UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-Q





|/X/ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ----------------------------------------------------------------------------------------

For the quarter period ended March 31, 2001



|/_/ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | -----------------------------------------------------------------------------------------

For the transition period from _______ to _______

Commission File Number: 33-81890

Community Bankshares, Inc.

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|Georgia                         |  | 58-1415887         
|------------------------------- |  | -------------------
|(State or other jurisdiction of |  | (IRS Employer      
|incorporation or organization)  |  | Identification No.)
|                                |  |                    





|448 North Main Street,                   |  |           
|---------------------------------------- |  | ----------
|Cornelia, Georgia                        |  | 30531     
|(Address of principal executive offices) |  | (Zip Code)



(706) 778-2265

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N/A

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Indicate by check mark whether the registrant has (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     /_/



APPLICABLE ONLY TO CORPORATE ISSUERS



Indicate the number of shares outstanding of each of the issuers classes of common stock, as of May 1, 2001:   2,181,830



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|COMMUNITY BANKSHARES, INC.
AND SUBSIDIARIES
INDEX
|-------------------------------------------------
|                                                 
|                                                 
|                                                 
|PART I.                                          
|                                                 
|Item 1.                                          
|                                                 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                 
|Item 2.                                          
|                                                 
|                                                 
|PART II                                          
|                                                 
|Item 6.                                          
|                                                 
|                                                 



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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

|COMMUNITY BANKSHARES, INC.                                                                                                                             
|-------------------------------------------------------------------------------------------------------------------------------------------------------
|AND SUBSIDIARIES                                                                                                                                       
|                                                                                                                                                       
|CONDENSED BALANCE SHEETS                                                                                                                               
|MARCH 31, 2001 AND DECEMBER 31, 2000                                                                                                                   
|(Dollars in thousands)                                                                                                                                 
|                                                                                                                                                       
|                                                                                                                                                       
|                                                                                                                                                       
|Assets                                                                                                                                                 
|                                                                                                                                                       
|Cash and due from banks                                                                                                                                
|Interest-bearing deposits in banks                                                                                                                     
|Federal funds sold                                                                                                                                     
|Securities available-for-sale                                                                                                                          
|Securities held-to-maturity (fair value          $31,743 and $31,983)                                                                                  
|Loans held for sale                                                                                                                                    
|                                                                                                                                                       
|Loans                                                                                                                                                  
|Less allowance for loan losses                                                                                                                         
|                                                                                                                                                       
|Loans, net                                                                                                                                             
|                                                                                                                                                       
|Premises and equipment                                                                                                                                 
|Other assets                                                                                                                                           
|                                                                                                                                                       
|Total assets                                                                                                                                           
|                                                                                                                                                       
|Liabilities and Shareholders' Equity                                                                                                                   
|                                                                                                                                                       
|Deposits                                                                                                                                               
|Noninterest-bearing demand                                                                                                                             
|Interest-bearing demand                                                                                                                                
|Savings                                                                                                                                                
|Time, $100,000 and over                                                                                                                                
|Other time                                                                                                                                             
|                                                                                                                                                       
|Total deposits                                                                                                                                         
|Federal Home Loan Advances                                                                                                                             
|Other borrowings                                                                                                                                       
|Other liabilities                                                                                                                                      
|                                                                                                                                                       
|Total liabilities                                                                                                                                      
|                                                                                                                                                       
|Redeemable common stock held by ESOP, 373,600 
          and 370,539 shares outstanding at March 31, 2001
          and December 31, 2000, respectively
|                                                                                                                                                       



2

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|                                                                                                 |   |         |  |   |        
|------------------------------------------------------------------------------------------------ | - | ------- |  | - | -------
|Shareholders' equity                                                                             |   |         |  |   |        
|Common stock, par value $1; 5,000,000
shares authorized; 2,181,830
shares issued and outstanding |   | 2,182   |  |   | 2,182  
|Capital surplus                                                                                  |   | 6,142   |  |   | 6,142  
|Retained earnings                                                                                |   | 31,708  |  |   | 29,976 
|Accumulated other comprehensive income (loss),
net of tax                                        |   | 417     |  |   | (50)   
|                                                                                                 |   |         |  |   |        
|Total shareholders' equity                                                                       |   | 40,449  |  |   | 38,250 
|                                                                                                 |   |         |  |   |        
|Total liabilities and shareholders' equity                                                       | $ | 607,985 |  | $ | 590,323
|                                                                                                 |   |         |  |   |        
|See Notes to Condensed Financial Statements.                                                     |   |         |  |   |        



