina.  In connection with the opening of this branch,
the Company purchased 1.6 acres of land and a 22,000 square foot facility in
Taylorsville at the intersection of Highway 90 and Highway 16.  The Company
renovated 5,600 square feet of this facility to house the operations of the
Taylorsville branch and intends to renovate and lease the remaining space to
other businesses.  Approximately 3,600 square feet of the facility is used for
the Bank's branch facility and contains six teller stations, two drive-in
windows, four offices, a vault, safe deposit boxes, a night depository and an
automated teller machine.  The remaining 2,000 square feet will be used for
future expansion of the Bank.

	The Company also leases 5,000 square feet of office space in the
Westfield Village Shopping Center in Wilkesboro, North Carolina.  This
facility houses certain of the Company's administrative and operational
functions.


Item 3.  Legal Proceedings.
------   -----------------

	There are no material pending legal proceedings to which the Company is
a party or of which any of its properties are subject; nor are there material
proceedings known to the Company to be contemplated by any governmental
authority; nor are there material proceedings known to the Company  in which
any director, officer or affiliate or any principal security holder of the
Company, or any associate of any of the foregoing is a party or has an
interest adverse to the Company.


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

	No matter was submitted during the fourth quarter ended December 31,
1999 to a vote of security holders of the Company.


                                 PART II

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

	A.	MARKET INFORMATION

	During the period covered by this report and to date, there has been no
established public trading market for the Company's Common Stock.

	B.	HOLDERS OF COMMON STOCK

	As of March 27, 2000, the number of holders of record of the Company's
Common Stock was 706.

	C.	DIVIDENDS

	To date, the Company has not paid any dividends on its Common Stock.  It
is the policy of the Board of Directors of the Company to reinvest earnings
for such period of time as is necessary to ensure the success of the
operations of the Company and of the Bank.  There are no current plans to
initiate payment of cash dividends, and future dividend policy will depend on
the Bank's earnings, capital requirements, financial condition and other
factors considered relevant by the Board of Directors of the Company.

	The Bank is restricted in its ability to pay dividends under the
national banking laws and by regulations of the OCC.  Pursuant to 12 U.S.C.
56, a national bank may not pay dividends from its capital.  All dividends
must be paid out of undivided profits, subject to other applicable provisions
of law.  Payments of dividends out of undivided profits is further limited by
12 U.S.C.   60(a), which prohibits a bank from declaring a dividend on its
shares of common stock until its surplus equals its stated capital, unless
there has been transferred to surplus not less than 1/10 of the Bank's net
income of the preceding two consecutive half-year periods (in the case of an
annual dividend).  Pursuant to 12 U.S.C.   60(b), the approval of the OCC is
required if the total of all dividends declared by the Bank in any calendar
year exceeds the total of its net income for that year combined with its
retained net income for the preceding two years, less any required transfers
to surplus.


Item 6.  Management's Discussion and Analysis or Plan of Operation.
------   ---------------------------------------------------------

RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED
DECEMBER 31, 1998

	For the years ended December 31, 1999 and 1998, net income amounted to
$1,453,469 and $976,413, respectively.  For the years ended December 1999 and
1998, basic income per share amounted to $1.00 and $0.70, respectively, and
diluted income per share amounted to $0.90 and $0.61, respectively.  During
1999 and 1998, there were outstanding warrants and stock options that were
dilutive (i.e., upon exercise, they diluted earnings per share by more than
3%), thus necessitating the disclosure of basic and diluted income per share.
Net income in 1999 increased by $477,056 over net income in 1998 primarily due
to the following reasons:

	a.	Average earning assets increased from $94.0 million at December 31,
1998 to $98.7 million at December 31, 1999, representing an increase of $4.7
million, or 5.0%.  Below are the various components of average earning assets
for the periods indicated:

                                               December 31,
                                            ------------------
                                            1999          1998
                                            ----          ----
                                              (In Thousands)

   Federal funds sold                      $ 1,115       $ 1,384
   Taxable securities                       22,234        21,018
   Non-taxable securities                    2,575         1,431
   Net loans                                72,804        70,207
                                            ------        ------
   Total earning assets                    $98,728       $94,040
                                            ======        ======

	b.	As a consequence of the increase in earning assets combined with
lower costs of funds, the net interest income also increased from $4,320,633
for the year ended December 31, 1998 to $4,793,379 for the year ended December
31, 1999.

	Below are the various components of interest income and expense, as well
as their yield/costs for the periods indicated:

                                           Years Ended
                              December 31, 1999       December 31,19998
                           ---------------------    --------------------
                             Interest      Yield      Interest     Yield
                           Income/Expense   Cost    Income/Expense  Cost
                           --------------  -----    -------------- -----
                                         (Dollars in Thousands)
Interest income:
---------------
Federal funds sold             $   57       5.11%       $   75      5.42%
Taxable securities              1,257       5.65%        1,308      6.22%
Non-taxable securities            106       6.24%           63      6.70%
Loans                           7,236       9.94%        7,122     10.14%
                                -----                    -----
    Total                      $8,656       8.82%       $8,568      9.11%
                                =====                    =====

Interest expense:
----------------
NOW and money
  market deposits              $  533       3.11%       $  525      3.34%
Savings deposits                   71       2.02%           99      2.90%
Time deposits                   3,188       5.05%        3,605      5.82%
Other borrowings                   71       4.98%           18      4.20%
                                -----                    -----
    Total                      $3,863       4.53%       $4,247      5.21%
                                =====                    =====

Net interest income            $4,793                   $4,321
                                =====                    =====
Net yield on earning assets                 4.85%                   4.59%
                                            ====                    ====

	c.	Non-interest income as a percentage of average total assets for
1999 and 1998 amounted to 0.60% and 0.53%, respectively.  The 1999 results are
above those of 1998 because of higher fees charged on transactional accounts
and an increase in fee income generated by Community Mortgage Corporation, a
wholly owned subsidiary of the Company ("Community Mortgage").  Non-interest
expense, as a percentage of average assets for 1999 and 1998, amounted to
2.81% and 2.92%, respectively.  The primary reasons for the reduction in
expense in 1999, as compared to 1998 are lower professional fees and lease
expenses and, to a large extent, the attainment of economy of scale.


NET INTEREST INCOME

	The Company's results of operations are determined by its ability to
manage effectively interest income and expense, to minimize loan and
investment losses, to generate non-interest income and to control non-interest
expense.  Since interest rates are determined by market forces and economic
conditions beyond the control of the Company, the ability to generate net
interest income is dependent upon the Company's ability to maintain an
adequate spread between the rate earned on earning assets and the rate paid on
interest-bearing liabilities, such as deposits and borrowings. Thus, net
interest income is the key performance measure of income.

	The Company's net interest income for 1999 was $4,793,379 as compared to
$4,320,633 for 1998. Average yields on earning assets were 8.82% and 9.11% for
the years ended December 31, 1999 and 1998, respectively.  The average costs
of funds for 1999 decreased to 4.53% from the 1998 cost of 5.21%.  Net
interest yield is computed by subtracting interest expense from interest
income and dividing the resulting figure by average interest-earning assets.
Net interest yields for the years ended December 31, 1999 and 1998 amounted to
4.85% and 4.59%, respectively.  Net interest income for 1999 as compared to
1998 increased by $472,746, primarily due to the increase in average earning
assets from $94.0 million in 1998 to $94.7 million in 1999 and due to the
decrease in the cost of funds, from 5.21% in 1998 to 4.53% in 1999.


NON-INTEREST INCOME

	Non-interest income for the years ended December 31, 1999 and 1998
amounted to $639,596 and $529,912, respectively.  As a percentage of average
assets, non-interest income increased from 0.53% in 1998 to 0.60% in 1999
primarily because of higher fees on transactional accounts and an increase in
fee income generated by Community Mortgage

	The following table summarizes the major components of non-interest
income for the periods therein indicated:

                                              Year Ended December 31,
                                              -----------------------
                                                 1999         1998
                                                 ----         ----
                                                   (In Thousands)
   Service fees on deposit accounts              $228         $164
   Gain (loss) on sale of securities              (24)           1
   Fees from Community Mortgage                   315          244
   Miscellaneous, other                           121          121
                                                  ---          ---
   Total non-interest income                     $640         $530
                                                  ===          ===

NON-INTEREST EXPENSE

	Non-interest expense increased from $2,930,160 during 1998 to $2,964,000
in 1999.  As a percent of total average assets, non-interest expense decreased
from 2.92% in 1998 to 2.81% in 1999.  Below are the components of non-interest
expense for the years 1999 and 1998.

                                              Year Ended December 31,
                                              -----------------------
                                                 1999         1998
                                                 ----         ----
                                                   (In Thousands)
   Salaries and other personal benefits         $1,524       $1,418
   Data processing charges                         201          197
   Professional fees                               210          357
   Postage and courier fees                        112           89
   Depreciation and amortization                   132          104
   Repairs and maintenance                         106           85
   Other expenses                                  679          680
                                                 -----        -----
     Total non-interest expense                 $2,964       $2,930
                                                 =====        =====

	During 1999, the allowance for loan losses grew from $1,106,830 to
$1,228,895.  The allowance for loan losses as a percent of gross loans
increased from 1.51% at December 31, 1998 to 1.66% at December 31, 1999.  As
of December 31, 1999, management considers the allowance for loan losses to be
adequate to absorb possible future losses.  However, there can be no assurance
that charge-offs in future periods will not exceed the allowance for loan
losses or that additional provisions to the allowance will not be required.


LIQUIDITY AND INTEREST RATE SENSITIVITY

	Net interest income, the Company's primary source of earnings,
fluctuates with significant interest rate movements.  To lessen the impact of
these margin swings, the balance sheet should be structured so that repricing
opportunities exist for both assets and liabilities in roughly equivalent
amounts at approximately the same time intervals.  Imbalances in these
repricing opportunities at any point in time constitute interest rate
sensitivity.

	Interest rate sensitivity refers to the responsiveness of interest-
bearing assets and liabilities to changes in market interest rates.  The rate
sensitive position, or gap, is the difference in the volume of rate sensitive
assets and liabilities, at a given time interval.  The general objective of
gap management is to manage actively rate sensitive assets and liabilities so
as to reduce the impact of interest rate fluctuations on the net interest
margin.  Management generally attempts to maintain a balance between rate
sensitive assets and liabilities as the exposure period is lengthened to
minimize the Company's overall interest rate risks.

