SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

                                    FORM 10-Q

                QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the Quarterly Period Ended March 31, 1998

                           Commission File No. 2-89588

                        COMMUNITY BANKSHARES INCORPORATED
             (Exact name of registrant as specified in its charter)

        Virginia                                          54-1290793
(State of Incorporation)                    (I.R.S. Employer Identification No.)


                            200 North Sycamore Street
                                  P.O. Box 2166
                           Petersburg, Virginia 23804
                    (Address of principal executive offices)

                                 (804) 861-2320
                         (Registrant's telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months,  and (2) has been subject to such filing  requirements
for the past 90 days. Yes X No


Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of September 30, 1997:  Common Stock, $3.00 par value,
2,782,030 shares.
<PAGE>
                        COMMUNITY BANKSHARES INCORPORATED
                                    FORM 10-Q

                                 March 31, 1998


                                      INDEX

                                                                          Page
                                                                          ----

Part I.  Financial Information

          Consolidated Balance Sheets as of March 31, 1998
             and December 31, 1997                                         3

          Consolidated Statements of Income for the three months and
             fiscal year to date ended March 31, 1998 and 1997             4

          Consolidated Statements of Cash Flows for the three
             months ended March 31, 1998 and 1997                          5

           Management's Discussion and Analysis of the Financial
             Condition and Results of Operations                           6


Part II.  Other Information                                               11
<PAGE>
<TABLE>
Part I.  Financial Information

                                             COMMUNITY BANKSHARES INCORPORATED
                                          Consolidated Balance Sheets (Unaudited)
                                                      (In Thousands)
<CAPTION>
<S> <C>
                                                                        March 31,                    December 31,
ASSETS                                                                    1998                           1997
                                                                        --------                       -------- 
Cash and cash equivalents:
       Cash and due from banks                                          $ 12,866                       $ 12,398
       Federal funds sold                                               $ 22,241                       $ 14,606 
                                                                        --------                       -------- 
                   Total cash and cash equivalents                      $ 35,107                       $ 27,004 
                                                                        --------                       -------- 
Securities available for sale, at fair value                            $ 46,169                       $ 44,035
Investment securities                                                   $ 12,609                       $ 13,625 
                                                                        --------                       -------- 
                   Total securities                                     $ 58,778                       $ 57,660 
                                                                        --------                       -------- 

Loans, net of unearned income                                           $184,869                       $177,982
      Less allowance for loan losses                                     $ 2,010                       $  1,991 
                                                                        --------                       -------- 
                   Net loans                                            $182,859                       $175,991

Bank premises and equipment, net                                         $ 4,818                       $  4,824
Other real estate owned                                                  $ 1,025                       $  1,213
Other assets                                                             $ 3,706                       $  3,545 
                                                                        --------                       -------- 
                   Total assets                                         $286,293                       $270,237
                                                                        ========                       ========

LIABILITIES AND STOCKHOLDER'S EQUITY
Deposits:
     Noninterest-bearing deposits                                       $ 46,404                       $ 40,914
     Interest-bearing  deposits                                         $204,668                       $195,176 
                                                                        --------                       -------- 
                   Total deposits                                       $251,072                       $236,090

Federal Funds Purchased                                                 $     -                        $     -
Securities sold under agreements to repurchase                          $  1,347                       $  1,439
Other liabilities                                                       $  2,167                       $  1,576
Guaranteed debt of Employee Stock                                                              
        Ownership Trust                                                 $     41                       $     91 
                                                                        --------                       -------- 
                   Total liabilities                                    $254,627                       $239,196 
                                                                        --------                       -------- 

Stockholder's equity
     Capital stock                                                      $  8,347                       $  8,338
     Surplus                                                            $  5,437                       $  5,425
     Retained earnings                                                  $ 17,938                       $ 17,268
     Unrealized gains (losses) on securities
          available for sale, net of taxes                              $   (15)                       $    101
                   Unearned ESOP shares                                 $   (41)                       $    (91)
                                                                        --------                       -------- 
                   Total stockholder's equity                           $ 31,666                       $ 31,041 
                                                                        --------                       -------- 
                   Total liabilities and
                           stockholder's equity                         $286,293                       $270,237
                                                                        ========                       ========





