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, 1998
              _______________________________________________
 
                      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, 1998:  $9,097,732

The aggregate market value of the Common Stock of the Registrant held by 
nonaffiliates of the Registrant (573,662 shares) on March 15, 1999, was 
approximately $4,743,000.  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, 1998.  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 
15, 1999: 1,447,884 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 28, 1999 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 1999 
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 and Keogh 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, 1998, deposits at the Bank represented approximately 
13.3% of total deposits of financial institutions in the Bank's primary 
service area.  This compares with a market share of approximately 12.5% at 
June 30, 1997 and 9.3% at June 30, 1996.

	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, 1998 and 1997.  This 
presentation includes all major categories of interest-earning assets and 
interest-bearing liabilities:

                      AVERAGE CONSOLIDATED ASSETS

                                                 Years Ended December 31,
                                                 ------------------------
                                                     1998        1997
                                                     ----        ----
                                                      (in thousands)
Cash and due from banks                           $  3,306     $ 2,168
                                                   -------      ------
Taxable securities                                  21,018      16,373
Non-taxable securities                               1,431          21
Federal funds sold                                   1,384       1,230
Net loans                                           70,207      61,773
                                                   -------      ------
     Total earning assets                           94,040      79,397
Other assets                                         3,060       2,080
                                                   -------      ------
     Total assets                                 $100,406     $83,645
                                                   =======      ======

         AVERAGE CONSOLIDATED LIABILITIES AND STOCKHOLDERS' EQUITY

                                                 Years Ended December 31, 
                                                 ------------------------
                                                     1998        1997
                                                     ----        ----
Non interest-bearing deposits                      $ 6,384     $ 4,823
NOW and money market deposits                       15,707      12,766
Savings deposits                                     3,418       2,420
Time deposits                                       61,948      52,569
Federal funds and repurchase agreements                429         286
Other liabilities                                    1,307       1,050
                                                   -------      ------
  Total liabilities                                 89,193      73,914
Stockholders' equity                                11,213       9,731
                                                   -------      ------
  Total liabilities and stockholders' equity      $100,406     $83,645
                                                   =======      ======

	The following is a presentation of an analysis of the net interest 
earnings of 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, 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%
Federal funds and 
  repurchase agreements                      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.


                                          Year Ended December 31, 1997
                                          ----------------------------
                                        Average     Interest     Average
                Assets                  Amount       Earned       Yield
                ------                  -------     --------     -------
                                             (Dollars in thousands)
Taxable securities                       $16,373      $1,057       6.45%
Non-taxable securities                        21           1       6.67%(3)
Federal funds sold                         1,230          67       5.44%
Net loans                                 61,773(1)    6,139(2)    9.94%
                                          ------       -----
    Total earning assets                 $79,397      $7,264       9.15%
                                          ======       =====

                                         Average     Interest     Average
              Liabilities                Amount       Paid       Rate Paid
              -----------                -------     --------    ---------
NOW and money market deposits            $12,766      $  443       3.47%
Savings deposits                           2,420          75       3.12%
Time deposits                             52,569       3,140       5.97%
Federal funds and 
  repurchase agreements                      286          15       5.11%
                                          ------       -----
   Total interest-
    bearing liabilities                  $68,041     $ 3,673       5.40%
                                          ======      ======
Net yield on earning assets                                        4.52%
                                                                   ====
______________________
(1)	Twelve loans aggregating 96 were on non-accrual status on December 
      31, 1997.
(2)	Interest earned on net loans includes $171 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, 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 deposits             98        (16)         82
Savings deposits                          29         (5)         24
Time deposits                            541        (76)        465
Federal funds and 
 repurchase agreements                     5         (2)          3
                                       -----     ------       -----
     Total interest expense              673        (99)        574
                                       -----     ------       -----
Change in net interest income         $  540    $   190      $  730
                                       =====     ======       =====

                                      Year Ended December 31, 1997
                                            Compared to
                                      Year Ended December 31, 1996
                                      ----------------------------
                                       Increase (decrease) due to:
                                      Volume      Rate        Total
                                      ------      ----        -----
                                            (In thousands)
Interest earned on:
Taxable securities                     $  171   $     6     $  177
Non-taxable securities                      1        --          1
Federal funds sold                          7       (19)       (12)
Net loans                               1,831        39      1,870
                                        -----    ------      -----
     Total interest income              2,010        26      2,036
                                        -----    ------      -----
Interest paid on:
NOW and money market deposits             110        --        110
Savings deposits                           18         2         19
Time deposits                             785       (39)       746
Federal funds and 
 repurchase agreements                     (3)       (1)        (4) 
                                        -----    ------      -----
     Total interest expense               910       (38)       871
                                        -----    ------      -----
Change in net interest income          $1,100   $    64     $1,165
                                        =====    ======      =====


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 and Keogh 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, 1998
                                       ------------------------------------
      Deposit Category                 Average Amount     Average Rate Paid
      ----------------                 --------------     -----------------
                                              (Dollars in thousands)
Non interest-bearing 
  demand deposits                        $ 6,384           Not Applicable

NOW and money
  market deposits                        $15,707              3.34%

Savings deposits                         $ 3,418              2.90%

Time deposits                            $61,948              5.82%

Federal funds and 
  repurchase agreements                  $   429              4.20%


                                                    Year Ended
                                                 December 31, 1997 
                                       ------------------------------------
      Deposit Category                 Average Amount     Average Rate Paid
      ----------------                 --------------     -----------------
                                              (Dollars in thousands)
Non interest-bearing 
  demand deposits                         $ 4,823        Not Applicable

NOW and money
  market deposits                         $12,766             3.47%

Savings deposits                          $ 2,420             3.12%

Time deposits                             $52,569             5.97%

Federal funds and 
  repurchase agreements                   $   286             5.11%

	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, 1998:

                                   Time Certificates
                                       of Deposit 
                                   -----------------
                                     (In thousands)

            3 months or less            $ 8,081
            3-6 months                    6,340
            6-12 months                   7,439
            over 12 months                1,712
                                         ------
            Total                       $23,572
                                         ======


LOAN PORTFOLIO

	The Bank engages in a full complement of lending activities, 
including commercial, consumer/installment and real estate loans.  As of 
December 31, 1998, the Bank had a legal lending limit for unsecured 
loans of up to $1,279,000 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,
               ------------                      ------------------
                                                 1998          1997
                                                 ----          ----
Domestic:                                         (In thousands)
  Commercial, financial and agricultural       $29,133       $28,215
  Real estate-construction                       7,699         6,572
  Real estate-mortgage                          20,831        21,088
  Installment and other loans to individuals    15,405        14,016
  Lease financing                                  159           336
                                                ------        ------
Subtotal                                        73,227        70,227
  Less: Allowance for possible loan losses      (1,107)       (1,033)
                                                ------        ------
Total (net of allowance)                       $72,120       $69,194
                                                ======        ======

	The following is a presentation of an analysis of maturities of 
loans as of December 31, 1998:

                             Due in 1    Due After   Due After
     Type of Loan         Year or Less  1 to 5 Yrs    5 Yrs      Total
     ------------         ------------  ----------   ---------   -----
                                            (In thousands)
Commercial, financial
  and agricultural          $24,567       $3,642       $924     $29,133
Real estate-construction      6,260        1,439         --       7,699
                             ------        -----        ---      ------
  Total                     $30,827       $5,081       $924     $36,832
                             ======        =====        ===      ======

	For the above loans, the following is a presentation of an analysis
of sensitivities to changes in interest rates as of December 31, 1998:

                             Due in 1    Due After   Due After
     Interest Category    Year or Less  1 to 5 Yrs    5 Yrs      Total
     -----------------    ------------  ----------   ---------   -----
                                            (In thousands)
Predeterimined
   interest rate             $ 8,809       $1,586     $ --      $10,395
Floating interest rate        22,018        3,495      924       26,437
                              ------        -----      ---       ------
  Total                      $30,827       $5,081     $924      $36,832
                              ======        =====      ===       ======

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

	As of December 31, 1997, twelve loans totaling $95,501 were 
accounted for on a non-accrual basis, and no loans were defined as 
"troubled debt restructurings."  As of December 31, 1997, non-accrual 
loans represented 0.14% of total loans, while the ratio of the allowance 
for loan losses to non-accrual loans was 10.8 to 1.0.  At December 31, 
1997, there were no loans which were accruing interest and contractually 
past due 90 days or more.

