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:  SEPTEMBER 30, 1997
                                 ------------------


                                       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 November 10, 1997,  there were 5,094,920  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

              Unaudited Consolidated Statements of Financial Condition as of
              September 30, 1997  and December 31, 1996 (Unaudited)                      2

              Consolidated  Statements of Operations  for the three and the nine
              months ended September 30, 1997 and 1996 (Unaudited)                       3

              Consolidated Statements of Changes in Shareholders' Equity for the
              year ended December 31, 1996 and for the nine months ended
              September 30, 1997 (Unaudited)                                             4

              Consolidated Statements of Cash Flows for the nine  months
              ended September 30, 1997 and 1996 (Unaudited)                              5

              Notes to Consolidated Financial Statements (Unaudited)                     6

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

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

Item 1        Legal Proceedings                                                         19

Item 2        Changes in Securities                                                     19

Item 3        Default Upon Senior Securities                                            19

Item 4        Submission of Matters to a Vote of Security Holders                       19

Item 5        Other Information                                                         20

Item 6        Exhibits and Reports on Form 8-K                                          20

              Signature Page                                                            21
</TABLE>


                                       1
<PAGE>

<TABLE>
<CAPTION>

ITEM 1.  FINANCIAL STATEMENTS.

COMMUNITY SAVINGS BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AT SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
                                                                                 September 30,    December 31,
                                                                                      1997            1996
                                                                                   ---------       ---------
                                                                                          (Unaudited)
                                                                                         (In Thousands)
<S>                                                                                <C>             <C>      
ASSETS
  Cash and cash equivalents:
     Cash and amounts due from depository institutions                             $  14,193       $  13,547
     Interest-bearing deposits                                                        36,104          28,895
                                                                                   ---------       ---------
        Total cash and cash equivalents                                               50,297          42,442

  Securities available for sale                                                      139,379         123,152
  Investments - held to maturity                                                      21.409          22,139
  Mortgage-backed and related securities - held to maturity                           48,326          53,405
  Loans receivable, net of allowance for loan losses                                 418,760         389,040
  Accrued interest receivable                                                          2,824           2,354
  Office properties and equipment, net                                                20,259          16,368
  Real estate owned, net                                                                 593           1,455
  Federal Home Loan Bank stock - at cost                                               3,263           2,864
  Other assets                                                                         4,110           1,990
                                                                                   ---------       ---------
        Total assets                                                               $ 709,220       $ 655,209
                                                                                   =========       =========

LIABILITIES
  Deposits                                                                         $ 544,295       $ 513,709
  Mortgage-backed bond - net                                                          16,558          17,230
  Advances from Federal Home Loan Bank                                                48,926          34,763
  ESOP borrowings                                                                      1,621           1,915
  Advances by borrowers for taxes and insurance                                        6,968           1,059
  Other liabilities                                                                    7,969           8,378
  Deferred income taxes                                                                2,441           2,036
                                                                                   ---------       ---------
        Total liabilities                                                            628,778         579,090
                                                                                   ---------       ---------

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, 5,094,920 and
    5,090,120 shares outstanding at September 30, 1997 and
    December 31, 1996, respectively                                                    5,095           5,090
  Additional paid in capital                                                          30,136          29,950
  Retained income - substantially restricted                                          47,341          44,603
  Common stock purchased by Employee Stock Ownership Plan                             (1,522)         (1,848)
  Common stock issued to Recognition and Retention Plan                                 (468)           (608)
  Unrealized decrease in market value of assets available
    for sale, net of income taxes                                                       (140)         (1,068)
                                                                                   ---------       ---------
        Total shareholders' equity                                                    80,442          76,119
                                                                                   ---------       ---------
        Total liabilities and shareholders' equity                                 $ 709,220       $ 655,209
                                                                                   =========       =========
</TABLE>

See notes to consolidated financial statements.

                                       2
<PAGE>
<TABLE>
<CAPTION>
COMMUNITY SAVINGS BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996

                                                                 For the three months     For the nine months
                                                                  ended September 30,     ended September 30,
                                                                   1997        1996        1997         1996
                                                                 --------    --------    --------    --------
                                                                              (Unaudited)
                                                                            (In Thousands)
<S>                                                              <C>         <C>         <C>         <C>     
Interest income:
  Real estate loans                                              $  8,065    $  7,297    $ 23,544    $ 20,487
  Consumer and commercial business loans                              405         457       1,222       1,164
  Investment securities and securities available for sale           3,135       2,623       8,414       7,359
  Mortgage-backed and related securities                              816       1,069       2,827       2,838
  Interest-earning deposits                                           473         399       1,464       1,836
                                                                 --------    --------    --------    --------
     Total interest income                                         12,894      11,845      37,471      33,684
                                                                 --------    --------    --------    --------

Interest expense:
  Deposits                                                          5,800       4,985      16,832      14,749
  Advances from Federal Home Loan Bank
    and other borrowings                                            1,236         967       3,464       2,761
                                                                 --------    --------    --------    --------
     Total interest expense                                         7,036       5,952      20,296      17,510
                                                                 --------    --------    --------    --------

Net interest income                                                 5,858       5,893      17,175      16,174

Provision for loan losses                                             138          28         221          68
                                                                 --------    --------    --------    --------

Net interest income after provision for loan losses                 5,720       5,865      16,954      16,106
                                                                 --------    --------    --------    --------