                                                      - 3 -
<PAGE>
                                               COMMUNITY BANKSHARES INCORPORATED
                                         Consolidated Statements of Income (Unaudited)
<CAPTION>
                                                                                                       Fiscal year to date
                                                                         Quarter ended                 Three months ended
                                                                            March 31,                        March 31,
                                                                     -----------------------           ----------------------
                                                                       1998           1997               1998          1997
                                                                     -------        -------            -------       -------
Interest  income:
       Interest and fees on loans                                    $ 4,459        $ 4,081            $ 4,459       $ 4,081
       Interest on securities:                                                                                  
              U.S. Treasury securities and U.S.government
                      agency and corporation obligations             $   756        $   784            $   756       $   784
              Obligations of states and political subdivisions       $   124        $    95            $   124       $    95
              Other securities                                       $     7        $    51            $     7       $    51
       Interest on Federal funds sold                                $   230        $    77            $   230       $    77 
                                                                     -------        -------            -------       -------
                              Total interest income                  $ 5,576        $ 5,088            $ 5,576       $ 5,088

Interest expense:
       Interest on deposits                                          $ 2,254        $ 2,090            $ 2,254       $ 2,090
       Interest on Federal funds purchased                           $    -         $     1            $    -        $     1
       Interest on Securities sold under                                                                        
             agreements to repurchase                                $    14        $     8            $    14       $     8 
                                                                     -------        -------            -------       -------
                              Total interest expense                 $ 2,268        $ 2,099            $ 2,268       $ 2,099 
                                                                     -------        -------            -------       -------
                               Net interest income                   $ 3,308        $ 2,989            $ 3,308       $ 2,989 
                                                                     -------        -------            -------       -------

Provision for loan losses                                            $    52        $    15            $    52       $    15
                               Net interest income after provision
                                    for loan losses                  $ 3,256        $ 2,974            $ 3,256       $ 2,974 
                                                                     -------        -------            -------       -------
Other income:
       Service charges, commissions and fees                         $   366        $   326            $   366       $   326
       Security gains (losses)                                       $    96        $    -             $    96       $    -
       Gain on sale of bank premises and equipment                   $    -         $    -             $    -        $    -
       Gain on sale of other real estate                             $    -         $    -             $    -        $    -
       Other operating income                                        $    53        $    89            $    53       $    89 
                                                                     -------        -------            -------       -------
                              Total other income                     $   515        $   415            $   515       $   415
Other expenses:
       Salaries and benefits                                         $ 1,263        $ 1,143            $ 1,263       $ 1,143
       Expense on premises and fixed assets, net                     $   277        $   293            $   277       $   293
       Other operating expenses                                      $   579        $   590            $   579       $   590 
                                                                     -------        -------            -------       -------
                              Total other expenses                   $ 2,119        $ 2,026            $ 2,119       $ 2,026

Income before income taxes                                           $ 1,652        $ 1,363            $ 1,652       $ 1,363
Income tax expense                                                   $   515        $   481            $   515       $   481 
                                                                     -------        -------            -------       -------
                              Net income                             $ 1,137        $   882            $ 1,137       $   882 
                                                                     -------        -------            -------       -------
Earnings per common and common equivalent
        shares (based on 2,782,030; 2,777,856
         2,782,030; 2,777,856 respectively)                            $0.41          $0.32              $0.41         $0.32
Earnings per common share, assuming full                                                        
         dilution( based on 2,893,056; 2,845,161                       $0.39          $0.31              $0.39         $0.31
         2,893,0562; 2,845,161 respectively)


                                                             - 4 -
<PAGE>
                                          COMMUNITY BANKSHARES INCORPORATED
                                  Consolidated Statements of Cash Flows (Unaudited)
                                      Nine Months Ended March 31, 1998 and 1997
<CAPTION>

                                                                                  1998                           1997
                                                                                -------                        -------
Cash Flows from Operating Activities                                                                  
     Net income                                                                 $ 1,137                        $   882
     Adjustments to reconcile net income to net cash and                                              
            cash equivalents provided by operating activities:                                        
                  Depreciation of bank premises and equipment                   $   119                        $   124
                  Provision for loan losses                                     $    53                        $    15
                  Amortization and accretion of investment securities           $   (18)                       $    -
                  (Gain) loss on sale of bank premises and equipment            $    (7)                       $    -
                  (Gain) loss on sale of other securities                       $   (11)                       $    -
                  (Gain) loss on sale of other real estate                      $    -                         $    30
                  Changes in operating assets and liabilities:                                        
                            (Increase) Decrease in accrued interest receivable  $    22                        $   (63)
                            (Increase) Decrease in prepaid expenses             $   (92)                       $   (40)
                            (Increase) Decrease in accrued interest payable     $   107                        $     4
                            (Increase) Decrease in unrealized securities losses $   (87)                       $    15
                            (Increase) Decrease in deferred income taxes        $   (93)                       $  (196)
            Net change in other operating assets and liabilities                $   316                        $   130 
                                                                                -------                        -------
                               Net cash and cash equivalents provided                                 
                                    by operating activities                     $ 1,446                        $   901
                                                                                                      