	As of December 31, 1998, 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 interest income has been recognized during 1998 on loans that have 
been accounted for on a non-accrual basis.  Additional interest income 
of approximately $11,027 in 1997 would have been recorded if all loans 
accounted for on a non-accrual basis had been current in accordance with 
the original terms.  No interest income has been recognized during 1997 
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

                                                   Years ended 
                                                   December 31,
                                                   ------------
                                                1998         1997
                                                ----         ----
                                              (Dollars in thousands)

Balance at beginning of period                 $1,033      $  619
                                                -----       -----
Charge-offs:
  Installment and other loans to individuals      (91)        (77)
  Commercial, financial, agricultural             (37)         (6)
  Real estate - mortgage                          (72)         --
  Real estate - construction                       --          --
  Lease financing                                  --          --
                                                -----       -----
                                                 (200)        (83)

Recoveries:
  Installment and other loans to individuals       16          11
  Commercial, financial, agricultural              --           1
  Real estate - mortgage                           --          --
  Real estate - construction                       --          --
  Lease financing                                  --          --
                                                -----       -----
                                                   16          12

Net charge-offs                                  (184)        (71)
                                                -----       -----
Additions charged to operations                   258         485
                                                -----       -----
Balance at end of period                       $1,107      $1,033
                                                =====       =====
Ratio of net charge-offs during the period to
  average loans out-standing during the
  period                                         0.26%       0.11%
                                                 ====        ====
	At December 31, 1998 the allowance was allocated as follows:

                                                    Percent of loans
                                                    in each category
                                          Amount     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%
                                           ======        =====

	At December 31, 1997 the allowance was allocated as follows:

                                                    Percent of loans
                                                    in each category
                                          Amount     to total loans  
                                          ------    ----------------
                                            (Dollars in thousands)

Commercial, financial and agricultural    $   460         40.2%
Real estate - construction                    106          9.4%
Real estate - mortgage                        255         30.0%
Installment and other loans to individuals    186         20.0%
Lease financing                                 7          0.5%
Unallocated                                    19          N/A
                                           ------        -----
     Total                                $ 1,033        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, 1998, 39.8% 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 92.0% of these commercial loans 
at December 31, 1998 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, 1998 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 28.5% of outstanding 
loans at December 31, 1998.  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, 1998, investment securities comprised 
approximately 25.4% of the Bank's assets and net loans comprised 
approximately 68.6% 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:

                                                   December 31,
                                                   ------------
    Investment Category                        1998            1997
    -------------------                        ----            ----
                                                  (In thousands)
Available-for-Sale:
Obligations for U.S. Treasury
  and other U.S. Agencies                     $19,648         $12,787
Tax-exempt securities                           2,300             479
Federal Reserve Bank Stock                        191             112
Other securities                                2,149             214
                                               ------          ------
Total                                         $24,288         $13,592
                                               ======          ======
Held-to-Maturity:
Obligations for U.S. Treasury
 and other U.S. Agencies                      $   --          $   250
Mortgage backed securities                      1,001             899
Other securities                                1,384           2,479
                                               ------          ------
Total                                         $ 2,385         $ 3,628
                                               ======          ======

	The following table indicates for the year ended December 31, 
1998 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:
------------------
Obligations of U.S. Treasury	
  and other U.S. Agencies:
  0 - 1 Yr.                             $ 5,598         6.05%
  Over 1 through 5 Yrs                   12,641         6.02%
  Over 5 through 10 Yrs                   1,409         5.89%

Tax-exempt securities(1): 
  Over 1 through 5 Yrs.                     886         6.21%
  Over 5 through 10 Yrs.                  1,414         7.01%

Mortgage Pools:
  0-1 Yr.                                   319         5.77%
  Over 1 through 5 Yrs.                     772         5.83%
  Over 5 through 10 Yrs                     283         5.69%

Other securities:
  0-1 Yr.                                   499         5.56%
  Over 5 through 10 Yrs.                    276         6.08%

FRB Stock (no maturity)                     191         6.00%
                                         ------
Total                                   $24,288         5.98%
                                         ======
____________________
(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:
----------------
Mortgage-backed securities:
  0- 1 Yr.                               $  192         6.86%
  Over 1 through 5 Yrs.                     804         6.73%
  Over 10 Yrs.                                5         6.78%

Mortgages Pools:
  0-1 Yr.                                   379         5.96%
  Over 1 through 5 Yrs                    1,005         6.47%
                                         ------         ----
Total:                                  $ 2,385         6.54%
                                         ======         ====


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,
                                           ------------------------
                                            1998             1997
                                            ----             ----
Return on Average Assets                    0.97%            0.75%
Return on Average Equity                    8.70%            6.50%
Average Equity to Average Assets Ratio     11.17%           11.63%
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 is required to purchase 
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, 1998 the Bank had outstanding participations totaling 
$1,344,111.


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.

	The Company is currently evaluating its computer systems as well as 
those of its data processing vendor to determine whether modifications 
and expenditures will be necessary to make its systems as well as those 
of its vendor compliant with Year 2000 requirements.  These requirements 
have arisen due to the widespread use of computer programs that rely on 
two-digit date codes to perform computations or decision-making 
functions.  Many of these programs may fail as a result of their 
inability to properly interpret date codes beginning January 1, 2000.  
For example, such programs may misinterpret "00" as the year 1900 
rather than 2000.  In addition, some equipment, being controlled by 
microprocessor chips, may not deal appropriately with the year "00."  
The Company  believes that its systems are currently year 2000 compliant 
and does not believe that material expenditures will be necessary to 
implement any further modifications.  However, there can be no assurance 
that all necessary modifications will be identified and corrected or 
that unforeseen difficulties or costs will not arise.  In addition, 
there can be no assurance that the systems of other companies on which 
the Company's systems rely will be modified on a timely basis, or that 
the failure by another company to properly modify its systems will not 
negatively impact the Company's systems or operations.


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 34 persons on a full-time basis, 
including 13 officers and three 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 Comptroller 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.

	A bank holding company is generally 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, there are 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.  Effective April 21, 1997, the Federal Reserve Board revised 
and expanded 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 
Comptroller 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 Comptroller 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 Comptroller.  
Both the Federal Reserve Board and the Comptroller 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 Comptroller'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 Comptroller 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 Comptroller 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 Comptroller'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 Comptroller has modified the list of qualifying 
intangibles, currently including only purchased credit card 
relationships and mortgage and mon-mortgage servicing assets, whether 
originated or purchased and excluding any interest-only strips 
receivable related thereto.  Furthermore, the Comptroller'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 Comptroller 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 Comptroller 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 Comptroller, 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 Comptroller, 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, 
beginning no later than January 1, 1999, covered institutions must 
"backtest," 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 Comptroller 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 
Comptroller 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.

	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.  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.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

	No matter was submitted during the fourth quarter ended 
December 31, 1998 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 15, 1999, the number of holders of record of the 
Company's Common Stock was 745.

	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 Comptroller.  
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 
Comptroller 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, 1998 COMPARED TO YEAR 
ENDED DECEMBER 31, 1997

	For the years ended December 31, 1998 and 1997, net income 
amounted to $976,413 and $628,122, respectively.  For the years ended 
December 1998 and 1997, basic income per share amounted to $0.70 and 
$0.49, respectively, and diluted income per share amounted to $0.61 and 
$0.40, respectively.  During 1998 and 1997, 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 1998 
increased by $348,291 over net income in 1997 primarily due to the 
following reasons:

	a.	Average earning assets increased from $79.4 million at 
December 31, 1997 to $94.0 million at December 31, 1998, representing an 
increase of $14.6 million, or 18.4%.  Below are the various components 
of average earning assets for the periods indicated:

                                                  December 31,
                                          -------------------------
                                             1998             1997
                                             ----             ----
                                                (In Thousands)
Federal funds sold                        $  1,384         $  1,230
Taxable securities                          21,018           16,373
Non-taxable securities                       1,431               21
Net loans                                   70,207           61,772
                                            ------           ------
Total earning assets                       $94,040          $79,396
                                            ======           ======

	b.	As a consequence of the increase in earning assets, the net 
interest income also increased from $3,590,657 for the year ended 
December 31, 1997 to $4,320,633 for the year ended December 31, 1998.  

