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 September 30, 1999

                           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, 1998: Common Stock, $3.00 par value, 2,721,196
shares.

<PAGE>

                       COMMUNITY BANKSHARES INCORPORATED
                                   FORM 10-Q

                               September 30, 1999


                                      INDEX
                                     -------
                                                                      Page
                                                                      ----
Part I.  Financial Information

         Consolidated Balance Sheets as of September 30, 1999
            and December 31, 1998                                       3

         Consolidated Statements of Income for the nine months and
            fiscal year to date ended September 30, 1999 and 1998       4

         Consolidated Statements of Cash Flows for the nine
            months ended September 30, 1999 and 1998                    5

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


Part II.  Other Information                                            15

<PAGE>

Part I.  Financial Information

                        COMMUNITY BANKSHARES INCORPORATED
                     CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                                 (In Thousands)


                                                SEPTEMBER 30,     DECEMBER 31,
ASSETS                                             1999              1998
                                                   ----              ----

CASH AND CASH EQUIVALENTS:
    Cash and due from banks                      $  16,222         $  12,778
    Federal funds sold                           $   4,835         $  34,657
                                                  --------          --------
        TOTAL CASH AND CASH EQUIVALENTS          $  21,057         $  47,435
                                                  --------          --------

SECURITIES AVAILABLE FOR SALE, AT FAIR VALUE     $  63,159         $  62,131
INVESTMENT SECURITIES                            $   6,800         $   9,679
                                                  --------          --------
        TOTAL SECURITIES                         $  69,959         $  71,810
                                                  --------          --------

LOANS, NET OF UNEARNED INCOME                    $ 252,237         $ 203,232
    Less allowance for loan losses               $   2,525         $   2,345
                                                  --------          --------
        NET LOANS                                $ 249,712         $ 200,887

BANK PREMISES AND EQUIPMENT, NET                 $   4,630         $   4,765
OTHER REAL ESTATE OWNED                          $   1,117         $   1,078
OTHER ASSETS                                     $   5,267         $   4,170
                                                  --------          --------

        TOTAL ASSETS                             $ 351,742         $ 330,145
                                                  ========          ========
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS:
    Noninterest-bearing deposits                 $  61,369         $  54,354
    Interest-bearing  deposits                   $ 250,444         $ 237,724
                                                  --------          --------
        TOTAL DEPOSITS                           $ 311,813         $ 292,078

FEDERAL FUNDS PURCHASED                          $     527         $      -
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE   $   3,239         $   1,914
OTHER LIABILITIES                                $   2,172         $   2,033
                                                  --------          --------
        TOTAL LIABILITIES                        $ 317,751         $ 296,025
                                                  --------          --------

STOCKHOLDERS' EQUITY
    Capital stock                                $   8,152         $   8,286
    Surplus                                      $   3,985         $   4,915
    Retained earnings                            $  23,444         $  20,820
    Accumulated other comprehensive income
      net of tax                                 $  (1,590)        $      99
                                                  --------          --------

        TOTAL STOCKHOLDERS' EQUITY               $  33,991         $  34,120
                                                  --------          --------

        TOTAL LIABILITIES AND
          STOCKHOLDERS' EQUITY                   $ 351,742         $ 330,145
                                                  ========          ========

                                      - 3 -
<PAGE>
                        COMMUNITY BANKSHARES INCORPORATED
                  CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                                  FISCAL YEAR TO DATE
                                                                    QUARTER ENDED                  NINE MONTHS ENDED
                                                                    SEPTEMBER 30,                    SEPTEMBER 30,
                                                             -----------------------------   ------------------------------
                                                                  1999          1998              1999           1998
                                                                  ----          ----              ----           ----
            <S>                                                    <C>          <C>               <C>             <C>
INTEREST  INCOME:
   Interest and fees on loans                                   $ 5,608       $ 4,895           $ 15,784      $ 14,026
   Interest on securities:
       U.S. Treasury securities and U.S.government
            agency and corporation obligations                  $   865       $   781           $  2,587      $  2,332
       Obligations of states and political subdivisions         $   187       $   150           $    551      $    416
       Other securities                                         $    35       $    51           $    102      $     99
   Interest on Federal funds sold                               $   111       $   246           $    468      $    690
                                                                 ------        ------            -------       -------
                 TOTAL INTEREST INCOME                          $ 6,806       $ 6,123           $ 19,492      $ 17,563

