UNITED STATES
                        SECURITIES & EXCHANGE COMMISSION
                              WASHINGTON, DC 20552

                                    ---------

                                    FORM 10-Q

(Mark One)

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


For the quarterly period ended:  JUNE 30, 1998
                                 -------------

                                       OR


[ ]   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 000-29460
                                               ---------

                       COMMUNITY SAVINGS BANKSHARES, INC.
--------------------------------------------------------------------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

             UNITED STATES                                   65-0780334
----------------------------------------        --------------------------------
    (STATE OR OTHER JURISDICTION OF                        (IRS EMPLOYER
    INCORPORATION OR ORGANIZATION)                      IDENTIFICATION NO.)

          660 US Highway One
         North Palm Beach, FL                                  33408
----------------------------------------        --------------------------------
    (ADDRESS OF PRINCIPAL EXECUTIVE                          (ZIP CODE)
               OFFICES)


        REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (561) 881-2212
                                                           --------------

     Indicate  by check  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 [ ]

     As of August 11,  1998,  there were  5,103,960  shares of the  Registrant's
common stock outstanding.
<PAGE>

                COMMUNITY SAVINGS BANKSHARES, INC. AND SUBSIDIARY
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
 PART I. FINANCIAL INFORMATION                                                                      PAGE
 -----------------------------                                                                      ----
<S>        <C>                                                                                       <C>
 Item 1.   Financial Statements
           Consolidated Statements of Financial Condition as of
           June 30, 1998 (Unaudited) and December 31, 1997                                            2

           Consolidated Statements of Operations (Unaudited) for the three and six  months
           ended June 30, 1998 and 1997                                                               3

           Consolidated Statements of Comprehensive Income (Unaudited) for the three and six
           months ended June 30, 1998 and 1997                                                        4

           Consolidated Statements of Changes in Shareholders'  Equity
           for the six months ended June 30, 1998 (Unaudited) and
           for the year ended December 31, 1997                                                       5

           Consolidated Statements of Cash Flows (Unaudited) for the six months
           ended June 30, 1998 and 1997                                                               6

           Notes to Consolidated Financial Statements (Unaudited)                                     7

Item 2.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations                                                                 11

Item 3.    Quantitative and Qualitative Disclosures About Market Risk                                20

PART II. OTHER INFORMATION
--------------------------

Item 1.    Legal Proceedings                                                                         20

Item 2.    Changes in Securities                                                                     20

Item 3.    Default Upon Senior Securities                                                            21

Item 4.    Submission of Matters to a Vote of Security Holders                                       21

Item 5.    Other Information                                                                         21

Item 6.    Exhibits and Reports on Form 8-K                                                          22

           Signature Page                                                                            23
</TABLE>

                                                    1
<PAGE>



ITEM 1.  FINANCIAL STATEMENTS

COMMUNITY SAVINGS BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AT JUNE 30, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
                                                                                   June 30,    December 31,
                                                                                     1998         1997
                                                                                   ---------    ---------
                                                                                  (Unaudited)
                                                                                       (In thousands)
<S>                                                                                <C>          <C>
ASSETS
  Cash and cash equivalents:
     Cash and amounts due from depository institutions                             $  16,477    $  12,333
     Interest-bearing deposits                                                        30,948       13,621
                                                                                   ---------    ---------
        Total cash and cash equivalents                                               47,425       25,954

  Securities available for sale                                                       91,316      142,269
  Investments - held to maturity                                                      21,443       21,388
  Mortgage-backed and related securities - held to maturity                           41,884       46,413
  Loans receivable, net of allowance for loan losses                                 527,375      451,709
  Accrued interest receivable                                                          2,725        3,162
  Office properties and equipment, net                                                22,157       20,206
  Real estate owned, net                                                                 711          592
  Federal Home Loan Bank stock - at cost                                               3,782        3,264
  Other assets                                                                         6,670        5,176
                                                                                   ---------    ---------
        Total assets                                                               $ 765,488    $ 720,133
                                                                                   =========    =========

LIABILITIES
  Deposits                                                                         $ 574,383    $ 550,708
  Mortgage-backed bond - net                                                          15,883       16,333
  Advances from Federal Home Loan Bank                                                75,630       57,341
  Employee Stock Ownership Plan borrowing                                                 --        1,424
  Advances by borrowers for taxes and insurance                                        5,467          931
  Other liabilities                                                                    8,077        9,101
  Deferred income taxes                                                                2,970        3,036
                                                                                   ---------    ---------
        Total liabilities                                                            682,410      638,874
                                                                                   ---------    ---------

SHAREHOLDERS' EQUITY
  Preferred stock ($1 par value): 10,000,000 authorized shares, no shares issued          --           --
  Common stock ($1 par value): 20,000,000 authorized shares; 5,100,120 and
     5,094,920 shares outstanding at June 30, 1998 and December 31, 1997,              
     respectively                                                                      5,100        5,095
  Additional paid in capital                                                          30,621       30,278
  Retained income - substantially restricted                                          49,347       47,887
  Common stock purchased by Employee Stock Ownership Plan                             (1,227)      (1,424)
  Common stock issued to Recognition and Retention Plan                                 (330)        (423)
  Unrealized decrease in market value of assets available for sale, net of 
    income taxes                                                                        (433)        (154)
                                                                                   ---------    ---------
        Total shareholders' equity                                                    83,078       81,259
                                                                                   ---------    ---------
        Total liabilities and shareholders' equity                                 $ 765,488    $ 720,133
                                                                                   =========    =========
</TABLE>

See notes to consolidated financial statements.

