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, 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,  2,759,087
shares.

<PAGE>
                        COMMUNITY BANKSHARES INCORPORATED
                                    FORM 10-Q

                                 March 31, 1999


                                      INDEX

                                                                            Page

Part I.  Financial Information

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

           Consolidated Statements of Income for the three months and
                  fiscal year to date ended March 31, 1999 and 1998          4

           Consolidated Statements of Cash Flows for the three
                  ended March 31, 1999 and 1998                              5

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


Part II.  Other Information                                                 15

<PAGE>
<TABLE>
Part I.  Financial Information

                                        COMMUNITY BANKSHARES INCORPORATED
                                     Consolidated Balance Sheets (Unaudited)
                                                  (In Thousands)
<CAPTION>
                                                                       March 31                     December 31,
ASSETS                                                                   1999                           1998
------                                                                   ----                           ----
<S>                                                                    <C>                            <C>     
Cash and cash equivalents:
       Cash and due from banks                                         $ 14,764                       $ 12,778
       Federal funds sold                                              $ 12,907                       $ 34,657
                                                                       ---------                      --------
                   Total cash and cash equivalents                     $ 27,671                       $ 47,435
                                                                       ---------                      --------

Securities available for sale, at fair value                           $ 64,517                       $ 62,131
Investment securities                                                  $  8,666                       $  9,679
                                                                       ---------                      --------
                   Total securities                                    $ 73,183                       $ 71,810
                                                                       ---------                      --------

Loans, net of unearned income                                          $222,635                       $203,232
      Less allowance for loan losses                                   $  2,423                       $  2,345
                                                                       ---------                      --------
                   Net loans                                           $220,212                       $200,887

Bank premises and equipment, net                                       $  4,759                       $  4,765
Other real estate owned                                                $  1,333                       $  1,078
Other assets                                                           $  4,432                       $  4,170
                                                                       ---------                      --------

                   Total assets                                        $331,590                       $330,145
                                                                       ========                       ========  
LIABILITIES AND STOCKHOLDER'S EQUITY
Deposits:
     Noninterest-bearing deposits                                      $ 54,413                       $ 54,354
     Interest-bearing  deposits                                        $ 238,943                      $237,724
                                                                       ---------                      --------
                   Total deposits                                      $293,356                       $292,078

Federal Funds Purchased                                                $      -                       $      -
Securities sold under agreements to repurchase                         $  1,865                       $  1,914
Other liabilities                                                      $  2,096                       $  2,033
Guaranteed debt of Employee Stock                                                              
        Ownership Trust                                                $      -                       $      -
                                                                       ---------                      --------
                   Total liabilities                                   $297,317                       $296,025
                                                                       ---------                      --------

Stockholder's equity
     Capital stock                                                     $  8,250                       $  8,286
     Surplus                                                           $  4,665                       $  4,915
     Retained earnings                                                 $ 21,550                       $ 20,820
     Unrealized gains (losses) on securities                    
          available for sale, net of taxes                             $   (192)                      $     99
                   Unearned ESOP shares                                $      -                       $      -
                                                                       ---------                      --------

                   Total stockholder's equity                          $ 34,273                       $ 34,120
                                                                       ---------                      --------

                   Total liabilities and
                           stockholder's equity                        $331,590                       $330,145
                                                                       ========                       ========  
</TABLE>



                                                      - 3 -
<PAGE>
<TABLE>
                                              COMMUNITY BANKSHARES INCORPORATED
                                        Consolidated Statements of Income (Unaudited)
<CAPTION>
                                                                                                      Fiscal year to date
                                                                        Quarter ended                  Three months ended
                                                                           March 31,                        March 31,
                                                               -----------------------------   -------------------------------
                                                                      1999           1998              1999            1998
                                                                      ----           ----              ----            ----
<S>                                                                  <C>            <C>                <C>            <C>    
Interest  income:
       Interest and fees on loans                                    $ 4,925        $ 4,459            $ 4,925        $ 4,459
       Interest on securities:                                                                                  
              U.S. Treasury securities and U.S.government
                      agency and corporation obligations             $   871        $   747            $   871        $   747
              Obligations of states and political subdivisions       $   180        $   124            $   180        $   124
              Other securities                                       $    33        $    16            $    33        $    16
       Interest on Federal funds sold                                $   202        $   230            $   202        $   230
                                                                     -------        -------            -------        -------
                              Total interest income                  $ 6,211        $ 5,576            $ 6,211        $ 5,576

Interest expense:
       Interest on deposits                                          $ 2,542        $ 2,254            $ 2,542        $ 2,254
       Interest on Federal funds purchased                           $     -        $     -            $     -        $     -
       Interest on Securities sold under
              agreements to repurchase                               $    22        $    14            $    22        $    14
                                                                     -------        -------            -------        -------

                              Total interest expense                 $ 2,564        $ 2,268            $ 2,564        $ 2,268
                                                                     -------        -------            -------        -------
                               Net interest income                   $ 3,647        $ 3,308            $ 3,647        $ 3,308
                                                                     -------        -------            -------        -------