INTEREST EXPENSE:
   Interest on deposits                                         $ 2,666       $ 2,446           $  7,777      $  7,046
   Interest on Federal funds purchased                          $     4       $    -            $      4      $     -
   Interest on Securities sold under
     agreements to repurchase                                   $    30       $    22           $     72      $     52
                                                                 ------        ------            -------       -------

                 TOTAL INTEREST EXPENSE                         $ 2,700       $ 2,468           $  7,853      $  7,098
                                                                 ------        ------            -------       -------
                 NET INTEREST INCOME                            $ 4,106       $ 3,655           $ 11,639      $ 10,465
                                                                 ------        ------            -------       -------

PROVISION FOR LOAN LOSSES                                       $    81       $   198           $    201      $    308
                 NET INTEREST INCOME AFTER PROVISION
                    FOR LOAN LOSSES                             $ 4,025       $ 3,457           $ 11,438      $ 10,157
                                                                 ------        ------            -------       -------
OTHER INCOME:
   Service charges, commissions and fees                        $   529       $   520           $  1,510      $  1,343
   Security gains (losses)                                      $    -        $    45           $      2      $    152
   Other operating income                                       $    66       $   250           $    163      $    346
                                                                 ------        ------            -------       -------

                 TOTAL OTHER INCOME                             $   595       $   815           $  1,675      $  1,841
OTHER EXPENSES:
   Salaries and benefits                                        $ 1,510       $ 1,397           $  4,456      $  3,943
   Expense on premises and fixed assets, net                    $   329       $   297           $    955      $    849
   Other operating expenses                                     $   638       $   573           $  1,983      $  1,754
                                                                 ------        ------            -------       -------

                 TOTAL OTHER EXPENSES                           $ 2,477       $ 2,267           $  7,394      $  6,546

Income before income taxes                                      $ 2,143       $ 2,005           $  5,719      $  5,452
Income tax expense                                              $   703       $   630           $  1,838      $  1,737
                                                                 ------        ------            -------       -------

                 NET INCOME                                     $ 1,440       $ 1,375           $  3,881      $  3,715
                                                                 ------        ------            -------       -------
EARNINGS PER COMMON AND COMMON EQUIVALENT
    SHARES (BASED ON 2,740,032; 2,777,855
    2,740,032; 2,777,855 RESPECTIVELY)                            $0.53         $0.50              $1.42         $1.34
                                                                  -----         -----              -----         -----
EARNINGS PER COMMON SHARE, ASSUMING FULL
    DILUTION( BASED ON 2,801,059; 2,881,397                       $0.51         $0.48              $1.39         $1.29
    2,801,059; 2,881,397 RESPECTIVELY)                            -----         -----              -----         -----
</TABLE>
                                      - 4 -
<PAGE>
                        COMMUNITY BANKSHARES INCORPORATED
                CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                  NINE MONTHS ENDED SEPTEMER 30, 1999 AND 1998
<TABLE>
<CAPTION>
                                                                           1999           1998
                                                                           ----           ----
          <S>                                                              <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income                                                           $  3,881       $  3,715
   Adjustments to reconcile net income to net cash and cash
     equivalents provided by operating activities:
       Depreciation of bank premises and equipment                      $    378       $    357
       Provision for loan losses                                        $    201       $    308
       Amortization and accretion of investment securities              $      8       $    (47)
       (Gain) loss on sale of bank premises and equipment               $     -        $     (5)
       (Gain) loss on sale of other securities                          $     (2)      $   (152)
       (Gain) loss on sale of other real estate                         $     (1)      $     -
       Changes in operating assets and liabilities:
           (Increase) Decrease in accrued interest receivable           $   (389)      $   (311)
           (Increase) Decrease in prepaid expenses                      $   (177)      $    384
           (Increase) Decrease in accrued interest payable              $     (6)      $    (44)
           (Increase) Decrease in unrealized securities losse           $ (1,925)      $   (284)
           (Increase) Decrease in deferred income taxes                 $   (424)      $    150
   Net change in other operating assets and liabilities                 $  1,918       $    913
                                                                         -------        -------
               NET CASH AND CASH EQUIVALENTS PROVIDED
                 BY OPERATING ACTIVITIES                                $  3,462       $  4,984

