UNITED STATES
                        SECURITIES AND EXCHANGE COMMISSION
                              Washington, D. C.  20549
                                     FORM 10-K

/X/               Annual Report Pursuant to Section 13 or 15(d) of
                         The Securities Exchange Act of 1934

                      For the Fiscal Year Ended December 31, 1998

/ /              Transition Report Pursuant to Section 13 or 15(d) of
                            The Securities Exchange Act of 1934

                              Commission File Number 33-81890

                                  Community Bankshares, Inc.
                  ------------------------------------------------------
                  (Exact name of registrant as specified in its charter)

                     Georgia                            58-1415887
           ------------------------------           -------------------
          (State or other jurisdiction of           (I. R. S. Employer
          Incorporation or organization)             Identification No.)


                     448 North Main Street, Cornelia, Georgia  30531
                   ---------------------------------------------------
                   (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (706)778-2265

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act: None

     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(or for such
shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.   Yes / X /       No  /  /.

     Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.  / /
Not applicable.  Registrant is not required to be registered under the
Securities Exchange Act of 1934.

     Aggregate market value of the voting stock held by non-affiliates
(which for purposes hereof are all holders other than executive
officers and directors) of the Registrant as of March 20, 1999: 
$33,993,135 (based upon approximate market value of $33 /share, the
latest sales price known to the Registrant for the Common Stock, for
which there is no established trading market).

     As of March 20, 1999, 2,169,830 shares of Common Stock, par value
$1.00 per share, were issued and outstanding.
<PAGE>
                                 PART 1

ITEM 1.        BUSINESS.

     Community Bankshares, Inc. (the "Company") was organized under
the laws of Georgia in 1980 and commenced operations in 1981.  The
Company is a registered bank holding company.  All of the Company's
activities are currently conducted by or through its subsidiaries,
Community Bank & Trust-Habersham ("Community-Habersham"), Community
Bank & Trust-Alabama ("Community-Alabama"), Community Bank & Trust-
Jackson ("Community-Jackson") and Community Bank & Trust-Troup
("Community-Troup")  (collectively, the "Community Banking
Subsidiaries") and the non-bank subsidiaries of Community-Habersham,
Financial Supermarkets, Inc. ("Financial Supermarkets") and Financial
Properties.

     All references herein to the Company include Community
Bankshares, Inc., the Community Banking Subsidiaries and Financial
Supermarkets unless the context indicates a different meaning.  Unless
otherwise indicated, all  information in this filing has been adjusted
for the stock split effected on December 20, 1995, as a Common Stock
dividend and the associated reduction in par value of the Common
Stock.

Forward Looking Statements
--------------------------

     The following appears in accordance with the Securities
Litigation Reform Act of 1995.  These financial statements and
financial review include forward looking statements that involve
inherent risks and uncertainties.  A number of important factors could
cause actual results to differ materially from those in the forward
looking statements.  Those factors include fluctuations in interest
rates, inflation, government regulations, economic conditions,
competition in the geographic business areas in which the Company
conducts its operations,  material unforeseen changes in the financial
stability and liquidity of the Company's credit customers and material
unforeseen complications arising from the year 2000 issue. 

Business Description of Community Banking Subsidiaries
------------------------------------------------------

     GENERAL.    Each of the Community Banking Subsidiaries is
community-oriented and offers such customary banking services as
consumer and commercial checking accounts, NOW accounts, savings
accounts, certificates of deposit, lines of credit and money
transfers.  Each Community Banking Subsidiary finances commercial and
consumer transactions, makes secured and unsecured loans, and provides
a variety of other banking services. 