Provision for loan losses                                            $    80        $    52            $     80       $    52
                               Net interest income after provision
                                    for loan losses                  $ 3,567        $ 3,256            $ 3,567        $ 3,256
                                                                     -------        -------            -------        -------
Other income:
       Service charges, commissions and fees                         $   473        $   366            $   473        $   366
       Security gains (losses)                                       $    (4)       $    96            $    (4)       $    96
       Gain on sale of bank premises and equipment                   $     -        $     -            $     -        $     -
       Gain on sale of other real estate                             $     -        $     -            $     -        $     -
       Other operating income                                        $    48        $    53            $    48        $    53
                                                                     -------        -------            -------        -------

                              Total other income                     $   517        $   515            $   517        $   515
Other expenses:
       Salaries and benefits                                         $ 1,455        $ 1,263            $ 1,455        $ 1,263
       Expense on premises and fixed assets, net                     $   305        $   277            $   305        $   277
       Other operating expenses                                      $   653        $   579            $   653        $   579
                                                                     -------        -------            -------        -------

                              Total other expenses                   $ 2,413        $ 2,119            $ 2,413        $ 2,119

Income before income taxes                                           $ 1,671        $ 1,652            $ 1,671        $ 1,652
Income tax expense                                                   $   527        $   515            $   527        $   515
                                                                     -------        -------            -------        -------

                              Net income                             $ 1,144        $ 1,137            $ 1,144        $ 1,137
                                                                     -------        -------            -------        -------
Earnings per common and common equivalent
        shares (based on 2,759,087; 2,782,030
         2,759,087; 2,782,030 respectively)                          $  0.41        $  0.41            $  0.41        $  0.41
                                                                     -------        -------            -------        -------
Earnings per common share, assuming full                                                                        
         dilution( based on 2,967,413; 2,915,356
         2,967,413; 2,915,356 respectively)                          $  0.39        $  0.39            $  0.39        $  0.39
                                                                     -------        -------            -------        -------
</TABLE>


                                                             - 4 -
<PAGE>
<TABLE>
                                            COMMUNITY BANKSHARES INCORPORATED
                                    Consolidated Statements of Cash Flows (Unaudited)
                                        Nine Months Ended March 31, 1999 and 1998
<CAPTION>
                                                                                  1999                           1998
                                                                                  ----                           ----
<S>                                                                             <C>                             <C>     
Cash Flows from Operating Activities                                                                  
     Net income                                                                 $  1,144                        $  1,137
     Adjustments to reconcile net income to net cash and                                              
            cash equivalents provided by operating activities:                                        
                  Depreciation of bank premises and equipment                   $    125                        $    119
                  Provision for loan losses                                     $     80                        $     53
                  Amortization and accretion of investment securities           $     12                        $    (18)
                  (Gain) loss on sale of bank premises and equipment            $      -                        $     (7)
                  (Gain) loss on sale of other securities                       $      4                        $    (11)
                  (Gain) loss on sale of other real estate                      $      -                        $      -
                  Changes in operating assets and liabilities:                                        
                            (Increase) Decrease in accrued interest receivable  $   (175)                       $     22
                            (Increase) Decrease in prepaid expenses             $    (99)                       $    (92)
                            (Increase) Decrease in accrued interest payable     $     24                        $    107
                            (Increase) Decrease in unrealized securities losses $   (166)                       $    (87)
                            (Increase) Decrease in deferred income taxes        $    (99)                       $    (93)
            Net change in other operating assets and liabilities                $    151                        $    316
                                                                                --------                        --------


                               Net cash and cash equivalents provided                                 
                                    by operating activities                     $  1,001                        $  1,446

Cash Flows from Investing Activities                                                                  
     Proceeds from sale of investment securities                                $  4,269                        $  6,827
     Proceeds from maturities of investment securities                          $  5,437                        $  3,955
     Purchase of investment securities                                          $(11,452)                       $(11,912)
     Purchase of other real estate                                              $   (255)                       $   (165)
     Net increase in loans                                                      $(19,398)                       $ (6,804)
     Proceeds from sale of bank premises and equipment                          $      -                        $     20
     Proceeds from sale of other real estate                                    $      -                        $    431
     Capital expenditures                                                       $    105                        $   (216)
                                                                                --------                        --------
                               Net cash and cash equivalents used in                                  
                                    investing activities                        $(21,294)                       $ (7,864)

Cash Flows from Financing Activities                                                                  
     Net increase (decease) in deposits                                         $  1,278                        $ 14,523
     Net increase (decrease) in federal funds purchased                         $    (49)                       $      -
     Redemption of common stock                                                 $   (286)                       $      -
     Issuance of common stock                                                   $      -                        $     21
     Dividends paid                                                             $   (414)                       $   (469)
                                                                                --------                        --------
                               Net cash and cash equivalents provided                                 
                                    by financing activities                     $    529                        $ 14,075
                                                                                ========                        ========