CASH FLOWS FROM INVESTING ACTIVITIES
     Proceeds from sale of investment securities                        $ 11,627       $ 15,990
     Proceeds from maturities of investment securities                  $  7,524       $ 12,830
     Purchase of investment securities                                  $(17,985)      $(33,412)
     Purchase of other real estate                                      $   (371)      $   (457)
     Net increase in loans                                              $(49,007)      $(17,707)
     Proceeds from sale of bank premises and equipment                  $     -        $     20
     Proceeds from sale of other real estate                            $    331       $    802
     Capital expenditures                                               $   (327)      $   (362)
                                                                         -------        -------
                               NET CASH AND CASH EQUIVALENTS USED IN
                                    INVESTING ACTIVITIES                $(48,208)      $(22,296)

CASH FLOWS FROM FINANCING ACTIVITIES
     Net increase (decease) in deposits                                 $ 18,954       $ 29,040
     Net increase (decrease) in federal funds purchased                 $  1,852       $  1,133
     Redemption of common stock                                         $ (1,064)      $   (502)
     Issuance of common stock                                           $     -        $     21
     Dividends paid                                                     $ (1,257)      $ (1,238)
                                                                         -------        -------
                               NET CASH AND CASH EQUIVALENTS PROVIDED
                                    BY FINANCING ACTIVITIES             $ 18,485       $ 28,454
                                                                         =======        =======

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                        $(26,261)      $ 11,142
                                                                         -------        -------

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                        $ 47,318       $ 26,329
                                                                         -------        -------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                              $ 21,057       $ 37,471
                                                                         -------        -------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
     Cash payments for:
            Interest                                                    $  7,854       $  7,921
                                                                         -------        -------

            Income taxes                                                $  1,658       $  1,738
                                                                         -------        -------
</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 nine months of 1999 of $3.881 million was an
increase of 4.47% over the first nine months of 1998. Earnings per share (on a
fully diluted basis) for the nine months ended September 30, 1999 was $1.39
compared to $1.34 for the same period last year.

     The Company's return on average equity decreased slightly for the first
nine months of 1999 over 1998. The return on average equity was 14.87% for the
nine months ended September 30, 1999, compared to 15.48% in 1998. The return on
average assets amounted to 1.52% and 1.73% for the nine months ended September
30, 1999 and 1998.

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 11.22% to $11.639 million for the first nine
months of 1999. This increase was attributable to the growth in the Company's
loan portfolio. Total loans outstanding increased 24.11%, or $49.005 million for
the first nine months of 1999. 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
62.51% 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 nine months ended September 30, 1999, increased
10.64% to $7.853 million as compared to $7.098 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 $201,000 for the first nine months of 1999. 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 $2.525 million at September 30, 1999
or 1.00% of total loans, as compared to $2.345 or 1.15% at December 31, 1998.
Non-performing assets totaled $3.124 million at September 30, 1999 compared to
$3.392 million at December 31, 1998. The multiple of the allowance for loan
losses to non-performing assets was.81x at September 30, 1999 and 0.69x at
December 31, 1998. 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 interest can be repaid.  The Company

                                      - 7 -
<PAGE>

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 nine months ended September 30, 1999, non-interest
income decreased $166,000 or 9.02% to $1.675 million as compared to $1.184
million one year earlier. The decrease was primarily due to a decrease in other
operating income.