     DEPOSITS.    Each Community Banking Subsidiary offers a full
range of depository accounts and services to both consumers and
businesses.  At December 31, 1998, the Company's aggregate deposit
base, totaling approximately $405.2 million, consisted of
approximately $65.3 million in non-interest-bearing demand deposits
(16.11% of total deposits), approximately $94.4 million in interest-
bearing demand deposits (including money market accounts) (23.30% of
total deposits), approximately $19.7 million in savings deposits
(4.86% of total deposits), approximately $158.8 million in time
deposits in amounts less than $100,000 (39.19% of total deposits), and
approximately $67.0 million in time deposits of $100,000 or more
(16.54% of total deposits). 
<PAGE>
     LOANS.    Each Community Banking Subsidiary makes both secured
and unsecured loans to individuals, firms and corporations, and both
consumer and commercial lending operations include various types of
credit for customers.  In addition, the Company operates a loan
production office in Gainesville, Georgia through Community-Habersham. 
The Gainesville loan production office (the "LPO") funds and sells on
the open market loans guaranteed by the Small Business Administration
(the "SBA").  Secured loans include first and second real estate
mortgage loans.  Each Community Banking Subsidiary also makes direct
installment loans to consumers on both a secured and unsecured basis. 
At December 31, 1998, consumer, real estate (including mortgage and
construction loans) and commercial loans represented approximately
14.68%, 33.07% and 51.28%, respectively, of the Company's total loan 
portfolio.  The real estate loans made by each Community Banking
Subsidiary include residential real estate construction, acquisition
and development loans, as well as loans for other purposes which are
secured by real estate. 

     Commercial lending is directed principally toward businesses
within the defined  market area of the Community Banking Subsidiaries
or which are existing or potential deposit customers of the Community 
Banking Subsidiaries.  The LPO, however, makes a large portion of loans
to individuals and businesses that are not located in its market area.
A portion of loans categorized as commercial loans are not secured by
real estate.  Collateral includes marketable securities, certificates
of deposit, accounts receivable, inventory and equipment.  Commercial
lending decisions are based upon a determination of the borrower's ability
and willingness to repay the loan, which in turn are impacted by such
factors as the borrower's cash flow, sales trends and inventory
levels, as well as relevant economic conditions.  This category
includes loans made to individuals, partnership or corporate borrowers
and obtained for a variety of purposes.  Risks associated with these
loans can be significant.  Risks include, but are not limited to,
fraud, bankruptcy, economic downturn, deteriorated or non-existing
collateral, and changes in interest rates. 

     Loans secured by real estate which are made to businesses are
categorized as real estate loans.  Often, real estate collateral is
deemed to be superior to other collateral available to small- to
medium-sized businesses.  The underwriting standards of and risks to
the Community Banking Subsidiaries are as described below with respect
to real estate loans. 

     The Community Banking Subsidiaries offer traditional first
mortgage loans to individuals for single-family structures.  These
loans are sold in the secondary market.  Since the Community Banking
Subsidiaries are originators of mortgages rather than investors, they
sell them servicing-released.  They  offer loan-to-value amounts from
70% to 95%.  Various types of fixed-rate and variable-rate products
are available.  Risks involved with residential mortgage lending
include, but are not limited to, title defects, fraud, general real
estate market deterioration, inaccurate appraisals, interest rate
fluctuations and financial deterioration of the borrower.

     The Community Banking Subsidiaries also make residential
construction loans, generally for one-to-four unit structures.  The
Community Banking Subsidiaries require a first line position on the
loans associated with construction projects and offer these loans only
to bona fide professional building contractors.  Loan disbursements
require independent, on-site inspections to assure the project is on
budget and that the loan proceeds are being used in accordance with
the plans, specifications and survey for the construction project and
not being diverted to other uses.  The loan-to-value ratio for such
<PAGE>
loans is usually 75% to 85% of the as-built appraised value.  Loans
for construction can present a high degree of risk to the Community
Banking Subsidiaries, depending on, among other things, whether the
builder can sell the home to a buyer, whether the buyer can obtain
permanent financing, whether the transaction produces income in the
interim, and the nature of changing economic conditions.