	The asset mix of the balance sheet is continually evaluated in terms of
several variables:  yield, credit quality, appropriate funding sources and
liquidity.  To effectively manage the liability mix of the balance sheet
focuses on expanding the various funding sources.  The interest rate
sensitivity position at year-end 1999 is presented below.  Since all interest
rates and yields do not adjust at the same velocity, the gap is only a general
indicator of rate sensitivity.

                                    After
                                    three    After
                                    months    six
                                     but     months   After one
                            Within  within    but      year but   After
                            three    six     within     within    five
                            months  months  one year  five years  years  Total
                            ------  ------  --------  ----------  -----  -----
                                            (Dollars in Thousands)
EARNING ASSETS
Loans                       $43,672 $  1,911  $  1,218  $25,548  $ 1,816 $74,165
Securities                      742      290     1,028   14,581    4,538  21,179
Federal funds sold            2,000     --        --       --       --     2,000
                             ------  -------   -------   ------   ------  ------
Total earning assets        $46,414 $  2,201  $  2,246  $40,129  $ 6,354 $97,344
                             ======  =======   =======   ======   ======  ======

SUPPORTING SOURCE OF FUNDS

Interest-bearing demand
  deposits and savings      $21,842 $   --    $   --    $  --    $  --   $21,842
Certificates,
  less than $100M             9,550   14,738     9,827    3,423     --    37,538
Certificates,
  $100M and over             10,498    7,677     4,401    1,989     --    24,565
                             ------  -------   -------   ------   ------  ------
Total interest-
  bearing liabilities       $41,890 $ 22,415  $ 14,228  $ 5,412  $  --   $83,945
                             ======  =======   =======   ======   ======  ======

Interest rate
  sensitivity gap           $ 4,524 $(20,214) $(11,982) $34,717  $ 6,354 $13,399

Cumulative gap              $ 4,524 $(15,690) $(27,672) $ 7,045  $13,399 $13,399

Interest rate
  sensitivity gap ratio       1.11     0.10      0.16     7.41     N/A     1.16

Cumulative interest rate
  sensitivity gap ratio       1.11     0.72      0.65     1.08    1.16     1.16

	As evidenced by the above table, the Company is asset sensitive from zero
to three months, liability sensitive from three months to one year and asset
sensitive thereafter. In a declining interest rate environment, a liability
sensitive position (a gap ratio of less than 1.0) is generally more
advantageous since liabilities are repriced sooner than assets.  Conversely,
in a rising interest rate environment, an asset sensitive position (a gap
ratio over 1.0) is generally more advantageous, as earning assets are repriced
sooner than liabilities.  With respect to the Company, an increase in interest
rate will result in higher earnings for the first three months, lower earnings
from three months to one year, and higher earnings thereafter.  Conversely, a
decline in interest rate will lower income for the first three months, increase
earnings from three months to one year, and lower earnings thereafter.  This,
however, assumes that all other factors affecting income remain constant.

	As the Company continues to grow, management will continuously structure
its rate sensitivity position to best hedge against rapidly rising or falling
interest rates. The Bank's Asset/Liability Committee meets on a quarterly
basis and develops management's strategy for the upcoming period.  Such
strategy includes anticipations of future interest rate movements.  Interest
rate risk will, nonetheless, fall within previously adopted policy parameters
to contain any risk.

	Liquidity represents the ability to provide steady sources of funds for
loan commitments and investment activities and to maintain sufficient funds to
cover deposit withdrawals and payment of debt and operating obligations.
These funds can be obtained by converting assets to cash or by attracting new
deposits.  The Company's primary source of liquidity comes from its ability to
maintain and increase deposits through the Bank.  Deposits grew by $.6 million
in 1999.  Below are the pertinent liquidity balances and ratios for the years
ended December 31, 1999 and 1998.

                                                  December 31,
                                             ----------------------
                                                 1999      1998
                                                 ----      ----
                                             (Dollars in Thousands)

  Cash and cash equivalents                    $14,469   $ 3,181
  Marketable securities                         21,178    26,673
  CDs,over $100,000 to total deposits ratio      26.7%     25.8%
  Loan to deposit ratio                          79.3%     79.0%
  Brokered deposits                               --        --

	Large denomination certificates during 1999 have increased approximately
$1.0 million, and reliance on such certificates to fund normal banking
operations has been maintained at an acceptable range in relation to other
sources of funds.  At December 31, 1999 and 1998, large denomination
certificates accounted for 26.7% and 25.8%, respectively of total deposits.
Large denomination CDs are generally more volatile than other deposits. As a
result, management continually monitors the competitiveness of the rates it pays
on its large denomination CDs and periodically adjusts its rates in accordance
with market demands.  Significant withdrawals of large denomination CDs may have
a material adverse effect on the Bank's liquidity.  Management believes that
since a majority of the above certificates were obtained from Bank customers
residing in Wilkes County, North Carolina, the volatility of such deposits is
lower than if such deposits were obtained from depositors residing outside of
Wilkes County, as outside depositors are more likely to be interest rate
sensitive.

	Securities, particularly securities available-for-sale, provide a
secondary source of liquidity.  Approximately $2.1 million of the $21.2
million in the Bank's securities portfolio is scheduled to mature during 2000.
Additionally, several securities have call dates prior to their maturity
dates, thus enhancing the Company's liquidity posture.

	Brokered deposits are deposits instruments, such as certificates of
deposits, deposit notes, bank instrument contracts and certain municipal
investment contracts that are issued through brokers and dealers who then
offer and/or sell these deposit instruments to one or more investors.  As of
December 31, 1999 and 1998, the Company had no brokered deposits in its
portfolio.

	On December 23, 1997, the Company, along with eight of its directors,
were sued by Edward F. Greene and Joe Severt, individually and derivatively on
behalf of the Company.  This lawsuit was dismissed on September 24, 1998.
Shortly after the lawsuit was dismissed, the plaintiffs threatened to refile
their lawsuit against the Company.  On December 23, 1998, the Company settled
the proposed derivative action involving the Company and eight of its
directors.  All claims made by all parties have been dismissed pursuant to the
settlement.  Under the terms of the settlement agreement, six of the directors
of the Company  purchased substantially all of the common stock of the Company
owned by Edward F. Greene and Stephen B. Greene, and certain of their
affiliates.  In addition, the Company and two of its directors purchased from
Edward F. Greene and Stephen B. Greene all stock purchase warrants and stock
options of the Company held by the Greenes. These purchases were completed on
February 18, 1999.  In connection therewith, the Company repurchased 82,968
common stock purchase warrants and options to purchase 20,000 shares of common
stock, for a total purchase price of $1,155,100.

	Pursuant to the terms of the settlement agreement, the Company purchased
its Curtis Bridge Road bank premises from Edward F. Greene in December 1998 at
a purchase price of $314,100, which represents the appraised value of this
property.

	Other than as set forth above, management knows of no trends, demands,
commitments, events or uncertainties that should result in or are reasonably
likely to result in the Company's liquidity increasing or decreasing in any
material way in the foreseeable future.


CAPITAL ADEQUACY

	There are now two primary measures of capital adequacy for banks and
bank holding companies: (i) risk-based capital guidelines; and (ii)
the leverage ratio.

	The risk-based capital guidelines measure the amount of a bank's required
capital in relation to the degree of risk perceived in its assets and its off-
balance sheet items.  Capital is divided into two "tiers."  Tier 1 capital
consists of common shareholders' equity, non-cumulative and cumulative (bank
holding companies only), perpetual preferred stock and minority interests.
Goodwill is subtracted from the total.  Tier 2 capital consists of the
allowance for loan losses, hybrid capital instruments, term subordinated debt
and intermediate term preferred stock.  Banks are required to maintain a
minimum risk-based capital ratio of 8.0%, with at least 4.0% consisting of
Tier 1 capital.

	The second measure of capital adequacy relates to the leverage ratio.
The OCC has established a 3.0% minimum leverage ratio requirement.  Note that
the leverage ratio is computed by dividing Tier 1 capital into total assets.
Banks that are not rated CAMEL 1 by their primary regulator should maintain a
minimum leverage ratio of 3.0% plus an additional cushion of at least 1 to 2
percent, depending upon risk profiles and other factors.


	A new rule was recently adopted by the Federal Reserve Board, the OCC and
the FDIC that adds a measure of interest rate risk to the determination of
supervisory capital adequacy. Concurrently, the agencies issued a joint policy
statement to bankers, effective June 26, 1996,  to provide guidance on sound
practices for managing interest rate risk.  In the policy statement, the
agencies emphasize the necessity of adequate oversight by a bank's Board of
Directors and senior management and of a comprehensive risk management
process.  The policy statement also describes the critical factors affecting
the agencies' evaluations of a bank's interest rate risk when making a
determination of capital adequacy.  The agencies' risk assessment approach
used to evaluate a bank's capital adequacy for interest rate risk relies on a
combination of quantitative and qualitative factors.  Banks that are found to
have high levels of exposure and/or weak management practices will be directed
by the agencies to take corrective action.

	The table below illustrates the Bank's and Company's regulatory capital
ratios at December 31, 1999.

                                                          Minimum
                                                         Regulatory
                                    December 31, 1999    Requirement
                                    -----------------    -----------
 Bank
 Tier 1 Capital                           12.8%              4.0%
 Tier 2 Capital                            1.2%              N/A
    Total risk-based capital ratio        14.0%              8.0%

 Leverage ratio                            9.5%              3.0%

 Company - Consolidated
 Tier 1 Capital                           15.1%              4.0%
 Tier 2 Capital                            1.2%              N/A
    Total risk-based capital ratio        16.3%              8.0%

 Leverage ratio                           11.2%              3.0%

	The above ratios indicate that the capital positions of the Company and
the Bank are sound and that the Company is well positioned for future growth.


Item 7.  Financial Statements.
------   --------------------

	The following financial statements are filed with this report:

	Report of Independent Accountants

	Consolidated Balance Sheet - December 31, 1999 and 1998

	Consolidated Statements of Income - Years ended December 31, 1999 and
	1998

	Consolidated Statements of Changes in Shareholders' Equity - Years ended
	December 31, 1999 and 1998

	Consolidated Statements of Cash Flows - Years ended December 31, 1999 and
	1998

	Notes to Consolidated Financial Statements


Report of Independent Accountants



Board of Directors
Community Bancshares, Inc.
Wilkesboro, North Carolina

	We have audited the accompanying consolidated balance sheets of
Community Bancshares, Inc. and subsidiaries (the "Company") as of December 31,
1999 and 1998, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for the two years in the period ended
December 31, 1999.  These consolidated financial statements are the
responsibility of the Company's management.  Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

	We conducted our audits in accordance with generally accepted
auditing standards.  Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement.  An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation.  We believe that our audits provide
a reasonable basis for our opinion.