NON-INTEREST EXPENSE. Non-interest expense of $7.394 million for the nine months
ended September 30, 1999, was an increase of $848,000 or 12.95% over the $6.546
million for the same period last year. Salaries and employee benefits, the
largest component on non-interest expense increased 13.01% to $4.456 million for
the first nine months of 1999. This increase is partially due to the opening of
a new branch location and the addition of personnel in existing locations made
necessary by overall growth.

FINANCIAL CONDITION
-------------------

     Total assets as of September 30, 1999 were $351.742 million, an increase of
6.54% from $330.145 million at December 31, 1998. Net loans outstanding for the
nine months ended September 30, 1999 stood at $249.712 million, a net increase
of $48.825 million or 24.30% over the $200.887 million recorded at December 31,
1998.

     Deposits for the nine months ended September 30, 1999 stood at $311.813
million an increase of $19.735 million or 6.76% over the $292.078 million at
December 31, 1998.

     Total securities for the nine months ended September 30, 1999 were $69.959
million a decrease of $1.851 million or 2.58% from the $71.810 million at
December 31, 1998. 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 is based on the needs of
the Company and current yields and other market conditions. Securities are
classified as held-to-maturity when

                                      - 8 -

<PAGE>

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 September 30, 1999, the Company's ratio of total capital to
risk-weighted assets was 14.13% and its ratio of Tier 1 capital to risk-weighted
assets was 13.20%. Both ratios exceeded the fully phased-in capital
requirements. The following summarizes the Company's regulatory capital and
related ratios at September 30, 1999 (dollars in thousands):

          Tier 1 Capital                        $ 35,581

          Tier 2 Capital                        $  2,525

          Total risk-based capital              $ 38,106

          Total risk-weighted assets            $269,515

                                      - 9 -
<PAGE>

          CAPITAL RATIOS:

          Tier 1 risk-based capital ratio           13.20%

          Total risk-based capital ratio            14.13%

          Tier 1 Capital to average total assets    10.29%


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 nine months ended September 30, 1999 the Company provided cash or
liquidity from operations in the amount of $3.462 million. The Company's net
investing activities used $48.208 million in the same period, primarily due to
an increase of $49.007 in the loan portfolio. Financing activities provided an
additional $18.485 million, consisting mainly of an increase in deposits of
$18.954. For the first nine months of 1999 this produced a net decrease in
liquidity of $26.261 million. Cash and cash equivalents on hand at September 30,
1999 totaled $21.057 million. Management believes that the Company has enough
asset liquidity to meet the needs of maturing deposits.

YEAR 2000 ISSUES. The Year 2000 Issue (commonly referred to as "Y2K") is the
result of computer programs being written using two digits, rather than four
digits, to define the applicable year. The Y2K issue, which is common to most
corporations, including banks, concerns the inability of information systems,
primarily (but not exclusively) computer software programs, to properly
recognize and process date-sensitive information as the Year 2000 approaches and
beyond. The following constitutes the Company's Y2K readiness disclosure under
the Year 2000 Information and Readiness Disclosure Act.


                                     - 10 -
<PAGE>

Since the Company's subsidiary bank's information systems functions are either
outsourced to service providers or processed on in-house computer systems using
programs developed by third-party vendors, the direct effort to correct Y2K
issues will be undertaken largely by third parties and will therefore not be
totally within the Company's direct control. The Company expects to bring all of
its mission critical operating systems into compliance with Y2K requirements
through the installation of updated or replacement programs developed by third
parties.

The Company began addressing the Y2K issue in the fall of 1997 when its
subsidiary banks formed Y2K project teams comprised of financial, operations,
data processing and loan servicing personnel. A Y2K Plan of Action was developed
by each bank and approved by the respective Boards of Directors and by the Board
of Directors of the company in 1997. The Board of Directors receive quarterly
Year 2000 status reports on all mission critical systems and the related testing
details.