Other income:
 Servicing income and other fees                                       46          50         204         113
 NOW account and other customer fees                                  876         817       2,483       2,360
 Net gain (loss) on sale and early maturities
   of securities available for sale                                    (8)          6          (8)        144
 Gain on sale of other assets                                         617          --         617          --
 Net loss on amounts due from depository institutions                  --          --          --        (200)
 Net gain (loss) on sale of loans receivable                            3          (7)          3        (225)
 Loss incurred in real estate venture                                 (75)         (1)        (75)        (59)
 Miscellaneous                                                         63          62         160         131
                                                                 --------    --------    --------    --------
     Total other income                                             1,522         927       3,384       2,264
                                                                 --------    --------    --------    --------

Operating expense:
 Employee compensation and benefits                                 2,332       1,988       6,585       5,782
 Occupancy and equipment                                            1,257       1,180       3,677       3,437
 Net gain on real estate owned                                        (26)       (243)        (29)       (325)
 Advertising and promotion                                            115         149         547         511
 Federal deposit insurance premium                                     86       3,110         185       3,628
 Miscellaneous                                                      1,209         958       2,813       2,379
                                                                 --------    --------    --------    --------
     Total operating expense                                        4,973       7,142      13,778      15,412
                                                                 --------    --------    --------    --------

Income (loss) before provision for (benefit from) income taxes      2,269        (350)      6,560       2,958

Provision for (benefit from) income taxes                             720        (164)      2,276          94
                                                                 --------    --------    --------    --------
Net income (loss)                                                $  1,549    $   (186)   $  4,284    $  2,864
                                                                 ========    ========    ========    ========
Primary earnings (loss) per share                                $   0.31    $  (0.04)   $   0.85    $   0.58
                                                                 ========    ========    ========    ========
Fully diluted earnings (loss) per share                          $   0.30    $  (0.04)   $   0.84    $   0.58
                                                                 ========    ========    ========    ========
</TABLE>

See notes to consolidated financial statements.


                                       3
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997  (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 - September 30, 1996        $  5,090   $ 29,881   $ 43,902    $ (1,965)   $   (654)   $ (1,198)   $ 75,056
Net income for three months ended
   December 31, 1996                      --         --      1,160          --          --          --       1,160
Stock options exercised                   --          4         --          --          --          --           4
Unrealized increase in market
   value of assets available for
   sale (net of income taxes)             --         --         --          --          --         130         130
Amortization of deferred
   compensation - Employee Stock
   Ownership Plan and Recognition
   and Retention Plan                     --         65         --         117          46          --         228
Dividends declared                        --         --       (459)         --          --          --        (459)
                                  --------------------------------------------------------------------------------

Balance - December 31, 1996
   (unaudited)                         5,090     29,950     44,603      (1,848)       (608)     (1,068)     76,119
Net income for nine  months ended
   September  30, 1997                    --         --      4,284          --          --          --       4,284
Stock options exercised                    5         49         --          --          --          --          54
Unrealized increase in market
   value of assets available for
   sale (net of income taxes)             --         --         --          --          --         928         928
Amortization of deferred
   compensation - Employee Stock
   Ownership Plan and Recognition
   and Retention Plan                     --        137         --         326         140          --         603
Dividends declared                        --         --     (1,546)         --          --          --      (1,546)
                                  --------------------------------------------------------------------------------
Balance-September 30, 1997
   (unaudited)                      $  5,095   $ 30,136   $ 47,341    $ (1,522)   $   (468)   $   (140)   $ 80,442
                                  ================================================================================
</TABLE>

See notes to consolidated financial statements.


                                       4
<PAGE>
COMMUNITY SAVINGS BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>

                                                                        For the nine months ended
                                                                              September 30,
                                                                            1997        1996
                                                                          --------    --------
                                                                               (Unaudited)
                                                                              (In Thousands)
<S>                                                                       <C>         <C>     
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
 Net income                                                               $  4,284    $  2,864
 Adjustments to reconcile net income to net cash provided
  by operating activities:
   Depreciation                                                              1,049         940
   ESOP and Recognition and Retention Plan compensation expense                603         430
   Accretion of discounts, amortization of premiums, and other deferred
    yield items                                                             (1,149)     (1,123)
   Provision for losses on other assets                                         --         200
   Provision for loan losses                                                   221          68
   Provision for gains and net gains on sales of real estate owned            (123)        (96)
   Amortization of discount on mortgage-backed bond                            369         372
   Net (gain) loss on sale and early maturities of
    securities available for sale                                                8        (254)
   Net (gain)loss on sale of loans and other assets                           (630)        208
 Increase in accrued interest receivable                                      (470)       (236)
 Increase in other assets                                                   (2,120)       (491)
 (Increase) decrease  in loans available for sale                               70         319
 Increase (decrease) in other liabilities                                     (409)      2,576
                                                                          --------    --------

      Net cash provided by operating activities                              1,703       5,777
                                                                          --------    --------

CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
 Loan originations and principal payments on loans                         (25,750)    (29,017)
 Principal payments received on mortgage-backed and related securities      10,194       8,965
 Principal payments on investments                                           1,438       2,075
 Purchases of
   Loans                                                                    (4,463)    (16,671)
   Securities available for sale                                           (41,309)    (63,332)
   Federal Home Loan Bank stock                                               (399)         --
   Office property and equipment                                            (4,933)     (1,366)
 Proceeds from sales of:
   Federal Home Loan Bank stock                                                 --       2,000
   Office properties and equipment                                             129         425
   Participation loan purchased                                                 --       3,452
   Real estate acquired in settlement of loans                               1,263         728
 Proceeds from calls or maturities of investments                           21,734      13,213
 Other investing                                                               331        (394)
                                                                          --------    --------