	In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Community Bancshares, Inc., and subsidiaries at December 31, 1999
and 1998, and the consolidated results of their operations and their cash
flows for each of the years in the two-year period ended December 31, 1999, in
conformity with generally accepted accounting principles.


                                 /s/ Francis & Co., CPAs


Atlanta, Georgia
February 17, 200


                       COMMUNITY BANCSHARES, INC.
                       WILKESBORO, NORTH CAROLINA
                       CONSOLIDATED BALANCE SHEETS

                               ASSETS
                               ------
                                                    As of December 31,
                                               ----------------------------
                                                   1999            1998
                                                   ----            ----
Cash and due from banks                        $ 14,469,256    $  3,181,025
Federal funds sold, net  (Note 3)                 2,000,000         -  -
                                                -----------     -----------
  Total cash and cash equivalents              $ 16,469,256    $  3,181,025
Securities:  (Notes 2, 4 & 5)
  Available-for-sale at fair value               19,372,280      24,288,316
Held to maturity (Estimated market
  values of $1,788,107 and $2,416,622 at
  December 31, 1999 and 1998, respectively        1,806,490       2,385,162
Loans, net  (includes loans of  $815,874
  (1999) and $1,013,866 (1998) to insiders)
  (Notes 2, 6, 7 & 17)                           72,935,601      72,120,625
Property and equipment, net  (Notes 2 & 8)        2,172,849       2,214,607
Other assets                                      1,049,054         943,466
                                                -----------     -----------
   Total Assets                                $113,805,530    $105,133,201
                                                ===========     ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
Deposits
  Non-interest bearing deposits                $  7,998,076    $  7,959,459
  Interest bearing deposits                      83,944,444      83,347,077
                                                -----------     -----------
       Total deposits  (Note 11)               $ 91,942,520    $ 91,306,536
FHLB advances (Note 10)                           8,684,919         700,000
Other liabilities                                 1,042,655       1,156,731
                                                -----------     -----------
   Total Liabilities                           $101,670,094    $ 93,163,267
                                                -----------     -----------

Commitments and Contingencies  (Note 9)

Shareholders' Equity:  (Notes 1, 12 & 16)
Common stock, $3.00 par value, 10,000,000 shares
   authorized, 1,467,384 (1999) and 1,446,984
  (1998) issued and outstanding                $  4,402,152    $  4,340,952
Paid-in-capital                                   4,742,143       5,769,693
Retained earnings                                 3,221,263       1,767,794
Accumulated other comprehensive income             (230,122)         91,495
                                                -----------     -----------
   Total Shareholders' Equity                  $ 12,135,436    $ 11,969,934
                                                -----------     -----------
   Total Liabilities and Shareholders' Equity  $113,805,530    $105,133,201
                                                ===========     ===========

          Refer to notes to the consolidated financial statements.



                       COMMUNITY BANCSHARES, INC.
                       WILKESBORO, NORTH CAROLINA
                       Consolidated Statements of Income


                                                 Years Ended December 31,
                                                   1999            1998
Interest Income:                                   ----            ----
 Interest and fees on loans                    $  7,236,858    $  7,121,587
 Interest on investment securities                1,362,719       1,370,889
 Interest on federal funds sold                      56,981          75,344
                                                -----------     -----------
    Total interest income                      $  8,656,558    $  8,567,820
Interest Expense:
 Interest on deposits and borrowings
  (Note 13)                                    $  3,863,179    $  4,247,187
                                                -----------     -----------
Net interest income                               4,793,379       4,320,633
Provision for possible loan losses  (Note 7)        215,535         258,257
                                                -----------     -----------
Net interest income after provision for
  possible loan losses                         $  4,577,844    $  4,062,376
                                                -----------     -----------

Other Income:
  Gain/(loss) on sale of securities  (Note 4)  $    (24,331)   $      1,360
  Service fees on deposit accounts                  227,635         164,058
  Fees from Community Mortgage                      314,984         243,632
  Miscellaneous, other                              121,308         120,862
                                                -----------     -----------
      Total other income                       $    639,596    $    529,912
                                                -----------     -----------

Other Expenses:
  Salaries and benefits                        $  1,524,260    $  1,418,436
  Data processing expense                           200,759         196,876
  Professional fees                                 209,908         356,612
  Depreciation and amortization                     131,952         104,385
  Repairs and maintenance                           105,923          84,590
  Postage and courier                               112,031          89,441
  Other operating expenses  (Note 14)               678,681         679,820
                                                -----------     -----------
Total other expenses                           $  2,963,514    $  2,930,160
                                                -----------     -----------

Income before income tax                       $  2,253,926    $  1,662,128
Income tax  (Notes 2 & 15)                          800,457         685,715
                                                -----------     -----------

Net income                                     $  1,453,469    $    976,413
                                                ===========     ===========

Basic earnings per share  (Note 2)                $ 1.00         $ .70
                                                   =====          ====
Diluted earnings per share (Note 2)               $  .90         $ .61
                                                   =====          ====


               Refer to notes to the consolidated financial statements.



                       COMMUNITY BANCSHARES, INC.
                       WILKESBORO, NORTH CAROLINA
           Consolidated Statements of Changes in Shareholders' Equity
                 for the years ended December 31, 1999 and 1998


                                                       Accumulated
                                                          Other
              Number    Common       Paid                Compre-
                Of      Stock        -in-      Retained  hensive
              Shares   Par Value    Capital    Earnings  Income      Total
              ------   ---------    -------    --------  ------      -----

Balance,
December 31,
  1997       1,297,156 $3,891,468 $5,380,223 $  791,381 $  41,936  $10,105,008
             ---------  ---------  ---------  ---------  --------   ----------

Comprehensive income:
 Net income,
  1998          --         --          --       976,413     --         976,413
 Unrealized
  gains,
  securities    --         --          --        --        49,559       49,559

Exercise of
  warrants     147,628    442,884    369,070      --         --        811,954

Exercise of
  options        2,200      6,600     20,400      --         --         27,000
             ---------  ---------  ---------  ---------  --------   ----------

Balance,
  December 31,
  1998       1,446,984 $4,340,952 $5,769,693 $1,767,794 $  91,495  $11,969,934

Comprehensive income:
 Net income,
  1999          --          --         --     1,453,469     --       1,453,469
 Unrealized
  loss,
  securities    --          --         --        --      (321,617)    (321,617)

Exercise of
  warrants         500      1,500      1,250     --        --            2,750

Exercise of
  options       19,900     59,700    126,300     --        --          186,000

Cancellation
 of 82,968
 warrants and
 20,000  options  --        --    (1,155,100)    --       --        (1,155,100)
             ---------  ---------  ---------  ---------  --------   ----------

Balance,
 December 31,
 1999        1,467,384 $4,402,152 $4,742,143 $3,221,263 $(230,122) $12,135,436
             =========  =========  =========  =========  ========   ==========


               Refer to notes to the consolidated financial statements.



                       COMMUNITY BANCSHARES, INC.
                       WILKESBORO, NORTH CAROLINA
                 Consolidated Statements of Cash Flows

                                              Years Ended December 31,
                                              ------------------------
                                                 1999          1998
                                                 ----          ----
Cash flows from operating activities:
 Net income                                   $  1,453,469  $    976,413
  Adjustments to reconcile net income to
   net cash provided by operating activities:
    Depreciation and amortization                  131,952       104,385
    Net accretion of discount on securities        (70,202)       51,214
    Loss on sale or  settlements of securities      24,331        (1,360)
    Provisions for loan losses                     215,535       258,257
(Increase) in other assets                        (112,733)     (129,317)
(Decrease) in liabilities                         (114,076)      (34,354)
                                               -----------   -----------
Net cash provided by operating activities     $  1,528,276  $  1,225,238
                                               -----------   -----------

Cash flows from investing activities:
Available-for-sale securities:
   Proceeds from sale of securities           $  3,704,184  $    504,687
   Proceeds from maturities and paydowns        17,338,871     3,973,984
   Purchase of securities                      (16,402,765)  (15,175,211)
Held-to-maturity securities:
   Purchase of securities                       (1,328,112)     (538,462)
   Maturities and paydowns                       1,906,784     1,781,105
Net increase in loans                           (1,030,511)   (3,184,878)
Purchase of property and equipment                 (83,049)     (505,785)
                                               -----------   -----------
Net cash provided by investing activities     $  4,105,402  $(13,144,560)
                                               -----------   -----------

Cash flows from financing activities:
Proceeds from exercise of options
   and warrants                               $    188,750  $    838,954
Cancellation of options/warrants                (1,155,100)       --
Borrowings, FHLB                                 7,984,919       700,000
Increase in deposits                               635,984     9,526,972
                                               -----------   -----------
Net cash provided by financing activities     $  7,654,553  $ 11,065,926
                                               -----------   -----------

Net increase in cash and cash equivalents     $ 13,288,231  $   (853,396)
Cash and cash equivalents, beginning of year     3,181,025     4,034,421
                                               -----------   -----------
Cash and cash equivalents, end of year        $ 16,469,256  $  3,181,025
                                               ===========   ===========

Supplemental Information:

Income taxes paid                             $    687,050  $    653,516
                                               ===========   ===========

Interest paid                                 $  4,017,130  $  4,339,941
                                               ===========   ===========


          Refer to notes to the consolidated financial statements



                        COMMUNITY BANCSHARES, INC.
                        WILKESBORO, NORTH CAROLINA
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999 AND 1998


NOTE 1 - SUMMARY OF ORGANIZATION

	Community Bancshares, Inc., Wilkesboro, North Carolina (the "Company")
was incorporated under the laws of the State of North Carolina on June 11,
1990, for the purpose of becoming a bank holding company with respect to a
proposed national bank, Wilkes National Bank (the "Bank"), to be located in
Wilkesboro, North Carolina.  The Bank commenced operations on January 17, 1992
immediately after the Company acquired 100 percent of the Bank's voting stock
by injecting $3.75 million into the Bank's capital accounts.  Since then, the
bank opened three additional branches, bringing the total banking offices to
four.  The Bank is primarily engaged in the business of obtaining deposits and
providing commercial, consumer, and real estate loans to the general public.
Bank deposits are each insured up to $100,000 by the Federal Deposit Insurance
Corporation (the "FDIC") subject to certain limitations imposed by the FDIC.