The Y2K Project Teams have completed an assessment, identified all mission
critical systems and created a tracking system, which identifies all third party
vendors and their Y2K compliance status, and their Y2K compliant version of all
bank installed systems. Mission critical systems include hardware, software
programs, and program interfaces, operating systems along with other mechanical
or computer-generated requirements that are beyond the Company's main central
processing systems. Based on the results of the assessments, the Company's
subsidiary banks have established internal time frames to upgrade or replace its
existing hardware and software systems. The subsidiary banks will utilize
internal and external resources to test the software and systems for Year 2000
modifications and compliance. The Company has completed 100% of the planned
upgrades. All of the Company's subsidiary banks are fully Y2K compliant.

The Company's plan to resolve the Y2K issue was developed along the five phase
project management process outlined in the Federal Financial Institutions
Examination Council (FFIEC) Year 2000 statement dated May 5, 1997 which
consisted of:
1.   Awareness.  This phase defined the Y2K issue for all the Company Directors,
     Officers and employees and made them aware of the potential challenges
     associated with the century date change. This phase has been completed.
2.   Assessment. This phase consisted of an extensive evaluation of the size and
     complexity of the Y2K issue and an identification of all systems software
     and hardware that had Y2K implications on continuing operations. During
     this phase all mission critical vendors were identified and an ongoing
     monitoring process was initiated. This phase has been completed and the
     vendor monitoring process is ongoing.

                                     - 11 -
<PAGE>

3.   Renovation. This phase consisted of upgrading, repairing or replacing all
     mission critical systems and hardware, along with the installation of
     upgraded and enhanced computer software provided by third party vendors.
     All mission critical third party systems have either been replaced or
     upgraded with a Y2K compliant product as of March 31, 1999. All
     non-critical software applications that are effected by the Y2K problem
     have been identified and have been upgraded to compliant systems. This
     phase has been completed.
4.   Validation. This is the testing phase of the Y2K project. The Y2K Project
     Teams have developed and implemented test plans for all mission critical
     systems and will document the test results for review and certification
     before any new or upgraded system will be released into daily operations.
     This phase of the plan has been completed
5.   Implementation. This is the phase that involves incorporating all Y2K
     compliant systems into the daily operating environment.

The Company's subsidiary banks have also developed contingency plans that
outline emergency response procedures that meet federal guidelines and protect
the company's ability to continue to operate. Existing contingency procedures
attempt to cover every aspect of the date change transition. The goal of
contingency planning is to facilitate the resumption of business in the event
there is a disruption of critical systems necessary for regular operations.

Although the Company's Project Teams are monitoring the progress of the Y2K
Plan, outside regulators and auditors continue to examine our Year 2000
readiness programs.

The chief components of the Company's expense related to the Y2K issue are
currently believed to be the replacement of personal computer equipment and the
purchase or upgrade of third party software. External maintenance and internal
modification costs will be expensed as incurred. Costs of new hardware and
software will be capitalized and depreciated in accordance with existing
policies. Management expects to incur costs in the range of $100,000 to $200,000
on its Y2K readiness effort. Through September 30, 1999, the Company has
expended approximately $149,000. Costs of the Y2K project are based on current
estimates and actual results could vary significantly once detailed testing is
completed. If the Y2K Plan is unsuccessful, it may have a material, adverse
effect on the Company's future operating results and financial condition.

Recognizing the importance of customer awareness, the Company's subsidiary banks
have undertaken communications projects with all of its deposit and loan
customers by

                                     - 12 -
<PAGE>

including information about the Year 2000 issues in regular statement mailings.
Also, letters have been sent to major commercial loan customers informing them
of the Year 2000 issue and how it can impact businesses. An overall assessment
of Y2K readiness of The Company's commercial loan customers has been completed,
with an overall assessment of low risk. The Company will continue to monitor its
large commercial loan relationships through assigned account officers. Also, new
and renewed commercial credits greater than $100,000 include a Y2K analysis as
part of the normal underwriting decision process.

