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 Quarter Ended June 30, 1998

                                  OR

  [  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
                         EXCHANGE ACT OF 1934

                     Commission File No. 0-16461

                      COMMUNITY BANCSHARES, INC.
          (Exact name of registrant as specified in its charter)


          Delaware                                         63-0868361
 (State of Incorporation)                (I.R.S. Employer Identification No.)


    Main Street, P. O. Box 1000, Blountsville, AL               35031 
          (Address of principal executive office)          (Zip Code)


      Registrant's telephone number, including area code:  (205) 429-1000


                            No Change
      (Former name, former address and former fiscal year, if changed since
                            last report)

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      


Indicate  the  number  of shares outstanding of the registrant's class of common
stock, as of the latest  practicable date.

     Class                                      Outstanding at June 30, 1998
Common Stock, $.10 Par Value                            4,137,924


                                        <PAGE>
 


                               INDEX

         COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES


PART I.   FINANCIAL INFORMATION                                     PAGE


Item 1. Financial Statements (Unaudited)

        Consolidated balance sheets-June 30,1998 and 
         December  31,  1997    . . . . . . . . . .                   3

        Consolidated statements of income and consolidated 
         statements of comprehensive income- Three months
         ended  June 30,1998 and 1997    . . . . . . . . . .        4-5

        Consolidated statements of income and consolidated 
         statements of comprehensive income- Six months
         ended June 30,1998 and 1997    . . . . . . . . . .         6-7


        Consolidated statements of cash flows - Six months 
         ended June 30, 1998 and 1997    . . . . . . . . . .          8

        Notes to consolidated financial statements-June 30, 1998. . .10


Item 2.  Management's Discussion and Analysis of Financial 
         Condition and Results of Operations    . . . . . . . . . .  13

Item 3.  Quantitative and Qualitative Disclosures 
         About Market Risk  . . . . . . . . . .                      19

PART II.  OTHER INFORMATION

Item  4. Submission of Matters to a Vote of Security Holders . . . . 20

Item  6 .Exhibits and Reports on Form 8-K . . . . . . . . . .        20

SIGNATURES

                                              <PAGE>
 


                      PART I - FINANCIAL INFORMATION
                 ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED)
                COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS

                                                     June 30,    December 31, 
                                                       1998         1997  
Assets
 Cash . . . . . . . . . . . . . . . . . . . .  $    7,055,499 $    6,359,331
Due from banks  . .                                21,378,204     13,292,647
Interest-bearing deposits with banks  . . . . . .     950,000      2,514,558
Federal funds sold . . . . . . . . . . . . . . . .  4,900,000     26,600,000
Securities available for sale   . . . . . . . . .  83,722,801     85,092,069
Loans  . . . . . . . . . . . . . . . . . . . . .  378,858,737    327,084,688
Less: Unearned income  . . . . . . . . . . . . .    2,061,801        950,205
      Allowance for loan losses  . . . . . . . . .  3,363,620      2,131,354
         Net Loans  . . . . . . . . . . . . .     373,433,316    324,003,129

Premises and equipment, net   . . . . . . . . .    25,785,832     22,362,432
Accrued interest . . . . . . . . . . . . . . . . .  5,132,233      5,089,765
Intangibles, net . . . . . . . . . . . . . . . . .  6,524,475      4,117,825
Other real estate  . . . . . . . . . . . . . . . .    661,317        656,271
Other assets . . . . . . . . . . . . . . . . . . .  1,987,393      1,750,819

Total Assets . . . . . . . . . . . . . . . . .  $ 531,531,070 $  491,838,846

Liabilities and Shareholders' Equity
Deposits:
 Noninterest-bearing . . . . . . . . . . . . .  $  59,205,436 $   52,356,858
 Interest-bearing  . . . . . . . . . . . . . .    419,499,496    388,531,773
    Total Deposits . . . . . . . . . . . . . .    478,704,932    440,888,631

Other short-term borrowings   . . . . . . . . .     2,552,452      2,630,387
Accrued interest . . . . . . . . . . . . . . . . .  3,431,368      2,912,286
Long-term debt . . . . . . . . . . . . . . . . . .  6,950,769      7,397,612
Other liabilities  . . . . . . . . . . . . . . . .  3,206,708      2,012,500
      Total Liabilities  . . . . . . . . . . . .  494,846,229    455,841,416

Minority interest in consolidated subsidiary  . .          0          18,382

Shareholders' equity
  Common stock, par value $.10 per share, 
  5,000,000 shares authorized, 4,137,924 shares 
  issued as of June 30,1998 and 2,031,606 shares 
  issued as of December 31, 1997                      413,792        203,161
  Capital surplus . . . . . . . . . . . . . . . .  19,329,566     18,524,301
  Retained earnings . . . . . . . . . . . . . . .  18,382,186     18,824,795
  Unearned ESOP shares - 194,794 and 204,610 
  shares unreleased at June 30, 1998 and 
  December 31,1997  . . . .                        (1,940,966)    (2,002,902)
  Accumulated comprehensive income: unrealized 
  gains on investment securities available for 
  sale, net of deferred taxes   . . . . . . .         500,263        429,693
                      
           Total Shareholders' Equity  . . . . .   36,684,841     35,979,048

           Total Liabilities and 
           Shareholders' Equity  . . . . . .  $   531,531,070 $  491,838,846