	In 1990, during its initial stages, the Company filed a Form S-1
Registration Statement with the Securities and Exchange Commission offering
for sale a minimum of 365,000 and a maximum of 660,000 shares of its common
stock, $6.00 par value per share.  During 1995, the Company's Board of
Directors declared a two-for-one stock split and reduced the par value of the
Company's common stock to $3.00 per share.  During 1996, the Company completed
the sale of 500,000 shares of its common stock, resulting in net proceeds of
$4,934,242.  As of December 31, 1999 and 1998, there were 1,467,384 and
1,446,984 shares of common stock, respectively, outstanding.

	In the initial stock sale in 1990, the Company offered warrants to its
organizers and to a group of initial subscribers.  Each warrant, when
surrendered with $5.50 to the Company, is convertible into one share of common
stock.  The warrants expire ten years from January 17, 1992.  At December 31,
1999, there were 151,568 warrants outstanding. The Company also has a stock
option plan with 180,500 options outstanding as of December 31, 1999.  Details
of the option plan are discussed under Notes 12 & 16.

	During 1994, the Company, together with four unrelated banks,
established Community Mortgage Corporation ("Community Mortgage") to engage in
mortgage related activities as allowed under the Bank Holding Company Act.
The Company invested $50,000 in Community Mortgage in exchange for 20% of
Community Mortgage's common stock.  During 1996 and 1997, the Company acquired
additional shares of Community Mortgage, eventually increasing its ownership
position to 100% of the voting shares.  Community Mortgage's financial
statements are included in the Company's consolidated financial statements as
of and for the years ended December 31, 1999 and 1998.


NOTE 2 - SUMMARY OF  SIGNIFICANT ACCOUNTING POLICIES

	BASIS OF PRESENTATION AND RECLASSIFICATION.  The consolidated financial
statements include the accounts of the Company and its subsidiaries.  All
significant intercompany accounts and transactions have been eliminated in
consolidation.  Certain prior year amounts have been reclassified to conform to
the current year presentation.  Such reclassifications had no impact on net
income or shareholders' equity.

	BASIS OF ACCOUNTING.  The accounting and reporting policies of the
Company conform to generally accepted accounting principles and to general
practices in the banking industry. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the financial
statements and income and expenses during the reporting period.  Actual
results could differ significantly from those estimates.  Material estimates
that are particularly susceptible to significant change in the near term
relate to the determination of the allowance for loan losses and the valuation
of real estate acquired in connection with foreclosure proceedings.

	INVESTMENT SECURITIES.  Investment securities that the Company has the
positive intent and ability to hold to maturity are classified as held to
maturity and are reported at amortized cost.  Investment securities held for
current resale are classified as trading securities and are reported at fair
value, with unrealized gains and losses included in earnings.  Investment
securities not classified either as securities held to maturity or trading
securities are classified as available for sale and reported at fair value;
net unrealized gains or losses (net of related taxes) are excluded from
earnings and are reported as accumulated other comprehensive income/(loss)
within shareholders' equity.  The classification of investment securities as
held to maturity, trading or available for sale is determined at the date of
purchase.

	Realized gains and losses from sales of investment securities are
determined based upon the specific identification method.  Premiums and
discounts are amortized as an adjustment to yield over the remaining lives of
the securities using the level-yield method.

	Management periodically evaluates investment securities for other than
temporary declines in value and records losses, if any, through an adjustment
to earnings.

	LOANS, INTEREST AND FEE INCOME ON LOANS.  Loans are stated at the
principal balance outstanding.  Unearned discount, unamortized loan fees and
the allowance for possible loan losses are deducted from total loans in the
statement of condition.  Interest income is recognized over the term of the
loan based on the principal amount outstanding.  Points on real estate loans
are taken into income to the extent they represent the direct cost of
initiating a loan.  The amount in excess of direct costs is deferred and
amortized over the expected life of the loan.

	Accrual of interest on loans is discontinued either when reasonable
doubt exists as to the full or timely collection of interest or principal or
when a loan becomes contractually past due by 90 days or more with respect to
interest or principal.  When a loan is placed on non-accrual status, all
interest previously accrued but not collected is reversed against current
period interest income.  Income on such loans is then recognized only to the
extent that cash is received and where the future collection of principal is
probable. Loans are returned to accruing status only when they are brought
fully current with respect to interest and principal and when, in the judgment
of management, the loans are estimated to be fully collectible as to both
principal and interest.

	Impaired loans are (i) non-performing loans that have been placed on
nonaccrual status and (ii) loans which are performing according to all
contractual terms of the loan agreement, but may have substantive indication
of potential credit weakness.  Accounting standards require impaired loans to
be measured based on (a) the present value of expected future cash flows
discounted at the loan's original effective interest rate, or (b) the loan's
observable market price, or (c) the fair value of the collateral if the loan
is  collateral dependent.

	ALLOWANCE FOR LOAN LOSSES.  The allowance for loan losses (the
"Allowance") is established through provisions charged to operations.  Loans
deemed to be uncollectible are charged against the Allowance, and subsequent
recoveries, if any, are credited to the Allowance.  The adequacy of the
Allowance is based on management's evaluation of the loan portfolio under
current economic conditions, past loan loss experience, adequacy of underlying
collateral, changes in the nature and volume of the loan portfolio, review of
specific problem loans, and such other factors which, in management's
judgment, deserve recognition in estimating loan losses.  The evaluation for
the adequacy of the Allowance is inherently subjective as it requires material
estimates, including the amounts and timing of future cash flows expected to
be received on impaired loans that may be susceptible to significant change.
Various regulatory agencies, as an integral part of their examination process,
periodically review the Company's Allowance.  Such agencies may require the
Company to recognize additions to the Allowance based on their judgments about
information available to them at the time of their examination.

	PROPERTY AND EQUIPMENT.  Building, furniture, equipment and leasehold
improvements are stated at cost, net of accumulated depreciation.
Depreciation is computed using the straight line method over the estimated
useful lives of the related assets.  Maintenance and repairs are charged to
operations, while major improvements are capitalized.  Upon retirement, sale
or other disposition of property and equipment, the cost and accumulated
depreciation are eliminated from the accounts, and gain or loss is included in
income from operations.

	OTHER REAL ESTATE.  Other real estate represents property acquired
through foreclosure proceedings.  Other real estate is carried at the lower
of:  (i) cost; or (ii) fair value less estimated selling costs.  Fair value is
determined on the basis of current appraisals, comparable sales and other
estimates of value obtained principally from independent sources.  Any excess
of the loan balance at the time of foreclosure over the fair value of the real
estate held as collateral is treated as a loan loss and charged against the
allowance for loan losses.  Gain or loss on the sale of the property and any
subsequent adjustments to reflect changes in fair value of the property are
reflected in the income statement.  Recoverable costs relating to the
development and improvement of the property are capitalized whereas routine
holding costs are charged to expense.

	INCOME TAXES.  Income tax expense consists of current and deferred
taxes.   Current income tax provisions approximate taxes to be paid or
refunded for the applicable year.  Deferred tax assets and liabilities are
recognized on the temporary differences between the bases of assets and
liabilities as measured by tax laws and their bases as reported in the
financial statements.  Deferred tax expense or benefit is then recognized for
the change in deferred tax assets or liabilities between periods.

	Recognition of deferred tax balance sheet amounts is based on
management's belief that it is more likely than not that the tax benefit
associated with certain temporary differences, tax operating loss
carryforwards, and tax credits will be realized.  A valuation allowance is
recorded for those deferred tax items for which it is more likely than not
that realization will not occur.

	STATEMENT OF CASH FLOWS.  For purposes of reporting cash flows, cash and
cash equivalents include cash on hand, amounts due from banks and federal
funds sold.  Generally, federal funds are purchased or sold for one day
periods.

	STOCK OPTIONS AND WARRANTS.  There are two major accounting standards
that address the accounting for stock options/warrants.  Entities are allowed
to freely choose between the two distinct standards.  The first standard, APB
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") measures
stock options/warrants by the intrinsic value method.  Under the above method,
if the exercise price is the same or above the quoted market price at the date
of grant, no compensation expense is recognized.  The second standard, SFAS
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), may recognize
a compensation expense even in cases where the exercise price is the same or
above the quoted market price.  SFAS 123 takes into account the time value of
the options/warrants; that is, the value of being able to defer a decision on
whether or not to exercise the option/warrants until the expiration date.  The
Company follows the accounting standards of APB 25.  Had the Company followed
the accounting standards of SFAS 123, net income for the years ended December
31, 1999 and 1998 would have been reduced by $46,128 and $36,147,
respectively.  On a per share basis, basic and diluted earnings per share
would have been reduced in each of the above years by $.03 and diluted
earnings per share would have been reduced by $.03 (1999) and $.02 (1998).

	EARNINGS PER SHARE ("EPS").  The Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128").  SFAS 128
establishes standards for computing and presenting EPS.  Because the Company
has a complex capital structure, it is required to report: (i) basic EPS; and
(ii) diluted EPS.  Basic EPS is defined as the amount of earnings available to
each share of common stock outstanding during the reporting period.  Diluted
EPS is defined as the amount of earnings available to each share of common
stock outstanding during the reporting period and to each share that would
have been outstanding assuming the issuance of common stock for all dilutive
potential common stock outstanding during the reporting period.