     Additionally, the Community Banking Subsidiaries make acquisition
and development loans to approved developers for the purpose of
developing acreage into single-family lots on which houses will be
built.  The loan-to-value ratio for such loans does not exceed 75% of
the value as defined by an independent appraisal, or 100% of the cost,
whichever is less.  Loans for acquisition and development can present
a high degree of risk to the Community Banking Subsidiaries, depending
upon, among other things, whether the developer can find builders to
buy the lots, whether the builders can obtain financing, whether the
transaction produces income in the interim, and the nature of changing
economic conditions. 

     In addition, the Community Banking Subsidiaries make consumer
loans, consisting primarily of installment loans to individuals for
personal, family and household purposes, including loans for
automobiles,  home improvements and investments.  Consumer lending
decisions are based on a determination of the borrower's ability and
willingness to repay the loan, which in turn are impacted by such
factors as the borrower's income, job stability, previous credit
history and collateral for the loan.  Risks associated with these
loans include, but are not limited to, fraud, deteriorated or non-
existing collateral, a general economic downturn, and consumer
financial problems.

     LENDING POLICY.    The current lending strategy of each Community 
Banking Subsidiary is to offer consumer, real estate and commercial
credit services to individuals and entities that meet the Company's
credit standards.  Each Community Banking Subsidiary provides its
lending officers with written guidelines for lending activities. 
Lending authority is delegated by the Board of Directors of the
particular Community Banking Subsidiary to loan officers, each of whom
is limited in the amount of secured and unsecured loans which he or
she can make to a single borrower or related group of borrowers.

     LOAN REVIEW AND NON-PERFORMING ASSETS.    Each Community Banking
Subsidiary reviews its loan portfolio to determine deficiencies and
corrective action to be taken, and the Company reviews the loan
portfolio of each Community Banking Subsidiary.  Senior lending
officers conduct periodic reviews of borrowers with total direct and
indirect indebtedness of $75,000 or more and ongoing review of all
past due loans.  Past due loans are reviewed at least weekly by
lending officers and a summary report is reviewed monthly by the
particular Community Banking Subsidiary's Board of Directors.  Each
Board of Directors review all loans over $100,000, whether current or
past due, at least once annually.  In addition, each Community Banking
Subsidiary maintains internal classifications of problem and potential
problem loans.

     ASSET/LIABILITY MANAGEMENT.    Each Community Banking
Subsidiary's Board of Directors is charged with establishing policies
to manage the assets and liabilities of the bank.  Each Board's task
is to manage asset growth, net interest margin and liquidity and
capital.  The Board directs the bank's overall acquisition and
allocation of funds.  At its monthly meetings, the Board receives a
report from the President of the bank with regard to the monthly asset
<PAGE>
and liability funds budget and income and expense budget in relation
to the actual composition and flow of funds, the ratio of the amount
of rate-sensitive assets to the amount of rate-sensitive liabilities,
the amount of interest rate risk and equity market value exposure
under varying rate environments, the ratio of loan loss reserve to
outstanding loans and other variables, such as expected loan demand,
investment opportunities, core deposit growth within specified
categories, regulatory changes, monetary policy adjustments and the
overall condition of the local and state economy.

     INVESTMENT POLICY.    The Company's investment portfolio policy
is to maximize income consistent with liquidity, asset quality and
regulatory constraints.  The policy is reviewed from time to time by
the Company's Board of Directors.  Individual transactions, portfolio
composition and performance are reviewed and approved monthly by the
Board of Directors or a committee thereof.  The President of each
Community Banking Subsidiary implements the policy and reports to the
bank's full Board of Directors on a monthly basis information
concerning sales, purchases, resultant gains or losses, average
maturity, federal taxable equivalent yields and appreciation or
depreciation by investment categories. 