             See notes to consolidated financial statements

                                   {page 3}

                 COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF INCOME
                                  (UNAUDITED)
                                                     Three Months Ended
                                                          June 30,        
                                                     1998            1997     
Revenue From Earning Assets
  Interest and fees on loans  . . . . . . .   $   9,299,780  $    7,842,209 
  Interest on investment securities:
    Taxable securities . . . . . . . . . . . .    1,064,830       1,089,642
    Securities exempt from federal 
      income taxes  . . . . . . . .                 176,646         176,050 
Interest on federal funds sold  . . . . . . . . .   158,626         176,319
Interest on deposits in other banks   . . . . . . .  14,988          29,193
Total Revenue From Earning Assets  . . . . .     10,714,870       9,313,413

Interest Expense
  Interest on deposits . . . . . . . . . . . .    5,282,496       4,678,684
  Interest on other short-term borrowings   . . .    23,659          35,028
  Interest on long-term debt  . . . . . . . . .     145,326         168,955
      Total Interest Expense   . . . . . . . . .  5,451,481       4,882,667

Net interest income                               5,263,389       4,430,746
Provision for loan losses .                         208,020         296,269

Net interest income after provision 
  for loan losses  . . . . . . . . . . . . .      5,055,369       4,134,477
Noninterest Income
  Service charges on deposits   . . . . . . . .     754,069         613,676
  Insurance commissions  . . . . . . . . . . . .    673,612         142,405
  Bank club dues . . . . . . . . . . . . . . . . .  153,187         142,123
  Other operating income . . . . . . . . . . . . .  472,973         246,514
  Investment securities gains   . . . . . . . . .     2,706            -0- 
     Total Noninterest Income   . . . . . . . . . 2,056,547        1,144,718

Noninterest Expenses
 Salaries and employee benefits  . . . . . . . .  3,470,069        2,269,724
 Occupancy expense  . . . . . . . . . . . . . .     476,219          353,695
 Furniture and equipment expense   . . . . . . .    356,730          294,295
 Director and committee fees   . . . . . . . . .    162,950          158,995
 Other operating expenses . . . . . . . . . . .   1,200,751          819,491
 Total Noninterest Expenses   . . . . . . . . . . 5,666,719        3,896,200

Income before income taxes . . . . . . . . . . .  1,445,197        1,382,995
Provision for income taxes                          411,481          380,827

Net Income  . . . . . . . . . . . . . . . . .  $  1,033,716  $     1,002,168

Earnings Per Common Share
  Net income     . . . . . . . . . . . . . . . $        .27  $           .27
Earnings Per Common Share-assuming dilution
  Net income     . . . . . . . . . . . . . .   $        .26  $           .27 

                See notes to consolidated financial statements
 
                                        {Page 4}

                 COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                   (UNAUDITED)
                                                         Three Months Ended
                                                              June 30,
                                                     1998             1997     

Net income  . .                                $  1,033,716   $    1,002,168 

Other comprehensive income, net of tax:        
   Realized investment security gains  . . . .        2,706           (2,590)
   Unrealized gains (losses) on securities  . . .   (17,391)         748,373
     Less income tax effect  . . . . . . . . .        5,874         (298,313)
        Total other comprehensive income   . . .     (8,811 )        447,470 
     
Comprehensive income  . . .                    $  1,024,905   $    1,449,638 



                   See notes to consolidated financial statements

                                    5 <PAGE>
 


                  COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME
                                 (UNAUDITED)
                                                        Six Months Ended
                                                            June 30,         
                                                     1998             1997     
Revenue From Earning Assets
  Interest and fees on loans  . . . . . . . .  $  17,445,895  $  15,623,572 
  Interest on investment securities:
    Taxable securities  . . . . . .  . . . . .     2,148,516      2,205,914
    Securities exempt from federal income taxes  .   354,016        358,927 
  Interest on federal funds sold  . . . . . . . . .  525,301        195,681
  Interest on deposits in other banks   . . . .       35,426         49,434
        Total Revenue From Earning Assets  . . . .20,509,154     18,433,528

Interest Expense
  Interest on deposits . . . . . . . . . . . . . .10,412,740      9,120,982
  Interest on other short-term borrowings   . . .     52,939         79,943
  Interest on long-term debt  . . . . . . . . . .    292,833        324,313
      Total Interest Expense   . . . . . . . .    10,758,512      9,525,238

Net interest income    . . . . . . . . . . . . .   9,750,642      8,908,290
Provision for loan losses .                          396,744        494,247

Net interest income after provision 
   for loan losses  . . . . . . . . . . . . . .    9,353,898      8,414,043

Noninterest Income
  Service charges on deposits   . . . . . . . . .  1,422,773      1,236,577
  Insurance commissions  . . . . . . . . . . . . . 1,087,324        332,608
  Bank club dues . . . . . . . . . . . . . . . . .   300,525        276,907
  Other operating income . . . . . . . . . . . . .   821,124        476,480
  Investment securities gains   . . . . . . . . .     11,508         (2,590) 
          Total Noninterest Income   . . . . . . . 3,643,254      2,319,982

Noninterest Expenses
 Salaries and employee benefits  . . . . . . . . . 6,527,220      4,917,162
 Occupancy expense  . . . . . . . . . . . . . . .    924,535        697,147
 Furniture and equipment expense   . . . . . . .     690,793        568,701
 Director and committee fees   . . . . . . . . . .   325,558        311,870
 Other operating expenses . . . . . . . . . . . .  2,313,197      1,702,030
    Total Noninterest Expenses   . . . . . . . . .10,781,303      8,196,910