 	The following is a reconciliation of net income (the numerator) and the
weighted average shares outstanding (the denominator) used in determining
basic and diluted EPS for each of the following periods:

                                    Year Ended December 31, 1999
                         ----------------------------------------------------
                                 Basic EPS                  Diluted EPS
                         ------------------------    ------------------------
                         Numerator    Denominator    Numerator    Denominator
                         ---------    -----------    ---------    -----------
Net income               $1,453,469                 $1,453,469
Weighted average shares                1,457,259                   1,457,259
Dilutive options,
  warrants, net                                                      154,099
                          ---------    ---------     ---------     ---------
   Totals                $1,453,469    1,457,259    $1,453,469     1,611,358
                          =========    =========     =========     =========

EPS                                $1.00                      $.90
                                    ====                       ===

                                    Year Ended December 31, 1999
                         ----------------------------------------------------
                                 Basic EPS                  Diluted EPS
                         ------------------------    ------------------------
                         Numerator    Denominator    Numerator    Denominator
                         ---------    -----------    ---------    -----------
Net income               $  976,413                 $  976,413
Weighted average shares                1,397,041                   1,397,041
Dilutive options,
  warrants, net                                                      206,178
                          ---------    ---------     ---------     ---------
   Totals                $  976,413    1,397,041    $  976,413     1,603,219
                          =========    =========     =========     =========

EPS                                $.70                       $.61
                                    ===                        ===

	RECENT ACCOUNTING PRONOUNCEMENTS.  In March 1998, the American Institute
of Certified Public Accountants issued Statement of Position ("SOP") 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use".  SOP 98-1 provides guidance for capitalizing and expensing the
costs of computer software developed or obtained for internal use.  SOP 98-1
is effective for financial statements for fiscal years beginning after
December 15, 1998.  The adoption of SOP 98-1 did not have a material impact on
the accompanying consolidated financial statements.

	SFAS 133, "Accounting for Derivative Instruments and Hedging Activities"
was issued in June, 1998 and is effective for all calendar-year entities
beginning in January, 2000.  This Statement applies to all entities and
requires that all derivatives be recognized as assets or liabilities in the
balance sheet, at fair values.  Gains and losses of derivative instruments not
designated as hedges will be recognized in the income statement.  Since the
Company does not invest in derivative instruments, SFAS 133 will not have a
material impact on the Company's financial statements.

	SFAS 134, "Accounting for Mortgage-Backed Securities Retained after the
Securitization  of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise" amends prior accounting standards, primarily SFAS 65, with respect
to the classification of retained interests, such as mortgage-backed
securities, following a securitization of mortgage loans held for sale.  This
statement became effective for the first quarter of 1999.  Since the Company
does not securitize mortgage loans, no financial statement impact has resulted
from adopting this statement.


NOTE 3 - FEDERAL FUNDS SOLD

	  The Bank is required to maintain legal cash reserves computed by
applying prescribed percentages to its various types of deposits.  When the
Bank's cash reserves are in excess of the required amount, the Bank may lend
the excess to other banks on a daily basis.  At December 31, 1999 and 1998,
the Bank sold $2,000,000 and zero, respectively, to other banks through the
federal funds market.


NOTE 4 - SECURITIES AVAILABLE-FOR-SALE

	The amortized costs and estimated market values of securities available-
for-sale as of December 31, 1999 follow:

                                                   Gross
                                                 Unrealized
                               Amortized     ----------------    Estimated
    Description                  Costs       Gains     Losses   Market Values
    -----------                  -----       -----     ------   -------------
U.S. Treasury securities     $   505,063     $ --    $  (5,843)  $   499,220
U.S. Agency securities        14,539,632      564     (245,668)   14,294,528
FRB, FHLB stock                  625,400       --        --          625,400
Municipal securities           2,563,346       --      (47,799)    2,515,547
Mortgage pools                 1,222,752       --      (43,022)    1,179,730
Other securities                 264,756       --       (6,901)      257,855
                              ----------      ---     --------    ----------
  Total securities           $19,720,949     $564    $(349,233)  $19,372,280
                              ==========      ===     ========    ==========

	All national banks are required to hold FRB stock.  No ready market
exists for the FRB stock nor does the stock have a quoted market value.
Accordingly, FRB stock is reported at cost.  Also, no ready market exists for
FHLB stock.  Accordingly, the FHLB stock is recorded at cost.

	The amortized costs and estimated market values of securities available-
for-sale as of December 31, 1998 follow:

                                                   Gross
                                                 Unrealized
                               Amortized     ----------------    Estimated
    Description                  Costs       Gains     Losses   Market Values
    -----------                  -----       -----     ------   -------------
U.S. Treasury securities     $ 2,765,918   $ 32,802  $   --       $ 2,798,720
U.S. Agency securities        16,756,102    102 010     (8,414)    16,849,698
FRB, FHLB stock                  191,100       --        --           191,100
Municipal securities           2,276,412     25,954     (2,525)     2,299,841
Mortgage pools                 1,377,225      2,516     (5,438)     1,374,303
Other securities                 773,986        668      --           774,654
                              ----------    -------    -------     ----------
  Total securities           $24,140,743   $163,950   $(16,377)   $24,288,316
                              ==========    =======    ========    ==========

	The amortized costs and estimated market values of securities available-
for-sale at December 31, 1999, by contractual maturity, are shown in the
following chart. Expected maturities may differ from contractual maturities
because issuers may have the right to call or prepay obligations with or
without call or prepayment penalties.

                                         Amortized       Estimated
                                           Costs       Market Values
                                           -----       -------------
   Due in one year or less              $ 2,098,061     $ 2,059,832
   Due after one through five years      14,174,646      13,980,250
   Due after five through ten years       2,822,842       2,706,798
   FRB, FHLB stock (no maturity)            625,400         625,400
                                         ----------      ----------
     Total securities                   $19,720,949     $19,372,280
                                         ==========      ==========

	Proceeds form sales of securities during 1999 and 1998 were $3,704,184
and $504,687, respectively.  A loss of $(24,331) (1999) and a gain of $1,360
(1998) were realized on those sales.

	As of December 31, 1999 and 1998, securities with an aggregate par value
of $3,775,000 and $3,500,000, respectively, were pledged as collateral to
secure public funds.


NOTE 5 - SECURITIES HELD-TO-MATURITY

	The amortized costs and estimated market values of securities held-to-
maturity as of December 31, 1999 follow:

                                                   Gross
                                                 Unrealized
                               Amortized     ----------------    Estimated
    Description                  Costs       Gains     Losses   Market Values
    -----------                  -----       -----     ------   -------------
Mortgage-backed securities   $   442,521   $   --    $  (6,817)   $   435,704
Mortgage pools                 1,363,969      2,056    (13,622)     1,352,403
                              ----------    -------    -------     ----------
  Total securities           $ 1,806,490   $  2,056   $(20,439)   $ 1,788,107
                              ==========    =======    ========    ==========

        The amortized costs and estimated market values of securities held-to-
maturity as of December 31, 1998 follow:

                                                   Gross
                                                 Unrealized
                               Amortized     ----------------    Estimated
    Description                  Costs       Gains     Losses   Market Values
    -----------                  -----       -----     ------   -------------
Mortgage-backed securities   $ 1,000,584   $ 12,660  $    (212)   $ 1,013,032
Mortgage pools                 1,384,578     19,012        --       1,403,590
                              ----------    -------    -------     ----------
  Total securities           $ 2,385,162   $ 31,672   $   (212)   $ 2,416,622
                              ==========    =======    ========    ==========

	The amortized costs and estimated market values of securities held-to-
maturity at December 31, 1999, by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.

                                         Amortized       Estimated
                                           Costs       Market Values
                                           -----       -------------
   Due after one through five years     $   601,405     $   596,966
   Due after five through ten years         943,402         935,045
   Due after ten years                      261,683         256,096
                                         ----------      ----------
     Total securities                   $ 1,806,490     $ 1,788,107
                                         ==========      ==========

	At December 31, 1999 and 1998, securities with an aggregate par value of
$762,695 and zero, respectively, were pledged to secure public deposits.


NOTE 6 - LOANS

	The composition of net loans by major loan category, as of December 31,
1999 and 1998, follows:

                                                   December 31,
                                               ---------------------
                                               1999             1998
                                               ----             ----
  Commercial, financial, agricultural      $32,471,688      $29,132,567
  Real estate-construction                   7,483,941        7,699,492
  Real estate-mortgage                      21,236,064       20,830,973
  Installment                               12,959,935       15,404,781
  Lease financing                               12,868          159,642
                                            ----------       ----------
  Loans, gross                             $74,164,496      $73,227,455
  Deduct:
    Allowance for loan losses               (1,228,895)      (1,106,830)
                                            ----------       ----------
      Loans, net                           $72,935,601      $72,120,625
                                            ==========       ==========

	The Company considers impaired loans to include all restructured loans,
loans on which the accrual of interest had been discontinued and all other
loans which are performing according to the loan agreement, but may have
substantive indication of potential credit weakness.  The Company's recorded
investment in impaired loans amounted to approximately $861,833 and $1,409,332
at December 31, 1999 and 1998, respectively.  These loans had related
allowances for loan losses of approximately $107,748 and $211,400, at December
31, 1999 and 1998, respectively.  Non-accruing loans, a loan category which is
part of impaired loans, amounted to $103,511 and zero at December 31, 1999 and
1998, respectively.  Had interest been accrued on these loans at their
originally contracted rates, interest income would have been increased by
approximately $4,306 and zero for the years ended December 31, 1999 and 1998,
respectively.


NOTE 7 - ALLOWANCE FOR POSSIBLE LOAN LOSSES

	The allowance for possible loan losses is a valuation reserve available
to absorb future loan charge-offs.  The Allowance is increased by provisions
charged to operating expenses and by recoveries of loans which were previously
written-off.  The Allowance is decreased by the aggregate loan balances, if
any, which were deemed uncollectible during the year.