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

                                                 Years Ended
                               December 31, 1998         December 31, 1997
                              -------------------        ------------------
                              Interest      Yield        Interest     Yield
                           Income/expense    Cost     Income/expense   Cost
                           --------------   -----     --------------  -----
                                          (Dollars in Thousands)

Interest income:
---------------
Federal funds sold              $   75       5.42%       $   67        5.44%
Taxable securities               1,308       6.22%        1,057        6.45%
Non-taxable securities              63       6.70%            1        6.67%
Loans                            7,122      10.14%        6,139        9.94%
                                 -----                    -----
     Total                      $8,568       9.11%       $7,264        9.15%
                                 =====                    =====
Interest expense:
----------------
NOW and money market deposits   $  525      3.34%        $  443        3.47%
Savings deposits                    99      2.90%            75        3.12%
Time deposits                    3,605      5.82%         3,140        5.97%
Federal funds and repurchase 
  Agreements                        18      4.20%            15        5.11%
                                 -----                    ----
     Total                      $4,247      5.21%        $3,673        5.40%
                                 =====                    =====
     Net interest income        $4,321                   $3,591
                                 =====                    =====
     Net yield on earning assets            4.59%                      4.52%
                                            ====                       ====

	c.	Non-interest income as a percentage of average total assets 
for 1998 and 1997 amounted to 0.53% and 0.56%, respectively.  The 1998 
results are slightly below those of 1997 because of the lower fees and 
charges earned by Community Mortgage Corporation, a wholly owned 
subsidiary of the Company ("Community Mortgage").  Non-interest 
expense, as a percentage of average assets for 1998 and 1997, amounted 
to 2.92% and 2.81%, respectively.  The primary reasons for the increase 
in expense in 1998, as compared to 1997 are relocation expenses 
associated with the North Wilkesboro branch and the Company's 
administrative office, additional personnel expenses and professional 
fees paid in connection with the shareholder litigation.


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 1998 was $4,320,633 as 
compared to $3,590,657 for 1997. Average yields on earning assets were 
9.11% and 9.15% for the years ended December 31, 1998 and 1997, 
respectively.  The average costs of funds for 1998 decreased to 5.21% 
from the 1997 cost of 5.40%.  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, 1998 and 1997 amounted to 4.59% 
and 4.52%, respectively.  Net interest income for 1998 as compared to 
1997 increased by $729,976, primarily due to the increase in average 
earning assets from $79.4 million in 1997 to $94.0 million in 1998 and 
due to the increase in net yield on earning assets, from 4.52% in 1997 
to 4.59% in 1998.


NON-INTEREST INCOME

	Non-interest income for the years ended December 31, 1998 and 1997 
amounted to $529,912 and $465,821, respectively.  As a percentage of 
average assets, non-interest income decreased from 0.56% in 1997 to 
0.53% in 1998 primarily because of lower fees earned by Community 
Mortgage. 

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

                                          Year Ended December 31,
                                          -----------------------
                                              1998         1997
                                              ----         ----
                                                (In Thousands)
Service fees on deposit accounts            $   164      $   137
Gain (Loss) on sale of securities                 1           (5)
Fees from Community Mortgage                    244          258
Miscellaneous, other                            121           76
                                             ------       ------
Total non-interest income                   $   530      $   466
                                             ======       ======


NON-INTEREST EXPENSE

	Non-interest expense increased from $2,347,494 during 1997 to 
$2,930,160 in 1998.  As a percent of total average assets, non-interest 
expense increased from 2.81% in 1997 to 2.92% in 1998.  Below are the 
components of non-interest expense for the years 1998 and 1997.

                                          Year Ended December 31,
                                          -----------------------
                                              1998         1997
                                              ----         ----
                                                (In Thousands)
   Salaries and other personnel benefits    $1,418       $1,215
   Data processing charges                     197          138
   Professional fees                           357          158
   Postage and courier fees                     89           76
   Supplies and printing                       116          114
   Rent and lease expense                      123          117
   Other expenses                              630          529
                                             -----        -----
     Total non-interest expense             $2,930       $2,347
                                             =====        =====

	During 1998, the allowance for loan losses grew from $1,033,393 to 
$1,106,830.  The allowance for loan losses as a percent of gross loans 
increased from 1.47% at December 31, 1997 to 1.51% at December 31, 1998.  
As of December 31, 1998, 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 1998 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 six
                                 months     months  After one
                        Within    but        but     year but   After
                        three    within     within   within     five
                        months  one year  one year  five years  years  Total
                        ------  --------  --------  ----------  -----  -----
EARNING ASSETS                        (Dollars in Thousands)
Loans                   $42,762  $ 4,230  $ 10,727   $13,861  $ 1,647  $73,227
Securities                  327      501     6,159    16,108    3,578   26,673
                         ------   ------   -------    ------   ------   ------
Total earning assets    $43,089  $ 4,731  $ 16,886   $29,969  $ 5,225  $99,900
                         ======   ======   =======    ======   ======   ======

SUPPORTING SOURCES OF FUNDS
Interest-bearing demand
 deposit and savings    $21,021 $   --    $   --     $  --    $   --   $21,021
Certificates, 
  less than $100M         9,257   11,779    12,397     5,321      --    38,754
Certificates,
  $100M and over          8,081    6,340     7,439     1,712      --    23,572
                         ------   ------   -------    ------   ------   ------
Total interest-
 bearing liabilities    $38,359 $ 18,119  $ 19,836   $ 7,033  $   --   $83,347
                         ======   ======   =======    ======   ======   ======

Interest rate
 sensitivity gap         $4,730 $(13,388) $ (2,950)  $22,936  $ 5,225  $16,553
Cumulative gap            4,730   (8,658)  (11,608)   11,328   16,553   16,553
Interest rate
 sensitivity gap ratio     1.12     0.26      0.85      4.26     N.A.     1.20
Cumulative interest rate
 sensitivity gap ratio     1.12     0.85      0.85      1.14     1.20     1.20

	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 $9.5 million in 1998.  Below are the 
pertinent liquidity balances and ratios for the years ended December 31, 
1998 and 1997.
                                                      December 31,
                                                 --------------------
                                                   1998        1997
                                                   ----        ----
                                                (Dollars in Thousands)

   Cash and cash equivalents                     $  3,181     $ 4,034
   Marketable securities                           26,673      17,220
   CDS, over $100,000 to total deposits ratio        25.8%       25.8%
   Loan to deposit ratio                             79.0%       84.6%
   Brokered deposits                                  --          --

	Large denomination certificates during 1998 have increased 
approximately $2.5 million, but reliance on such certificates to fund 
normal banking operations has been maintained at a constant level in 
relation to other sources of funds.  At December 31, 1998 and 1997, 
large denomination certificates accounted for 25.8% of total deposits 
for each of the above two years.  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 $7.0 million of the $26.7 
million in the Bank's securities portfolio is scheduled to mature during 
1999.  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, 1998 and 1997, 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 82,986 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 Comptroller 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 
Comptroller 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, 1998.

                                                          Minimum
                                                         Regulatory
                                      December 31, 1998  Requirement
                                      -----------------  -----------
Bank
----
Tier 1 Capital                             11.6%            4.0%
Tier 2 Capital                              1.2%            N/A 
                                           ----             ---
  Total risk-based capital ratio           12.8%            8.0%
                                           ====             ===

Leverage ratio                              8.7%            3.0%
                                            ===             ===

Company - Consolidated
----------------------
Tier 1 Capital                             15.7%            4.0%
Tier 2 Capital                              1.3%            N/A 
                                           ----             ---
  Total risk-based capital ratio           17.0%            8.0%
                                           ====             ===

Leverage ratio                             11.9%            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.