Income before income taxes                         2,215,849      2,537,115
Provision for income taxes                           622,683        712,731
       Net Income before Minority Interest  . . .  1,593,166      1,824,384
Minority interest in consolidated subsidiary   . .     4,167          -0-

Net Income  . . . . . . . . . . . . . . . . . . $  1,588,999 $    1,824,384

Earnings Per Common Share
   Net income     . . . . . . . . . . . . . .   $       .41  $         .48
Earnings Per Common Share-assuming dilution
   Net income     . . . . . . . . . . . . . . . $       .40  $         .48 

           See notes to consolidated financial statements

                              6 <PAGE>
  

             COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

            CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                              (UNAUDITED)
                                                  Six Months Ended
                                                      June 30,              
                                                  1998            1997     

Net income  . .                               $  1,588,999    $  1,824,384 

Other comprehensive income, net of tax:     
      Realized investment security gains  . . . .   11,508         (2,590) 
      Unrealized gains on securities   . . . . . . 106,109       (223,247)
        Less income tax effect  . . . . . . . . .  (47,047)        90,335 
         Total other comprehensive income   . . .   70,570       (135,502)

Comprehensive income  . . .                   $  1,659,569   $  1,688,882 

                See notes to consolidated financial statements

                                7 <PAGE>
 

          COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

              CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (UNAUDITED)


                                                     Six Months Ended
                                                          June 30,         
                                                   1998             1997     
Operating activities:
 Net income . . . . . . . . . . . . . . . . . . $  1,588,999  $  1,824,384
 Adjustments to reconcile net income 
  to net cash provided by 
  operating activities:
   Provision for loan losses   . . . . . . . .       396,744       494,247
   Provision for depreciation and 
    amortization   . . . . . . .                     926,483       724,213
   Amortization of investment security 
    premiums and accretion of discounts  . . . . . .  74,708        19,333
   Deferred tax expense     . . . . . . . . . . . . . 45,518        62,452
   Loss on sale of premises and equipment   . . . .    3,763         1,058 
   Realized investment security losses (gains)       (11,508)        2,590
   Increase (decrease) in accrued interest receivable (5,173)       25,014 
   Increase in accrued interest payable  . . . .     492,391       580,197 
   Other  . . . . . . . . . . . . . . . . . . . .   (550,460)   (1,332,734)
     Net cash provided by operating activities  . .2,961,465     2,400,754 

Investing activities:
 Proceeds from sales of investment securities  . . 6,586,500     5,007,863
 Proceeds from maturity of investment securities   4,022,319     3,137,430 
 Purchase of investment securities   . . . . . .  (9,185,134)   (2,286,703)
 Decrease (increase) in interest-bearing 
  deposits with other banks                         1,564,558   (1,175,280)
 Cash disbursed in acquisition of 
  finance offices    . .                           (6,543,108)       -0-
 Cash disbursed in acquisition of   
  insurance operations   . . . .                   (1,471,387)       -0-
 Cash received in acquisition of branch office      2,763,123        -0-
 Net increase in loans to customers  . . . . . . .(40,826,361)  (1,295,886)
 Proceeds from sale of premises and equipment  .      153,951      104,855 
 Net proceeds from sale of other real estate   .       42,500        -0- 
 Capital expenditures . . . . . . . . . . . . .    (3,792,168)  (4,056,647)
    Net cash provided (used) by 
     investing activities                         (46,685,207)    (564,368)

Financing activities:
 Net increase in demand deposits, 
  NOW accounts,and savings accounts  . . . . . .   15,568,586    5,299,475 
 Net increase in certificates of deposit   . . . . 16,603,565   23,007,155
 Net decrease in short-term borrowings   . . . .       33,934   (5,064,519)
 Issuance and sale of common stock.  . . . . . . .  1,015,896       96,720 
 Repayment of long-term debt   . . . . . . . . . .   (384,907)    (382,941)
 Cash dividends . . . . . . . . . . . . . . . . .  (2,031,607)  (1,500,000)
 Net cash provided by financing activities  . . .  30,805,467   21,455,890

 Net increase in cash and cash equivalents . . . .(12,918,275)  23,292,276

Cash and cash equivalents at beginning of period   46,251,978   17,612,177

Cash and cash equivalents at end of period   . . $ 33,333,703 $ 40,612,177


                See notes to consolidated financial statements

                                 8 <PAGE>
 


            COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (UNAUDITED)
                                                        Six Months Ended
                                                           June 30,          
                                                     1998            1997     

Supplemental disclosures of cash flow information:
 Cash paid during the period for:
  Interest  . . . . . . . . . . . . . . . . . . .$ 10,239,430 $   8,945,041
  Income taxes  . . . . . . . . . . . . . . . . .     317,658     1,290,777

Supplemental schedule of non-cash investing and financing activities:

   Other real estate of $374,000 and $87,500 was acquired in 1998 and 1997, 
   respectively, from employees as a result of the Company s relocation program.

   Upon the pledging of purchased shares to obtain additional ESOP debt of 
   $137,918 on October 2, 1995, long-term debt  was  increased  and  equity 
   was decreased . The debt was reduced and shares were released by $61,936
   and $57,508 during the six month periods ended June 30, 1998 and 1997, 
   respectively, as a result of payments made by the Company's ESOP on the 
   outstanding ESOP debt.