      Net cash used for investing activities                               (41,765)    (79,922)
                                                                          --------    --------

CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
 Net increase (decrease) in:
   NOW accounts, demand deposits, and savings accounts                       2,494      (8,741)
   Certificates of deposit                                                  28,092      45,985
 Advances from Federal Home Loan Bank                                       20,000      22,500
 Repayment of advances from Federal Home Loan Bank                          (5,837)     (3,263)
 Advances by borrowers for taxes and insurance                               5,909       5,401
 ESOP loan                                                                    (294)       (345)
 Proceeds from exercise of stock options                                        54          13
 Payments made on mortgage-backed bond                                      (1,041)     (1,040)
 Dividends paid                                                             (1,460)     (1,227)
                                                                          --------    --------

      Net cash provided by financing activities                             47,917      59,283
                                                                          --------    --------


NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                         7,855     (14,862)
CASH AND CASH EQUIVALENTS, beginning of period                              42,442      59,642
                                                                          --------    --------
CASH AND CASH EQUIVALENTS, end of period                                  $ 50,297    $ 44,780
                                                                          ========    ========
</TABLE>


See notes to consolidated financial statements.


                                       5
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    BASIS OF PRESENTATION

      The unaudited  consolidated  interim  financial  statements  for Community
      Savings  Bankshares,  Inc.  ("Bankshares")  and its  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  the  Association's   Annual  Report  to
      Shareholders  for the year ended  September 30, 1996.  As the  Association
      represents  Bankshares'  sole  investment,  the interim periods  presented
      herein are comparable to prior year financial data.

2.    REORGANIZATION TO A MUTUAL 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
      newly-formed,   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 regulated by the
      Office of Thrift Supervision ("OTS").

      Under the  reorganization,  each share of the  Association's  common stock
      held by the existing  shareholders  was converted into one share of common
      stock of Bankshares.  ComFed,  which was the majority  holder of shares of
      the Association, now holds 2,620,144 shares of Bankshares, or 51.4% of the
      5,094,920  shares of common  stock  issued and  outstanding.  The minority
      shares are owned by members of the public including officers and directors
      of Bankshares.

      The  reorganization  was accounted for in a manner similar to a pooling of
      interests and did not result in any  significant  accounting  adjustments.
      Bankshares conducts no business other than holding the common stock of the
      Association. Consequently, its net income is derived from the Association.

 3.   CHANGE IN FISCAL YEAR END

      During  January  1997,  the  Board  of  Directors   voted  to  change  the
      Association's  fiscal  year  end from  September  30th to  December  31st,
      effective December 31, 1996.  Bankshares' fiscal year end is December 31st
      as well.


4.    NEW ACCOUNTING PRONOUNCEMENTS

      In June 1997, the Financial  Accounting  Standards  Board ("FASB")  issued
      Statements  of  Financial   Accounting   Standards   No.  130   "Reporting
      Comprehensive  Income", which requires 


                                       6
<PAGE>

      that an enterprise  report, by major components and as a single total, the
      change in its net assets during the period from nonowner sources,  and No.
      131 "Disclosures about Segments of an Enterprise and Related Information",
      which  establishes   annual  and  interim   reporting   standards  for  an
      enterprise's   operating  segments  and  related   disclosures  about  its
      products,  services,  geographic  areas, and major customers.  Adoption of
      these  statements  will  not  impact  Bankshares'  consolidated  financial
      position,  results of  operations  or cash  flows,  and any effect will be
      limited to the form and content of its  disclosures.  Both  statements are
      effective for fiscal years beginning after December 15, 1997, with earlier
      application permitted.

5.    LOANS RECEIVABLE


      Loans receivable consist of the following:
<TABLE>
<CAPTION>

                                                                         September 30,  December 31,
                                                                             1997          1996
                                                                           --------      --------
                                                                                (In Thousands)
<S>                                                                        <C>           <C>     
Real estate loans:
   Residential 1-4 family                                                  $314,952      $293,296
   Residential 1-4 family held for sale (at lower of cost or fair value)         --            70
   Residential construction loans                                            44,093        33,158
   Non-residential construction loans                                            --         2,200
   Land loans                                                                18,854        19,426
   Multi-family loans                                                         8,881         8,096
   Commercial                                                                44,827        37,815
                                                                           --------      --------
      Total real estate loans                                               431,607       394,061
                                                                           --------      --------

Non-real estate loans:
   Consumer loans                                                            15,415        16,028
   Commercial business                                                        2,354         2,458
                                                                           --------      --------
      Total non-real estate loans                                            17,769        18,486
                                                                           --------      --------
      Total loans receivable                                                449,376       412,547

Less:
   Undisbursed loan proceeds                                                 27,933        20,765
   Unearned discount and net deferred loan fees                                  51           200
   Allowance for loan losses                                                  2,632         2,542
                                                                           --------      --------
Total loans receivable,  net                                               $418,760      $389,040
                                                                           ========      ========
</TABLE>

      The  amount of loans on which  Bankshares  has  ceased  accruing  interest
      aggregated  approximately  $1,263,000 and $1,631,000 at September 30, 1997
      and December 31,  1996,  respectively.  The amount of interest not accrued
      related to these loans was approximately  $93,000 and $65,000 at September
      30, 1997 and December 31, 1996, respectively.