Business Description of Non-Banking Subsidiaries
------------------------------------------------

     FINANCIAL SUPERMARKETS.  Financial Supermarkets, formed as a
Georgia corporation in 1984, is a wholly-owned subsidiary of
Community-Habersham and has three divisions.  Financial Supermarkets'
primary division, The Supermarket Bank, provides various consulting
and licensing services to financial institutions in connection with
the establishment of bank branches in supermarkets.  These services
are marketed to international, interstate, regional and community
financial institutions.  Financial Supermarkets enters into agreements
with major supermarket chains for the right to establish bank branches
in particular sites.  Financial Supermarkets then licenses such
rights, along with the right to operate the "Supermarket Bank", to
individual financial institutions, in addition to providing consulting
services to such institutions ranging from providing alternative
construction designs to coordinating employee training. 

     Since 1984, Financial Supermarkets has assisted clients with the
development of Supermarket Bank facilities in grocery stores
throughout the United States.  Financial Supermarkets primarily
competes in the in-store bank branch consulting business with
International Banking Technologies of Atlanta and Memphis-based
National Commerce Bank Services, Inc. a wholly owned subsidiary of
National Commerce Bancorporation. 

     Over its 14-year history, Financial Supermarkets has expanded the
scope of its business beyond the supermarket bank industry.  In 1988,
it formed a consulting division for the financial services industry. 
The division is based in Atlanta and works with financial institutions
across the United States with regard to state and federal regulatory
compliance issues and other day-to-day operational matters. 

     In 1992, Financial Supermarkets formed a full-service marketing
consulting firm to consult with financial institutions primarily in
the Southeastern United States, in addition to working closely with
Supermarket Bank clients to develop related advertising and marketing
programs.  In 1994, Financial Supermarkets formed a travel agency to
provide customers with a full range of travel services. 
<PAGE>
     FINANCIAL PROPERTIES.  Community-Habersham acquired an additional
subsidiary in March 1998 which changed its name to Financial
Properties, Inc.   ("Financial Properties").   Financial Properties
engages in real estate brokerage and related activities.    

Competition
-----------

     The banking business is highly competitive.  Community-Habersham
competes with three other institutions in Habersham County, Georgia,
three institutions in White County, Georgia, and nine institutions in
Hall County, Georgia; Community -Jackson competes with five other
depository institutions in Jackson County, Georgia; Community-Alabama
competes with one other depository institution in Bullock County,
Alabama, and eleven other depository institutions in Montgomery,
Alabama, and Community-Troup competes with eight other depository
institutions in Troup County, Georgia.  Each Community Banking
Subsidiary also competes with other financial service organizations,
including savings and loan associations, finance companies, credit
unions and certain governmental agencies.  To the extent that banks
must maintain non-interest-earning reserves against deposits, they may
be at a competitive disadvantage when compared with other financial
service organizations that are not required to maintain reserves
against substantially equivalent sources of funds.  Further, the
increased competition from investment bankers and brokers and other
financial service organizations may have a significant impact on the
competitive environment in which each Community Banking Subsidiary
operates. 


Employees
---------

     At December 31, 1998, the Company had 260 full-time employees and
44 part-time employees.  Neither the Company nor any of its
subsidiaries is a party to any collective bargaining agreement, and
management of the Company believes that its employee relations are
good. 

Supervision and Regulation
--------------------------

     GENERAL.   The Company is a registered bank holding company
subject to regulation by the Board of Governors of the Federal Reserve
(the "Federal Reserve") under the Bank Holding Company Act of 1956, as
amended (the "Bank Holding Act").  The Company is required to file
financial information with the Federal Reserve periodically and is
subject to periodic examination by the Federal Reserve. 