3

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|COMMUNITY BANKSHARES, INC.                                         
|-------------------------------------------------------------------
|AND SUBSIDIARIES                                                   
|                                                                   
|CONDENSED STATEMENTS OF
INCOME                                     
|AND COMPREHESIVE INCOME                                            
|THREE MONTHS ENDED MARCH 31, 2001 AND 2000                         
|(Dollars in thousands, except per share amounts)                   
|(Unaudited)                                                        
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Interest income                                                    
|Loans                                                              
|Taxable securities                                                 
|Nontaxable securities                                              
|Deposits in banks                                                  
|Federal funds sold                                                 
|                                                                   
|Total interest income                                              
|                                                                   
|Interest expense on deposits                                       
|Deposits                                                           
|Other borrowings                                                   
|                                                                   
|Total interest expense                                             
|                                                                   
|Net interest income                                                
|Provision for loan losses                                          
|                                                                   
|Net interest income after
                provision for loan losses
|                                                                   
|Other income                                                       
|Service charges on deposit accounts                                
|Other service charges and fees                                     
|Gains on sale of loans                                             
|Trust
Department fees                                              
|Nonbank subsidiary non-interest income                             
|Other operating income                                             
|                                                                   
|Total other income                                                 
|                                                                   
|Other expenses                                                     
|Salaries and employee benefits                                     
|Occupancy expense                                                  
|Equipment expense                                                  
|Other operating expenses                                           
|                                                                   
|Total other expenses                                               
|                                                                   
|Income before income taxes                                         
|                                                                   
|Income tax expense                                                 
|                                                                   

4

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|                                                                                                |   |        |   |       
|----------------------------------------------------------------------------------------------- | - | ------ | - | ------
|Net income                                                                                      | $ | 1,967  | $ | 1,601 
|                                                                                                |   |        |   |       
|Other comprehensive income:                                                                     |   |        |   |       
|Unrealized gains on securities
          available-for-sale arising during
          the period |   | 467    |   | 49    
|Less:     reclassification adjustment            for gains included in net            income    |   | 0      |   | 0     
|                                                                                                |   |        |   |       
|Total other comprehensive income (loss)                                                         |   | 467    |   | 49    
|                                                                                                |   |        |   |       
|Comprehensive income                                                                            | $ | 2,434  | $ | 1,650 
|                                                                                                |   |        |   |       
|Basic earnings per common share                                                                 | $ | 0.90   | $ | 0.73  
|                                                                                                |   |        |   |       
|Diluted earnings per common share                                                               |   | 0.89   |   | 0.73  
|                                                                                                |   |        |   |       
|Cash dividends per share of common stock                                                        | $ | 0.0500 | $ | 0.0435
|                                                                                                |   |        |   |       
|See Notes to Condensed Financial Statements.                                                    |   |        |   |       



5

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|COMMUNITY BANKSHARES, INC.                                   
|-------------------------------------------------------------
|AND SUBSIDIARIES                                             
|                                                             
|CONDENSED STATEMENTS OF CASH FLOWS                           
|FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000           
|(Dollars in thousands)                                       
|(Unaudited)                                                  
|                                                             
|                                                             
|                                                             
|OPERATING ACTIVITIES                                         
|Net income                                                   
|Adjustments to reconcile net income to                       
|net cash
provided by (used in) operating activities          
|Depreciation and amortization                                
|Provision for loan losses                                    
|Provision for other real estate                              
|Deferred income taxes                                        
|(Increase) decrease in loans held for sale                   
|Net losses on sale of other real estate                      
|(Increase) decrease in interest receivable                   
|Increase (decrease) in interest payable                      
|Increase (decrease) in taxes payable                         
|(Increase) decrease in accounts                              
|receivable of nonbank subsidiary                             
|(Increase) decrease in work in                               
|process of nonbank subsidiary                                
|Decrease in accruals and                                     
|payables of nonbank subsidiary                               
|Other operating activities                                   
|                                                             
|Net cash provided by
(used in) operating activities          
|                                                             
|INVESTING ACTIVITIES                                         
|Purchases of securities available-for-sale                   
|Proceeds from maturities of securities
available-for-sale    
|Purchases of securities held-to-maturity                     
|Proceeds from maturities of securities
held-to-maturity      
|Net (increase) decrease in Federal funds sold                
|Net (increase) decrease in interest-bearing
deposits in banks
|Net (increase) decrease in loans                             
|Purchase of premises and equipment                           
|Proceeds from sales of other real estate                     
|                                                             
|Net cash used in
Investing activities                        
|                                                             