                                                     2
<PAGE>


COMMUNITY SAVINGS BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX  MONTHS ENDED JUNE 30, 1998 AND 1997

<TABLE>
<CAPTION>
                                                             For the three months     For the six months
                                                                ended June 30,          ended June 30,
                                                               1998        1997        1998        1997
                                                             --------    --------    --------    --------
                                                                              (Unaudited)
                                                                             (In thousands)
<S>                                                          <C>         <C>         <C>         <C>
Interest income:                                            
  Real estate loans                                          $  9,453    $  7,791    $ 18,377    $ 15,479
  Consumer and commercial business loans                          467         410         913         817
                                                            
  Investment securities and securities available for sale       2,111       2,909       4,754       5,280
  Mortgage-backed and related securities                          794       1,021       1,637       2,010
  Interest-earning deposits                                       644         426       1,146         991
                                                             --------    --------    --------    --------
     Total interest income                                     13,469      12,557      26,827      24,577
                                                             --------    --------    --------    --------
                                                            
Interest expense:                                           
  Deposits                                                      6,051       5,661      11,976      11,031
  Advances from Federal Home Loan Bank and borrowings       
     other borrowings                                           1,305       1,152       2,679       2,229
                                                             --------    --------    --------    --------
     Total interest expense                                     7,356       6,813      14,655      13,260
                                                             --------    --------    --------    --------
Net interest income                                             6,113       5,744      12,172      11,317
Provision for loan losses                                          96          53         213          83
                                                             --------    --------    --------    --------
Net interest income after provision for loan losses             6,017       5,691      11,959      11,234
                                                             --------    --------    --------    --------

Other income:
 Servicing income and other fees                                   47         104         104         158
 NOW account and other customer fees                              855         829       1,677       1,608
 Miscellaneous                                                    (81)         38         (25)         96
                                                             --------    --------    --------    --------
     Total other income                                           821         971       1,756       1,862
                                                             --------    --------    --------    --------

Operating expense:                                          
 Employee compensation and benefits                             2,633       2,122       4,994       4,253
 Occupancy and equipment                                        1,243       1,226       2,527       2,420
 Net (gain) loss on real estate owned                               1          (9)         20          (3)
 Advertising and promotion                                        296         238         467         432
 Federal deposit insurance premium                                 86          83         171          99
 Miscellaneous                                                    623         852       1,667       1,604
                                                             --------    --------    --------    --------
     Total operating expense                                    4,882       4,512       9,846       8,805
                                                             --------    --------    --------    --------

Income before provision for  income taxes                       1,956       2,150       3,869       4,291
Provision for income taxes                                        677         767       1,358       1,556
                                                             --------    --------    --------    --------
Net income                                                   $  1,279    $  1,383    $  2,511    $  2,735
                                                             ========    ========    ========    ========
Basic earnings per share                                     $   0.26    $   0.28    $   0.51    $   0.55
                                                             ========    ========    ========    ========
  Diluted earnings per share                                 $   0.25    $   0.27    $   0.49    $   0.54
                                                             ========    ========    ========    ========
</TABLE>

                                                     3
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE SIX  MONTHS ENDED JUNE 30, 1998 AND 1997

<TABLE>
<CAPTION>
                                                       For the three months   For the six months
                                                          ended June 30,        ended June 30,
                                                         1998       1997       1998       1997
                                                        -------    -------   -------    -------
                                                                      (Unaudited)
                                                                     (In thousands)
<S>                                                     <C>        <C>       <C>        <C>
Net income                                              $ 1,279    $ 1,383   $ 2,511    $ 2,735
Other comprehensive income, net of tax:
   Change in unrealized increase (decrease) in market
           value of assets available for sale              (133)     1,015      (279)       483
                                                        -------    -------   -------    -------
Comprehensive income                                    $ 1,146    $ 2,398   $ 2,232    $ 3,218
                                                        =======    =======   =======    =======
</TABLE>

See notes to consolidated financial statements.

                                                4
<PAGE>



COMMUNITY SAVINGS BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1997 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                       Unrealized
                                                                                                        Increase
                                                                                                     (Decrease) in
                                                              Retained      Employee   Recognition    Market Value
                                                 Additional   Income-        Stock         and         of Assets
                                        Common    Paid In   Substantially   Ownership   Retention    Available for
                                         Stock    Capital    Restricted       Plan         Plan           Sale       Total
                                       ====================================================================================
                                                                      (In thousands)

<S>                                    <C>        <C>         <C>           <C>         <C>            <C>         <C>     
Balance - December 31, 1996            $  5,090   $ 29,920    $ 44,603      $ (1,818)   $   (608)      $ (1,068)   $ 76,119
Net income for the year ended                                                                         
    December 31, 1997                        --         --       5,356            --          --             --       5,356
Stock options exercised                       5         45          --            --          --             --          50
Unrealized increase in market value                                                                   
    of assets available for sale
    (net of income taxes)                    --         --          --            --          --            914         914
Amortization of deferred                                                                              
    compensation - Employee Stock                                                                    
    Ownership Plan and Recognition                                                                   
    and Retention Plan                       --        313          --           394         185             --         892
Dividends declared                           --         --      (2,072)           --          --             --      (2,072)
                                       ------------------------------------------------------------------------------------
                                                                                                      
Balance - December 31, 1997               5,095     30,278      47,887        (1,424)       (423)          (154)     81,259
                                                                                                      
Net income for the  six months ended                                                                  
    June 30, 1998                            --         --       2,511            --          --             --       2,511
Stock options exercised                       5         45          --            --          --             --          50
Unrealized decrease in  market value                                                                  
    of assets available for sale
    (net of income taxes)                    --         --          --            --          --           (279)       (279)
Amortization of deferred                                                                              
    compensation - Employee Stock                                                                    
    Ownership Plan and Recognition                                                                   
    and Retention Plan                       --        298          --           197          93             --         588
Dividends declared                           --         --      (1,051)           --          --             --      (1,051)
                                       ------------------------------------------------------------------------------------
Balance-June 30, 1998 (unaudited)      $  5,100   $ 30,621    $ 49,347      $ (1,227)   $   (330)      $   (433)   $ 83,078
                                       ====================================================================================
</TABLE>

See notes to consolidated financial statements.

                                                              5
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
                                                                                       For the six months
                                                                                         ended June 30,
                                                                                        1998        1997
                                                                                      --------    --------
                                                                                           (Unaudited)
                                                                                         (In thousands)
<S>                                                                                   <C>         <C>
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
 Net income                                                                           $  2,511    $  2,735
 Adjustments to reconcile net income to net cash provided by operating activities:
   Depreciation                                                                            720         677
   ESOP and Recognition and Retention Plan compensation expense                            588         371
   Accretion of discounts, amortization of premiums, and other deferred yield items     (1,531)       (766)
   Provision for loan losses                                                               213          83
   Provision for net gains on sales of real estate owned                                   (15)         (2)
   Amortization of discount on mortgage-backed bond                                        243         246
   Net loss (gain) on sale of loans and other assets                                         1         (14)
 Decrease (increase) in accrued interest receivable                                        437        (526)
 Increase in other assets                                                               (1,494)     (1,967)
 Increase in loans available for sale                                                       --         (10)
 (Decrease) increase in other liabilities                                               (1,024)        526
                                                                                      --------    --------

      Net cash provided by operating activities                                            649       1,353
                                                                                      --------    --------

CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
 Loan originations and principal payments on loans-net                                 (37,633)    (18,406)
 Principal payments received on mortgage-backed and related securities
     and securities available for sale                                                  17,004       6,389
 Principal payments received on investments-held to maturity                               743         939
 Purchases of
   Loans                                                                               (38,307)     (2,590)
   Securities available for sale                                                            --     (41,309)
   Federal Home Loan Bank stock                                                           (518)       (399)
   Office property and equipment                                                        (2,674)     (2,756)
Proceeds from sales of:
   Office properties and equipment                                                           1          78
   Real estate acquired in settlement of loans                                             522         189
Proceeds from calls of securities available for sale                                    38,381      12,000
Proceeds from maturities of investments-held to maturity                                    --         300
                                                                                      --------    --------
Other investing                                                                            (79)       (186)
                                                                                      --------    --------

          Net cash used for investing activities                                       (22,560)    (45,751)
                                                                                      --------    --------

CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
 Net increase (decrease) in:
   NOW accounts, demand deposits, and savings accounts                                  17,571       3,445
   Certificates of deposit                                                               6,104      23,379
 Advances from Federal Home Loan Bank                                                   22,000      15,000
 Repayment of advances from Federal Home Loan Bank                                      (3,711)     (3,711)
 Advances by borrowers for taxes and insurance                                           4,536       3,776
 ESOP loan                                                                              (1,424)       (196)
 Proceeds from exercise of stock options                                                    50          --
 Payments made on mortgage-backed bond                                                    (693)       (694)
 Dividends paid                                                                         (1,051)       (973)
                                                                                      --------    --------

          Net cash provided by financing activities                                     43,382      40,026
                                                                                      --------    --------

NET  INCREASE IN CASH AND CASH EQUIVALENTS                                              21,471      (4,372)
CASH AND CASH EQUIVALENTS, beginning of period                                          25,954      42,442
                                                                                      --------    --------
CASH AND CASH EQUIVALENTS, end of period                                              $ 47,425    $ 38,070
                                                                                      ========    ========
</TABLE>

See notes to consolidated financial statements.

                                                     6
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    BASIS OF PRESENTATION

      The unaudited  consolidated  interim  financial  statements  for Community
      Savings Bankshares,  Inc.  ("Bankshares") and its wholly-owned  subsidiary
      Community  Savings,  F. A. (the  "Association"),  reflect all  adjustments
      (consisting  only of normal  recurring  accruals) which, in the opinion of
      management,  are  necessary  to present  fairly  Bankshares'  consolidated
      financial  condition and the  consolidated  results of operations and cash
      flows for  interim  periods.  The  results  for  interim  periods  are not
      necessarily  indicative  of trends or results to be expected  for the full
      year. All weighted  interest  rates are presented on an annualized  basis.
      The unaudited  consolidated  interim financial statements and notes should
      be read in conjunction with the audited consolidated  financial statements
      and  the  notes  thereto   included  in   Bankshares'   Annual  Report  to
      Shareholders  for the year ended December 31, 1997. As the common stock of
      the Association  represents  Bankshares' sole investment on a consolidated
      basis,  the interim periods  presented herein are comparable to prior year
      financial data.

2.    REORGANIZATION  TO A MID-TIER HOLDING COMPANY AND CONVERSION TO STOCK FORM
      OF OWNERSHIP

      On September 30, 1997, the Association  completed its reorganization  into
      the two-tier form of mutual  holding  company  ownership.  Pursuant to the
      reorganization,  the Association is now the wholly owned subsidiary of the
      federally chartered mid-tier stock holding company, Bankshares. Bankshares
      is the majority owned subsidiary of ComFed, M.H.C. ("ComFed"), a federally
      chartered mutual holding company.  ComFed,  Bankshares and the Association
      are chartered and regulated by the Office of Thrift Supervision ("OTS").

      The  reorganization  was accounted for in a manner similar to a pooling of
      interests and did not result in any  significant  accounting  adjustments.
      Bankshares' only significant asset is the common stock of the Association.
      Consequently,  substantially  all of its net  income is  derived  from the
      Association.

3.    NEW ACCOUNTING PRONOUNCEMENTS

      SFAS  No.  133,   "Accounting  for  Derivative   Instruments  and  Hedging
      Activities" ("SFAS No. 133"), issued by FASB in June 1998, must be adopted
      by Bankshares as of January 1, 2000. This Statement establishes accounting
      and  reporting  standards for  derivative  financial  instruments  and for
      hedging activities.  Upon adoption of the Statement,  all derivatives must
      be  recognized  at fair  value as  either  assets  or  liabilities  in the
      statement of financial position.  Changes in the fair value of derivatives
      not designated as hedging  instruments  are to be recognized  currently in
      earnings. Gains or losses on derivatives designated as hedging instruments
      are either to be recognized  currently in earnings or are to be recognized
      as a component of other  comprehensive  income,  depending on the intended
      use of the  derivatives  and the resulting  designations.  Upon  adoption,
      retroactive application of this Statement to financial statements of prior
      periods  is not  permitted.  Bankshares  is  currently  in the  process of
      evaluating  the  impact  of SFAS  No.  133 on its  consolidated  financial
      position and results of operations.

                                       7
<PAGE>

4.    LOANS RECEIVABLE

      Loans receivable consists of the following:

                                                 June 30,   December 31,
                                                  1998         1997
                                                ---------    ---------
                                               (Unaudited)
                                                    (In thousands)
      Real estate loans:
         Residential 1-4 family                 $ 419,069    $ 339,117
         Residential 1-4 family held for sale
            (at lower of cost or fair value)           --           --
         Residential construction                  42,807       32,828
         Non-residential construction               4,217        2,022
         Land                                      12,409       17,117
         Multi-family                               8,739        8,800
         Commercial                                46,147       59,220
                                                ---------    ---------
            Total real estate loans               533,388      459,104
                                                ---------    ---------
     
      Non-real estate loans:
         Consumer                                  15,191       15,694
         Commercial business                        5,508        3,530
                                                ---------    ---------
            Total non-real estate loans            20,699       19,224
                                                ---------    ---------
            Total loans receivable                554,087      478,328
     
      Less:
         Undisbursed loan proceeds                 25,134       24,163
         Unearned discount (premium) and
            net deferred loan fees (costs)         (1,189)        (206)
         Allowance for loan losses                  2,767        2,662
                                                ---------    ---------
      Total loans receivable,  net              $ 527,375    $ 451,709
                                                =========    =========

      The  amount  of  loans  which  had  ceased  accruing  interest  aggregated
      approximately  $1,366,000 and $1,379,000 at June 30, 1998 and December 31,
      1997,  respectively.  The amount of interest not accrued  related to these
      loans was approximately  $63,000 and $86,000 at June 30, 1998 and December
      31, 1997, respectively.