   Unrealized  gains on investment securities available for sale decreased by  
   $117,617 during the six months ended June 30, 1998.
                     
                       See notes to consolidated financial statements

                                    9 <PAGE>
 


                    COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (UNAUDITED)

                               June 30, 1998



NOTE A - Basis of Presentation

The  accompanying  unaudited  consolidated  financial  statements  have been 
prepared in accordance with generally accepted  accounting  principles  for  
interim  financial  information  and  with  the  instructions  to  Form 10-Q 
and Article 10 of  Regulation  S-X.    Accordingly,  they  do  not include all 
of the information and footnotes required by generally accepted  accounting  
principles  for  complete  financial  statements.  In the opinion of management,
all adjustments (consisting of normal  recurring accruals) considered necessary 
for a fair presentation have been included.  Operating results for the six month
period  ended  June  30,  1998 are not necessarily indicative of the results 
that may be expected for the year ended December  31, 1998.  For further 
information, refer to the consolidated financial statements and footnotes 
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.

NOTE B - Income Taxes

The  effective  tax  rates of approximately 28.0 percent and 28.1 percent for 
the three months ended June 30, 1998 and 1997 are less than the statutory rate 
principally because of the effect of tax-exempt interest income.

NOTE C - Investment Securities

Effective  January  1,  1994,  the  Company  applied  the  accounting  and 
reporting requirements of Statement of Financial Accounting  Standards  No.  
115,  Accounting  for  Certain  Investments  in  Debt  and Equity Securities 
("SFAS 115"). This pronouncement  requires  that all investments in debt 
securities be classified as either held-to-maturity securities, which  are  
reported  at  amortized  cost;  trading securities, which are reported at fair 
value, with unrealized gains and losses included  in earnings; or available-for-
sale securities, which are reported at fair value, with unrealized gains and 
losses excluded from earnings and reported in a separate component of 
stockholders' equity (net of deferred tax effect).

At  June  30,  1998, the Company had net unrealized gains of $833,771  in 
available-for-sale securities which are reflected  in  the  presented  assets 
and resulted in a increase in stockholders' equity of $500,263,  net of deferred
tax liability. There  were  no  trading  securities.  The net increase in 
stockholders  equity as a result of the SFAS 115 adjustment from  December 31, 
1997 to June 30, 1998 was $70,570. 


NOTE D - Shareholders' Equity

In  January  of 1997, the Board of Directors of the Company declared a dividend
of $.75 per share to shareholders of record as  of  January  8, 1997, and 
another dividend of $1.00 per share was declared in January of 1998 to 
shareholders of record as  of  January 26, 1998. Additionally, a one-for-one 
stock dividend was declared and distributed to stockholders of record as  of 
the same date. The payment of dividends on common stock is subject to the prior
payment of principal and interest on  the  Company's  long-term  debt,  
maintenance  of  sufficient  earnings  and  capital of the subsidiaries and to 
regulatory  restrictions.

All per share disclosures have been adjusted to reflect the impact of the 
one-for-one stock dividend in the first quarter of 1998.

                                        10 <PAGE>
 


NOTE D - Shareholders' Equity (continued)


On  March  26,  1998,  March  27,  1997,  and  March  28,  1996,  the Company 
issued 191,664, 103,000, and 270,000 options, respectively,  to purchase its 
common shares to its directors and or senior managers.The options were 
distributed among the directors  and  or  senior  managers  based upon their 
years of service and their positions of leadership with the Company. Each  of 
the stock option agreements contained an option price of $15.00 per share (1998
issuance), $12.50 per share (1997 issuance)  or  $10.00  per  share  (1996 
issuance), the market value of the shares at the time of issuance. The options 
are exercisable  between  April 1, 1996 and March 31, 2003, and are treated as 
non-qualified opions under the provisions of the Internal  Revenue  Code.  The 
agreements also contain a provision whereby the Company shall compensate the 
optionee in cash for any federal or state tax liability incurred upon the 
exercise of the options.

These  options  have  been  treated as common stock equivalents and have been 
included in the calculation of average common shares  outstanding,  for  the  
purpose  of  calculating  diluted earnings per share, in Exhibit 11, causing the
equivalent  average  number  of  shares  outstanding for the first quarter to 
rise by 51,530 shares and 14,177 shares, respectively, in 1998 and 1997. There
was  no  dilutive  effect  on  book value per share at June 30, 1998, nor on the
book value of the Company s common shares at June 30, 1997.

In  October  1995, the Financial Accounting Standards Board ( FASB ) issued 
Statement of Financial Accounting Standards No.123,  Accounting  and  Disclosure
of Stock-Based Compensation ( SFAS 123"). SFAS 123 is effective for years 
beginning after December  15,  1995,  and  allows  for  the  option  of  
continuing  to  follow Accounting Principles Board Opinion No. 25, Accounting 
for Stock Issued to Employees, and the related Interpretations or selecting the 
minimum value method of expense recognition  as  described in SFAS 123. The 
Company has elected to apply APB Opinion No. 25 in accounting for its incentive
stock  options;  accordingly, no  compensation expense cost has been recognized
by the Company. The Companys net income,earnings  per  share  -  basic, and  
earnings per share - diluted would have been reduced by $ 236,677, $ 0.06, and 
$ 0.07, respectively,  for  the  six  months  ended  June  30, 1998, had 
compensation cost for the Company s stock option plan been determined  based 
on  the  fair  value  ( minimum value method ) at the grant date for options 
under the plan.  The effect would have been $ 129,162, $ 0.03, and $ 0.04, 
respectively, for the same period in 1997.