6

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|                                                             |   |         |  |   |        
|------------------------------------------------------------ | - | ------- |  | - | -------
|FINANCING ACTIVITIES                                         |   |         |  |   |        
|Net increase (decrease) in deposits                          |   | 18,206  |  |   | 35,114 
|Repayment of other borrowings                                |   | (56)    |  |   | (38)   
|Dividends paid                                               |   | (109)   |  |   | (95)   
|                                                             |   |         |  |   |        
|Net cash provided by financing activities                    |   | 18,041  |  |   | 34,981 
|Net decrease in cash and due from banks                      | $ | (9,425) |  | $ | (1,153)
|                                                             |   |         |  |   |        
|Cash and due from banks at beginning of the period           |   | 38,410  |  |   | 31,834 
|                                                             |   |         |  |   |        
|Cash and due from banks at end of the period                 | $ | 28,985  |  | $ | 30,681 
|                                                             |   |         |  |   |        
|SUPPLEMENTAL DISCLOSURES                                     |   |         |  |   |        
|Cash paid for:                                               |   |         |  |   |        
|Interest                                                     | $ | 3,822   |  | $ | 4,349  
|                                                             |   |         |  |   |        
|Income taxes                                                 | $ | 474     |  | $ | 54     
|                                                             |   |         |  |   |        
|NONCASH TRANSACTIONS                                         |   |         |  |   |        
|Unrealized (gains)
losses on
securities available-for sale   | $ | (715)   |  | $ | (82)   
|                                                             |   |         |  |   |        
|Principal balances on loans transferred to other
real estate | $ | -       |  | $ | 431    
|                                                             |   |         |  |   |        
|                                                             |   |         |  |   |        

See Notes to Condensed Financial Statements

7

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COMMUNITY BANKSHARES, INC.
AND SUBSIDIARIES

NOTES TO CONDENSED FINANCIAL STATEMENTS



NOTE 1.       BASIS OF PRESENTATION



The consolidated financial information included herein is unaudited; however, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in opinion of
management, necessary for a fair statement of results for the interim periods.

The results of operations for the three month period ending March 31, 2001 are not necessarily indicative of the results to be expected for the full year.



NOTE 2.
          CURRENT ACCOUNTING DEVELOPMENTS



In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, effective for fiscal years beginning after June 15,
2000. This Statement establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other contracts, and requires that an entity recognize all derivatives as assets or
liabilities in the balance sheet and measure them at fair value. If certain conditions are met, an entity may elect to designate a derivative as follows: (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows of a forecasted transaction, or (c) a hedge of the foreign currency exposure of an unrecognized firm commitment, an available-for-sale security, a foreign currency
denominated forecasted transaction, or a net investment in a foreign corporation. The Statement generally provides for matching the timing of the recognition of the gain or loss on derivatives designated as hedging instruments with the recognition of the
changes in the fair value of the item being hedged. Depending on the type of hedge, such recognition will be in either net income or other comprehensive income. For a derivative not designated as a hedging instrument, changes in fair value will be
recognized in net income in the period of change. The adoption of this Statement on the consolidated financial statements has not effected the financial statements through March 31, 2001.

There are no other recent accounting pronouncements that have had, or are expected to have, a material effect on the Companys financial statements.



8

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NOTE 3
          EARNINGS PER COMMON SHARE

The following is a reconciliation of net income (the numerator) and weighted-average shares outstanding (the denominator) used in determining basic and diluted earnings per common share (EPS).