Activity within the Allowance accounts for the years ended December 31,
1999 and 1998 follows:

                                                   December 31,
                                               ---------------------
                                               1999             1998
                                               ----             ----
Balance, beginning of year                 $1,106,830        $1,033,393
Add: Provision for loan losses                215,535           258,257
Add: Recoveries of previously charged
     off amounts                               23,889            14,897
                                            ---------         ---------
   Total                                   $1,346,254        $1,306,547
Deduct: Amount charged-off                   (117,359)         (199,717)
                                            ---------         ---------
Balance, end of year                       $1,228,895        $1,106,830
                                            =========         =========


NOTE 8 - PROPERTY AND EQUIPMENT

	Building, furniture, equipment, land and leasehold improvements are
stated at cost less accumulated depreciation.  Components of property and
equipment included in the consolidated balance sheets at December 31, 1999 and
1998 follow:

                                                   December 31,
                                               ---------------------
                                               1999             1998
                                               ----             ----
Land                                       $  464,100       $  464,100
Leasehold improvement                          13,165          118,090
Building                                    1,606,078        1,537,333
Furniture and equipment                       472,387          408,632
                                            ---------        ---------
   Property and equipment, gross           $2,555,730       $2,528,155
Deduct:
    Accumulated depreciation                 (382,881)        (313,548)
                                            ---------        ---------
    Property and equipment, net            $2,172,849       $2,214,607
                                            =========        =========

	Depreciation expenses for the years ended December 31, 1999 and 1998
amounted to $124,807 and $97,239, respectively.  Depreciation is charged to
operations over the estimated useful lives of the assets.  The estimated
useful lives and methods of depreciation for the principal items follow:

    Type of Asset             Life in Years   Depreciation Method
  Furniture and equipment       1 to 7           Straight-line
  Building                     32 to 39          Straight-line
  Leasehold improvements          5              Straight-line


NOTE 9 - COMMITMENTS AND CONTINGENCIES

	On December 23, 1998, the Company settled a proposed derivative action
involving the Company and eight of its directors.  All claims made by all
parties have been dismissed pursuant to the settlement.  Pursuant to the terms
of the settlement agreement on February 18, 1999, six directors agreed to
purchase substantially all of the common stock of the Company owned by two
other directors and their related interests.  In addition, the Company and
certain directors agreed to purchase from the above two directors all the
Company's warrants and stock options owned by the above two directors.
Accordingly, the Company purchased 82,968 warrants and 20,000 options for an
aggregate price of $1,155,100.  All warrants and options purchased by the
Company in the above transaction were cancelled.

	Please refer to Notes 1, 12, 16 and 17 concerning warrants and options
earned by directors, organizers and executive officers.

	Please refer to Note 17 concerning a contract the Company executed with
the Bank's CEO.


NOTE 10 - FHLB ADVANCES

	Advances from FHLB totaled $8,684,919 and $700,000 at December 31, 1999
and 1998, respectively.  Below are additional details concerning the advances.

            Outstanding Advances
                December 31,
            -------------------     Interest                Maturity
            1999           1998      Rate      Amortizing    Date
            ----           ----      ----      ----------    ----
         $  684,919     $  700,000   6.15%        Yes       8-17-2018
          2,000,000         --       5.71%        No        9-28-2004
          2,000,000         --       6.09%        No        3-15-2000
          4,000,000         --       5.96%        No        2-22-2000
          ---------      ---------
Total    $8,684,919     $  700,000    N/A         N/A          N/A
          =========      =========


NOTE 11 - DEPOSITS

	The following details deposit accounts at December 31, 1999 and 1998:

                                                   December 31,
                                               ---------------------
                                               1999             1998
                                               ----             ----
Non-interest bearing deposits              $ 7,998,076       $ 7,959,459
Interest bearing deposits:                   8,351,500         8,219,478
  NOW accounts                               9,917,395         9,016,364
  Money market accounts                      3,572,569         3,785,727
  Time, less than $100,000                  37,537,544        38,753,556
  Time, $100,000 and over                   24,565,436        23,571,952
                                            ----------        ----------
   Property and equipment, gross           $91,942,520       $91,306,536
                                            ==========        ==========


NOTE 12 - SHAREHOLDERS' EQUITY

	The Company currently has 10.0 million shares of common stock
authorized, 1,467,384 shares of which were issued and outstanding at December
31, 1999.  The holders of common stock have no preemptive rights with respects
to the issuance of any shares by the Company. The Company is authorized to
issue up to 1.0 million shares of preferred stock, $6.00 par value, issuable
in series, the relative rights and preferences of which shall be designated by
the Board of Directors.  The preferred stock may have senior dividend and/or
liquidation preferences superior to those of common stock.  No preferred stock
were issued and outstanding at December 31, 1999.

	At December 31, 1999 and 1998, there were 151,568 and 235,036 stock
warrants, respectively, outstanding.  During 1999 and 1998, 500 and 147,628
warrants, respectively, were exercised at $5.50 per share.  Also, the Company
purchased and immediately cancelled 82,968 warrants during calendar year 1999.

	The Company adopted an incentive stock option plan covering 400,000
stock options.  At December 31, 1999 and 1998, there were 180,500 and 201,496
stock options, respectively, outstanding.  Please refer to Notes 16 & 17 for
additional details concerning stock options.



NOTE 13 - INTEREST ON DEPOSITS AND BORROWINGS

	A summary of interest expense for the years ended December 31, 1999 and
1998 follows:

                                                   December 31,
                                               ---------------------
                                               1999             1998
                                               ----             ----
  Interest on NOW accounts                  $  243,930       $  260,675
  Interest on money market accounts            289,435          264,017
  Interest on savings accounts                  70,610           98,985
  Interest on CDs under $100,000             1,946,689        2,276,718
  Interest on CDs, $100,000 and over         1,241,187        1,328,642
  Interest, other borrowings                    71,328           18,150
                                             ---------        ---------
   Total interest on deposits
    and borrowings                          $3,863,179       $4,247,187
                                             =========        =========


NOTE 14 - OTHER OPERATING EXPENSES

	A summary of other operating expenses for the years ended December 31,
1999 and 1998 follows:

                                                   December 31,
                                               ---------------------
                                               1999             1998
                                               ----             ----
  Advertising and public relations            $ 69,141        $ 81,450
  Supplies and printing                         94,065         115,719
  Utilitie and telephone                        91,738          87,343
  Rental and lease expense                      54,937         123,333
  Taxes and licenses                            51,142          66,630
  Regulatory assessments                        52,621          48,493
  All other operating expenses                 265,037         156,852
                                               -------         -------
   Total other operating expenses             $678,681        $679,820
                                               =======         =======


NOTE 15 - INCOME TAXES

	As of December 31, 1999 and 1998, the Company's provision for income
taxes consisted of the following:

                                                   December 31,
                                               ---------------------
                                               1999             1998
                                               ----             ----
  Current                                     $765,180       $721,424
  Deferred                                      37,408         29,577
  Reversal of valuation allowance                --           (47,969)
  Loss carryforward, (benefit)                  (2,131)       (17,317)
                                               -------        -------
   Federal income tax expense                 $800,457       $685,715
                                               =======        =======

	Deferred income taxes for the years ended December 31, 1999 and 1998
consist of the following:

                                                1999           1998
                                                ----           ----
   Provision for loan losses                  $41,684        $24,969
   Other                                       (4,276)         4,608
                                               ------         ------
      Total                                   $37,408        $29,577
                                               ======         ======

	The Company's provision for income taxes differs from the amounts
computed by applying the federal income tax statutory rates to income before
income taxes.  A reconciliation of federal statutory income taxes to the
Company's actual income tax provision follows for the year ended December 31,
1999:
                                                      1999
                                                      ----
   Income taxes at statutory rate                   $766,335
   State tax, net of Federal benefits                102,541
   Change in valuation allowance                     (41,684)
   Tax exempt income                                 (40,031)
   Other                                              13,296
                                                     -------
      Total                                         $800,457
                                                     =======
	The tax effects of the temporary differences that comprise the net
deferred tax assets at December 31, 1999 is presented below:

                                                      1999
 Deferred tax assets:                                 ----
   Allowance for loan losses                        $ 390,201
   Community Mortgage                                  11,152
   Unrealized loss, securities                        118,547
   Deferred asset, depreciation                         1,743
   Valuation reserve                                 (341,923)
                                                     --------
      Net deferred tax asset                        $ 149,720
                                                     ========

	There was a net change in the valuation allowance during 1999.  In
assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized.  The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during  the
periods in which those temporary differences become deductible.  Management
considers the scheduled reversal of deferred tax liabilities, projected future
taxable income, and tax planning strategies in making this assessment.  Based
upon the level of historical taxable income and projection for future taxable
income over the periods which the temporary differences resulting in the
deferred tax assets are deductible, management believes it is more likely than
not that the Company will realize the benefits of those deductible
differences, net of the existing valuation allowance at December 31, 1999.


NOTE 16 - BENEFIT PLANS

	The Company has a savings plan (the "Savings Plan") administered under
the provisions of the Internal Revenue Code Section 401(k).  During 1999 and
1998, the Company made contributions totaling $36,000 and $31,174
respectively, to the Savings Plan.

	On November 18, 1993, the Bank's Board of Directors adopted a profit
sharing plan ("Profit Plan") for the benefit of its employees.  There were no
transactions relating to this Profit Plan during either 1999 or 1998.

	The shareholders of the Company voted to adopt an incentive stock option
plan ("Incentive Plan") for directors and key employees.  The Incentive Plan
became effective March 18, 1993 and covers 400,000 options.  The exercise
price of options granted must be at least the average market price as of the
date of the grant.  The above options expire between five to ten years from
the date of the grant.  In May, 1994, the Incentive Plan was amended to, among
other things, provide for the automatic annual grant of options to purchase
2,000 shares of common stock to each of the Company's outside directors.  The
following table summarizes the activities within the Company's Incentive Plan,
including those discussed in Note 12.

                                                    Stock Options
                                                --------------------
                                                1999            1998
                                                ----            ----
  Options granted in previous years            224,296        188,296
  Options granted this year                     20,904         36,000
  Options exercised in previous years          (19,600)       (17,400)
  Options exercised this year                  (19,900)        (2,200)
  Options forfeited in previous years           (3,200)        (1,200)
  Options forfeited this year                   (2,000)        (2,000)
  Options cancelled this year                  (20,000)          --
                                               -------        -------
   Balance, end of year                        180,500        201,496
                                               =======        =======

   Options available for grant                 154,800        175,704
                                               =======        =======

	The options entitle their holders to purchase one share of the Company's
common stock for an amount between $5.50 to $17.00 each, at a weighted average
price of $12.15.


NOTE 17 - RELATED PARTY TRANSACTIONS

	EMPLOYMENT AGREEMENT WITH CEO.  On February 1, 1995, the Company entered
into an Employment Agreement (the "Agreement") with one of its directors
pursuant to which he would continue to serve as the President and Chief
Executive Officer ("CEO") of both the Company and the Bank.  The Agreement is
for a term of five years; provided, however, that during each of the first
five years, an additional year will be added to the term of the agreement so
that the Agreement will expire on February 1, 2005.  The Agreement provides
for an annual base salary of $84,000, with bonuses to be determined at the
discretion of the Board of Directors.  The Agreement also provides for certain
severance payments to be paid to the CEO in the event of a change in control
of the Company.  In the events of a change in control and the hiring of a
different CEO, the present CEO would be entitled to receive a lump sum cash
payment equal to $300,000.  In addition, in the event the CEO is terminated by
the Company without cause, he would receive during the balance of his term of
employment the annual base salary which would otherwise be payable to him had
he remained in the employ of the Company.  The Agreement also entitles the CEO
to other customary benefits, including an automobile allowance, health, life
and disability insurance.  During each of the calendar years 1999 and 1998,
the CEO was granted options to purchase 2,404 and 10,000 shares of the
Company's common stock, respectively, at $10.00 per share.  For the years
ended December 31, 1999 and 1998, the Company incurred costs of approximately
$146,212 and $136,953 respectively, in salary and various benefits relating to
the CEO's employment agreements.