NOTE E - Employee Stock Ownership Plan

The  Company  adopted an Employee Stock Ownership Plan (the "ESOP") effective as
of January 1, 1985, which enables eligible employees  of  the  Company and its 
subsidiaries  to  own  Company  common stock.  Employees who work 1,000 hours in
any consecutive  twelve  month period become participants in the ESOP on 
December 31 of that year, and remain eligible in every  subsequent  year  in  
which 1,000 hours of work are completed.  Employer contributions, which are made
at the discretion of the  Company's Board of Directors, are allocated to 
eligible participants in proportion to their eligible pay, which equals  W-2 
wages  plus  pre-tax  reductions  for  the  Company's  cafeteria  plan.   The 
Internal Revenue Service imposes a limit ($160,000 in 1998) on the maximum 
amount of eligible pay under the plan.

On  November  3,  1993, the ESOP's Trustees executed a promissory note of 
$1,200,000 in order to purchase common stock from the  Company's  public  
offering of new common stock.  The note was originally secured by 80,000 shares
of purchased stock. On  October  2,1995,the  ESOP  acquired  7,455  additional 
shares  with  the  proceeds  of  a  second promissory note,  collateralized  by 
the acquired shares. On May 17, 1996, these two notes were refinanced and an 
additional 58,000 shares of  stock  were  obtained by the ESOP. These shares 
were funded with the same promissory note which provided funds to refinance the
previously  executed  notes. This new note was originally secured by 117,847 
shares of the Company s common stock. The  shares  securing the note are 
released proratably by the lender as monthly payments of principal and interest
are made. The  note  is  guaranteed  by  the  Company.  As  of  June  30,  1998,
there were 194,794 unreleased shares with a fair value of approximately 
$3,700,000.  These shares are subtracted from outstanding shares for earnings 
per share calculations.

Effective  January  1, 1994, the Company applied the accounting and reporting 
requirements of Statement of Position No. 93-6,  Employers'  Accounting  for 
Employee Stock Ownership Plans ("SOP 93-6"). Under the provisions of SOP 93-6, 
the employer must  recognize  the  indebtedness of its sponsored ESOP on its 
financial statement and reduce its stockholder's equity for  shares  of  stock
which  have not been released by a lender to the ESOP for allocation to its 
participating employees. The  portion  of  payments    made  by  the  Company  
to the ESOP on behalf of its participating employees which are used to pay 
interest on the ESOP debt  is classified as interest expense on the Companys 
income statement.

                                     {Page 11}

Note E - Employee Stock Ownership Plan (continued) 

Dividends  paid  on released ESOP shares are credited to the accounts of the 
participants to whom the shares are allocated. Dividends on unreleased shares 
are treated as other income of the ESOP.

At  June  30, 1998, the Company's financial statements reflect long term debt 
and a corresponding contra-equity account, as  a result of the ESOP debt, of 
$1,940,966.

                                 12 <PAGE>
 


                                    Item 2.
           MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                          AND RESULTS OF OPERATIONS


This  discussion  is  intended  to  assist  an  understanding  of the Company 
and its Subsidiaries' financial condition and  results  of  operations. Unless
the  context  otherwise  indicates,  "the  Company"  shall  include the Company
and its Subsidiaries.    This  analysis  should be read in conjunction with the
financial statements and related notes appearing in Item  1  of  the  June  30,
1998  Form 10-Q and Management's Discussion and Analysis of Financial Condition
and Results of Operations appearing in the Company's Annual Report on Form 10-K
for the year ended December 31, 1997.


FINANCIAL CONDITION

June 30, 1998 compared to December 31, 1997


Loans

Loans comprised the  largest  single  category  of the Company's earning assets
on June 30, 1998.  Loans, net of unearned income  and  reserve for loan losses, 
were 70.3% of total assets at June 30, 1998 and 65.9% of total assets at 
December 31, 1997. Total net loans were $373,433,316 at June 30, 1998, 
representing a 15.2% increase from the December 31, 1997 total of $324,003,129. 


Investment Securities and Other Earning Assets

Investment  securities and federal funds sold decreased $ 23,069,268 or 20.7 
from December 31, 1997 to June 30, 1998.  This  decrease  was due primarily to
loan growth in excess of deposit growth .The investment securities portfolio is
used to make various  term  investments,  to  provide  a  source  of  liquidity
and to serve as collateral to secure certain government deposits. Investment 
securities  at  June  30,  1998  were  $83,722,801 compared with $85,092,069 at
December 31, 1997, reflecting  a 1.6% decrease of $1,369,268.  Short-term 
investments in the form of interest-bearing deposits with banks were $950,000 
at June 30, 1998 and $2,514,558 at December 31, 1997.