     The Bank Holding Act requires every bank holding company to
obtain the prior approval of the Federal Reserve before (i) it may
acquire direct or indirect ownership or control of more than 5% of the
voting shares of any bank that it does not already control;  (ii) it
or any of its subsidiaries, other than a bank, may acquire all or
substantially all of the assets of a bank; and (iii) it may merge or
consolidate with any other bank holding company.  In addition, a bank
holding company is generally prohibited from engaging in, or
acquiring, direct or indirect control of the voting shares of any
company engaged in non-banking activities.  This prohibition does not
apply to activities found by the Federal Reserve, by order or
regulation, to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto.  Some of the
activities that the Federal Reserve has determined by regulation or
order to be so closely related to banking are:  making or servicing
loans and certain types of leases; performing certain data processing
<PAGE>
services; acting as fiduciary or investment or financial advisor;
providing discount brokerage services; underwriting bank eligible
securities; underwriting debt and equity securities on a limited basis
through separately capitalized subsidiaries; and making investments in
corporations or projects designed primarily to promote community
welfare. 

     The Company must also register with the Department of Banking and
Finance of the State of Georgia (the "DBF") and file periodic
information with the DBF.  As part of such registration, the DBF
requires information with respect to the financial condition,
operations, management and intercompany relationships of the Company
and Community-Habersham, Community-Jackson and Community-Troup and
related matters.  The DBF may also require such other information as
is necessary to keep itself informed as to whether the provisions of
Georgia law and the regulations and orders issued thereunder by the
DBF have been complied with, and the DBF may examine the Company and
each of the Georgia Community Banking Subsidiaries. 

     The Company is an "affiliate" of the Community Banking
Subsidiaries under the Federal Reserve Act, which imposes certain
restrictions on  (i ) loans by the Community Banking Subsidiaries to
the Company,  (ii)  investments in the stock or securities of the
Company by the Community Banking Subsidiaries,  (iii)  the Community
Banking Subsidiaries taking the stock or securities of an "affiliate"
as collateral for loans by the Community Banking Subsidiaries to a
borrower and (iv) the purchase of assets from the Company by the
Community Banking Subsidiaries.  Further, a bank holding company and
its subsidiaries are prohibited from engaging in certain tie-in
arrangements in connection with any extension of credit, lease or sale
of property or furnishing of services. 

     Community-Habersham, Community-Jackson and Community-Troup, as
Georgia banking associations, are subject to the supervision of, and
are regularly examined by, the Federal Deposit Insurance Corporation
(the "FDIC") and the DBF.  Community-Alabama is subject to the
supervision and examination of the Alabama State Banking Department
(the "ABD") in addition to the FDIC.  Both the FDIC and the DBF must
grant prior approval of any merger, consolidation or other corporate
reorganization involving Community-Habersham, Community-Jackson or
Community-Troup.  The ABD must grant prior approval of any merger,
consolidation or other corporate reorganization involving Community-
Alabama.  A bank can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC in connection with the
default of a commonly-controlled institution.  


     PAYMENT OF DIVIDENDS.   The Company is a legal entity separate
and distinct from the Community Banking Subsidiaries.  Most of the
revenues of the Company result from dividends paid to it by the
Community Banking Subsidiaries.  There are statutory and regulatory
requirements applicable to the payment of dividends by the Community
Banking Subsidiaries, as well as by the Company to its shareholders.   

     The Community Banking Subsidiaries are each state-chartered banks
regulated by the DBF or ABD, as applicable, and the FDIC.  Under the
regulations of the DBF, dividends may not be declared out of the
retained earnings of a Georgia bank without first obtaining the
written permission of the DBF unless such bank meets all of the
following requirements: 
<PAGE>
     (a)  Total classified assets as of the most recent examination of
          the bank do not exceed 80% of equity capital (as defined by
          regulation); 

     (a)  The aggregate amount of dividends declared or anticipated to
          be declared in the calendar year does not exceed 50% of the
          net profits after taxes but before dividends for the
          previous calendar year; and 

     (c)  The ratio of equity capital to adjusted assets is not less
          than 6%.