|                                                   | Three Months Ended March 31, 2001
( Dollars and shares in Thousands, 
except per share amounts)
|-------------------------------------------------- | -----------------------------------------------------------------------------------------------
|                                                   | Net
Income(Numerator)                                                                          
|                                                   |                                                                                                
|Basic EPS                                          | $1,967                                                                                         
|Effect of Dilutive Securities
       Stock options | 0                                                                                              
|                                                   |                                                                                                
|Diluted EPS                                        | $1,967                                                                                         
|                                                   |                                                                                                
|                                                   |                                                                                                
|                                                   |                                                                                                
|                                                   |                                                                                                
|                                                   |                                                                                                
|                                                   | Three Months Ended March 31, 2000
(Dollars and shares in Thousands, 
except per share amounts) 
|                                                   | Net
Income(Numerator)                                                                          
|                                                   |                                                                                                
|                                                   |                                                                                                
|Basic EPS                                          | $1,601                                                                                         
|Effect of Dilutive Securities
       Stock options | 0                                                                                              
|                                                   |                                                                                                
|Diluted EPS                                        | $1,601                                                                                         
|                                                   |                                                                                                
|                                                   |                                                                                                





9

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NOTE 4
          SEGMENT INFORMATION

Selected segment information by industry segment for the periods ended March 31, 2001 and 2000 is as follows:





|                                    | Reportable Segments
(Dollars in thousands)
|----------------------------------- | ------------------------------------------
|For the Period Ended March 31, 2001 |                                           
|                                    |                                           
|Revenue from external customers     |                                           
|Inter-segment revenues (expenses)   |                                           
|Segment profit (loss)               |                                           
|Segment assets                      |                                           





|                                    | Reportable Segments
(Dollars in thousands)
|----------------------------------- | ------------------------------------------
|For the Period Ended March 31, 2000 |                                           
|                                    |                                           
|Revenue from external customers     |                                           
|Inter-segment revenues              |                                           
|Segment profit                      |                                           
|Segment assets                      |                                           





2001

2000Net IncomeTotal profit for reportable segments
$
2,272

$
1,961Non-reportable segment loss

(290)


(268)Elimination of inter-segment (gains) losses

(15)


(93)Total consolidated other income
$
1,967

$
1,601




10

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COMMUNITY BANKSHARES, INC.
AND SUBSIDIARIES

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS



Forward Looking Statements

The following appears in accordance with the Securities Litigation Reform Act. These financial statements and discussion and analysis include forward looking statements that involve inherent risks
and uncertainties. A number of important factors could cause actual results to differ materially from those in the forward looking statements. Those factors include fluctuations in interest rates, inflation, government regulations, economic conditions and
competition in the geographic business areas in which we conduct operations.

Managements Discussion and Analysis

The following is managements discussion and analysis of certain significant factors which have affected our financial position and operating results during the periods included in the
accompanying consolidated financial statements.

Financial Condition

As of March 31, 2001, we continue to experience growth in total assets, total loans and total deposits as compared to December 31, 2000. Total assets, loans, and deposits increased by 2.99%, 2.90%
and 3.59% respectively. The growth in loans, although less the same period in 2000, is consistent with managements expectations. The growth in deposits is slightly lower than the prior comparable period, but consistent with managements
expectations. The growth in assets is attributable to growth in deposits and retention of earnings. Management expects the growth to continue in the future.

Liquidity

As of March 31, 2001, the liquidity ratio was 22.87% which is within our target range of 20 - 25%. The banks have available lines of credit to meet unexpected liquidity needs. Liquidity is
measured by the ratio of net cash, short term and marketable securities to net deposits and short term Liabilities.

Interest Rate Risk

Our overall interest rate risk was less than 5% of net interest income subjected to rising and falling rates of 200 basis points. We have positioned ourself to be protected against any further
changes in rates in either direction.



11

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Capital

Banking regulation requires the Company and the Banks to maintain capital levels in relation to our assets. At March 31, 2001, the Companys and the Banks capital ratios were considered
satisfactory based on regulatory minimum capital requirements. The minimum capital requirements and the actual consolidated capital ratios at March 31, 2001 were as follows:

| |                              | Actual | Regulatory Minimum
| | ---------------------------- | ------ | ------------------
| |                              |        |                   
| | Leverage                     | 8.78%  | 4.00%             
| | Risked Based Capital ratios: |        |                   
| | Core Capital                 | 11.50% | 4.00%             
| | Total Capital                | 12.77% | 8.00%             
| |                              |        |                   
| |                              |        |                   