YEAR 2000

	A critical issue affecting companies that rely extensively on 
electronic data processing systems, such as the Company, is the Year 
2000 issue.  The Year 2000 issue has arisen due to the widespread use of 
computer programs that rely on two-digit date codes to perform 
computations or decision making functions.  Many of these programs may 
fail as a result of their inability to properly interpret date codes 
beginning January 1, 2000.  For example, such programs may misinterpret 
"00" as the year 1900 rather than the year 2000.  In addition, some 
equipment being controlled by microprocessor chips may not deal 
appropriately with the year "00."  This could result in a system failure 
or miscalculations causing disruptions of operations, including among 
other things, a temporary inability to process transactions or engage in 
similar, normal business activities.

	The Bank primarily uses a third-party vendor for processing its 
primary banking applications.  During 1997, the Bank formed an internal 
task force, chaired by its Operations Executive, to address the Year 
2000 issue, conduct a comprehensive review of the Bank's systems and 
ensure that the Bank takes any necessary measures.  The Bank is 
currently involved in testing its systems to ensure that they are Year 
2000 compliant.  Management estimates that the Bank will incur 
approximately $50,000 in expenditures relating to Year 2000 compliance.  
As of December 31, 1998, the Company had spent approximately $1,500 to 
upgrade its software and hardware systems to help ensure that they would 
be Year 2000 complaint.  Further, all third-party vendors have been 
contacted to provide assurances that their data processing programs and 
systems are Year 2000 compliant now or will be well in advance of the 
year 2000.  The Company believes that its systems and those of its data 
processing vendors are currently Year 2000 compliant and does not 
believe that material expenditures will be necessary to implement any 
further modifications.  However, there can be no assurance that 
unforseen difficulties or costs will not arise.  In addition, there can 
be no assurance that systems of other companies on which the Company's 
systems rely, such as the Bank's data processing vendor, will be 
modified on a timely basis, or that the failure by another company to 
properly modify its systems will not negatively impact the Company's 
systems or operations.


ITEM 7.  FINANCIAL STATEMENTS.

	The following financial statements are filed with this report:

	Report of Independent Accountants

	Consolidated Balance Sheet - December 31, 1998

	Consolidated Statements of Income - Years ended December 31, 1998
	and 1997

	Consolidated Statements of Changes in Shareholders' Equity - Years
	ended December 31, 1998 and 1997

	Consolidated Statements of Cash Flows - Years ended December 31, 1998
	and 1997

	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, 
1998 and 1997, and the related consolidated statements of income, changes in 
shareholders' equity and cash flows for the years then ended.  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, 1998 
and 1997, and the consolidated results of their operations and their cash flows 
for each of the years in the two-year period ended December 31, 1998, in 
conformity with generally accepted accounting principles.

                                      /s/ Francis & Company, CPAs

Atlanta, Georgia
March 10, 1999


                            COMMUNITY BANCSHARES,INC.
                           WILKESBORO, NORTH CAROLINA
                           Consolidated Balance Sheets

                                  ASSETS 
                                                     As of December 31,
                                                 ---------------------------
                                                     1998           1997
                                                     ----           ----
Cash and due from banks                          $  3,181,025   $  2,534,421
Federal funds sold, net  (Note 3)                      --          1,500,000
                                                  -----------    -----------
  Total cash and cash equivalents                $  3,181,025   $  4,034,421
Securities:  (Notes 2, 4 & 5)
  Available-for-sale at fair value                 24,288,316     13,592,071
Held to maturity (Estimated market 
  values of $2,416,622 and $3,644,394 at
  December 31, 1998 and 1997, respectively          2,385,162      3,627,805
Loans, net  (includes loans of  $1,013,866
  (1998) and $2,097,432 (1997) to insiders)
  (Notes 2, 6, 7 & 16)                             72,120,625     69,194,004
Property and equipment, net  (Notes 2 & 8)          2,214,607      1,806,059
Goodwill                                               19,984         26,645
Other assets                                          923,482        794,652
                                                  -----------     ----------
  Total Assets                                   $105,133,201    $93,075,657
                                                  ===========     ==========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
Deposits
  Non-interest bearing deposits                  $  7,959,459    $ 5,910,213
  Interest bearing deposits                        83,347,077     75,869,351
                                                  -----------     ----------
       Total deposits  (Note 10)                 $ 91,306,536    $81,779,564
Other liabilities                                   1,856,731      1,191,085
                                                  -----------     ----------
  Total Liabilities                              $ 93,163,267    $82,970,649
                                                  -----------     ----------

Commitments and Contingencies  (Note 9)

Shareholders' Equity:  (Notes 1, 11 & 15)
Common stock, $3.00 par value, 10,000,000
  shares   authorized, 1,446,984 (1998) and
  1,297,156 (1997) issued and outstanding         $  4,340,952   $ 3,891,468
Paid-in-capital                                      5,769,693     5,380,223
Retained earnings                                    1,767,794       791,381
Unrealized gain on securities, net                      91,495        41,936
                                                   -----------    ----------
   Total Shareholders' Equity                     $ 11,969,934   $10,105,008
                                                   -----------    ----------
   Total Liabilities and Shareholders' Equity     $105,133,201   $93,075,657
                                                   ===========    ==========

           Refer to notes to the consolidated financial statements.


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

                                                  Years Ended December 31,
                                                 -------------------------
                                                     1998           1997
Interest Income:                                     ----           ----
 Interest and fees on loans                      $ 7,121,587   $ 6,138,953
 Interest on investment securities                 1,370,889     1,057,699
 Interest on federal funds sold                       75,344        66,940
                                                  ----------    ----------
    Total interest income                        $ 8,567,820   $ 7,263,592
                                                  ----------    ----------
Interest Expense:
 Interest on deposits and borrowings  (Note 12)  $ 4,247,187   $ 3,672,935
                                                  ----------    ----------

Net interest income                                4,320,633     3,590,657
Provision for possible loan losses  (Note 7)         258,257       485,000
                                                  ----------    ----------
Net interest income after provision for
possible loan losses                             $ 4,062,376   $ 3,105,657
                                                  ----------    ----------
Other Income:
  Gain/(loss) on sale of securities  (Note 4)    $     1,360   $    (4,618)
  Service fees on deposit accounts                   164,058       137,070
  Fees from Community Mortgage                       243,632       257,996
  Miscellaneous, other                               120,862        75,373
                                                  ----------    ----------
      Total other income                         $   529,912   $   465,821
                                                  ----------    ----------
Other Expenses:
  Salaries and benefits                          $ 1,418,436   $ 1,214,956
  Data processing expense                            196,876       137,924
  Professional fees                                  356,612       158,024
  Supplies and printing                              115,719       114,324
  Rent and lease expense                             123,333       116,691
  Postage and courier                                 89,441        76,323
  Other operating expenses  (Note 13)                629,743       529,252
                                                  ----------    ----------
Total other expenses                             $ 2,930,160   $ 2,347,494
                                                  ----------    ----------

Income before income tax                         $ 1,662,128   $ 1,223,984
Income tax  (Notes 2 & 14)                           685,715       595,862
                                                  ----------    ----------

Net income                                       $   976,413   $   628,122

Other comprehensive income, net of tax
  Unrealized holding gains, securities                49,559        34,532
                                                  ----------    ----------

Comprehensive income                             $ 1,025,972   $   662,654
                                                  ==========    ==========

Basic earnings per share  (Note 2)               $       .70   $       .49
                                                  ==========    ==========
Diluted earnings per share (Note 2)              $       .61   $       .40
                                                  ==========    ==========

            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, 1998 and 1997

                  Number   Common      Paid              Unrealized
                   Of      Stock       -in-    Retained    Gain,
                  Shares  Par Value   Capital  Earnings  Securities   Total
                  ------  ---------   -------  --------  ----------   -----
Balance,
  December 31, 
  1995           781,786 $2,345,358 $1,868,236 $ (187,710) $17,242 $4,043,126
                 -------  ---------  ---------  ---------   ------  ---------

Net income,
  1996            -   -      -   -     -   -      350,969    -   -    350,969

Net unrealized 
  (losses)
  - securities    -   -      -   -     -   -       -   -    (9,838)    (9,838)

Exercise of
  warrants         1,800      5,400      4,500     -   -     -   -      9,900

Exercise of
  Options            800      2,400      5,100     -   -     -   -      7,500

Sale of stock    500,000  1,500,000  3,434,242     -    -    -   -  4,934,242
                 -------  ---------  ---------  ---------   ------  ---------

Balance,
  December 31,
  1996         1,284,386 $3,853,158 $5,312,078 $  163,259 $  7,404 $9,335,899
               ---------  ---------  ---------  ---------   ------  ---------

Net income,
  1997           -   -      -   -      -   -      628,122   -   -     628,122

Net unrealized
  gains
  - securities    -   -     -   -      -   -       -   -     34,532    34,532

Exercise of 
  Warrants         2,450      7,350     6,125      -    -    -    -    13,475

Exercise of
 Options          10,320     30,960    62,020      -    -    -    -    92,980
               ---------  ---------  ---------  ---------   ------  ---------

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

Net income,
  1998           -   -      -   -      -   -      976,413    -   -    976,413

Net 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
               =========  =========  =========  =========  ======  ==========

            Refer to notes to the consolidated financial statements.