                                       7
<PAGE>

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

                                                          For the nine months
                                                          ended September 30,
                                                         1997             1996
                                                       -------          -------
                                                             (In Thousands)

Balance, beginning of period                           $ 2,542          $ 3,492
Provision charged to income                                221               68
Losses charged to allowance                               (131)          (1,248)
Recoveries                                                  --               --
                                                       -------          -------
Balance, end of period                                 $ 2,632          $ 2,312
                                                       =======          =======

      Bankshares  accounts for impaired  loans in  accordance  with SFAS No. 114
      "Accounting  by Creditors for Impairment of a Loan" as amended by SFAS No.
      118.

      An  analysis  of the  recorded  investment  in  impaired  loans  owned  by
      Bankshares  at June 30, 1997 and the related  allowance for those loans is
      as follows:
                                                            September 30, 1997
                                                        ------------------------
                                                          Loan          Related
                                                        Balances      Allowances
                                                        --------      ----------
                                                              (In Thousands)
Impaired loan balances and related
   allowances for loan losses                              $1,050         $  252
                                                           ======         ======

6.    REAL ESTATE OWNED

      Real estate owned consists of the following:
<TABLE>
<CAPTION>

                                                      September 30,    December 31,
                                                          1997             1996
                                                          -----           -----
                                                             (In Thousands)

<S>                                                      <C>              <C>   
Real estate owned                                        $  642           $1,547
Less allowance for loss                                      49               92
                                                         ------           ------
Total                                                    $  593           $1,455
                                                         ======           ======
</TABLE>

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

                                                           For the nine months
                                                           ended September 30,
                                                          ---------------------
                                                          1997            1996
                                                          -----           -----
                                                              (In Thousands)

Balance, beginning of period                              $  92           $ 149
Provision charged to income                                  --             (32)
Losses charged to allowance                                 (43)            (25)
                                                          -----           -----
Balance, end of period                                    $  49           $  92
                                                          =====           =====

                                       8
<PAGE>


 7.   DEPOSITS

      The weighted-average  interest rates on deposits at September 30, 1997 and
      December 31, 1996 were 4.29% and 4.15%, respectively. Deposit accounts, by
      type and range of rates at  September  30,  1997 and  December  31,  1996,
      consist of the following:
<TABLE>
<CAPTION>

                                                        September 30,   December 31,
                                                        -------------   ------------
                                                            1997          1996
                                                          --------      --------
                                                               (In Thousands)
<S>                                                       <C>           <C>     
ACCOUNT TYPE AND RATE
Non-interest-bearing NOW accounts                         $ 19,810      $ 18,627
NOW, Super NOW and funds transfer accounts                  65,944        67,076
Passbook and statement accounts                             29,669        30,821
Money market accounts                                       73,109        69,514
                                                          --------      --------

Total non-certificate accounts                             188,532       186,038
                                                          --------      --------

Certificates:
 3.00% or less                                               1,339         1,035
 3.01% - 3.99%                                                  11           598
 4.00% - 4.99%                                              27,959        51,484
 5.00% - 5.99%                                             284,013       232,313
 6.00% - 6.99%                                              33,734        33,568
 7.00% - 7.99%                                               8,707         8,673
                                                          --------      --------
Total certificates of deposit                              355,763       327,671
                                                          --------      --------

Total                                                     $544,295      $513,709
                                                          ========      ========
</TABLE>

      Individual  deposits  greater  than  $100,000  at  September  30, 1997 and
      December 31, 1996 aggregated  approximately  $83,499,000 and  $72,504,000,
      respectively. Deposits in excess of $100,000 are not insured.

8.    CONTINGENCIES

      Bankshares  is continuing to  investigate a previously  reported  possible
      employee  defalcation  which may have been  occurring  for several  years.
      Bankshares maintains insurance to cover possible defalcation losses with a
      claim deductible of $200,000.  Bankshares  established a liability for the
      amount of the deductible during fiscal year 1996.  Bankshares has notified
      its insurance company of the potential claim and the insurance company has
      acknowledged  coverage.  The  insurance  company  is  in  the  process  of
      completing  its due diligence  related to the claim.  Management  does not
      believe  that the  claim  will  have any  material  adverse  effect on its
      financial position or results of its operations.

                                       9
<PAGE>

9.    EARNINGS PER SHARE

      The primary and fully diluted  weighted-average  number of shares includes
      adjustments  for the  Association's  ESOP,  Recognition and Retention Plan
      ("RRP"),  and stock options. For the quarter ended September 30, 1997, the
      primary and fully diluted  weighted-average number of shares was 5,066,404
      and 5,088,291, respectively. For the quarter ended September 30, 1996, the
      primary and fully diluted  weighted-average number of shares was 5,036,778
      and 5,076,896, respectively.

      During March 1997,  FASB issued SFAS No. 128,  "Earnings  per Share".  The
      statement,  which  is  intended  to  simplify  the  current  standard  for
      computing  earnings per share and to make it compatible with international
      standards, is effective for financial statements issued for periods ending
      after  December 15,  1997.  At that time,  Bankshares  will be required to
      change the method  currently  used to  compute  earnings  per share and to
      restate  all prior  periods.  Under the new  method  for  computing  basic
      earnings per share, the dilutive effect of stock options will be excluded.
      For the quarter ended September 30, 1997,  basic and diluted  earnings per
      share as computed under the provisions of SFAS No. 128, would be $0.31 per
      share.


                                       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.

                       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., 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.  ComFed owns 2,620,144  shares of Bankshares
common  stock  with  the  remaining  2,474,776  shares  being  owned  by  public
shareholders.