                                       8
<PAGE>


      An analysis of the changes in the allowance for loan losses is as follows:

                                                  For the six months
                                                    ended June 30,
                                                  1998          1997
                                                 ------        ------
                                                      (Unaudited)
                                                    (In thousands)

      Balance, beginning of period               $2,662        $2,542
      Provision charged to income                   213            83
      Losses charged to allowance                  (108)          (23)
      Recoveries                                     --            --
                                                 ------        ------
      Balance, end of period                     $2,767        $2,602
                                                 ======        ======

      The  Association  accounts for impaired loans in accordance  with SFAS No.
      114  "Accounting by Creditors for Impairment of a Loan" as amended by SFAS
      No.  118   "Accounting  by  Creditors  for  Impairment  of  a  Loan-Income
      Recognition  and  Disclosures".  There were no impaired  loans at June 30,
      1998.  Impaired  loans  totaled  $1,044,000  with a related  allowance  of
      $252,000 at December 31, 1997.

5.    REAL ESTATE OWNED

      Real estate owned consists of the following:

                                               June 30,      December 31,
                                                 1998            1997
                                                 ----            ----
                                              (Unaudited)
                                                    (In thousands)

       Real estate owned                         $752            $633
       Less allowance for loss                     41              41
                                                 ----            ----
       Total real estate owned                   $711            $592
                                                 ====            ====

      Changes in allowance for loss on real estate owned are as follows:

                                                For the six months
                                                   ended June 30,
                                                1998           1997
                                                ----           ----
                                                     (Unaudited)
                                                   (In thousands)

       Balance, beginning of period              $41            $92
       Provision charged to income                --             --
       Losses charged to allowance                --            (43)
                                                 ---            ---
       Balance, end of period                    $41            $49
                                                 ===            ===

                                       9
<PAGE>


6.    CONTINGENCIES

      There  are  various  claims  and  lawsuits  in  which  Bankshares  or  the
      Association are periodically  involved incidental to its business.  In the
      opinion of  management,  no  material  loss is  expected  from any of such
      pending  claims or lawsuits.  Reference is made to Note 13 in the Notes to
      Consolidated  Financial  Statements  included in  Bankshares'  1997 Annual
      Report.

7.    SUBSEQUENT EVENTS

      On July 29, 1998,  the Boards of Directors of ComFed,  Bankshares  and the
      Association  unanimously  adopted a plan of  conversion  and agreement and
      plan of reorganization  (the "Plan of Conversion"),  pursuant to which the
      Association  will  reorganize  from the two-tier  mutual  holding  company
      structure to the stock holding company structure.  The Association amended
      the  Plan of  Conversion  on  August  13,  1998.  Pursuant  to the Plan of
      Conversion,  (i) ComFed and  Bankshares  will be merged  with and into the
      Association,  with the Association as survivor,  (ii) the Association will
      become a wholly owned  subsidiary of a to-be-formed  Delaware  corporation
      ("New  Holding  Company"),  (iii) the shares of common stock of Bankshares
      held by persons other than ComFed (whose shares will be cancelled) will be
      converted into shares of common stock of the New Holding Company  pursuant
      to an  exchange  ratio  designed  to  preserve  the  percentage  ownership
      interests of such persons, and (iv) the New Holding Company will offer and
      sell shares of its common stock to members of ComFed,  shareholders of the
      Association  and others in the manner and  subject to the  priorities  set
      forth in the Plan of Conversion.

      The  transactions  contemplated  by the Plan of Conversion  are subject to
      approval of Bankshares'  shareholders,  the members of ComFed, and various
      regulatory agencies.

                                       10
<PAGE>



ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS

                                     GENERAL

In the  following  discussion,  references to  "Bankshares"  relate to Community
Savings Bankshares, Inc. together with its subsidiary, Community Savings, F. A.(
the "Association").

                       COMMUNITY SAVINGS BANKSHARES, INC.

Bankshares is a federally  chartered mid-tier stock holding company organized in
August 1997. The only  significant  asset of Bankshares is its investment in its
wholly-owned  subsidiary,  the  Association.  Bankshares  is  majority  owned by
ComFed, M.H.C.  ("ComFed"),  a federally chartered mutual holding company. After
the close of business on  September  30,  1997,  Bankshares  acquired all of the
issued and  outstanding  common stock of the  Association in connection with the
Association's  reorganization  into the two-tier form of mutual holding  company
ownership.  At that  time,  each  share of the  Association's  common  stock was
converted into one share of Bankshares'  common stock. At June 30, 1998,  ComFed
owned 2,620,144 shares of Bankshares' common stock with the remaining  2,479,976
shares owned by minority  shareholders.  The holding company  reorganization was
accounted for at historical cost in a manner similar to a pooling of interests.

                            COMMUNITY SAVINGS, F. A.

The  Association,  founded in 1955,  is a federally  chartered  savings and loan
association  headquartered  in North  Palm  Beach,  Florida.  The  Association's
deposits are  federally  insured by the Federal  Deposit  Insurance  Corporation
("FDIC")  through  the  Savings   Association   Insurance  Fund  ("SAIF").   The
Association has been a member of the Federal Home Loan Bank of Atlanta  ("FHLB")
since 1955.  The  Association  is regulated by the Office of Thrift  Supervision
("OTS"). On October 24, 1994, the Association  completed a reorganization into a
federally   chartered   mutual  holding   company,   ComFed.   As  part  of  the
reorganization,  the  Association  organized  a new  federally  chartered  stock
savings  association  and  transferred  substantially  all  of  its  assets  and
liabilities  to the stock savings  association in exchange for a majority of the
common stock of the stock savings association.

The Association is a community-oriented  financial institution engaged primarily
in the business of attracting  deposits  from the general  public and using such
funds, together with other borrowings,  to invest in various consumer-based real
estate loans, commercial loans,  mortgage-backed and related securities ("MBS"),
and  investment   securities.   The  Association's  plan  is  to  operate  as  a
well-capitalized,   profitable  and  independent  institution.  The  Association
currently  exceeds  all  regulatory  capital  requirements.   The  Association's
profitability  is highly  dependent on its net interest  income.  The components
that determine net interest income are the amount of interest-earning assets and
interest-bearing  liabilities,  together  with the rates  earned or paid on such
interest  rate-sensitive  instruments.  The Association is sensitive to managing
interest rate risk exposure by better  matching  asset and liability  maturities
and rates.  This is  accomplished  while  considering the credit risk of certain
assets. The Association maintains asset quality by utilizing  comprehensive loan
underwriting   standards  and  collection   efforts  as  well  as  by  primarily
originating or purchasing secured or guaranteed assets.