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

                                                Years Ended December 31,
                                                --------------------------
                                                   1998           1997 
                                                   ----           ----
Cash flows from operating activities:
Net income                                      $    976,413  $    628,122
  Adjustments to reconcile net income to
  net cash provided by operating activities:
    Depreciation and amortization                    104,385        67,249
    Net amortization of premiums on securities        51,214        36,484
    (Gain) on sale or  settlements of securities      (1,360)        4,618
    Provisions for loan losses                       258,257       485,000
(Increase) in other assets                          (129,317)      (58,111)
(Decrease) in liabilities                            (34,354)      266,793
                                                 -----------   -----------
Net cash provided by operating activities       $  1,225,238  $  1,430,155
                                                 -----------   -----------
Cash flows from investing activities:
Available-for-sale securities: 
   Proceeds from sale of securities             $    504,687  $  2,051,632
   Proceeds from maturities and paydowns           3,973,984     3,005,042
   Purchase of securities                        (15,175,211)   (7,355,633)
Held-to-maturity securities:
   Purchase of securities                           (538,462)   (1,093,283)
   Maturities and paydowns                         1,781,105     2,889,874
Net increase in loans                             (3,184,878)  (16,892,306)
Purchase of property and equipment                  (505,785)   (1,645,784) 
                                                 -----------   -----------
Net cash used in investing activities           $(13,144,560) $(19,040,458) 
                                                 -----------   -----------

Cash flows from financing activities:
Proceeds from exercise of options
   and warrants                                 $    838,954  $    106,455
 Borrowings, FHLB                                    700,000       -  -  
 Increase in deposits                              9,526,972    17,324,387
                                                 -----------   -----------
Net cash provided from financing activities     $ 11,065,926  $ 17,430,842
                                                 -----------   -----------

Net (decrease) in cash and cash equivalents     $   (853,396) $   (179,461)
Cash and cash equivalents, beginning of year       4,034,421     4,213,882
                                                 -----------   -----------
Cash and cash equivalents, end of year          $  3,181,025  $  4,034,421
                                                 ===========   ===========

Supplemental Information: 

Income taxes paid                               $    653,516  $    563,394
                                                 ===========   ===========
Interest paid                                   $  4,339,941  $  3,465,712
                                                 ===========   ===========

           Refer to notes to the consolidated financial statements


                           COMMUNITY BANCSHARES,INC.
                           WILKESBORO, NORTH CAROLINA
                     Notes to Consolidated Financial Statements
                           December 31, 1998 and 1997


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.  Upon commencement of the Bank's planned principal 
operations on January 17, 1992, the Company acquired 100 percent of the voting 
stock of the Bank by injecting $3,750,000 into the Bank's capital accounts.  
Since then, three additional branches were established, bringing the total 
banking offices to four.

	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, 1998 and 1997, there were 1,446,984 and 1,297,156 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, 
1998, there were 235,036 warrants outstanding. The Company also has a stock 
option plan with 201,496 options outstanding as of December 31, 1998.  Details 
of the option plan are discussed under Notes 11 & 15.

	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, 1998 and 1997.


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 balance sheet 
and revenues and expenses for the 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 foreclosures or in satisfaction of loans.

	Investment Securities.  The Company adopted Statement of Financial 
Accounting Standards No. 115, "Accounting for Certain Investment in Debt and 
Equity Securities"  ("SFAS 115") on January 1, 1994.  SFAS 115 requires 
investments in equity and debt securities to be classified into three 
categories:

1.     Held-to-maturity securities.  These are securities which the Company 
       has the ability and intent to hold until maturity.  These securities 
       are stated at cost, adjusted for amortization of premiums and the 
       accretion of discounts. 

2.     Trading securities.  These are securities which are bought and held 
       principally for the purpose of selling in the near future.  Trading 
       securities are reported at fair market value, and related unrealized 
       gains and losses are recognized in the income statement.  As of 
       December 31, 1998 and 1997, the Company had no securities in this 
       category.

3.     Available-for-sale securities.  These are securities which are not 
       classified as either held-to-maturity or as trading securities.  These 
       securities are reported at fair market value.  Unrealized gains and 
       losses are reported, net of tax, as separate components of 
       shareholders' equity.  Unrealized gains and losses are excluded from 
       the income statement. 

        A decline in the fair value of any available for sale or held to 
maturity security below cost that is deemed other than temporary, results in 
a charge to income and the establishment of a new cost basis for the security

        Purchase premiums and discounts on investment securities are amortized 
and accreted to interest income using the level yield method on the 
outstanding principal balances.  In establishing the accretion of discounts
and amortization of premiums, the Company utilizes market based prepayment 
assumptions.  Interest and dividend income are recognized when earned.  
Realized gains and losses for securities sold are included in income and are 
derived using the specific identification method for determining the costs of 
securities sold.

        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.

        The Company adopted the provisions of SFAS No. 114, "Accounting by 
Creditors for Impairment of a Loan," as amended by SFAS No. 118, "Accounting 
for Impairment of a Loan - Income Recognition and Disclosure."  These standards 
require impaired loans to be measured based on the present value of expected 
future cash flows discounted at the loan's original effective interest rate, or 
at the loan's observable market price, or the fair value of the collateral if 
the loan is collateral dependent.  A loan is considered impaired when, based on 
current information and events, it is probable that the Company will be unable 
to collect all amounts due according to the contractual terms of the note 
agreement.  Cash receipts on impaired loans which are accruing interest are 
applied to principal and interest under the contractual terms of the loan 
agreement.  Cash receipts on impaired loans for which the accrual of interest 
has been discontinued are applied to reduce the principal amount of such loans 
until the principal has been recovered and are recognized as interest income 
thereafter.

	Allowance for Loan Losses.   The allowance for loan losses is established
through provisions charged to operations.  Such provisions are 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.  Loans are charged off when, in the 
opinion of management, such loans are deemed to be uncollectible.  Subsequent 
recoveries are added to the allowance.

	Management believes that the allowance for loan losses is adequate.  While 
management uses available information to recognize loan losses, future 
additions to the allowance may be necessary based on changes in economic 
conditions.  In addition, various regulatory agencies, as an integral part of 
their examination process, periodically review the Company's allowance for loan 
losses.  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 or in satisfaction of loans.  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 or acceptance in 
satisfaction of loans 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 sale and any subsequent adjustments to reflect changes in fair 
value and selling costs are recorded as a component of income.  Costs of 
improvements to other real estate are capitalized, while costs associated with 
holding other real estate are charged to operations.

	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, 1998 and 1997 would have been reduced by $22,340 and $23,734, 
respectively.  On a per share basis, basic and diluted earnings per share would 
have been reduced in each of the above years by $.02.