                            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. 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 and mortgage-backed  securities ("MBS").  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

Bankshares  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.   Bankshares  also  adjusts  liquidity  as
appropriate  to meet its  asset and  liability  management  objectives.  A major
portion of Bankshares'  liquidity  consists of cash and cash equivalents,  which
are a product of its operating, investing, and financing activities.

Bankshares 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 is currently  5.0%.  Bankshares'
liquidity  ratio averaged 13.9% during the nine months ended  September 30, 1997
while liquidity ratios averaged 14.1% for the year ended December 31, 1996.

Bankshares'  primary sources of funds are deposits,  amortization and prepayment
of loans and MBS,  maturities  of  investment  securities  and other  short-term
investments,  and earnings and funds provided from  operations.  While scheduled
principal  repayments  on loans and MBS are a relatively  predictable  source of
funds,  deposit  flows and loan  prepayments  are greatly  influenced by general
interest rates,  economic  conditions,  and competition.  Bankshares manages the
pricing of its  deposits to maintain a desired  deposit  balance.  In  addition,
Bankshares  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 $36.1 million at September 30, 1997. Other assets qualifying
for liquidity  outstanding at September 30, 1997 amounted to $52.0 million.  For
additional information about cash flows from Bankshares'  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  Bankshares  requires  funds beyond its ability to generate them
internally, borrowing agreements exist with the FHLB which provide an additional
source of funds.  At September  30,  1997,  Bankshares'  advances  from the FHLB
totaled $48.9 million.  Bankshares has in the past utilized  borrowings from the
FHLB  principally  to reduce  interest  rate  risk,  rather  than for  liquidity
purposes.

At September 30, 1997,  Bankshares had outstanding  loan  commitments  totalling
$4.7  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  $278.4  million  at  September  30,  1997.  Based on prior  experience,
management believes that a significant portion of such deposits will remain with
Bankshares.


                                       12
<PAGE>


                               FINANCIAL CONDITION

                SEPTEMBER 30, 1997 COMPARED TO DECEMBER 31, 1996

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

                                                  September 30, December 31, Increase
                                                      1997         1996     (Decrease)
                                                    --------     --------    --------
                                                                (Unaudited)
                                                              (In Thousands)
<S>                                                 <C>          <C>         <C>     
Assets:
   Total assets                                     $709,220     $655,209    $ 54,011
   Cash and cash equivalents                          50,297       42,442       7,855

   Securities portfolio:
      Investment securities                           21,409       22,139        (730)
      Securities available for sale                  139,379      123,152      16,227
      Mortgage-backed and related securities          48,326       53,405      (5,079)
                                                    --------     --------    --------
   Total securities portfolio                        209,114      198,696      10,418

    Loans receivable, net                            418,760      389,040      29,720
    Real estate owned, net                               593        1,455        (862)

Liabilities and Shareholders' Equity:

  Total liabilities                                  628,778      579,090      49,688
  Deposits                                           544,295      513,709      30,586
  Federal Home Loan Bank advances                     48,926       34,763      14,163
  Advances by borrowers for taxes and insurance        6,968        1,059       5,909
  Shareholders' equity                                80,442       76,119       4,323
</TABLE>

Total assets increased $54.0 million to $709.2 million at September 30, 1997, as
compared to $655.2 million at December 31, 1996 primarily due to a $29.7 million
net increase in  Bankshares'  loan  portfolio to $418.7 million at September 30,
1997 from $389.0  million at December 31, 1996, and a $10.4 million net increase
in the  securities  portfolio  (which  includes  securities  available for sale,
investment  securities,  and MBS) to $209.1  million at September  30, 1997 from
$198.7  million at December 31, 1996.  In  addition,  cash and cash  equivalents
increased $7.9 million to $50.3 million at September 30, 1997 from $42.4 million
at December  31, 1996.  The  increase in total assets was funded  primarily by a
$30.6  million net increase in deposits to $544.3  million at September 30, 1997
from $513.7  million at December 31, 1996. In addition,  purchases of securities
available  for sale were funded in part by a $14.1  million net increase in FHLB
advances which totaled $48.9 million and $34.8 million at September 30, 1997 and
December 31, 1996, respectively.

The  securities  portfolio net increase of $10.4 million  reflects  purchases of
$41.3 million of new securities  available for sale as Bankshares utilized funds
raised in odd-term certificates of deposit promotions and FHLB advances,  offset
in part by scheduled  principal  reductions,  calls,  sales, and amortization of
premiums and discounts amounting to $30.9 million.

Loans  receivable  increased $29.7 million as a result of Bankshares'  continued
emphasis on its  lending  activities.  Loan  originations  of $89.3  million and
purchases  of  $4.5  million  (primarily   consisting  of  one-  to  four-family
residential properties) were offset by repayments and other adjustments of $64.1
million. Real estate owned decreased $862,000 to $593,000 at September 30, 1997,
from $1.5 million at December 31, 1996,  primarily due to the sale of foreclosed
real estate.


                                       13
<PAGE>

Total  liabilities  increased  $49.7 million to $628.8  million at September 30,
1997,  from $579.1  million at December 31, 1996.  Total  deposits  increased by
$30.6  million to $544.3  million at September  30, 1997 from $513.7  million at
December 31, 1996 due  primarily to increased  retail  deposits  resulting  from
special  promotions  of odd-term  certificates  as well as  competitive  pricing
intended  to protect  and  enhance the  Association's  market  share  during the
period.