Cash Flows from Investing Activities                                                                  
     Proceeds from sale of investment securities                                $ 6,827                        $ 1,720
     Proceeds from maturities of investment securities                          $ 3,955                        $ 2,033
     Purchase of investment securities                                         $(11,912)                       $(3,340)
     Purchase of other real estate                                              $  (165)                       $  (505)
     Net increase in loans                                                      $(6,804)                       $(4,100)
     Proceeds from sale of bank premises and equipment                          $    20                        $    -
     Proceeds from sale of other real estate                                    $   431                        $   441
     Capital expenditures                                                       $  (216)                       $  (431)
                                                                                -------                        -------
                               Net cash and cash equivalents used in                                  
                                    investing activities                        $(7,864)                       $(4,182)
                                                                                                      
Cash Flows from Financing Activities                                                                  
     Net increase (decease) in deposits                                         $14,523                        $ 1,825
     Net increase (decrease) in federal funds purchased                         $    -                         $    -
     Issuance of common stock                                                   $    21                        $    -
     Dividends paid                                                             $  (469)                       $    - 
                                                                                -------                        -------
                               Net cash and cash equivalents provided                                 
                                    by financing activities                     $14,075                        $ 1,825
                                                                               ========                        =======
                                                                                                      
Increase (decrease) in cash and cash equivalents                                $ 7,657                        $(1,456)
                                                                                -------                        -------
                                                                                                      
Cash and cash equivalents at beginning of period                                $27,205                        $23,870 
                                                                                -------                        ------- 
Cash and cash equivalents at end of period                                      $35,107                        $22,414 
                                                                                -------                        -------
Supplemental Disclosure of Cash Flow Information                                                      
     Cash payments for:                                                                               
            Interest                                                            $ 2,262                        $ 2,096 
                                                                                -------                        -------
            Income taxes                                                        $   517                        $    70 

</TABLE>
                                                               - 5 -
<PAGE>
MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS

     Community  Bankshares  Incorporated (the "Company") is a multi-bank holding
company organized under Virginia law which provides  financial  services through
its wholly-owned subsidiaries, The Community Bank and Commerce Bank of Virginia,
and County Bank of  Chesterfield.  All subsidiary  banks are full service retail
commercial banks offering a wide range of banking services, including demand and
time deposits,  as well as  commercial,  industrial,  residential  construction,
residential  mortgage and consumer loans. The Company's  primary trade areas are
the  Petersburg,  Virginia area and the  Richmond,  Virginia  area.  The Company
operates twelve branch locations in these trade areas.

     The following discussion provides information about the major components of
the  results of  operations  and  financial  condition,  liquidity  and  capital
resources of Community  Bankshares  Incorporated.  This  discussion and analysis
should be read in conjunction with the Consolidated Financial Statements.

Overview. Net income for the first three months of 1998 of $1.137 million was an
increase of 28.91% over the first three months of 1997. Earnings per share (on a
fully  diluted  basis)  for the three  months  ended  March  31,  1998 was $0.41
compared to $0.32 for the same period last year.

     The Company's return on average equity increased for the first three months
of 1998 over 1997.  The return on average equity was 15.56% for the three months
ended March 31, 1998,  compared to 13.15% in 1997.  The return on average assets
amounted to 1.68% and 1.41% for the three months ended March 31, 1998 and 1997.

Net Interest  Income.  Net interest  income  represents the principal  source of
earnings  for the  Company.  Net  interest  income  equals  the  amount by which
interest  income  exceeds  interest  expense.  Changes  in the volume and mix of
interest-earning  assets  and  interest-bearing  liabilities,  as well as  their
respective  yields  and  rates,  have a  significant  impact on the level of net
interest income.