      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, 1998
                                    ----------------------------
                                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
                                    ===                        ===


                                    Year Ended December 31, 1997
                                    ----------------------------
                                Basic EPS                   Diluted EPS
                          -----------------------    -----------------------
                          Numerator   Denominator    Numerator   Denominator
                          ---------   -----------    ---------   -----------
Net income                $ 628,122                  $ 628,122
Weighted average shares                1,292,264                  1,292,264
Dilutive options,
  warrants, net                                                     273,674
                           --------    ---------      --------    ---------
   Totals                 $ 628,122    1,292,264     $ 628,122    1,565,938
                           ========    =========      ========    =========

EPS                                $.49                       $.40
                                    ===                        ===


        Recent Accounting Pronouncements.  Beginning January 1, 1998, the 
Company adopted the provisions of SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information," which is effective for annual and 
interim periods beginning after December 15, 1997.  This Statement establishes 
standards for the method that public entities are to use when reporting 
information about operating segments in annual financial statements and 
requires that those enterprise reports be issued to shareholders, beginning 
with annual financial statements in 1998 and for interim and annual financial 
statements thereafter.  SFAS 131 also established standards for related 
disclosures about products and services, geographic areas and major customers.

	SFAS 132, "Employers' Disclosures About Pensions and Other Postretirement 
Benefits" revises and standardizes certain disclosures which were required 
under SFAS 87, 88 and 106.  Generally, the new Statement uses a separate but 
parallel format, eliminates less useful information, requires additional data 
deemed useful by analysts, and allows some aggregation of presentation.   This 
Statement was adopted by the Company during 1998.

	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.  The Company 
has not made an assessment of the expected impact that SFAS 133 will have on
its financial statements.


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, 1998 and 1997, the 
Bank sold zero and $1,500,000, 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, 1998 follow:

                                                 Gross
                               Amortized       Unrealized        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 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
                               ==========   =======   =======    ==========

        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.

	The amortized costs and estimated market values of securities available-
for-sale as of December 31, 1997 follow:

                                                 Gross
                                 Amortized     Unrealized        Estimated
Description                       Costs      Gains   Losses    Market Values
                              -----------  --------  --------  -------------
U.S. Treasury securities      $ 3,273,964  $ 26,544  $ -   -    $ 3,300,508
U.S. Agency securities          9,449,439    41,827    (4,672)    9,486,594
FRB stock                         112,500    -   -     -   -        112,500
Municipal securities              476,585     2,051    -   -        478,636
Other securities                  216,043    -   -     (2,210)      213,833
                               ----------   -------   -------    ----------
    Total securities          $13,528,531  $ 70,422  $ (6,882)  $13,592,071
                               ==========   =======   =======    ==========

        The amortized costs and estimated market values of securities available-
for-sale at December 31, 1998, 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                        $ 6,372,557    $ 6,416,304
Due after one through five years                14,218,891     14,299,074
Due after five through ten years                 3,358,195      3,381,838
FRB stock (no maturity)                            191,100        191,100
                                                ----------     ----------
    Total securities                           $24,140,743    $24,288,316
                                                ==========     ==========

	Proceeds form sales of securities during 1998 and 1997 were $504,687 and 
$2,051,632, respectively.  Gains of $1,360 (1998) and losses of $4,618 (1997) 
were realized on those sales.

	As of December 31, 1998 and 1997, securities with an aggregate par value 
of $3,500,000 and $2,166,109, 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, 1998 follow:

                                                 Gross
                                 Amortized     Unrealized        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 as of December 31, 1997 follow:

                                                 Gross
                                 Amortized     Unrealized        Estimated
Description                       Costs      Gains   Losses    Market Values
                                ----------  -------  ------    -------------
U.S. Agency securities          $   250,000  $   625 $ -   -   $    250,625
Other securities                    988,146   10,800   (2,638)      996,308
Mortgaged backed 
 Securities                         898,615    -   -   (6,067)      892,548
Mortgage pools                     1,491,04   17,531   (3,662)    1,504,913
                                ----------    ------  -------   -----------
    Total securities            $ 3,627,805  $28,956 $(12,367) $  3,644,394
                                ==========    ======  =======   ===========

	The amortized costs and estimated market values of securities held-to-
maturity at December 31, 1998, 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 in one year or less                        $  571,342     $   573,834
Due after one year through five years           1,809,267       1,838,342
Due after ten years                                 4,553           4,446
                                                ---------      ----------
   Total securities                            $2,385,162     $ 2,416,622
                                                =========      ==========

        At December 31, 1998 and 1997, securities with an aggregate par value of
zero and $250,000, respectively, were pledged to secure public deposits.


Note 6 - Loans

	The composition of net loans by major loan category, as of December 31, 
1998 and 1997, follows:
                                                        December 31,
                                                  --------------------------
                                                     1998            1997
                                                     ----            ----
Commercial, financial, agricultural               $29,132,567    $28,215,330
Real estate - construction                          7,699,492      6,571,616
Real estate - mortgage                             20,830,973     21,088,303
Installment                                        15,404,781     14,016,280
Lease financing                                       159,642        335,868
                                                   ----------     ----------
Loans, gross                                      $73,227,455    $70,227,397
Deduct:
Allowance for loan losses                          (1,106,830)    (1,033,393)
                                                   ----------     ----------
     Loans, net                                   $72,120,625    $69,194,004
                                                   ==========     ==========

        The Company had no loans which it considered to be impaired other than 
the loans on which the accrual of interest had been discontinued.  The total 
recorded investment in impaired loans was zero and $95,501 at December 31, 1998 
and 1997, respectively.  These loans had related allowances for loan losses of 
approximately zero and $34,600 at December 31, 1998 and 1997, respectively.  
The average recorded investment in impaired loans for 1998 and 1997 was $98,406
and $148,053, respectively.  There was no significant amount of interest income
recognized on impaired loans in 1998 or 1997.


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 for loan losses accounts for the years 
ended December 31, 1998 and 1997 follows:

                                                 Years ended December 31,
                                                --------------------------
                                                   1998            1997
                                                   ----            ----
Balance, beginning of year                      $1,033,393      $  619,133
Add: Provision for loan losses                     258,257         485,000
Add: Recoveries of previously charged 
  off amounts                                       14,897          12,370
                                                 ---------       ---------
   Total                                        $1,306,547      $1,116,503
Deduct:   Amount charged-off                      (199,717)        (83,110)
                                                 ---------       ---------
Balance, end of year                            $1,106,830      $1,033,393
                                                 =========       =========


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, 1998 and 
1997 follow:
                                                        December 31,
                                                 --------------------------
                                                     1998            1997
                                                     ----            ----
Land                                             $  464,100      $  350,000
Leasehold improvement                               118,090          68,938
Building                                          1,537,333       1,337,332
Furniture and equipment                             408,632         276,423
                                                  ---------       ---------
   Property and equipment, gross                 $2,528,155      $2,032,693
Deduct: 
    Accumulated depreciation                       (313,548)       (226,634)
                                                  ---------       ---------
    Property and equipment, net                  $2,214,607      $1,806,059
                                                  =========       =========

	Depreciation expenses for the years ended December 31, 1998 and 1997 
amounted to $97,239 and $58,582, 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                   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.  Please
refer to Note 22 for additional details.

	Please refer to Notes 1, 11, 15 and 16 concerning warrants and options 
earned by directors, organizers and executive officers.

	Please refer to Note 16 concerning a contract the Company executed with 
the Bank's CEO.

	Please refer to Note 16 for the discussion concerning the leases of the 
Bank's operating facilities.


Note 10 - Deposits

	The following details deposit accounts at December 31, 1998 and 1997:

                                                        December 31,
                                                ----------------------------
                                                     1998            1997
                                                     ----            ----
Non-interest bearing deposits                   $ 7,959,459      $ 5,910,213
 Interest bearing deposits:
     NOW accounts                                 8,219,478        6,241,531
     Money market accounts                        9,016,364        7,699,956
     Savings                                      3,785,727        2,689,560
     Time, less than $100,000                    38,753,556       38,105,637
     Time, $100,000 and over                     23,571,952       21,132,667
                                                 ----------       ----------
        Total deposits                          $91,306,536      $81,779,564
                                                 ==========       ==========


Note 11 - Shareholders' Equity

	In May 1995, the Company's Board of Directors (the "Board") declared a 
two-for-one stock split, in the form of a 100% stock dividend, to all 
shareholders of record as of July 3, 1995.  As a consequence to the stock 
split, the par value of the common stock was reduced from $6.00 to $3.00, 
while the number of outstanding shares was doubled.  The Company currently 
has 10.0 million shares of common stock authorized, 1,446,984 shares of which 
were issued and outstanding at December 31, 1998.  The holders of common stock
have no preemptive rights with respects to the issuance of any shares by the 
Company.