Total equity  increased  to $80.4  million at  September  30,  1997,  from $76.1
million at December 31, 1996,  reflecting net income for the nine months of $4.3
million,  a net  increase in the market  value of assets  available  for sale of
$928,000,  proceeds totaling $54,000 from the exercise of stock options, and the
stock benefit plans accrual of $603,000,  offset in part by the  declaration  of
dividends  totalling $1.5 million.  For further  information,  see the unaudited
consolidated  statements of changes in shareholders'  equity in the accompanying
consolidated financial statements.

At  September  30,  1997,  the  Association   exceeded  all  regulatory  capital
requirements as follows:
<TABLE>
<CAPTION>

                                                                                                To be Considered
                                                                        Minimum for             Well Capitalized
                                                                      Capital Adequacy       for Prompt Corrective
                                                 Actual                   Purposes              Action Provision
                                        ------------------------- ------------------------- -------------------------
                                           Ratio       Amount         Ratio       Amount        Ratio       Amount
                                        ------------ ------------ ----------- ------------- ------------ ------------
<S>                                           <C>        <C>            <C>        <C>             <C>       <C>    
As of September  30, 1997:
Shareholders' equity and ratio
   to total assets                            11.3%      $80,442
                                              =====
Unrealized decrease in market value
   of securities available for sale                          140
Tangible capital, and ratio to                           -------
   adjusted total assets                      11.4%      $80,582        1.5%       $10,640
                                              =====      =======        ====       =======
Tier 1 (core) capital and ratio
   to adjusted total assets                   11.4%      $80,582        3.0%       $21,281         5.0%      $35,468
                                              =====      =======        ====       =======         ====      =======
Tier 1 (core) capital and ratio to
   risk-weighted total assets                 22.8%      $80,582                                   6.0%      $21,162
                                              =====      -------                                   ====      =======

Allowance for loan and lease losses                        2,380
Equity investments                                        (1,506)
                                                         -------
Tier 2 capital                                               874
                                                         -------
Total risk-based capital and ratio to
   risk-weighted total assets                 23.1%      $81,456        8.0%       $28,216        10.0%      $35,270
                                              =====      =======        ====       =======        =====      =======

Total assets                                            $709,220
                                                        ========
Adjusted total assets                                   $709,360
                                                        ========
Risk-weighted assets                                    $352,700
                                                        ========
</TABLE>


                                       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 where 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.  The Association  carries real estate owned at the lower of
cost or fair value, less cost to dispose. Management regularly reviews assets to
determine proper valuation.  The Association did not have any restructured loans
within the meaning of SFAS No. 15 at September 30, 1997 or December 31, 1996.

The  following  table  sets  forth   information   regarding  the  Association's
delinquent loans and foreclosed real estate at the dates indicated:
<TABLE>
<CAPTION>


                                                          September 30,    December 31,
                                                              1997            1996
                                                             ------          ------
                                                                    (unaudited)
                                                                  (In Thousands)
<S>                                                          <C>             <C>   
Non-performing loans:
Residential real estate loans:
  Loans 60 to 89 days delinquent                             $  879          $  446
  Loans more than 90 days delinquent                          1,248           1,524
                                                             ------          ------
    Total                                                     2,127           1,970
                                                             ------          ------

Commercial and multi-family real estate loans:
  Loans 60 to 89 days delinquent                                 --              --
  Loans more than 90 days delinquent                             --              --
                                                             ------          ------
    Total                                                        --              --
                                                             ------          ------

Consumer and commercial business loans:
  Loans 60 to 89 days delinquent                                 54              72
  Loans more than 90 days delinquent                             15             107
                                                             ------          ------
    Total                                                        69             179
                                                             ------          ------

Land
  Loans 60 to 89 days delinquent                                 --              --
  Loans more than 90 days delinquent                             --              --
                                                             ------          ------
    Total                                                        --              --
                                                             ------          ------
Total non-performing loans                                    2,196           2,149

Real estate owned net of related allowance                      593           1,455
Loans to facilitate sale of real estate owned                   219             224
                                                             ------          ------
Total non-performing assets and loans to facilitate
 sale of real estate owned                                   $3,008          $3,828
                                                             ======          ======
</TABLE>


                                       15
<PAGE>


                              RESULTS OF OPERATIONS
      FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996

                                     GENERAL

Net income for the quarter ended  September 30, 1997  increased  $1.7 million to
$1.5 million, or $0.31 per share,  compared to a loss of $186,000,  or $0.04 per
share,  for the quarter ended September 30, 1996. The increase in net income was
primarily  due to the one time SAIF  special  assessment  recognized  during the
quarter ended  September 30, 1996 which did not reoccur during the quarter ended
September 30, 1997.

                               NET INTEREST INCOME

Net  interest  income was  unchanged  at $5.9  million  for the  quarters  ended
September  30, 1997 and 1996.  The average  balance of  interest-earning  assets
increased  $62.7 million to $663.3 million for the three months ended  September
30, 1997 from $600.6  million for the same period in the prior year,  reflecting
the increases in the loan and securities portfolios. Such increase was offset by
a $63.3  million  increase  in average  interest-bearing  liabilities  to $607.5
million for the three months ended  September  30, 1997 from $544.2  million for
the same period in 1996, reflecting the growth of Bankshares' deposit portfolio,
primarily  certificates of deposit, and the use in part of FHLB advances to fund
securities purchases. At the same time, the net interest rate spread narrowed to
3.15% for the quarter  ended  September 30, 1997 from 3.52% for the same quarter
in 1996,  primarily  as a  result  of the  increased  weighted  average  cost of
deposits to 4.27 % for the quarter  ended  September 30, 1997 from 4.02% for the
same period in 1996. The increased  cost of deposits  reflects the 8.6% increase
in total  certificates  of deposit  which have a higher  cost to  Bankshares  as
compared to a 1.3% growth in lower costing core deposits.