     Under the regulations of the ABD, dividends may be declared by a
state bank without obtaining the prior written approval of the ABD
only if  (i)  the bank's surplus (as defined by regulation) is equal
to at least 20% of its capital (as defined by regulation) and  (ii) 
the aggregate of all dividends declared or anticipated to be declared
in the calendar year does not exceed the total of its net earnings (as
defined by regulation) of that year combined with its retained net
earnings of the preceding two year, less any required transfers to
surplus.  No dividends may be paid from an Alabama bank's surplus
without the prior written approval of the ABD. 

     The payment of dividends by the Company and the Community Banking
Subsidiaries may also be affected or limited by other factors, such as
the requirement to maintain adequate capital above regulatory
guidelines.  In addition, if, in the opinion of the applicable
regulatory authority, a bank under its jurisdiction is engaged in or
is about to engage in an unsafe or unsound practice (which, depending
upon the financial condition of the Community Banking Subsidiaries,
could include the payment of dividends) such authority may require,
after notice and hearing, that such bank cease and desist from such
practice.  The FDIC has issued a policy statement providing that
insured banks should generally only pay dividends out of current
operating earnings.  In addition to the formal statutes and
regulations, regulatory authorities consider the adequacy of each of
the Community Banking Subsidiary's total capital in relation to its
assets, deposits and other such items.  Capital adequacy
considerations could further limit the availability of dividends to
the Community Banking Subsidiaries.  At December 31, 1998, retained
earnings available from the Community Banking Subsidiaries to pay
dividends totaled approximately $4.5 million.  For 1998, the Company's
cash dividend payout ratio to shareholders was 4.69%. 


     MONETARY POLICY.   The results of operations of the Community
Banking Subsidiaries are affected by credit policies of monetary
authorities, particularly the Federal Reserve.  The instruments of
monetary policy employed by the Federal Reserve include open market
operations in U.S. government securities, changes in the discount rate
on bank borrowings and changes in reserve requirements against bank
deposits.  In view of changing conditions in the national economy and
in the money markets, as well as the effect of actions by monetary and
fiscal authorities, including the Federal Reserve, no prediction can
be made as to possible future changes in interest rates, deposit
levels, loan demand or the business and earnings of the Community
Banking Subsidiaries. 


     CAPITAL ADEQUACY.   The Federal Reserve and the FDIC have
implemented substantially identical risk-based rules for assessing
bank and bank holding company capital adequacy.  These regulations
<PAGE>
establish minimum capital standards in relation to assets and off-
balance sheet exposures as adjusted for credit risk.  Banks and bank
holding companies are required to have  (1) a minimum level of total
capital (as defined) to risk-weighted assets of eight percent (8%);  
(2) a minimum Tier One Capital (as defined) to risk-weighted assets of
four percent (4%); and  (3) a minimum stockholders' equity to risk-
risk-weighted assets of our percent (4%).  In addition, the Federal
Reserve and the FDIC have established a minimum three percent (3%)
leverage ratio of Tier One Capital to total assets for the most
highly-rated banks and bank holding companies.  "Tier One Capital"
generally consists of common equity not including unrecognized gains
and losses on securities, minority interests in equity accounts of
consolidated  subsidiaries and certain perpetual preferred stock less
certain intangibles.  The Federal Reserve and the FDIC will require a
bank holding company and a bank, respectively, to maintain a leverage
ratio greater than three percent (3%) if either is experiencing or
anticipating significant growth or is operating with less than well-
diversified risks in the opinion of the Federal Reserve.  The Federal
Reserve and the FDIC use the leverage ratio in tandem with the risk-
based ratio to assess the capital adequacy of banks and  bank holding
companies.  The FDIC, the Office of the Comptroller of the Currency
(the "OCC") and the Federal Reserve amended, effective January 1,
1997, the capital adequacy standards to provide for the consideration
of interest rate risk in the overall determination of a bank's capital
ratio, requiring banks with greater interest rate risk to maintain
adequate capital for the risk.