To date, the Company has not identified any system, which presents a material
risk of not being Year 2000 ready in a timely fashion, or for which a suitable
alternative cannot be implemented. However, as the company progresses with its
Y2K Plan, it may identify systems, which do present a material risk of Year 2000
disruption. Such disruption could include, among other things, the inability to
process and underwrite loan applications, to credit deposits and withdrawals
from customer accounts, to credit loan payments or track delinquencies, to
properly reconcile and record daily activity or to engage in normal banking
activities. Additionally, if the Company's commercial customers are not Year
2000 compliant and suffer adverse effects on their operations, their ability to
meet their obligations to the Company could be adversely affected. The failure
of the Company to identify systems which require Year 2000 hardware or software
upgrades that are critical to ongoing operations or the failure of the Company
or others with which the Company does business to become Year 2000 ready in a
timely manner could have a material adverse impact on the Company's financial
condition and results of operations. In addition, to the extent that the risks
poised by the Year 2000 problem are pervasive in data processing and
transmission and communications services worldwide, the Company cannot predict
with any certainty that its operations will remain materially unaffected after
January 1, 2000.

                           FORWARD LOOKING STATEMENTS

The preceding "Management's Discussion and Analysis of Financial Condition and
Results of Operations" sections of this Form 10-Q contain various "forward
looking statements" within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, which represents The Company's expectations and beliefs concerning
future events including, without limitation, the following: the Company's
efforts in retaining and expanding its customer base and differentiating it from
its competition; the FDIC insurance premium assessments for 1999; the impact
from liabilities arising from legal proceedings on its financial condition; the
impact of certain securities sales, and interest rates in general, on the
volatility of its net interest income; the impact of policy guidelines and
strategies on net interest income based on future interest rate projections; the
ability to

                                     - 13 -
<PAGE>

provide funding sources for both the Bank and the Parent Company; the benefits
of 1998 merger activity on future years' overhead expense; the impact of
portfolio diversification and the outplacement of high risk loans on future
levels on loan losses; the reversal in the trend of competition for real
estate-commercial loans and the effect of loan growth generally on the
improvement in net interest income; the assessment of its provision and reserve
for loan loss levels based upon future changes in the composition of its loan
portfolio, loan losses, collateral value and economic conditions; and
Management's assessment of the impact of the Year 2000 on the financial
condition, results of operations and liquidity of the Company.

The Company cautions that these statements are further qualified by important
factors that could cause actual results to differ materially from those set
forth in the forward looking statements due to market, economic and other
business-related risks and uncertainties affecting the realization of such
statements. Certain of these risks and uncertainties included in such forward
looking statements include, without limitations, the following: dynamics of the
markets served in terms of competition from traditional and nontraditional
financial service providers can affect both the funding capabilities of the
Company in terms of deposit garnering as well as the ability to compete for
loans and generate the higher yielding assets necessary to improve net interest
income; future legislation and actions by the Federal Reserve Board may result
in the imposition of costs and constraints on the Company through higher FDIC
insurance premiums, significant fluctuations in market interest rates and
operational limitations; significant fluctuations in market interest rates may
affect the ability to reinvest proceeds from the maturities and prepayments on
certain categories of securities and affect the overall yield of the portfolio;
business expansion activities and other efforts to retain customers may increase
the need for staffing and the resulting personnel expense in future periods;
deviations from the assumptions used to evaluate the appropriate level of the
reserve for loan losses as well as future purchases and sales of loans may
affect the appropriate level of the reserve for loan losses and thereby affect
the future levels of provisioning; the steps necessary to address the Year 2000
Issue include ensuring that not only the Company's automated systems, but also
those of vendors and customers, can become Year 2000 compliant.

Accordingly, results actually achieved may differ materially from expected
results in these statements. The Company does not undertake, and specifically
disclaims, any obligation to update any forward-looking statements to reflect
events or circumstances occurring after the date of such statements.




                                     -14 -
<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


                                     - 15 -
<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 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:  November 10, 1999

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