                            PROVISION FOR LOAN LOSSES

Bankshares  maintains  an  allowance  for  loan  losses  based  upon a  periodic
evaluation  of 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,  the nature and
volume of its loan  activities,  and current as well as expected future economic
conditions.  Loan loss  provisions are based upon  management's  estimate of the
fair value of the collateral and Bankshares' actual loss experience,  as well as
guidelines  applied  by the OTS and the  FDIC.  Bankshares'  provision  for loan
losses was $138,000 for the quarter  ended  September  30, 1997,  as compared to
$28,000 for the quarter  ended  September  30, 1996  primarily due to additional
specific reserves recognized during the period.  Bankshares'  allowance for loan
losses as a percentage of net loans  receivable was 0.63% and 0.61% at September
30, 1997 and 1996, respectively.

                                  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 as well as
income or loss resulting from a real estate venture in which a subsidiary of the
Association is involved. Other income increased $595,000 to $1.5 million for the
quarter  ended  September  30,  1997 from  $927,000  for the same period in 1996
primarily as a result of a $617,000 gain on the sale of other assets,  partially
offset by $75,000 in costs  expensed in connection  with the winding down of the
Association's real estate venture.


                                       16
<PAGE>


                                OPERATING EXPENSE


Operating  expense  decreased  $2.1  million to $5.0 million for the three month
period ended  September  30, 1997 from $7.1 million for the same period in 1996.
Operating  expense was higher in the 1996 period  primarily  due to the one-time
$2.8 million  SAIF special  assessment  to  recapitalize  the SAIF which did not
reoccur  during the same  period in 1997.  However,  employee  compensation  and
benefits  increased  $344,000  during the quarter ended  September 30, 1997 as a
result of increased  staffing  due to the opening of two new branch  offices and
the expanded loan production program. In addition, other increases of $77,000 in
occupancy  and  equipment  costs (also  relating to the new branch  offices) and
$251,000 in  miscellaneous  operating  expense occurred during the quarter ended
September  30,  1997 as compared to the same  quarter in 1996.  The  increase in
operating expense was partially offset by a $203,000 decrease in federal deposit
insurance premiums reflecting the reduced premium rate paid by Bankshares in the
1997 period. In addition,  Bankshares  recognized a $243,000 net gain on sale of
real estate owned during the quarter ended  September 30, 1996, as compared to a
$26,000 net gain for the same period in 1997.

                           PROVISION FOR INCOME TAXES

The provision for income taxes was $720,000 for the three months ended September
30,  1997 as  compared  to a benefit  of  $164,000  for the same  period in 1996
reflecting the increase in net income.

                              RESULTS OF OPERATIONS
       FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996

                                     GENERAL

Net income for the nine months ended  September 30, 1997  increased $1.4 million
to $4.3  million,  or $0.85 per share,  compared to $2.9  million,  or $0.58 per
share, for the same period in 1996. The increase in net income was primarily due
to the one-time SAIF special assessment  recognized during the nine months ended
September 30, 1996 which did not reoccur in 1997.  In addition,  during the nine
months ended  September  30, 1997,  there were  increases of $1.0 million in net
interest income and $1.1 million in other income, offset in part by increases of
$1.2 million and $2.2 million in other  expenses  and the  provision  for income
taxes, respectively.

                               NET INTEREST INCOME


Net interest income  increased $1.0 million to $17.2 million for the nine months
ended  September 30, 1997 from $16.2 million for the nine months ended September
30,  1996  primarily  as a  result  of  a  $60.2  million  increase  in  average
interest-earning  assets to $648.6  million for the nine months ended  September
30, 1997 from $588.4  million for the same period in the prior year,  reflecting
the growth in the  Bankshares'  loan and  securities  portfolios,  as well as an
increase in the average yield on  interest-earning  assets to 7.70% for the nine
months  ended  September  30, 1997 from 7.63% for the same  period in 1996.  The
increase in  interest-earning  assets was  partially  offset by a $60.7  million
increase in average interest-bearing  liabilities to $594.4 million for the nine
months ended  September 30, 1997 from $533.7 million for the same period in 1996
reflecting  the  growth  of the  Bankshares'  deposit  portfolio,  primarily  in
certificates  of  deposit,  and  the  use of FHLB  advances  to fund  securities
purchases  as well  as an  increase  in the  average  cost  on  interest-bearing
liabilities to 4.55% for the nine months ended September 30, 1997 from 4.37% for
the  same  period  in  1996.  The  increase  in the  average  cost is  primarily
attributable  to the  increased  cost of  certificates  of deposit  which have a
higher cost to Bankshares than do core deposits.

                                       17
<PAGE>

                            PROVISION FOR LOAN LOSSES

As  mentioned  previously,  loan loss  provisions  are based  upon  management's
estimate  of the fair  value  of the  collateral  and  Bankshares'  actual  loss
experience,  as well as guidelines applied by the OTS and the FDIC.  Bankshares'
provision  for loan losses was $221,000 for the nine months ended  September 30,
1997,  as  compared  to $68,000 for the nine  months  ended  September  30, 1996
primarily  due to additional  specific  reserves  recognized  during the period.
Bankshares'  allowance for loan losses as a percentage  of net loans  receivable
was 0.63% and 0.61% at September 30, 1997 and 1996, respectively.