                                       11
<PAGE>



                         LIQUIDITY AND CAPITAL RESOURCES

The Association  adjusts its liquidity  levels in order to meet funding needs of
deposit outflows,  payment of real estate taxes on mortgage loans,  repayment of
borrowings,  and loan  commitments.  The Association  also adjusts  liquidity as
appropriate  to meet its  asset and  liability  management  objectives.  A major
portion of the Association's liquidity consists of cash and cash equivalents and
interest-bearing deposits, which are a product of its operating,  investing, and
financing activities.

The  Association  is  required to maintain  minimum  levels of liquid  assets as
defined by OTS  regulations.  This  requirement,  which varies from time to time
depending upon economic conditions and deposit flows, is based upon a percentage
of deposits and short-term borrowings. The required ratio currently is 4.0%. The
Association's  liquidity  ratio  averaged 12.2% during the six months ended June
30, 1998 while  liquidity  ratios averaged 14.2% for the year ended December 31,
1997.

The  Association's  primary  sources  of funds are  deposits,  amortization  and
prepayment  of loans and MBS,  maturities  of  investment  securities  and other
short-term  investments,  FHLB  advances,  and earnings and funds  provided from
operations.   While  scheduled  principal  repayments  on  loans  and  MBS,  and
maturities of securities are a relatively  predictable source of funds,  deposit
flows and loan  prepayments  are greatly  influenced by general  interest rates,
economic conditions, and competition. The Association manages the pricing of its
deposits to maintain a desired  deposit  balance.  In addition,  the Association
invests  funds in excess of its immediate  needs in short-term  interest-earning
deposits and other assets, which provide liquidity to meet lending requirements.
Short-term  interest-bearing deposits with the FHLB of Atlanta amounted to $30.6
million at June 30, 1998. Other assets  qualifying for liquidity  outstanding at
June 30, 1998 amounted to $14.8 million.  For additional  information about cash
flows from the operating, financing, and investing activities, see the unaudited
consolidated statements of cash flows included in the financial statements.

Liquidity  management  is  both a  daily  and  long-term  function  of  business
management.   If  funds  are  required  beyond  the  ability  to  generate  them
internally, borrowing agreements exist with the FHLB which provide an additional
source of funds. FHLB advances totaled $75.6 million at June 30, 1998.

At June 30, 1998,  outstanding  loan  commitments  totaled $22.1 million,  which
amount does not include the unfunded  portion of loans in process.  Certificates
of deposit  scheduled to mature in less than one year totaled  $241.2 million at
June 30, 1998. Based on prior experience, management believes that a significant
portion of such deposits will remain with the Association.

                                       12
<PAGE>

                               FINANCIAL CONDITION

                   JUNE 30, 1998 COMPARED TO DECEMBER 31, 1997

The following  table  summarizes  certain  information  relating to  Bankshares'
financial condition at the dates indicated.

<TABLE>
<CAPTION>
                                                June 30,   December 31,   Increase
                                                  1998        1997       (Decrease)
                                                --------    --------      --------
                                               (Unaudited)
                                                          (In thousands)
<S>                                             <C>         <C>           <C>
Assets:
   Total assets                                 $765,488    $720,133      $ 45,355
   Cash and cash equivalents                      47,425      25,954        21,471
                                                                         
   Securities portfolio:                                                 
      Investments-held to maturity                21,443      21,388            55
      Securities available for sale               91,316     142,269       (50,953)
      Mortgage-backed and related securities-                            
           held to maturity                       41,884      46,413        (4,529)
                                                --------    --------      --------
   Total securities portfolio                    154,643     210,070       (55,427)
                                                ========    ========      ========
                                                                         
    Loans receivable, net                        527,375     451,709        75,666
    Real estate owned, net                           711         592           119
                                                                         
Liabilities and Shareholders' Equity:                                    
  Total liabilities                              682,410     638,874        43,536
  Deposits                                       574,383     550,708        23,675
  Federal Home Loan Bank advances                 75,630      57,341        18,289
  Shareholders' equity                            83,078      81,259         1,819
</TABLE>

Total assets  increased  $45.4  million to $765.5  million at June 30, 1998,  as
compared to $720.1  million at December 31, 1997 primarily due to an increase of
$75.7 million in the net loan  portfolio to $527.4 million at June 30, 1998 from
$451.7 million at December 31, 1997, as a result of the Association's  continued
emphasis on expanding its lending  activities.  The securities  portfolio (which
includes  securities  available  for  sale,  investment  securities,   and  MBS)
decreased  $55.4 million to $154.7  million at June 30, 1998 from $210.1 million
at December  31, 1997.  The  increase in total assets was funded  primarily by a
$23.7  million net increase in deposits to $574.4  million at June 30, 1998 from
$550.7 million at December 31, 1997. In addition,  FHLB advances increased $18.3
million,  totaling $75.6 million and $57.3 million at June 30, 1998 and December
31, 1997, respectively.

The  securities  portfolio's  net decrease of $55.4 million  primarily  reflects
calls of $38.4 million of securities  available for sale combined with scheduled
principal  reductions and  amortization  of premiums and discounts  amounting to
$17.0 million. As a result, cash and cash equivalents increased $21.5 million as
of June 30, 1998 as compared to December 31,  1997.  Such funds will be utilized
to fund  existing  loan  commitments  and to support the  Association's  lending
activities.

                                       13
<PAGE>

Loans  receivable  increased $75.7 million as a result of continued  emphasis on
expanded lending  activities.  Loan originations of $110.2 million and purchases
of $38.3  million  (consisting  of whole  loans  secured by one- to  four-family
residential  properties) were offset in part by repayments and other adjustments
of $72.8 million.

Real estate owned increased $119,000 to $711,000 at June 30, 1998, from $592,000
at December 31, 1997, primarily due to foreclosures on 8 residential  properties
during the  period,  partially  offset by the sale of 9  foreclosed  residential
properties.