     In addition, effective December 19, 1992, a new Section 38 to the
Federal Deposit Insurance Act implemented the prompt corrective action
provisions that Congress enacted as a part of the Federal Deposit
Insurance Corporation Improvement Act of 1991 (the "1991 Act").  The
"prompt corrective action" provisions set forth five regulatory zones
in which all banks are placed largely based on their capital
positions.  Regulators are permitted to take increasingly harsh action
as a bank's financial condition declines.  Regulators are also
empowered to place in receivership or require the sale of a bank to
another depository institution when a bank's capital leverage ratio
reaches two percent (2%).  Better capitalized institutions are
generally subject to less onerous regulation and supervision than
banks with lesser amounts of capital. 

     The FDIC has adopted regulations implementing the prompt
corrective action provisions of the 1991 Act, which place financial
institutions in the following five categories based upon
capitalization ratios:    (1)  A "well capitalized" institution has a
total risk-based capital ratio of at least 10%, a Tier One risk-based
ratio of at least 6% and a leverage ratio of at least 5%;  (2)  an
"adequately capitalized" institution has a total risk-based capital
ratio of at least 8%, a Tier One risk-based ratio of at least 4% and a
leverage ratio of at least 4%;  (3)  an "undercapitalized" institution
has a total risk-based capital ratio of under 8%, a Tier One risk-
based ratio of under 4% or a leverage ratio of under 4%;  (4) a
"significantly undercapitalized" institution has a total risk-based
capital ratio of under 6%, a Tier One risk-based ratio of under 3% or
a leverage ratio of under 3%; and  (5) a "critically undercapitalized"
institution has a leverage ratio of 2% or less.   Institutions in any
of the three undercapitalized categories would be prohibited from
declaring dividends or making capital distributions.  The FDIC
regulations also establish procedures for "downgrading" an institution
to a lower capital category based on supervisory factors other than
capital.  Under the FDIC's regulations, all of the Community Banking
Subsidiaries were "well capitalized" institutions at December 31,
1998. 
<PAGE>
     Set forth below are pertinent capital ratios for the Company and
the Community Banking Subsidiaries as of December 31, 1998. 

<TABLE>
<CAPTION>

Minimum Capital           Community-     Community-    Community-    Community-    The
Requirement               Habersham       Jackson       Alabama        Troup      Company
--------------            ----------     ----------    -----------   ----------   -------
<S>                       <C>           <C>           <C>           <C>           <C>
Tier One Capital          11.76%        8.89%         10.44%        13.05%        10.87%
   to Risk-based
   Assets: 4.00%<F1>

Total Capital to          13.01%        10.14%        11.70%        14.30%        12.12%
   Risk-based
   Assets 8.00%<F2>

Leverage Ratio            8.58%         6.71%         7.19%         9.31%         8.42%
 (Tier One Capital
  to Average Assets)
  4.00%<F3>

<FN>
<F1>   Minimum required ratio for "well capitalized" banks is 6%
<F2>   Minimum required ratio for "well capitalized" banks is 10%
<F3>   Minimum required ratio for "well capitalized" banks is 5%
</FN>
</TABLE>

         RECENT LEGISLATIVE AND REGULATORY ACTION.   On April 19, 1995,
the four federal bank regulatory agencies adopted revisions to the
regulations promulgated pursuant to the Community Reinvestment Act
(the "CRA"), which are intended to set distinct assessment standards
for financial institutions.  The revised regulation contains three
evaluation tests:  (i)  a lending test which compares the
institution's market share of loans in low- and moderate-income areas
to its market share of loans in its entire service area and the
percentage of a bank's outstanding loans to low- and moderate-income
areas or individuals,  (ii)  a services test which evaluates the
provisions of services that promote the availability of credit to low-
and moderate-income areas, and  (iii)  an investment test, which
evaluates an institution's record of investments in organizations
designed to foster community development, small-  and minority-owned
businesses and affordable housing lending, including state and local
government housing or revenue bonds.  The regulation is designed to
reduce some paperwork requirements of the current regulations and
provide regulators, institutions and community groups with a more
objective and predictable manner with which to evaluate the CRA
performance of financial institutions.  The rule became effective on
January 1, 1996, at which time evaluation under streamlined procedures
began for institutions with assets of less than $250 million that are
owned by a holding company with total assets of less than $1 billion. 
These regulations had no appreciable impact on the Company and the
Community Banking Subsidiaries.  