Increase (decrease) in cash and cash equivalents                                $(19,764)                       $  7,657
                                                                                --------                        --------

Cash and cash equivalents at beginning of period                                $ 47,435                        $ 27,205
                                                                                --------                        --------

Cash and cash equivalents at end of period                                      $ 27,671                        $ 35,107
                                                                                --------                        --------
Supplemental Disclosure of Cash Flow Information                                                      
     Cash payments for:                                                                               
            Interest                                                            $  2,574                        $  2,262
                                                                                --------                        --------

            Income taxes                                                        $    446                        $    517
                                                                                --------                        --------
</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 thirteen 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 1999 of $1.144 million was an
increase of 0.26% over the first three months of 1998.  Earnings per share (on a
fully  diluted  basis)  for the three  months  ended  March  31,  1999 was $0.41
compared to $0.41 for the same period last year.

     The Company's return on average equity decreased for the first three months
of 1999 over 1998.  The return on average equity was 13.88% for the three months
ended March 31, 1999,  compared to 15.56% in 1998.  The return on average assets
amounted to 1.48% and 1.68% for the three months ended March 31, 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 10.25% to $3.647 million for the first three
months of 1999.  This increase was  attributable  to the growth in the Company's
loan portfolio.  Total loans outstanding increased 9.55%, or $19.404 million for
the first three  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
69.33% 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,  1999,  increased
13.05% to $2.564  million as compared to $2.268  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,  $80,000 for the first three  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  $2.423 million at March 31, 1999 or
1.09% of total  loans,  as  compared to $2.345 or 1.15% at  December  31,  1998.
Non-performing  assets  totaled  $3.483  million at March 31,  1999  compared to
$3.392  million at December 31, 1998.  The  multiple of the  allowance  for loan
losses  to  non-performing  assets  was  0.70x at March  31,  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


                                      - 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, 1999,  non-interest
income increased $2,000 or 0.39% to $0.517 million as compared to $0.515 million
one year  earlier.  The amount of fee income  collected  actually  increased  by
$107,000,  however  this was largely  offset by a $100,000  decrease in security
gains.

Non-Interest  Expense.  Non-interest  expense  of $2.413  million  for the three
months  ended  March 31,  1999,  was an  increase of $294,000 or 13.87% over the
$2.119  million for the same period last year.  Salaries and employee  benefits,
the largest component on non-interest  expense increased 15.20% to $1.45 million
for the first  three  months of 1998,  this was  partially  due to a new  branch
opening.

Financial Condition 

     Total  assets as of March 31, 1999 were  $331.590  million,  an increase of
0.44% from $330.145 million at December 31, 1998. Net loans  outstanding for the
three months ended March 31, 1999 stood at $220.212  million,  a net increase of
$19.325  million or 9.62% over the  $200.887  million  recorded at December  31,
1998.

     Deposits  for the three  months  ended  March 31,  1999  stood at  $293.356
million an increase of $1.278 million or 0.44% over the $292.078 at December 31,
1998.

     Total  securities  for the three  months  ended March 31, 1999 were $73.183
million an  increase  of $1.373  million or 1.91%  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 are based on the needs
of the Company and current  yields and other market  conditions.  Securities are


                                      - 8 -

<PAGE>


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, 1999,  the Company's  ratio of total capital to  risk-weighted
assets was 15.54%  and its ratio of Tier 1 capital to  risk-weighted  assets was
14.52%.  Both ratios  exceeded the fully  phased-in  capital  requirements.  The
following  summarizes  the Company's  regulatory  capital and related  ratios at
March 31, 1999 (dollars in thousands):

                  Tier 1 Capital                              $ 34,465

                  Tier 2 Capital                              $  2,423

                  Total risk-based capital                    $ 36,888

                  Total risk-weighted assets                  $237,435

                                      - 9 -

<PAGE>

Capital Ratios:

                  Tier 1 risk-based capital ratio                15.54%

                  Total risk-based capital ratio                 14.51%

                  Tier 1 Capital to average total assets         11.38%

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, 1999 the  Company  provided  cash or
liquidity  from  operations in the amount of $1.001  million.  The Company's net
investing  activities  used  $21.294  million  in  the  same  period.  Financing
activities  provided  an  additional  $0.529  million,  consisting  mainly of an
increase in deposits of $1.278. For the first three months of 1998 this produced
a net decrease in  liquidity of  approximately  $19.764  million.  Cash and cash
equivalents  on hand at March  31,  1999  totaled  $27.671  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.

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


                                     - 10 -


<PAGE>

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 their  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,  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  approximately  100% of
the planned upgrades as of March 31, 1999. All of the Company's subsidiary banks
expect to be fully Y2K compliant before September 30, 1999.

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 will be upgraded to compliant systems by June 30, 1999.
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 will be completed by June 30, 1999.
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 March 31, 1999,  the Company has expended
approximately $123,000.  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


                                     - 12 -


<PAGE>

customers  by  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


                                     - 13 -


<PAGE>

ability to 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:  May 12, 1999














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