	At December 31, 1998 and 1997, there were 235,036 and 382,664 stock 
warrants, respectively, outstanding.  During 1998 and 1997, 147,628 and 2,450 
warrants, respectively, were exercised for $5.50 per share.

	The Company adopted an incentive stock option plan covering 400,000 stock 
options.  At December 31, 1998 and 1997, there were 201,496 and 169,696 stock 
options, respectively, outstanding.  Please refer to Notes 15 & 16 for 
additional details concerning stock options.

        The Company is authorized to issue up to 1,000,000 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.


Note 12 - Interest on Deposits and Borrowings

	A summary of interest expense for the years ended December 31, 1998 and 
1997 follows:
                                                        December 31,
                                                ----------------------------
                                                   1998              1997
                                                   ----              ----
Interest on NOW accounts                        $  260,675        $  170,656
Interest on money market accounts                  264,017           271,844
Interest on savings accounts                        98,985            75,384
Interest on CDs under $100,000                   2,276,718         2,081,309
Interest on CDs $100,000 and over                1,328,642         1,059,156
Interest, other borrowings                          18,150            14,586
                                                 ---------         ---------
   Total interest on deposits and borrowings    $4,247,187        $3,672,935
                                                 =========         =========


Note 13 - Other Operating Expenses

	A summary of other operating expenses for the years ended December 31, 
1998 and 1997 follows:
                                                        December 31,
                                                 ---------------------------
                                                     1998             1997
                                                     ----             ----
Advertising and public relations                 $   81,450       $   75,199
Depreciation and amortizaton                        104,385           67,249
Utilities and telephone                              87,343           65,069
Repairs and maintenance                              84,590           61,352
Taxes and licenses                                   66,630           38,117
Regulatory assessments                               48,493           45,724
All other operating expenses                        156,852          176,542
                                                  ---------        ---------
   Total other operating expenses                $  629,743       $  529,252
                                                  =========        =========


Note 14 - Income Taxes

	As of December 31, 1998 and 1997, the Company's provision for income 
taxes consisted of the following:
                                                        December 31,
                                                   -------------------------
                                                     1998             1997
                                                     ----             ----
Current                                            $721,424         $447,284
Deferred                                             29,577          134,638
Reversal of valuation allowance                     (47,969)           -  -
Loss carryforward,  (benefit)                       (17,317)          13,940
                                                    -------          -------
Federal income tax expense                         $685,715         $595,862
                                                    =======          =======

        Deferred income taxes for the years ended December 31, 1998 and 1997 
consist of the following:

                                                     1998             1997
                                                     ----             ----
Provision for loan losses                          $ 24,969         $137,448
Other                                                 4,608           (2,810)
                                                    -------          -------
   Total                                           $ 29,577         $134,638
                                                    =======          =======

	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,
1998:
                                                             1998
                                                             ----
Income taxes at statutory rate                           $  565,124
State tax, net of Federal benefits                           34,106
Change in valuation allowance                                23,001
Tax-free income                                              24,960
Other                                                        38,524
                                                          ---------
   Total                                                 $  685,715
                                                          =========

        The tax effects of the temporary differences that comprise the net 
deferred tax assets at December 31, 1998 is presented below:
 
                                                             1998
                                                             ----
Deferred tax assets:
Allowance for loan losses                                $  348,517
Community Mortgage                                           13,283
Unrealized gain, securities                                 (47,133)
Deferred asset, depreciation                                  6,019
Valuation reserve                                          (330,239)
                                                          ---------
  Net deferred tax asset                                 $   (9,553)
                                                          =========

	There was a net change in the valuation allowance during 1998.  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, 1998.


Note 15 - Benefit Plans

	The Company has a savings plan (the "Savings Plan") administered under 
the provisions of the Internal Revenue Code Section 401(k).  During 1998 and 
1997, the Company made contributions totaling $31,174 and $29,000 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 1998 or 1997.

	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 11.

                                                   Stock Options
                                              ------------------------
                                               1998             1997
                                               ----             ----
Options granted in past years                 188,296          126,296
Options granted this year                      36,000           62,000
Options exercised in previous years           (17,400)          (7,080)
Options exercised this year                    (2,200)         (10,320)
Options forfeited in previous years            (1,200)          (1,200)
Options forfeited this year                    (2,000)           -   -
                                              -------          -------
Balance, end of year                          201,496          169,696
                                              =======          =======

Options available for grant                   175,704          211,704
                                              =======          =======

	The options entitle their holders to purchase one share of the Company's 
common stock for an amount between $9.00 to $16.00 each, at a weighted average 
price of $11.88.


Note 16 - 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 1998 and 1997, the CEO 
was granted options to purchase 10,000 shares of the Company's common stock at 
$10.00 per share.  For the years ended December 31, 1998 and 1997, the Company 
incurred costs of approximately $143,553 and $133,432 respectively, in salary 
and various benefits relating to the CEO's employment agreements.

	Leases with Directors.  On June 27, 1991, the Company executed a lease 
arrangement for its main operating facility with the owner who also serves as a 
director of the Company.  The lease was renewed with an expiration date of 
March 1, 1999.  The new lease requires a monthly payment of $4,000 plus an 
annual increase tied to the increase in the Consumer Price Index.  Lease 
expense for the years ended December 31, 1998 and 1997 amounted to $48,455 and 
$51,658, respectively.  During December, 1998, the Company purchased the 
property for $314,100.

	On November 17, 1993, the Company also entered into a lease arrangement 
for its North Wilkesboro branch with the owners, who also serve as directors of 
the Company.  The lease terminated in 1998.  Lease expense for the years ended 
December 31, 1998 and 1997 amounted to $17,535 and $21,291.

	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, 1998 and 1997, loans outstanding to directors, 
their related interest and executive officers aggregated $1,013,866 and 
$2,097,432, 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 1998 and 1997 
follows:

                                               Insider Loan Transactions
                                               -------------------------
                                                  1998          1997
                                                  ----          ----
Balance, beginning of year                     $2,097,432    $1,438,919
New loans                                         158,229     1,965,055
Less: principal reductions                     (1,241,795)   (1,306,542)
                                                ---------     ---------
Balance, end of year                           $1,013,866    $2,097,432
                                                =========     =========

	Deposits by directors and their related interests, as of December 31, 
1998 and 1997 approximated $1,831,003 and $1,629,722, respectively.

	Directors/Organizers Stock  Warrants:  Please refer to Notes 1, 11, 15 
and 22 for additional details concerning warrants to directors and organizers.

	Incentive Stock Option Plan to Directors and Key Employees:  Please refer
to Notes 11 and 15 for additional details.


Note 17 - Fair Value of Financial Instruments

	The following methods and assumptions were used by the Company in 
estimating its fair value disclosures for financial instruments.  In cases 
where quoted market prices are not available, fair values are based on 
estimates using discounted cash flow methods.  Those methods are significantly 
affected by the assumptions used, including the discount rates and estimates of 
future cash flows.  In that regard, the derived fair value estimates cannot be 
substantiated by comparison to independent markets and, in many cases, could 
not be realized in immediate settlement of the instrument.  The use of 
different methodologies may have a material effect on the estimated fair market 
value accounts.  Also, the fair value estimates presented herein are based on 
pertinent information available to management as of December 31, 1998.  Such 
amounts have not been revalued for purposes of these financial statements since
those dates 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, 1998
                                           ---------------------------
                                              Carrying        Fair
                                              --------        ----
Financial assets:
  Cash and due from banks                  $  3,181,025   $  3,181,025
  Securities available for sale              24,288,316     24,288,316
  Securities held to maturity                 2,385,162      2,416,622
  Loans                                      72,120,625     72,051,177

Financial liabilities:
  Deposits                                   91,306,536     91,365,160


Note 18 - 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.