Total  liabilities  increased  $43.5 million to $682.4 million at June 30, 1998,
from $638.9  million at December 31,  1997.  Total  deposits  increased by $23.7
million to $574.4  million at June 30, 1998 from $550.7  million at December 31,
1997. The increase in deposits  primarily  reflected  increased  retail deposits
resulting from special  promotions of odd-term  certificates  as well as deposit
growth  experienced  at newer branch  offices.  Such increase also reflected the
Association's  continued  efforts to  competitively  price  deposit  accounts to
enhance its market share during the period.  In  addition,  a net $18.3  million
increase in FHLB  advances was used to  partially  fund the increase in the loan
portfolio.

Shareholders'  equity increased to $83.1 million or $16.66 per share at June 30,
1998,  from $81.3  million or $16.39 per share at December 31, 1997,  reflecting
net income for the six months of $2.5 million,  the receipt of proceeds totaling
$50,000 from the exercise of stock options,  and the stock benefit plans accrual
totaling  $588,000.  Such increase was offset in part by the declaration  during
the period of dividends  totaling  $1.1 million and a net decrease in the market
value of assets available for sale of $279,000. For further information, see the
unaudited  consolidated  statements  of changes in  shareholders'  equity in the
accompanying consolidated financial statements.

The Association is required to report regulatory  capital ratios  unconsolidated
with Bankshares.  The Association's actual regulatory capital amounts and ratios
at June 30, 1998 are as follows:
<TABLE>
<CAPTION>
                                                                               To be Considered
                                                                                     Well
                                                                   For            Capitalized
                                                                 Capital           for Prompt
                                                                Adequacy             Action
                                              Actual            Purposes           Provisions
                                              ------            --------           ----------
                                          Ratio    Amount    Ratio   Amount      Ratio   Amount
                                          -----    ------    -----   ------      -----   ------
                                                    (Dollars in thousands)
<S>                                       <C>     <C>         <C>    <C>         <C>     <C>
As of June 30, 1998:
Total Risk-based Capital (to
  Risk-weighted Assets)                   18.1%   $76,509     8.0%   $33,913     10.0%   $42,391
Core (Tier 1) Capital                                                                   
  (to Adjusted Tangible Assets)            9.6     73,742     4.0     22,972      5.0     32,287
Tangible Capital (to Tangible Assets)      9.6     73,742     1.5     11,486      N/A        N/A
Core (Tier 1) Capital                                                                   
  (to Risk-weighted Assets)               17.4     73,742     4.0     16,956      6.0     25,434
</TABLE>

As  of  June  30,  1998,   tangible  assets,   adjusted  tangible  assets,   and
risk-weighted  assets were $765.7 million,  $765.7 million,  and $423.9 million,
respectively.

                                       14
<PAGE>

                                  ASSET QUALITY

Loans  90  days  past  due are  generally  placed  on  non-accrual  status.  The
Association ceases to accrue interest on a loan once it is placed on non-accrual
status and interest  accrued but unpaid at such time is charged against interest
income. Additionally,  any loan for which it appears evident prior to being past
due 90 days  that the  collection  of  interest  is in doubt is also  placed  on
non-accrual  status.  Real estate  owned is carried at the lower of cost or fair
value,  less cost to dispose.  Management  regularly reviews assets to determine
proper  valuation.  There were no restructured  loans within the meaning of SFAS
No. 15 at June 30, 1998 or December 31, 1997.

The following table sets forth  information  regarding the delinquent  loans and
foreclosed real estate at the dates indicated:

                                                  June 30,   December 31,
                                                    1998        1997
                                                   ------      ------
                                                     (In thousands)
Non-performing loans:
Residential real estate loans:
  Loans 60 to 89 days delinquent                   $  440      $  492
  Loans more than 90 days delinquent                1,201       1,344
                                                   ------      ------
    Total                                           1,641       1,836
                                                   ------      ------
                                                              
Commercial and multi-family real estate loans:                
  Loans 60 to 89 days delinquent                       23          --
  Loans more than 90 days delinquent                   51          --
                                                   ------      ------
    Total                                              74          --
                                                   ------      ------
                                                              
Consumer and commercial business loans:                       
  Loans 60 to 89 days delinquent                        7          31
  Loans more than 90 days delinquent                   50          --
                                                   ------      ------
    Total                                              57          31
                                                   ------      ------
                                                              
Land                                                          
  Loans 60 to 89 days delinquent                       --          35
  Loans more than 90 days delinquent                   64          --
                                                   ------      ------
    Total                                              64          35
                                                   ------      ------
Total non-performing loans                          1,836       1,902
                                                              
Real estate owned net of related allowance            711         592
Loans to facilitate sale of real estate owned         153         217
                                                   ------      ------
Total non-performing assets and                               
   loans to facilitate sale of real estate owned   $2,700      $2,711
                                                   ======      ======

                                       15
<PAGE>

                            YEAR 2000 CONSIDERATIONS

In order to be ready for the year 2000 (the "Year 2000 Issue"),  the Association
has developed a Year 2000 Action Plan (the "Action Plan") which was presented to
the Audit Committee of the Board of Directors  during July 1997. The Action Plan
was  developed   using  the  guidelines   outlined  in  the  Federal   Financial
Institutions  Examination's  Council's "The Effect of 2000 on Computer Systems."
The Association's  Strategic Planning Committee assigned  responsibility for the
Action Plan to the Year 2000 Committee  which reports to the Strategic  Planning
Committee  and the  Board of  Directors  on a monthly  basis.  The  Action  Plan
recognizes  that  the   Association's   operating,   processing  and  accounting
operations  are  computer  reliant and could be affected by the Year 2000 Issue.
The  Association  is primarily  reliant on third party  vendors for its computer
output and processing, as well as other significant functions and services (i.e.
securities safekeeping services, securities pricing information, et cetera). The
Year 2000  Committee  is  currently  working  with these third party  vendors to
assess their year 2000 readiness. Based upon the initial assessment,  management
presently  believes  that with planned  modifications  to existing  software and
hardware and planned conversions to new software and hardware, the Association's
third party vendors are taking the appropriate  steps to ensure critical systems
will function properly. The Association currently expects such modifications and
conversions and related  testing to be completed by December 31, 1998.  However,
if such  modifications  and  conversions are not made, or are not completed on a
timely basis, the Year 2000 Issue could have a material impact on the operations
of the Association.

As of June 30, 1998, the Association had contacted all of its commercial  credit
customers  regarding the customers'  awareness of the Year 2000 issue.  While no
assurance  can be  given  that  the  customers  will  be  Year  2000  compliant,
management  believes that the customers are either  addressing  the  appropriate
issues to insure  compliance  or that they are not faced with material Year 2000
issues.