Asset Quality

Between  December  31,  1998  and  June  30, 1997, the Company experienced a 
slight decline in the quality of its assets as measured  by  two  key  ratios,
but saw another strengthen. The ratio of loan loss allowance to total 
nonperforming assets (defined  as  nonaccrual  loans,  loans  past due 90 days 
or greater, restructured loans, nonaccruing securities, and other real  estate) 
increased from 0.78 to 0.93. The ratio of total nonperforming assets to total 
assets increased from  0.006 to 0.007,  and  the  ratio  of  nonperforming  
loans  to  total  loans increased to 0.008 from 0.006 at 12/31/97. These ratios
declined  due  to an increase in past due and nonaccrual loans, and an increase
in other real estate due to the purchase of employees  homes who were relocated
by the Company. All three of these ratios remain favorable as compared with 
industry averages, and management is aware of no factors which would suggest 
that they are prone to erosion in future periods.


Deposits

Total  deposits of $478,704,932 at June 30, 1998 increased $37,816,301 (8.6%) 
over total deposits of  $440,888,631 at year-end  1997.    Deposits  are  the  
Company's primary source of funds with which to support its earning assets.  
Noninterest-bearing  deposits  increased  $6,848,578  or  13.1%  from  year-end
1997  to  June 30, 1998, and interest-bearing deposits    increased $30,967,723 
(8.0%) from year-end 1997.  Certificates of deposit of $100,000 or more 
decreased $5,102,056 (7.5%).


                                             {Page 13}

Other Short-term Borrowings

Other  short-term  borrowings  totaled $2,552,452 at June 30, 1998, a $77,935  
decrease from the December 31, 1997 total of $2,630,387.


Long-term Debt

At June 30, 1998 and December 31, 1997, the Company had notes payable totaling
$6,950,769, and $7,397,612, respectively. 

On  December  17,  1992,  the  Company entered into a loan agreement with a 
regional bank  for amounts up to $6,500,000. At June  30,  1998  and December 
31, 1997, the amounts outstanding were $3,201,758 and  $3,557,509, respectively,
due December 17,  2002,  bearing  interest  at a floating prime, and     
collateralized by 100% of the common stock of the subsidiary banks.  The  note
agreement  contains  provisions which limit the Company's right to transfer or 
issue shares of subsidiary banks' stock.  Principal  payments of $59,292 are 
due monthly; however, the Company has the option of postponing up to twenty-four
monthly principal payments, provided that no more than six consecutively 
scheduled installments are deferred. 

On  November  3,  1993, the ESOP's Trustees executed a promissory note of 
$1,200,000 in order to purchase common stock from the  Company's  public  
offering of new common stock.  The note was originally secured by 80,000 shares
of purchased stock. On  October  2,  1995,  the  ESOP  acquired  7,455  
additional  shares  with  the  proceeds  of  a  second promissory note, 
collateralized  by the acquired shares. On May 17, 1996, these two notes were 
refinanced and an additional 58,000 shares of stock  were  obtained by the ESOP
with a promissory note with a beginning balance of $2,183,805. The Company has 
guaranteed this  debt;  accounting  and  reporting  guidelines  mandate  that  
the  debt  be  recognized on the Company's statement of condition,  with  an  
offsetting charge against equity. As principal payments are made by the ESOP, 
the debt and offsetting charge  against  equity  are reduced. This note was 
originally secured by 117,847 shares of the Company s common stock. The note
bears interest at a floating rate, with principal and interest payments of 
$23,948 due monthly through June 17, 2018, with  all  remaining  principal,  
if  any,  due upon that date. The shares securing the note are released 
proratably by the lender  as monthly payments of principal and interest are 
made. The outstanding balance of this note was $1,940,966 at June 30, 1998, 
secured  by 194,794 of unreleased shares of Company stock (adjusted for the 
one-for-one stock split in March of 1998).

On  October  4, 1994, the Company entered into a twenty year, subordinated 
installment capital note due October 1, 2014 for the  purchase  of  treasury 
stock.  Monthly  principal  and interest payments of $15,506 are made on the 
note, which bears interest  at  the fixed rate of 7 %. The Company maintains 
the right to prepay the note at its sole discretion. The balance  of the note 
was $1,808,045 at June 30, 1998.

Maturities of long-term debt for the years ending December 31 are as follows:

                 1998  . . . . . . . . .   $     480,138
                 1999  . . . . . . . . .         907,869
                 2000  . . . . . . . . .         923,767
                 2001  . . . . . . . . .         941,467
                 2002  . . . . . . . . .         961,013
                 Thereafter  . . . . . .       2,736,515

                                           $   6,950,769



Shareholders' Equity

Company  shareholders'  equity  increased  $705,793  from  December  31,  1997
to June 301, 1998, due to:  net earnings of $1,588,999,  the  payment of a cash 
dividend of  $2,031,607, the reduction of unearned ESOP shares by $61,936, the 
issuance of  additional common stock for $1,015,895,  and the increase of 
unrealized gains on securities available for sale totaling $70,570, net of 
deferred tax liability.




                                   14 <PAGE>
 

Capital Resources

A  strong  capital  position  is  vital  to  the  continued  profitability of 
the Company because it promotes depositor and investor  confidence  and  
provides a solid foundation for future growth of the organization.  The Company
has provided the majority of its capital requirements through the retention of 
earnings.