Year Ended             Holding              Community   Elimin-
December 31, 1998        Co.        Bank    Mortgage    ations     Consolidated
-----------------      -------      ----    ---------   -------    ------------

Revenues from
 unaffiliated 
 customers         $      745  $  8,726,201 $370,786 $    -  -     $  9,097,732

Revenues from
 affiliates           118,357        -  -     -  -      (118,357)       -  -   
                    ---------   -----------  -------  ----------    -----------

   Total revenues  $  119,102  $  8,726,201 $370,786 $  (118,357)  $  9,097,732
                    =========   ===========  =======  ==========    ===========

Income/(loss) from
 operations, before
 tax               $ (254,873) $  1,866,068 $ 50,984 $    -  -     $  1,662,179
                    =========   ===========  =======  ==========    ===========

Indentifiable 
 assets, December
 31, 1998          $12,019,913 $103,176,616 $ 53,450 $(10,116,778) $105,133,201
                    =========   ===========  =======  ===========  ===========

Depreciation and
 Amortization      $   31,782  $     68,973 $  3,630 $    -  -     $    104,385
                    =========   ===========  =======  ===========  ===========


Note 19 - 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, 1998 and 1997, unfunded 
commitments to extend credit were $13,753,424 and $11,977,150, 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, 1998 and 1997, commitments under letters of credit was 
identical at $25,000.  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 20 - 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, 1998,
that the Company and the Bank meet all capital adequacy requirements to which 
they are subject.

	As of  December 31, 1998, the most recent notification from the Office of
the Comptroller of the Currency categorized the Bank as 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.  There are no conditions or events since that 
notification that management believes have changed the Company's capital 
category.  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, 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


                             Minimum Regulatory Capital Guidelines for Banks
                          ------------------------------------------------------
                                               Adequately             Well
(Dollars in thousands)        Actual           Capitalized         Capitalized
                          ---------------    ---------------     ---------------
                          Amount    Ratio    Amount    Ratio     Amount    Ratio
                          ------    -----    ------    -----     ------    -----
As of December 31, 1997:
-----------------------
Total capital-risk-based
(to risk-weighted assets):
   Bank                 $  8,214    11.8%    $5,559  >=  8%      $6,949 >=  10%
   Consolidated           10,925    15.4%     5,691  >=  8%        N/A  >=  N/A

Tier 1 capital-risk-based
(to risk-weighted assets):
   Bank                 $  7,346     10.6%   $2,780  >=  4%      $4,169 >=   6%
   Consolidated           10,036     14.1%    2,846  >=  4%        N/A  >=  N/A

Tier 1 capital-leverage
(to average assets):
   Bank                  $  7,346     9.1%   $3,228  >=  4%      $4,035 >=   5%
   Consolidated            10,036    12.0%    3,356  >=  4%        N/A  >=  N/A


Note 21 - 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.  The amount of cash dividends 
available from the Bank for payment in 1999 is $1,180,353 plus 1999 net 
earnings of the Bank.  For the years ended December 31, 1998 and 1997, no 
dividends were paid to shareholders.


Note 22 - Subsequent Event

	Subsequent to December 31, 1998, and prior to the date of this report, 
The six directors mentioned under Note 9, above, purchased substantially all of
the Company's common stock and a number of the Company's warrants owned/held by
two other directors and their related interests.  Additionally, the Company 
purchased 82,968 warrants and 20,000 options from the above two directors for
an aggregated price of $1,155,100.  The warrants and options purchased by the 
Company were cancelled.


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                                                1998           1997
                                                      ----           ----
Cash                                             $  1,450,663   $  1,089,954
Investment in Community Mortgage                       47,702         (2,765)
Investment in Bank                                  8,618,413      7,388,500
Property and equipment                              1,883,642      1,594,663
Other assets                                           19,493         57,016
                                                  -----------    -----------
   Total Assets                                  $ 12,019,913   $ 10,127,368
                                                  ===========    ===========

Liabilities and Shareholders' Equity:
Accounts payable                                 $     49,979   $     22,360
                                                  -----------    -----------
   Total Liabilities                             $     49,979   $     22,360
                                                  -----------    -----------

Common stock                                     $  4,340,952   $  3,891,468
Paid-in-capital                                     5,769,693      5,380,223
Retained earnings                                   1,767,794        791,381
Unrealized gain on securities                          91,495         41,936
                                                  -----------    -----------
   Total Shareholders' equity                    $ 11,969,934   $ 10,105,008
                                                  -----------    -----------
   Total Liabilities and 
     Shareholders' equity                        $ 12,019,913   $ 10,127,368
                                                  ===========    ===========


                     Parent Company Statements of Income

                                                  Years Ended December 31,
                                                  -------------------------
                                                      1998           1997
Revenues:                                             ----           ----
  Interest income                                 $   63,652     $  106,896
  Rental income                                       55,450          6,600
                                                   ---------      ---------
     Total revenues                               $  119,102     $  113,496
                                                   ---------      ---------

Expenses:
  Depreciation and amortization                   $   31,782     $   15,075
  Professional fees                                  290,613        103,606
  Other expenses                                      51,580         53,868
                                                   ---------      ---------
     Total expenses                               $  373,975     $  172,549
                                                   ---------      ---------

(Loss) before taxes and equity in undistributed 
  earnings of subsidiaries                        $ (254,873)    $  (59,053)
Tax (benefit)                                          - -          (24,655)
                                                   ---------      ---------
(Loss) before equity in undistributed earnings
 of subsidiaries                                  $ (254,873)    $  (34,398)
Equity in undistributed earnings of  subsidiaries      
                                                   1,231,286        662,520
                                                   ---------      ---------

  Net Income                                      $  976,413     $  628,122
                                                   =========      =========


                       Parent Company Statements of Cash Flows

                                                      Years Ended December 31,
                                                      ------------------------
                                                         1998          1997
Cash flows from operating activities:                    ----          ----
  Net income                                          $  976,413  $    628,122
  Adjustments to reconcile net income to net cash 
     provided by operating activities:
     Equity in undistributed earnings of subsidiaries (1,231,286)     (665,520)
    Depreciation and amortization                         31,782        15,075
    (Increase) in receivables and other assets            31,327       (29,470)
    Increase in payables                                  27,619        15,160
                                                       ---------    ----------
  Net cash provided by operating activities           $ (164,145)  $   (33,633) 
                                                       ---------    ----------

Cash flows from investing activities: 
  Purchase of property and equipment                  $ (314,100)  $(1,599,806)
  Investment in Bank                                       - -      (1,000,000)
  Investment in Community Mortgage                         - -          (2,500) 
                                                       ---------    ----------
 Net cash used by financing activities                $ (314,100)  $(2,602,306) 
                                                       ---------    ----------

Cash flows from financing activities:
  Proceeds from sale of stock                         $     - -    $    - -
  Exercise of warrants/options                           838,954       106,455
                                                       ---------    ----------
Net cash used by financing activities                 $  838,954   $   106,455
                                                       ---------    ----------

Net (decrease) in cash and cash equivalents           $  360,709   $(2,529,484)
Cash and cash equivalents, beginning of the year       1,089,954     3,619,438
                                                       ---------    ----------
Cash and cash equivalents, end of year                $1,450,663   $ 1,089,954
                                                       =========    ==========


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 30, 1999 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.         -    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 1998.

                                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 30, 1999         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 30, 1999
--------------------------------------------
   BRENT F. ELLER
   Secretary, Treasurer and Class I Director

/s/ Jack R. Ferguson                                  March 30, 1999
--------------------------------------------
   JACK R. FERGUSON
   Class II Director

/s/ Gilbert R. Miller                                 March 30, 1999
--------------------------------------------
   GILBERT R. MILLER
   Class I Director

/s/ Randy D. Miller                                   March 30, 1999
--------------------------------------------
   RANDY D. MILLER
   Class I Director

/s/ Dwight E. Pardue                                  March 30, 1999
--------------------------------------------
   DWIGHT E. PARDUE
   Class III Director

/s/ Robert F. Ricketts                                March 30, 1999
--------------------------------------------
   ROBERT F. RICKETTS, D.D.S.
   Class II Director

/s/ Rebecca Ann Sebastian                             March 30, 1999
--------------------------------------------
   REBECCA ANN SEBASTIAN
   Class I Director

/s/ R. Colin Shoemaker                                March 30, 1999
--------------------------------------------
   R. COLIN SHOEMAKER
   Class III Director

/s/ Ronald S. Shoemaker                               March 30, 1999
--------------------------------------------
   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)