12

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Results of Operation

Net interest income for the three month period ended March 31, 2001 increased 7.00% to $6,271,000 over $5,861,000 for the same period for 2000. Interest income for the three month period was up by
14.00% from $10,927,000 to $12,457,000. This increase in interest income is due to an increase in earning assets of 10.03% or $52,202,000 at March 31, 2001, compared to March 31, 2000. The largest increase in earning assets since March 31, 2000 was the
increase in loans of $42,161,000 or 11.04%. Investment securities increased by $4,516,000 while Federal Funds sold increased by $9,985,000. For the first three months of 2001, earning assets increased by $26,673,000 or 5.09%. Interest expense on interest
bearing deposits was up by $1,180,000 or 24.37% for the first three months of 2001 over the same period for 2000. This increase in interest expense is due to an increase in interest bearing deposits of 10.61% or $43,186,000 at March 31, 2001, compared to
March 31, 2000; as well as, an increase in deposit rates in 2000. For the first three months of 2001, interest bearing deposits increased by $20,791,000 or 4.84%. The increase in interest income, interest expense, and net interest income were all
consistent with budget projections made by management and is on target to be consistent with annual projections.

The loan loss reserve is evaluated monthly and adjusted to reflect the risk in the portfolio in the following manner. We use four different methods of measuring risk in the portfolio: (a) Risk in our
watch list of loans and past due
ratios and (b) Percentage of classified loans. We then compare results to reserve balances to assure any and all identified risk are covered.

The provision for loan losses was $406,000 and $342,000 for the first three months of 2001 and 2000, respectively. This provision can fluctuate due to many factors as mentioned above and the volume of
Small Business Administration (SBA) loans closed, as we have a policy of reserving 5% of the un-guaranteed portion of any SBA loans. We currently have reserves totaling $1,072,000 for our un-guaranteed portion of SBA loans.



13

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The following table furnishes information on the loan loss reserve for the current three month reporting period and the same period for 2000.



| |                         | 2001          | 2000         
| | ----------------------- | ------------- | -------------
| |                         |               |              
| | Beginning Balance       | $       6,307 | $       5,682
| |                         |               |              
| | Less Charge Offs:       |               |              
| | Real Estate Loans       | (43)          | (0)          
| | Commercial Loans        | (1)           | (89)         
| | Consumer Loans          | (192)         | (130)        
| |                         |               |              
| |                         | (236)         | (219)        
| |                         |               |              
| | Plus Recoveries         |               |              
| | Real Estate Loans       | 3             | 0            
| | Commercial Loans        | 4             | 39           
| | Consumer Loans          | 32            | 46           
| |                         |               |              
| |                         | 39            | 85           
| |                         |               |              
| |                         |               |              
| |                         |               |              
| | Net Charge-offs         | (197)         | (134)        
| |                         |               |              
| | Provision for loan loss | 406           | 342          
| |                         |               |              
| | Ending Balance          | $       6,516 | $       5,890
| |                         |               |              



The provision for loan losses for the three month period ended March 31, 2001 represented 206% of charge offs for the same period, while the provision for the first three months of 2000 represented
255% of the charge offs recorded in that period. The reserve at March 31, 2001 represented 217% of non-accrual loans while the reserve at March 31, 2000 represented 269% of non-accrual loans. Non accrual loans have increased from $2,190,000 at March 31,
2000 to $3,003,000 as of March 31, 2001. Past due loans greater than 90 days and accruing interest have increased from $523,000 in 2000 to $2,418,000 in 2001. This increase is indicative of a slight deterioration in loan quality. Management is aware of
this trend and continues to take steps to address the issue of loan quality. We are currently outside our policy guideline of maintaining a loan loss reserve of 200% of non-performing assets. However, $750,000 of non-accrual loans are guaranteed by the
Small Business Administration and after taking the effect of these guarantees into consideration, we would have a loan loss reserve of 196% of non-performing assets. The loan loss reserve balance to total loan ratio at March 31, 2001 was 1.51% as compared
to 1.52% at March 31, 2000. Management considered the loan loss reserve to be adequate to absorb any anticipated losses that may be incurred.