Bank  regulatory  authorities  are  placing  increased emphasis on the 
maintenance of adequate capital.  In 1990, new risk-based  capital  requirements
became  effective.    The  guidelines  take  into  consideration  risk factors, 
as defined by regulators,  associated  with  various  categories  of  assets,  
both  on and off the balance sheet.  Under the guidelines, capital  strength is
measured in two tiers which are used in conjunction with risk-adjusted assets 
to determine the risk-based  capital  ratios.    The  Company's  Tier I capital,
which consists of common equity less goodwill, amounted to $30.8 million  at 
June 30, 1998.  Tier II capital components include supplemental capital 
components such as qualifying allowance for  loan  losses  and  qualifying 
subordinated debt.  Tier I capital plus the Tier II capital components is 
referred to as Total Risk-Based capital and was $ 35.7 million at June 30, 1998.

The  Company's  current  capital  positions exceed the new guidelines. 
Management has reviewed and will continue to monitor the  Company's  asset  
mix  and  product  pricing,  and  the loan loss allowance, which are the areas 
determined to be most  affected by these new requirements.

                                  15 <PAGE>
 



RESULTS OF OPERATIONS

Six months ended June 30, 1998 and 1997


Summary

Net  earnings  of  the  Company  for the six months ended June 30, 1998 were 
$1,588,999 compared to $1,824,384 for the same period  in 1997, representing 
a 12.9% decrease.  This decrease was due principally to the increase of 
noninterest  expenses in  excess  of  interest  margin  and noninterest income.
This is a direct result of the Company's expansion activity, with three  new  
banking facilities being opened in 1994, two new locations opening in 1995, five
new locations opening in 1996, plus  the  purchase  of  the  assets  and  
assumption of liabilities of the Haleyville and Uniontown, Alabama branches of 
a  regional  bank during 1996. Additionally, a commitment has been made to open 
four de novo banks in Marshall County, Alabama and  Marengo  County,  Alabama,  
and  noninterest  expenses  have  already begun to be incurred. The decline in 
earnings is expected  to  be  purely  short-term,  as  most  of  the  start-up 
banks, with the exclusion of the four de novo banks, are approaching  a  size  
at  which they will contribute to profits. Noninterest expenses increased 
$2,584,393 during the first half  of 1998, as compared to the same period in 
1997; net interest margin increased $842,352 during the same period, while  
noninterest income increased by $1,323,272. 


Net Interest Income

Net  interest income, the difference between interest earned on assets and the 
cost of interest-bearing liabilities, is the largest  component  of  the  
Company's  net income.  Revenue from earning assets of the Company during the 
six months ended  June  30,  1998  increased  $2,075,626  (11.3%)  from  the  
same  period  in 1997.  This increase was due to higher average  outstanding  
balances of earning assets. Average earning assets outstanding during the first 
half  of 1998 were $35,498,246 higher  than during the first half of 1997. 
Interest expense for the six months ended June 30, 1998 increased $1,233,274 or
13.0%  over  the  corresponding  period  of  1997.As a result of these factors,
net interest income increased $842,352 or  9.5%, in the six months ended 
June 30, 1998, compared to the same period of 1997.



Provision for Loan Losses

The  provision  for  loan  losses represents the charge against current earnings
necessary to maintain the reserve for loan losses  at a level which management 
considers appropriate.  This level is determined based upon Community Bank's 
historical  charge-offs,  management's  assessment of current economic 
conditions, the composition of the loan portfolio and the levels of  nonaccruing
and  past  due  loans.   The provision for loan losses was $396,744 for the six 
months ended June 30, 1998  compared  to  $494,247 for the same period of 1997.
Charge-offs exceeded recoveries by $310,673 for the six months ended June  30, 
1998. The reserve for loan losses as a percent of outstanding loans, net of 
unearned income, was .89% at June 30, 1998 compared to .65% at year-end 1997.



Noninterest Income

Noninterest  income  for  the  six  months ended June 30, 1998 was $3,643,254 
compared to $2,319,982 for the same period of 1997.  This  57.0% increase was 
primarily due to an increase in insurance commissions realized of $754,716 in 
the first six  months  of  1998  as  compared  to  the  same  period of 1998. 
Significant components of noninterest income are as follows: Service  charges  
on deposits increased $186,196 (15.1%), insurance commissions increased $754,716
(226.9%), security gains of  $11,508  were  realized,  as  opposed  to  $2,590 
of losses in the first quarter of 1997,  and other operating income, primarily 
dues  for  the  bank  club  account, fees on debt cancellation contracts, and 
appraisal fees, increased $368,262 (48.9%) to $1,121,649.


                                         16 <PAGE>
 



Noninterest Expenses

Noninterest  expenses  for the six months ended June 30, 1998 were $10,781,303,
reflecting a 31.5% increase over the same period  of  1997.    The  primary 
components of noninterest expenses are salaries and employee benefits, which 
increased to  $6,527,220  for  the  six  months  ended  June  30,  1998,  32.7% 
higher than in the same period of 1997.  The increases in salaries  and  
employee  benefits  are  due  to  staffing  for  new banking locations and 
future expansion as well as merit increases  and  incentive  payments.  
Occupancy  costs increased $227,388 (32.6%), furniture and equipment expenses 
rose by $122,092  (21.5%),  and director and committee fees increased by $13,688
(4.4%).  Other operating expenses rose by 35.9% to $2,313,303.

The  substantial  increase  in  the  Company's  size  has necessitated increased
expenditures for data processing and other support activities and personnel, 
which will continue. 

The  majority  of  these  expenses  should  continue  at  or above the levels 
for the six months ended June 30, 1998, since management intends to continue its
growth policies.  