     Net interest income  increased 10.67% to $3.308 million for the first three
months of 1998.  This increase was  attributable  to the growth in the Company's
loan portfolio.  Total loans outstanding  increased 3.87%, or $6.887 million for
the first three  months of 1998.  The Company has had a  consistent  increase in
loan demand.  It is management's  belief that the increase in the lending volume
is a result of  competitive  pricing and,  responsiveness  to loan demands.  The
ability to make timely loan


                                      - 6 -
<PAGE>

decisions  is an  operating  characteristic  that often  allows the  Company the
opportunity to meet the needs of borrowers before their competitors. The Company
is competitive with rates and origination fees charged on loans. However,  since
69.00% of the entire loan  portfolio  may be  repriced in one year or less,  the
Company has the ability to respond quickly to market changes in rate structures.

     Interest expense for the three months ended March 31, 1998, increased 8.05%
to $2.268  million as  compared  to $2.099  million for the same period one year
earlier.  This increase was due to an increase in the volume of interest-bearing
liabilities.

Provision for Possible  Loan Losses.  The provision for possible loan losses was
increased,  $19,000 for the first three  months of 1998.  This  provision  is an
estimate of an amount  deemed  adequate to provide for  potential  losses in the
portfolio. The level of losses is affected by general economic trends as well as
conditions  affecting  individual  borrowers.  The  allowance is also subject to
regulatory  examinations and  determination as to adequacy,  which may take into
account such factors as the  methodology  used to calculate  the  allowance  and
comparison to peer groups.

     The allowance for loan losses  totaled  $2.010 million at March 31, 1998 or
1.09% of total  loans,  as  compared to $1.991 or 1.19% at  December  31,  1997.
Non-performing  assets  totaled  $2.283  million at March 31,  1998  compared to
$2.913  million at December 31, 1997.  The  multiple of the  allowance  for loan
losses  to  non-performing  assets  was  0.88x at March  31,  1998 and  0.68x at
December 31, 1997. Management constantly evaluates non-performing loans relative
to their collateral value and makes appropriate reductions in the carrying value
of those loans based on that review.

     The  allowance for loan losses  related to loans  identified as impaired is
primarily  based on the  excess  of the  loan's  current  outstanding  principal
balance over the estimated  fair market value of the related  collateral.  For a
loan that is not  collateral-dependent,  the allowance is recorded at the amount
by which the outstanding principal balance exceeds the current best estimate for
the future cash flows on the loan  discounted at the loan's  effective  interest
rate.

     Loans, including impaired loans, are generally placed in non-accrual status
when they are delinquent in principal and interest payments greater than 90 days
and the loan is not well  secured  and in process  of  collection.  Accruals  of
interest  are  discontinued  until it becomes  certain that both  principal  and


                                      - 7 -


<PAGE>

interest can be repaid.  The Company does have loans that are contractually past
due greater  than 90 days that are not in  non-accrual  status,  however,  those
loans are still  accruing  because  they are well  secured and in the process of
collection.  A loan  is well  secured  if  collateralized  by  liens  on real or
personal property, including securities, that have a realizable value sufficient
to discharge the debt in full or by the  guarantee of a financially  responsible
party.

     If foreclosure of property is required, the property is generally sold at a
public auction in which the Company may participate as a bidder.  If the Company
is the successful  bidder, the acquired real estate property is then included in
the Company's real estate owned account until it is sold.

Non-Interest  Income.  For the three months  ended March 31, 1998,  non-interest
income  increased  $100,000  or 24.10% to $0.515  million as  compared to $0.415
million one year  earlier.  The  increase  was  primarily  due to an increase in
securities gains income.

Non-Interest  Expense.  Non-interest  expense  of $2.119  million  for the three
months ended March 31, 1998, was an increase of $93,000 or 4.59% over the $2.026
million for the same period  last year.  Salaries  and  employee  benefits,  the
largest component on non-interest expense increased 10.50% to $1.263 million for
the first three months of 1998

Financial Condition

     Total  assets as of March 31, 1998 were  $286.293  million,  an increase of
5.94% from $270.237 million at December 31, 1997. Net loans  outstanding for the
three months ended March 31, 1998 stood at $182.859  million,  a net increase of
$6.868 million or 3.90% over the $175.991 million recorded at December 31, 1997.

     Deposits  for the three  months  ended  March 31,  1998  stood at  $251.072
million an  increase of $14.982  million or 6.35% over the  $236.090 at December
31, 1997.

     Total  securities  for the three  months  ended March 31, 1998 were $58.778
million an  increase  of $1.118  million or 1.94%  from the  $57.660  million at
December 31, 1997. The securities portfolio is maintained to manage excess funds
in  order  to  provide  diversification  and  liquidity  in  the  overall  asset
management policy.  The maturity of securities  purchased are based on the needs
of the Company and current yields and other market conditions.