The  Association  has completed its  company-wide  Year 2000  contingency  plan.
Individual  contingency  plans concerning  specific software and hardware issues
are currently being formulated.

The costs of modifications to the existing software is being primarily  absorbed
by the third party vendors,  however the  Association  recognized  that the need
exists to purchase new hardware and software.  Based upon current estimates, the
Association  has  identified  $1,800,000  in total  costs,  including  hardware,
software,  and other  issues,  for  completing  the Year 2000  project.  Of that
amount,  approximately  $1,226,000  and $39,000 was purchased  during the twelve
months ended December 31, 1997 and 1996.

                                       16
<PAGE>

                              RESULTS OF OPERATIONS
                FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997

                                     GENERAL

Net income for the quarter  ended June 30, 1998 was $1.3  million,  or $0.26 per
share,  a $104,000  decrease  from $1.4  million,  or $0.28 per  share,  for the
quarter ended June 30, 1997. The decrease in net income was primarily the result
of an increase in  operating  expense of $370,000 as well as a decrease in other
income  of  $150,000,  offset in part by a  $369,000  increase  in net  interest
income.

                               NET INTEREST INCOME

Net interest  income  increased  to $6.1 million for the quarter  ended June 30,
1998 from $5.7  million for the same period in 1997  primarily  as a result of a
$58.8 million increase in average  interest-earning assets to $711.9 million for
the three months ended June 30, 1998 from $653.1  million for the same period in
the prior year, reflecting the increase in the loan portfolio,  partially offset
by  the   decrease  in  the   securities   portfolio.   The  average   yield  on
interest-earning  assets  decreased to 7.57% for the three months ended June 30,
1998 from 7.69% for the 1997 period,  primarily as a result of decreased average
yield earned on real estate loans. The increase in interest income was partially
offset by a $61.6 million  increase in average  interest-bearing  liabilities to
$660.3  million for the three months ended June 30, 1998 from $598.7 million for
the same  period in 1997,  equally  reflecting  the growth of the  Association's
deposit   portfolio  and  additional   FHLB   advances.   The  average  cost  on
interest-bearing  liabilities decreased to 4.46% for the three months ended June
30, 1998 from 4.55% for the 1997 period,  primarily as a result of the decreased
weighted  average cost of borrowed funds to 6.48% for the quarter ended June 30,
1998 from 7.75% for the same period in 1997.

                            PROVISION FOR LOAN LOSSES

The  Association  maintains an  allowance  for loan losses based upon a periodic
evaluation  of,  among  other  things,  known  and  inherent  risks  in the loan
portfolio,  past  loan  loss  experience,  adverse  situations  that may  affect
borrowers'  ability to repay loans,  the estimated  value of the underlying loan
collateral,  volume and type of lending conducted by the Association and current
economic  conditions  in its market area.  Loan loss  provisions  are based upon
management's  estimate of the fair value of the  collateral  and the actual loss
experience,  as well as guidelines  applied by the OTS and the FDIC.  Management
reviews the adequacy of its allowance for loan losses monthly  through its asset
classification review. The provision for loan losses was $96,000 for the quarter
ended June 30, 1998,  as compared to $53,000 for the quarter ended June 30, 1997
primarily due to management's decision to increase reserves due to the growth in
the loan  portfolio  during  the  period.  The  allowance  for loan  losses as a
percentage  of net loans  receivable  was  0.52% and 0.63% at June 30,  1998 and
1997, respectively.

                                       17
<PAGE>

                                  OTHER INCOME

Other income consists of servicing income and fee income,  service charges, gain
or loss on the sale of securities  available  for sale and other  assets.  Other
income decreased  $150,000 to $821,000 for the quarter ended June 30, 1998, from
$971,000  for the  same  period  in 1997,  primarily  as a  result  of  $108,000
amortization of an affordable  housing tax credit partnership during the quarter
ended June 30, 1998 which did not occur in the same period 1997.

                                OPERATING EXPENSE

Operating expense increased  $370,000 to $4.9 million for the three month period
ended June 30,  1998 from $4.5  million  for the same  period in 1997.  Employee
compensation and benefits  increased  $511,000 during the quarter ended June 30,
1998 as a result of  increased  staffing  due to  branch  office  openings,  the
continued  expansion of the Association's  lending  activities and the increased
cost of stock benefit  programs  reflecting  the increase in the market value of
Bankshares'  common  stock.  This  increase  was  offset  in part by a  $229,000
decrease in  miscellaneous  expense  during the quarter ended June 30, 1998 as a
result of the  reversal of $267,000 in brokers fees which were  expensed  during
fiscal 1998 instead of capitalized according to FAS 91.

                           PROVISION FOR INCOME TAXES

The  provision for income taxes was $677,000 for the three months ended June 30,
1998 as compared to $767,000 for the same period in 1997 reflecting the decrease
in net income as well as the $129,000 tax benefit  recognized for the affordable
housing tax credit partnership.


                              RESULTS OF OPERATIONS
                 FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997

                                     GENERAL

Net income for the six months ended June 30, 1998 was $2.5 million, or $0.51 per
share, a $224,000  decrease from $2.7 million,  or $0.55 per share,  for the six
months ended June 30, 1997.  The decrease in net income was primarily the result
of  increases  in operating  expense and the  provision  for loan losses of $1.0
million and $130,000,  respectively, and a decrease in other income of $106,000,
partially  offset by the  combination  of an $855,000  increase in net  interest
income and a $198,000 decrease in the provision for income taxes.

                               NET INTEREST INCOME

Net interest income increased to $12.2 million for the six months ended June 30,
1998 from $11.3  million for the same period in 1997  primarily as a result of a
$59.9 million increase in average  interest-earning assets to $701.6 million for
the six months  ended June 30, 1998 from  $641.7  million for the same period in
the prior year.  Such increase  reflected an $87.4  million  increase in the net
loan portfolio,  offset in part by a $30.6 million decrease in the Association's
aggregate  securities  portfolio.  The average yield on interest-earning  assets
decreased  to 7.65% for the six months  ended  June 30,  1998 from 7.66% for the
1997 period,  primarily as a result of decreased  average  yields on real estate
loans and MBS,  which was offset in part by increased

                                       18
<PAGE>

average yields earned on investment securities and consumer and other loans. The
increase in interest income was partially  offset by a $60.8 million increase in
average interest-bearing  liabilities to $649.2 million for the six months ended
June 30,  1998  from  $588.4  million  for the same  period  in 1997,  primarily
reflecting the growth of the Association's deposit portfolio and additional FHLB
advances.  The average yield on  interest-bearing  liabilities  was unchanged at
4.51% for the six months ended June 30, 1998 from the 1997 period.  The weighted
average  cost of deposits  increased to 4.19 % for the six months ended June 30,
1998  from  4.15%  for the same  period in 1997.  This  increase  in the cost of
deposits was offset by a decrease in the cost of borrowed funds to 6.87% for the
six months ended June 30, 1998 from 7.84% for the same period in 1997.