                                  OTHER INCOME

Other  income  increased  $1.1 million to $3.4 million for the nine months ended
September 30, 1997 from $2.3 million for the same period in 1996  primarily as a
result of a $617,000  gain on sale of other assets  during the nine months ended
September  30,  1997.  In  addition,  other  income  for the nine  months  ended
September 30, 1997 included a $214,000  increase in loan and deposit fees as the
result of changes in  Bankshares'  fee  structure  implemented  in October 1996.
Other income in the 1996 period  included a $144,000 gain on the early  maturity
of  securities  available  for sale and a $200,000 loss reserve on an amount due
from a depository institution as well as a $218,000 loss incurred on the sale of
a participation loan, none of which items reoccurred during 1997.

                                OPERATING EXPENSE

Operating  expense  decreased  $1.6 million to $13.8  million for the nine month
period ended September 30, 1997, from $15.4 million for the same period in 1996,
primarily  due  to  the  one-time  $2.8  million  SAIF  special   assessment  to
recapitalize the SAIF which Bankshares  recognized  during the nine months ended
September  30,  1996 and which did not  reoccur  during  the 1997  period.  This
decrease  was   partially   offset  by  an  increase  of  $803,000  in  employee
compensation  and benefits as a result of increased  staffing due to the opening
of two new branch offices and the expanded loan production program. In addition,
other  increases of $240,000 in occupancy and equipment  costs (also relating to
the new branch offices) and $434,000 in miscellaneous  operating expense as well
as a decrease  of $296,000  in net gain on sale of real  estate  owned  occurred
during the nine months ended  September  30, 1997 as compared to the same period
in 1996.  The increase in operating  expense was partially  offset by a $622,000
decrease in federal deposit  insurance  premiums  reflecting the reduced premium
rate paid by the Association in the 1997 period.

                           PROVISION FOR INCOME TAXES

The  provision  for income  taxes  increased to $2.3 million for the nine months
ended  September 30, 1997 from $94,000 for the same period in 1996. The increase
was due to increased  earnings for the nine months ended  September  30, 1997 as
well as management's decision during the nine months ended September 30, 1996 to
reverse a prior year provision which was no longer required.


                                       18
<PAGE>


                           PART II. OTHER INFORMATION

ITEM 1.       LEGAL PROCEEDINGS

              There are  various  claims and  lawsuits  in which  Bankshares  is
              periodically  involved incidental to its business.  In the opinion
              of  management,  no  material  loss is  expected  from any of such
              pending claims or lawsuits.

ITEM 2.       CHANGES IN SECURITIES

              Not applicable.

ITEM 3.       DEFAULTS UPON SENIOR SECURITIES

              None.

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

              The  Association   held  a  Special  Meeting  of  Shareholders  on
              September  24,  1997  to  vote  on  the   reorganization   of  the
              Association  into a two-tier  holding  company  structure.  Of the
              5,090,120 shares eligible to vote,  holders of 4,153,712 shares or
              81.6%,   including   2,620,144   shares  owned  by  ComFed,   were
              represented in person or by proxy at the meeting.

              The votes cast produced the following result:

                                 Number of Votes
                 For                 Against                 Abstain
                 ---                 -------                 -------
              4,119,753               13,056                  20,903


                                       19
<PAGE>


ITEM 5.       OTHER INFORMATION.

(a)           MID-TIER HOLDING COMPANY.
              On January 16, 1997,  the Board of  Directors  of the  Association
              adopted a resolution  to proceed with filing an  application  with
              the OTS to  reorganize  the  Association  into a two-tier  holding
              company  structure.  As  a  result  of  the  reorganization,   the
              Association  is  a  wholly-owned   subsidiary  of  Bankshares  and
              shareholders  of  the  Association   became  the  shareholders  of
              Bankshares.

              ComFed, the Association's mutual holding company, holds a majority
              of the common stock of the new  mid-tier  stock  holding  company,
              Bankshares,   which  owns  100%  of  the   common   stock  of  the
              Association.  Under the reorganization,  each share of Association
              common stock held by existing  shareholders of the Association was
              converted  into one  share of  common  stock  of  Bankshares.  The
              reorganization  of the  Association  was  structured as a tax-free
              reorganization  and was  accounted  for in a manner  similar  to a
              pooling of interests. Completion of the reorganization was subject
              to regulatory approval by the OTS and to shareholder  approval. On
              August 4, 1997, the OTS issued its order approving the application
              of  Bankshares to become the holding  company of the  Association.
              The  reorganization  was approved by the shareholders at a special
              meeting held September 24, 1997. The reorganization,  as approved,
              was  finalized  after the close of business on September 30, 1997.
              The  stock  of  Bankshares  was   substituted   for  that  of  the
              Association on the Nasdaq National Market.

(b)           CHANGE OF FISCAL YEAR.
              During  January  1997,  the Board of Directors of the  Association
              approved a change of the Association's  fiscal year from September
              30 to December 31, effective December 31, 1996.
              Bankshares' fiscal year end is December 31 as well.

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

(a)           Exhibits.
              ---------

              None during the reporting period.

(b)           Current Reports on Form 8-K.
              ----------------------------

              None during the reporting period.

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<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.




                                         /s/ JAMES B. PITTARD, JR.
                                         ---------------------------------------
Date:         November 4, 1997           James B. Pittard, Jr.
                                         President and Chief Executive Officer


Date:         November 4, 1997           /s/ LARRY J. BAKER
                                         ---------------------------------------
                                         Larry J. Baker
                                         Senior Vice President and Treasurer

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