                                      - 8 -


<PAGE>

Securities are classified as  held-to-maturity  when management has the positive
intent and the  Company  has the  ability at the time of  purchase  to hold them
until maturity.  These securities are carried at cost, adjusted for amortization
of premium and  accretion  of  discount.  Securities  to be held for  indefinite
periods of time and not intended to be  held-to-maturity or on a long-term basis
are classified as  available-for-sale  and accounted for at fair market value on
an  aggregate  basis.  Unrealized  gains or losses are  reported as increases or
decreases in stockholder's equity, net of the related tax effect.

Capital Resources

     Capital resources represent funds, earned or obtained, over which financial
institutions  can exercise greater or longer control in comparison with deposits
or  borrowed  funds.  The  adequacy  of the  Company's  capital is  reviewed  by
management  on an ongoing  basis with  reference to the size,  composition,  and
quality of the Company's resources and consistency with regulatory  requirements
and industry  standards.  Management seeks to maintain a capital  structure that
will assure an adequate level of capital to support anticipated asset growth and
absorb potential losses.

     The Federal  Reserve,  along with the  Comptroller  of the Currency and the
Federal  Deposit  Insurance  Corporation,  has  adopted  capital  guidelines  to
supplement the existing  definitions  of capital for regulatory  purposes and to
establish minimum capital  standards.  Specifically,  the guidelines  categorize
assets and  off-balance  sheet  items into four  risk-weighted  categories.  The
minimum ratio of qualifying  total capital to  risk-assets is 8.0% of which 4.0%
must be Tier 1 capital,  consisting of common  equity,  retained  earnings and a
limited amount of perpetual preferred stock, less certain goodwill items.

     At March 31, 1998,  the Company's  ratio of total capital to  risk-weighted
assets was 16.80%  and its ratio of Tier 1 capital to  risk-weighted  assets was
15.80%.  Both ratios  exceeded the fully  phased-in  capital  requirements.  The
following  summarizes  the Company's  regulatory  capital and related  ratios at
March 31, 1998 (dollars in thousands):

                    Tier 1 Capital                                  $  31,722

                    Tier 2 Capital                                  $   2,010

                    Total risk-based capital                        $  33,732

                    Total risk-weighted assets                      $ 200,764

                                      - 9 -
<PAGE>

                    Capital Ratios:

                    Tier 1 risk-based capital ratio                     15.80%

                    Total risk-based capital ratio                      16.81%

                    Tier 1 Capital to average total assets              11.59%


Liquidity

     Liquidity  represents an  institution's  ability to meet present and future
financial  obligations through either the sale or maturity of existing assets or
the acquisition of additional funds through liability management.  Liquid assets
include  cash,   interest-bearing  deposits  with  banks,  federal  funds  sold,
investments  and loans  maturing  within one year.  As a result of the Company's
management  of liquid  assets and the  ability  to  generate  liquidity  through
liability  funding,  management  believes  that the  Company  maintains  overall
liquidity  sufficient to satisfy its  depositors'  requirements  and to meet its
customer's credit needs.

    For the three  months  ended  March 31, 1998 the  Company  provided  cash or
liquidity  from  operations in the amount of $1.446  million.  The Company's net
investing  activities  used  $7.864  million  in  the  same  period.   Financing
activities  provided an  additional  $14.075  million,  consisting  mainly of an
increase  in  deposits  of  $14.523.  For the  first  three  months of 1998 this
produced a net increase in liquidity of approximately  $7.657 million.  Cash and
cash equivalents on hand at March 31, 1998 totaled $35.107  million.  Management
believes  that the  Company  has  enough  asset  liquidity  to meet the needs of
maturing deposits.







                                     - 10 -
<PAGE>

Part II. Other Information

Item:    1        Legal proceedings:  None

         2        Changes in securities:  None

         3        Defaults upon senior securities:  None

         4        Results of votes of security holders:  None

         5        Other information:  None

         6        Exhibits and Reports on Form 8-K:  None












                                     - 11 -
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 thereto duly authorized.




COMMUNITY BANKSHARES INCORPORATED


s/Nathan S. Jones, 3rd
--------------------------------------------
Nathan S. Jones, 3rd
President and Chief Executive Officer




s/Thomas H. Caffrey, Jr.
--------------------------------------------
Thomas H. Caffrey, Jr.
Senior Vice President and Chief Financial Officer



Date:  May 13, 1998






                                     - 12 -