14

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The following table is a summary of Non Accrual, Past due and Restructured Debt



March 31, 2001



|                  |                  | Past Due             |                        
|----------------- | ---------------- | -------------------- | -----------------------
|                  | Non-accrual      | 90 days              | Restructured           
|                  | Loans            | Still accruing       | Debt                   
|                  |                  |                      |                        
|Real Estate Loans | $          2,356 | $              1,906 | $                     0
|Commercial Loans  | 255              | 163                  | 735                    
|Consumer Loans    | 392              | 349                  | 0                      
|                  |                  |                      |                        
|Total             | $          3,003 | $              2,418 | $                  735 
|                  |                  |                      |                        





March 31, 2000



|                  |                      | Past Due              |                        
|----------------- | -------------------- | --------------------- | -----------------------
|                  | Non-accrual          | 90 days               | Restructured           
|                  | Loans                | Still accruing        | Debt                   
|                  |                      |                       |                        
|Real Estate Loans | $                  0 | $                   0 | $                     0
|Commercial Loans  | 1,425                | 367                   | 778                    
|Consumer Loans    | 765                  | 156                   | 0                      
|                  |                      |                       |                        
|Total             | $            2,190   | $                523  | $                  778 
|                  |                      |                       |                        
|                  |                      |                       |                        

Loans classified for regulatory purposes as loss, doubtful, substandard, or special mention that have not been included in the table above do not represent or result from trends or uncertainties which
management reasonably expects will materially impact future operating results, liquidity or capital resources. These classified loans do not represent material credits about which management is aware of any information which causes management to have
serious doubts as to the ability of such borrows to comply with the loan payment terms.

The banks place loans on non-accrual at such a time it is apparent that the collection of all principal and interest is questionable and the loan is either past due 90 days or bankruptcy has been filed.

Other income increased by 57.81% or $1,902,000 during the three month period ended March 31, 2001 as compared to the same period for 2000. Nonbank subsidiary income increased by $1,530,000 in the
first quarter of 2001 compared to 2000. This increase is primarily due to the increase in activity associated with FSIs agreement with the Canadian Imperial Bank of Commerce (CIBC) to establish banking pavilions in Florida. Management
anticipates the level of activity associated with pavilion installations for CIBC to continue for the foreseeable future. Service charges on deposit accounts increased by $220,000 or 29.37% as compared to the same period for 2000. The major changes were
the increase in non-sufficient funds (NSF) charges of $190,000 and the increase in stop payment fees of $6,000. NSF charges increased primarily as a result of our continued growth in accounts in the totally free checking program. The increase of $96,000
in other service charges and fees is a result of the overall growth in deposit customers the banks have experienced



15

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during the three months ended March 31, 2001 compared to the same period in 2000. The gains on sale of loans decreased by $72,000 during the three month period ended March 31, 2001 as compared to the
same period for 2000. This decrease is due to a decreased number of sales of guaranteed portions of SBA loans during the first quarter.

Other expenses increased by 26.24% or $1,702,000 for the first three months of 2001 over the same period in 2000. Salaries and benefits increased by $924,000 or 26.50% from the first quarter of 2000
to the first quarter of 2001. This increase is primarily resulting from the increase in full time equivalent employees from 324 at March 2000 to 365 at March 2001. Equipment and occupancy expenses were up by $247,000 or 25.18% for the first quarter of
2001 over the first quarter of 2000. The increase in full time equivalent employees as well as equipment and occupancy expenses was primarily due to the addition of three supermarket banking centers during the past twelve months.

We incurred income tax expenses of $902,000 which represents an effective rate of 31% for the three month period ended March 31, 2001 as compared to $722,000 which represents an effective tax rate of
31% for the same period in 2000. The effective tax rate is effected by Financial Supermarkets, which does not have a portion of its income tax-free as do the Community Banking Subsidiaries.

Net income for the three month period was $1,967,000 or an increase of 22.86% over the same period for 2000. Management anticipates earnings to continue to meet the budgeted projections. However,
Management cannot guarantee the overall increase in earnings in 2001 compared to 2000 due to the variation in the number of supermarket bank installations from year to year.

We are not aware of any other known trends, events or uncertainties, other than the effect of events as described above, that will have or that are reasonably likely to have a material effect on its
liquidity, capital resources or operations. We are also not aware of any current recommendations by the regulatory authorities which, if they were implemented, would have such an effect.





16

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ITEM 6.           Exhibits and Reports on Form 8-K

|(a) | Exhibits           
|--- | -------------------
|    |                    
|    | None               
|    |                    
|(b) | Reports on Form 8-K
|    |                    
|    | None.              





17

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SIGNATURES

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





COMMUNITY BANKSHARES, INC.DATE: May 15, 2001
BY:     /s/ Harry L. StephensHarry L. Stephens, Executive Vice President and
       Chief Financial Officer










18