                            PROVISION FOR LOAN LOSSES

The  provision  for loan losses was  $213,000  for the six months ended June 30,
1998,  as  compared  to $83,000  for the six months  ended  June 30,  1997.  The
allowance for loan losses as a percentage of net loans  receivable was 0.52% and
0.63% at June 30, 1998 and 1997, respectively.  In management's judgement it was
prudent to  increase  the  allowance  for loan losses  based  upon,  among other
factors, the overall growth in its loan portfolio.

                                  OTHER INCOME

Other income consists of servicing income and fee income,  service charges, gain
or loss on the sale of securities  available  for sale and other  assets.  Other
income  decreased  $106,000 to $1.8  million  for the six months  ended June 30,
1998, from $1.9 million for the same period in 1997. This decrease reflected the
amortization of an affordable  housing tax credit partnership of $140,000 during
the six months ended June 30, 1998.  The  partnership  did not begin  amortizing
until the second half of 1997.

                                OPERATING EXPENSE

Operating  expense  increased  $1.0  million to $9.8  million  for the six month
period  ended  June 30,  1998 from  $8.8  million  for the same  period in 1997.
Increased  employee  compensation and benefits and occupancy and equipment costs
accounted for the majority of such increase,  increasing  $741,000 and $107,000,
respectively, during the six months ended June 30, 1998, as compared to the 1997
period.  Additional costs related to the  incentive-based  loan originators were
incurred during the 1998 period as a result of increased loan  originations.  In
addition, increases in staffing and occupancy costs resulted from two additional
branch  offices  operating  in the six months  ended June 30, 1998 that were not
open during the same period in 1997,  the  requirements  of the new company wide
computer network,  which involved new hardware and software depreciation expense
and  additional  personnel  for  implementation  and  training,  as  well as the
increased cost of benefit  programs  reflecting the increase in the market value
of Bankshares' common stock.

                                       19
<PAGE>



                           PROVISION FOR INCOME TAXES

The  provision  for income  taxes was $1.4 million for the six months ended June
30, 1998 as compared to $1.6 million for the same period in 1997  reflecting the
$174,000 tax benefit received from the affordable housing tax credit partnership
during the six months  ended June 30,  1998 which did not occur  during  1997 as
well as the decrease in net income.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For a discussion of Bankshares' asset and liability  management policies as well
as the  potential  impact of  interest  rate  changes  upon the market  value of
Bankshares' portfolio equity, see "Management's Discussion and Analysis - Market
Risk  Analysis" and -"Market Value of Portfolio  Equity" in  Bankshares'  Annual
Report to Shareholders.  There has been no material change in Bankshares'  asset
and liability position or the market value of Bankshares' portfolio equity since
December 31, 1997.


                           PART II. OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

           There are  various  claims and  lawsuits in which  Bankshares  or the
           Association are periodically  involved incidental to its business. In
           the opinion of  management,  no material loss is expected from any of
           such pending claims or lawsuits.  Reference is made to Note 13 in the
           Notes to Consolidated  Financial  Statements  included in Bankshares'
           1997 Annual Report.

ITEM 2.    CHANGES IN SECURITIES

           Not applicable.

                                       20
<PAGE>



ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

           None.

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

           Bankshares held its Annual Meeting of Shareholders on April 22, 1998.
           Of the 5,100,120 shares eligible to vote,  4,741,340  shareholders or
           93.0%,  including  2,620,144  shares owned by ComFed,  M. H. C., were
           represented in person or by proxy at the meeting.

           The votes cast produced the following results:

<TABLE>
<CAPTION>
           Election of Directors for                                    Number of Votes
           a three year term expiring                                   ---------------
                    in 2000                                         For             Withheld
           --------------------------                               ---             --------
           <S>                                                   <C>                 <C>   
           Forest C. Beaty, Jr.                                  4,698,690           42,650
           Frederick A. Teed                                     4,695,982           45,358

<CAPTION>
                                                               Number of Votes
                                                  -------------------------------------------
                                                  For              Withheld          Abstain
                                                  ---              --------          -------
           <S>                                 <C>                   <C>             <C>
           Ratification of Crowe Chizek
              and Company LLP as
              independent auditors for
              fiscal year 1998                 4,717,229             8,478           15,633
</TABLE>

ITEM 5.    OTHER INFORMATION.

On July 29,  1998,  the  Boards  of  Directors  of  ComFed,  Bankshares  and the
Association  unanimously  adopted a plan of conversion and agreement and plan of
reorganization  (the "Plan of  Conversion"),  pursuant to which the  Association
will reorganize from the two-tier mutual holding company  structure to the stock
holding company  structure.  The  Association  amended the Plan of Conversion on
August 13, 1998.  Pursuant to the Plan of Conversion,  (i) ComFed and Bankshares
will be merged with and into the Association,  with the Association as survivor,
(ii) the  Association  will become a wholly owned  subsidiary of a  to-be-formed
Delaware  corporation ("New Holding Company"),  (iii) the shares of common stock
of Bankshares held by persons other than ComFed (whose shares will be cancelled)
will be  converted  into  shares  of  common  stock of the New  Holding  Company
pursuant to an exchange  ratio  designed to preserve  the  percentage  ownership
interests of such persons,  and (iv) the New Holding Company will offer and sell
shares of its common stock to members of ComFed, shareholders of the Association
and others in the manner and subject to the  priorities set forth in the Plan of
Conversion.

The transactions  contemplated by the Plan of Conversion are subject to approval
of  Bankshares'  shareholders,  the members of ComFed,  and  various  regulatory
agencies.

                                       21
<PAGE>


ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K.

(a)        EXHIBITS.

           None.

(b)        CURRENT REPORTS ON FORM 8-K.

           None.

                                       22
<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 SAVINGS BANKSHARES, INC.




Date:         August 13, 1998         /s/ James B. Pittard, Jr.
                                      -----------------------------------------
                                          James B. Pittard, Jr.
                                          President and Chief Executive Officer


Date:         August 13, 1998         /s/ Larry J. Baker
                                      -----------------------------------------
                                          Larry J. Baker
                                          Senior Vice President and Treasurer

                                       23