The  Company's  strategy is to make each office of its subsidiary bank a vital 
part of the community it serves. Each office  has  management  and  personnel  
as  similar  to a full service, stand-alone bank as possible.  Although more 
expensive, we believe  this  strategy  has  been  successful  for  Community  
Bank,  and  will  best serve our communities, customers and  shareholders.

Income Taxes

The  Company  attempts  to maximize its net income through active tax planning.
The provision for income taxes of $622,683  for  the  six  months  ended  June  
30, 1998 decreased  $90,048 compared to the same period of 1997, due to the 
decrease in income  before tax.  Taxes as a percent of earnings decreased from 
28.1% to 28.0%.  The effective tax rate of approximately 28.0% is less than the 
statutory rate principally because of the effect of tax-exempt interest income.

                                    17 <PAGE>
 


                                      Item 3.
          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

  With  regard  to  quantitative  and  qualitative  disclosures regarding the 
Company s market risk, refer to Managements   Discussion  and  Analysis  and  
consolidated financial statements and notes included in the Company s annual
report  on Form 10-K for the year ended December 31, 1997.  Based on current 
market risk analysis, management believes that the  change  from  December  
31,  1997,  to June 30, 1998, in the Company s net interest income sensitivity 
over a one year horizon is not material.

                                18 <PAGE>
 


                           Part II - Other Information

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

  The  annual  meeting  of  stockholders  of  the Company was held on Thursday, 
March 26, 1998, at which the  following matters were voted upon by the 
stockholders of the Company.
                     
(a) Election of Class II Directors
                     
    Glynn  Debtor,  John  J. Lewis, Jr., Loy McGruder, Kennon R. (Chip) , Jr., 
and Bishop K. Walker, Jr., were elected  to  serve  as Class II directors of the
Company until the annual meeting of stockholders of the Company in 2001 or    
until their successors are elected and qualified.  The vote with respect to such
election was as follows:
                                                      Votes Cast  Abstentions
                                      Votes Cast      Against or   or Broker   
Name                                  In Favor         Withheld    Non-Votes
Glynn Debtor                           3,059,358            210
John J. Lewis, Jr.                     3,059,508                    
Loy McGruder                           3,059,568
Kennon R. (Chip) Patterson, Jr.        3,059,358            210      
Bishop K. Walker, Jr.                  3,059,568

 The following directors continued in office following the stockholders meeting:

  Name                                                   Term Expires
  Kennon R. Patterson, Sr.                                 1999      
  Denny Kelly                                              1999      
  Merritt Robbins                                          1999      
  Wayne Washam                                             1999      
  Bryan A. Corr                                            1999      
  Edward Ferguson                                          1999      
  Henry Sims                                               1999      
  C.K. Copeland   - Retired
  Stacey W. Mann                                           2000      
  Hodge Patterson, III                                     2000      
  Robert O. Summerford                                     2000      

(b)  Selection of Independent Auditors

    The stockholders of the Company ratified the appointment of Dudley, 
Hopton-Jones, Sims & Freeman, PLLC, as the Company s independent auditors for 
the fiscal year ending December 31, 1998, by the following vote:

                                Votes Cast                   Abstentions
       Votes Cast               Against or                   or Broker    
       In Favor                  Withheld                     Non-Votes 
       3,055,858                   800                          2,910 
                  
                   Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits:

     Exhibit Number          Description of Exhibit          Page Number
          11                 Computation of Earnings             20     
                                   Per Share               

          27                 Financial Data Schedule
                              (for the SEC use only)
(b) Reports on Form 8-K

    The Company did not file any reports on Form 8-K during the quarter ended 
    June 30, 1998.


                             {Page 19}

EXHIBIT 11 -- STATEMENT RE:  COMPUTATION OF EARNINGS PER SHARE

COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES




The  following tabulation presents the calculation of primary and fully diluted
earnings per common share for the six-month and three-month periods ended 
June 30, 1998 and 1997.

                                   Six Months Ended       Three Months Ended
                                       June 30,              June 30,      
                                  1998         1997        1998      1997    

Reported net income . . . .  $ 1,588,999   $ 1,824,354 $ 1,033,716 $ 1,002,168

Earnings on common shares .  $ 1,588,999   $ 1,824,354 $ 1,033,716 $ 1,002,168

Weighted average common
   shares outstanding-basic    3,881,008     3,787,629   3,895,487   3,792,675

Earnings per common share-basic
 Income from continuing 
   operations . . . . . . .  $       .41   $       .48 $       .27 $      .26

 Net income  . . . . . . .   $       .41   $       .48 $       .27 $      .26


Weighted average common
 shares outstanding-diluted    3,932,538      3,801,806  4,008,174  3,825,538

Earnings per common share-diluted
 Income from continuing 
  operations . . . . . . . . $       .40   $       .48  $      .26  $     .26

 Net income  . . . . . . .   $       .40   $       .48  $      .26  $     .26


                                  20 <PAGE>
 




SIGNATURES

Pursuant  to  the  requirements  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.



July 31, 1998                       /s/ Kennon R. Patterson, Sr.     
Date                                Kennon R. Patterson, Sr., as its  
                                    President and Chief Executive   
                                    Officer                          



July 31, 1998                        /s/ Paul W. Williams, CPA            
    Date                             Paul W. Williams, CPA, as its Senior
                                     Vice President and Chief        
                                     Accounting Officer              
                          




                                    21 <PAGE>