	BORROWINGS AND DEPOSITS BY DIRECTORS AND EXECUTIVE OFFICERS.  Certain
directors, principal officers and companies with which they are affiliated are
customers of and have banking transactions with the Bank in the ordinary
course of business.  As of December 31, 1999 and 1998, loans outstanding to
directors, their related interest and executive officers aggregated $815,874
and $1,013,866, respectively.  These loans were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with unrelated parties.

	A summary of the related party loan transactions during 1999 and 1998
follows:

                                              Insider Loan Transactions
                                              -------------------------
                                                1999            1998
                                                ----            ----
  Balance, beginning of year                 $1,013,866      $ 2,097,432
  New loans                                     613,048          158,229
  Less:  principal reductions                  (811,040)      (1,241,795)
                                              ---------       ---------
   Balance, end of year                      $  815,874      $1,013,866
                                              =========       =========

	Deposits by directors and their related interests, as of December 31,
1999 and 1998 approximated $1,905,656 and $1,831,003, respectively.

        DIRECTORS/ORGANIZERS STOCK  WARRANTS.  Please refer to Notes 1, 12 and
16 for additional details concerning warrants to directors and organizers.

        INCENTIVE STOCK OPTION PLAN TO DIRECTORS AND KEY EMPLOYEES.  Please
refer to Notes 12 and 16 for additional details.


NOTE 18 - FAIR VALUE OF FINANCIAL INSTRUMENTS

	The Company is required to disclose the fair value of its financial
instruments where it is practical to estimate that value.  The fair value
estimates are made at a specific point in time based  on relevant market
information.  Where available, quoted market prices are used to determine fair
value.  However, since numerous financial instruments lack quoted market
prices, the Company utilized various estimation methodologies to determine the
fair value.  These estimation methodologies incorporate a significant number
of assumptions based on judgments regarding current economic conditions, risk
characteristics of various financial instruments and other factors.  These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and, therefore, cannot be determined with precision.
Changes in the assumptions could significantly affect the estimates.

	The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1999.  Such amounts
have not been revalued for purposes of these financial statements since
December 31, 1999 and, therefore, current estimates of fair value may differ
significantly from the amounts presented herein.

	The following methods and assumptions were used  by the Company in
estimating fair values of financial instruments as disclosed herein:

	CASH AND DUE FROM BANKS, INTEREST-BEARING DEPOSITS WITH BANKS AND
FEDERAL FUNDS SOLD.  The carrying amounts of cash and due from banks,
interest-bearing deposits with banks, and Federal funds sold approximate their
fair value.

	AVAILABLE FOR SALE AND HELD TO MATURITY SECURITIES.  Fair values for
securities are based on quoted market prices.

	LOANS.  For variable-rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on carrying values.
For other loans, the fair values are estimated using discounted cash flow
methods, using interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality.  Fair values for impaired loans
are estimated using discounted cash flow methods or underlying collateral
values.

	DEPOSITS.  The carrying amounts of demand deposits and savings deposits
approximate their fair values.  Fair values for certificates of deposit are
estimated using discounted cash flow methods, using interest rates currently
being offered on certificates.

	OFF-BALANCE SHEET INSTRUMENTS.  Fair values of the Company's off-balance
sheet financial instruments are based on fees charged to enter into similar
agreements.  However, commitments to extend credit and standby letters of
credit do not represent a significant value to the Company until such
commitments are funded.  The Company has determined that these instruments do
not have a distinguishable fair value and no fair value has been assigned.

	The estimated fair values of the Company's financial instruments were as
follows:


                                                     December 31,
                                              ----------------------
                                              Carrying          Fair
                                              --------          ----
  Financial assets:
    Cash and due from banks                  $14,469,256      $14,469,256
    Federal funds sold                         2,000,000        2,000,000
    Securities available for sale             19,372,280       19,372,280
    Securities held to maturity                1,806,490        1,788,107
    Loans                                     72,935,601       72,664,979

  Financial liabilities
    Deposits                                 $91,942,520      $91,890,541
    FHLB borrowings                            8,684,919        8,684,919


NOTE 19 - SEGMENT REPORTING

	The Company's operations include two primary business segments, banking
and mortgage activities.  The Company, through the Bank, provides traditional
banking services including a full range of commercial and consumer banking
services.  Through Community Mortgage, the Company provides mortgage services
including the origination and sale of mortgage loans to various investors,
including other financial institutions.

Revenues from
 unaffiliated
 customers       $       707  $  8,980,463 $314,984 $     --      $  9,296,154
Revenues from
 affiliates           98,164        --         --        (98,164) $    --
                  ----------   -----------  -------  -----------   -----------
Total revenues   $    98,871  $  8,980,463 $314,984 $    (98,164) $  9,296,154
                  ==========   ===========  =======  ===========   ===========

Income/(loss)
 from operations,
 before tax      $   (58,380) $  2,306,038 $  6,268 $     --      $  2,253,926
                  ==========   ===========  =======  ===========   ===========

Identifiable
 assets, December
 31, 1999        $12,208,416  $113,620,799 $ 60,532 $(12,084,217) $113,805,530
                  ==========   ===========  =======  ===========   ===========

Depreciation and
 amortization    $     7,170  $    121,716 $  3,066 $     --      $    131,952
                  ==========   ===========  =======  ===========   ===========


NOTE 20 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

	In the ordinary course of business, and to meet the financing needs of
its customers, the Company is a party to various financial instruments with
off-balance sheet risk.  These financial
instruments, which include commitments to extend credit and standby letters of
credit, involve, to varying degrees, elements of credit and interest rate risk
in excess of the amounts recognized in the balance sheets.  The contract
amount of those instruments reflects the extent of involvement the Company has
in particular classes of financial instruments.

	The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend credit
and standby letters of credit is represented by the contractual amounts of
those instruments.  The Company uses the same credit policies in making
commitments and conditional obligations as it does for on-balance sheet
instruments.

	Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any material condition established in the
contract.  Commitments generally have fixed expiration dates or other
termination clauses and may require the payment of a fee.  At December 31,
1999 and 1998, unfunded commitments to extend credit were $14,376,478 and
$13,753,424, respectively.  The Company evaluates each customer's credit
worthiness on a case-by-case basis.  The amount of collateral obtained, if
deemed necessary by the Company upon extension of credit, is based on
management's credit evaluation of the borrower.  Collateral varies but may
include accounts receivable, inventory, property, plant and equipment, farm
products, livestock and income producing commercial properties.

	At December 31, 1999 and 1998, commitments under letters of credit were
$72,105 and $25,000, respectively.  The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending loan
facilities to customers.  Collateral varies but may include accounts
receivable, inventory, equipment, marketable securities and property.  Since
most of the letters of credit are expected to expire without being drawn upon,
they do not necessarily represent future cash requirements.

	The Company makes commercial, agricultural, real estate and consumer
loans to individuals and businesses located in and around Wilkes County, North
Carolina.  The Company does not have a significant concentration of credit
risk with any individual borrower.  However, a substantial portion of the
Company's loan portfolio is collateralized by real estate located in and
around Wilkes County, North Carolina.


NOTE 21 - REGULATORY MATTERS

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

	Qualitative measures established by regulation to ensure capital
adequacy require the Company and the Bank to maintain minimum amounts and
ratios (set forth in the table below) of total and Tier 1 capital (as defined
in the regulations) to risk-weighted assets (as defined), and of Tier 1
capital to average assets (as defined).  Management believes, as of December
31, 1999, that the Company and the Bank meet all capital adequacy requirements
to which they are subject.

	As of  December 31, 1999, the Bank was considered to be Well
Capitalized.  To be categorized as Adequately Capitalized or Well Capitalized,
the Bank must maintain minimum total risk based, Tier 1 risk-based and Tier 1
leverage ratios as set forth in the table below.  The actual capital amounts
and ratios are also presented in the table below:

                            Minimum Regulatory Capital Guidelines for Banks
                            -----------------------------------------------
                                              Adequately        Well
(Dollars in thousands)            Actual      Capitalized    Capitalized
                              -------------  -------------  -------------
                              AMOUNT  RATIO  AMOUNT  RATIO  AMOUNT  RATIO

As of December 31, 1999:
Total capital-risk-based
(to risk-weighted assets):
   Bank                      $11,019  14.0%  $6,310 >= 8%  $7,888 >= 10%
   Consolidated               12,879  16.3%   6,319 >= 8%    N/A  >= N/A

Tier 1 capital-risk-based
(to risk-weighted assets):
   Bank                      $10,033  12.8%  $3,155 >= 4%  $4,733 >= 6%
   Consolidated               11,892  15.1%   3,160 >= 4%    N/A  >= N/A

Tier 1 capital-leverage
(to average assets):
   Bank                      $10,033   9.5%  $4,220 >= 4%  $5,275 >= 5%
   Consolidated               11,892  11.2%   4,226 >= 4%    N/A  >= N/A

                            Minimum Regulatory Capital Guidelines for Banks
                            -----------------------------------------------
                                              Adequately        Well
(Dollars in thousands)            Actual      Capitalized    Capitalized
                              -------------  -------------  -------------
                              AMOUNT  RATIO  AMOUNT  RATIO  AMOUNT  RATIO

As of December 31, 1998:
Total capital-risk-based
(to risk-weighted assets):
   Bank                      $ 9,450  12.8%  $5,907 >= 8%  $7,384 >= 10%
   Consolidated               12,921  17.0%   6,088 >= 8%    N/A  >= N/A

Tier 1 capital-risk-based
(to risk-weighted assets):
   Bank                      $ 8,527  11.6%  $2,954 >= 4%  $4,431 >= 6%
   Consolidated               11,970  15.7%   3,044 >= 4%    N/A  >= N/A

Tier 1 capital-leverage
(to average assets):
   Bank                      $ 8,527   8.7%  $3,938 >= 4%  $4,923 >= 5%
   Consolidated               11,970  11.9%   4,016 >= 4%    N/A  >= N/A


NOTE 22 - DIVIDENDS

	The primary source of funds available to the Company to pay shareholder
dividends and other expenses is from the Bank.  Bank regulatory authorities
impose restrictions on the amounts of dividends that may be declared by the
Bank.  Further restrictions could result from a  review by regulatory
authorities of the Bank's capital adequacy. For the years ended December 31,
1999 and 1998, no dividends were paid to shareholders.


NOTE 23 - PARENT COMPANY FINANCIAL INFORMATION

	This information should be read in conjunction with the other notes to
the consolidated financial statements.

                         Parent Company Balance Sheets
                         -----------------------------
                                                     December 31,
Assets                                             1999        1998
------                                             ----        ----
Cash                                            $ 2,196,361  $ 1,450,663
Investment in Community Mortgage                     54,678       47,702
Investment in Bank                                9,802,377    8,618,413
Property and equipment                              111,367    1,883,642
Other assets                                         43,632       19,493
                                                 ----------   ----------
   Total Assets                                 $12,208,415  $12,019,913
                                                 ==========   ==========

Liabilities and Shareholders' Equity:
------------------------------------
Accounts payable                                $    72,979  $    49,979
                                                 ----------   ----------
   Total Liabilities                            $    72,979  $    49,979
                                                 ----------   ----------

Common stock                                    $ 4,402,152  $ 4,340,952
Paid-in-capital                                   4,742,143    5,769,693
Retained earnings                                 3,221,263    1,767,794
Unrealized gain on securities                      (230,122)      91,495
                                                 ----------   ----------
   Total Shareholders' equity                   $12,135,436  $11,969,934
                                                 ----------   ----------
   Total Liabilities and Shareholders' equity   $12,208,415  $12,019,913
                                                 ==========   ==========


                     Parent Company Statements of Income
                     -----------------------------------

                                                     December 31,
Revenues                                           1999        1998
--------                                           ----        ----
  Interest income                               $    98,164  $    63,652
  Rental income                                       --          55,450
  Other income                                          707        --
                                                 ----------   ----------
     Total revenues                             $    98,871  $   119,102
                                                 ----------   ----------

Expenses:
--------
  Depreciation and amortization                 $     7,170  $    31,782
  Professional fees                                 106,949      290,613
  Other expenses                                     43,132       51,580
                                                 ----------   ----------
     Total expenses                             $   157,251  $   373,975
                                                 ----------   ----------
(Loss) before taxes and equity in undistributed
  earnings of subsidiaries                      $   (58,380) $  (254,873)
Tax (benefit)                                         --           --
                                                 ----------   ----------
(Loss) before equity in
 undistributed earnings of subsidiaries         $   (58,380) $   254,873)
Equity in undistributed
 earnings of subsidiaries                         1,511,849    1,231,286
                                                 ----------   ----------
  Net Income                                    $ 1,453,469  $   976,413
                                                 ==========   ==========


                Parent Company Statements of Cash Flows


                                                     December 31,
Cashflows from operating activities:               1999        1998
-----------------------------------                ----        ----
  Net income                                    $ 1,453,469  $   976,413
  Adjustments to reconcile net income to
  net cash provided by operating activities:
    Equity in undistributed
     earnings of subsidiaries                    (1,511,849)  (1,231,286)
   Depreciation and amortization                      7,170       31,782
   (Increase) in receivables and other assets       (31,508)      31,327
   Increase in payables                              23,000       27,619
                                                 ----------   ----------
  Net cash used by operating activities         $   (59,718) $  (164,145)
                                                 ----------   ----------

Cash flows from investing activities:
------------------------------------
  Sale of property and equipment                $ 1,771,766  $  (314,100)
                                                 ----------   ----------
  Net cash provided from financing activities   $ 1,771,766  $  (314,100)
                                                 ----------   ----------

Cash flows from financing activities:
  Cancellation of options/warrants              $(1,155,100) $     --
  Exercise of warrants/options                      188,750      838,954
                                                 ----------   ----------
Net cash used by financing activities           $  (966,350) $   838,954
                                                 ----------   ----------

Net increase in cash and cash equivalents       $   745,698  $   360,709
Cash and cash equivalents,
 beginning of the year                            1,450,663    1,089,954
                                                 ----------   ----------
Cash and cash equivalents, end of year          $ 2,196,361  $ 1,450,663
                                                 ==========   ==========


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

	There has been no occurrence requiring a response to this Item.


                                     PART III

	The information relating to Items 9, 10, 11 and 12 of this Report will be
filed as an amendment to this Report on or before April 29, 2000 or the
Company will otherwise have filed a definitive proxy statement involving the
election of directors pursuant to Regulation 14A, which definitive proxy
statement will contain such information.


Item 13.  Exhibits and Reports on Form 8-K.
-------   --------------------------------

	(a)  EXHIBITS.  The following exhibits are filed with or incorporated by
reference into this report.  The exhibits which are denominated by an asterisk
(*) were previously filed as a part of, and are hereby incorporated by
reference from either (i) a Registration Statement on Form S-1 under the
Securities Act of 1933 for the Company, Registration Number 33-36512 (referred
to as "S-1"), (ii) the Annual Report on Form 10-K of the Company for the year
ended December 31, 1991 (referred to as "1991 10-K"), (iii) the Annual Report
on Form 10-KSB of the Company for the year ended December 31, 1993 (referred
to as "1993 10-K"), (iv) the Quarterly Report on Form 10-KSB of the Company
for the quarter ended September 30, 1995 (referred to as "10-Q"), (v) a
Registration Statement on Form S-2 under the Securities Act of 1933 for the
Company, Registration Number 33-99416 (referred to as "S-2"), (vi) the Annual
Report on Form 10-KSB for the year ended December 31, 1996 (referred to as
"1996 10-K"), or (vii) the Current Report on Form 8-K dated February 18, 1999
(referred to as "8-K").  The exhibit numbers correspond to the exhibit numbers
in the referenced document.

Exhibit No.                       Description of Exhibit
----------                        ----------------------

    *3.1     -    Articles of Incorporation dated June 11, 1990 (S-1).

    *3.2     -    Articles of Amendment dated August 21, 1990 (S-1).

    *3.2.1   -    Articles of Amendment dated November 13, 1995 (10-Q).

    *3.3     -    Amended and Restated Bylaws (8-K).

    *10.4    -    Lease Agreement dated June 27, 1991 by and between
                  Registrant and Edward F. and Frances C. Greene, for
                  facility located in Wilkesboro, North Carolina (1991
                  10-K).

    *10.5    -    Lease Agreement dated November 17, 1993 by and between
                  Registrant and Edward F. Greene and Joe D. Severt for
                  facility located in North Wilkesboro, North Carolina
                  (1993 10-K).

    *10.6    -    Employment Agreement, dated February 1, 1995, by and
                  among Community Bancshares, Inc., Wilkes National Bank
                  and Ronald S. Shoemaker (S-2).

    *10.7    -    Lease Agreement dated February 25, 1997 by and between
                  Wilkes National Bank and Edward F. and Francis C.
                  Greene, for facility located at 1600 Curtis Bridge
                  Road, Wilkesboro, North Carolina (1996 10-K).

     21.1    -    Subsidiaries of the Registrant.

     23.1    -    Consent of Francis & Co.

     27.1    -    Financial Data Sheet (for SEC use only).

	(b)	REPORTS ON FORM 8-K.  No reports on Form 8-K were required to be
filed for the fourth quarter of 1999.


                                 SIGNATURES
                                 ----------

	Pursuant to the requirements of Section 15(d) of the Securities Exchange
Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                                    COMMUNITY BANCSHARES, INC.



Dated: March 28, 2000               By: /s/ Ronald S. Shoemaker
                                        -------------------------
                                    Ronald S. Shoemaker
                                    President and Chief Executive Officer
                                    (chief executive, financial and accounting
                                     officer)

	Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated

             Signature                                    Date
             ---------                                    ----

/s/ Brent F. Eller                                     March 29, 2000
-------------------------------------
   BRENT F. ELLER
   Secretary, Treasurer and Class I Director

/s/ Jack R. Ferguson                                   March 29, 2000
-------------------------------------
   JACK R. FERGUSON
   Class II Director

/s/ Gilbert R. Miller                                  March 29, 2000
-------------------------------------
   GILBERT R. MILLER
   Class I Director

/s/ Randy D. Miller                                    March 29, 2000
-------------------------------------
   RANDY D. MILLER
   Class I Director

/s/ Dwight E. Pardue                                   March 29, 2000
-------------------------------------
   DWIGHT E. PARDUE
   Class III Director

/s/ Robert F. Ricketts, D.D.S.                         March 29, 2000
-------------------------------------
   ROBERT F. RICKETTS, D.D.S.
   Class II Director

/s/ Rebecca Ann Sebstian                               March 29, 2000
-------------------------------------
   REBECCA ANN SEBASTIAN
   Class I Director

/s/ R. Colin Shoemaker                                 March 29, 2000
-------------------------------------
   R. COLIN SHOEMAKER
   Class III Director

/s/ Ronald S. Shoemaker                                March 29, 2000
-------------------------------------
   RONALD S. SHOEMAKER
   President and Class III Director


                               EXHIBIT INDEX


Exhibit
Number                   Description of Exhibit
-------                  ----------------------

  21.1              Subsidiaries of the Registrant.

  23.1              Consent of Francis & Co.

  27.1              Financial Data Schedule (for SEC use only)



                                                        EXHIBIT 21.1


                    SUBSIDIARIES OF THE REGISTRANT


Wilkes National Bank, a national banking association

Community Mortgage Corporation, a North Carolina corporation


                                                        EXHIBIT 23.1


                     INDEPENDENT AUDITOR'S CONSENT


We consent to the incorporation by reference into the Form S-8 Registration
Statement of Community Bancshares, Inc. (Registration No. 333-46231) of our
report dated February 17, 2000, appearing in the Annual Report on Form 10-KSB
of Community Bancshares, Inc. for the year ended December 31, 1999.


                                      /s/ Francis & Co., CPAs
                                      --------------------------
                                      Francis & Co., CPAs



Atlanta, Georgia
March 28, 200