     Congress and various federal agencies (including, in addition to
the Community Banking Subsidiaries' regulatory agencies, the
Department of Housing and Urban Development, the Federal Trade
Commission and the Department of Justice) (collectively the "Federal


<PAGE>
Agencies") responsible for implementing the nations fair lending laws
have been increasingly concerned that prospective home buyers and
other borrowers are experiencing discrimination in their efforts to
obtain loans.  In recent years, the Department of Justice has filed
suit against financial institutions, which it determined had
discriminated, seeking fines and restitution for borrowers who
allegedly suffered from discriminatory practices.  Most, if not all,
of these suits have been settled (some for substantial sums) without a
full adjudication on the merits. 

     On March 8, 1994, the Federal Agencies, in an effort to clarify
what constitutes lending discrimination and specify the factors the
agencies will consider in determining if lending discrimination
exists, announced a joint policy statement detailing specific
discriminatory practices prohibited under the Equal Opportunity Act
and the Fair Housing Act.  In the policy statement, three methods of
proving lending discrimination were identified:  (1)  overt evidence
of discrimination, when a lender blatantly discriminates on a
prohibited basis,  (2)  evidence of disparate treatment, when a lender
treats applicants differently based on a prohibited factor even where
there is no showing that the treatment was motivated by prejudice or a
conscious intention to discriminate against a person, and  (3) 
evidence of disparate impact, when a lender applies a practice
uniformly to all applicants, but the practice has a discriminatory
effect, even where such practices are neutral on their face and are
applied equally, unless the practice can be justified on the basis of
business necessity.  

     On September 23, 1994, President Clinton signed the Reigle
Community Development and Regulatory Improvement Act of 1994 (the
"Regulatory Improvement Act").  The Regulatory Improvement Act
contains funding for community development projects through banks and
community development financial institutions and also numerous
regulatory relief provisions designed to eliminate certain duplicative
regulations and paperwork requirements.

     On September 29, 1994, President Clinton signed the Reigle-Neal
Interstate Banking and Branching  Efficiency Act of 1994 (the "Federal
Interstate Bill") which amends federal law to permit bank holding
companies to acquire existing banks in any state effective September
29, 1995, and any interstate bank holding company is permitted to
merge its various bank subsidiaries into a single bank with interstate
branches after May 31, 1997.  States had the authority to authorize
interstate branching prior to June 1, 1997, or alternatively, to opt
out of interstate branching prior to that date.  The Georgia Financial
Institutions Code was amended in 1994 to permit the acquisition of a
Georgia bank or bank holding company by out-of-state bank holding
companies beginning July 1, 1995.  On September 29, 1995, the
interstate banking provisions of the Georgia Financial Institutions
Code were superseded by the Federal Interstate Bill. 

     On January 26, 1996, the Georgia legislature adopted a bill (the
"Georgia Intrastate Bill") to permit, effective July 1, 1996, any
Georgia bank or group of affiliated banks under one holding company to
establish up to an aggregate of three new or additional branch banks
anywhere within the State of Georgia, excluding any branches
established by a bank in a county in which the bank is already
located.  After July 1, 1998, all restrictions on state-wide branching
were removed.  Prior to adoption of the Georgia Intrastate Bill,
Georgia only permitted branching within a county, via merger or
consolidation with an existing bank or in certain other limited
circumstances.
<PAGE>
FDIC INSURANCE ASSESSMENTS FOR THE COMMUNITY BANKING SUBSIDIARIES. 

     The Company is subject to FDIC deposit insurance assessments for
the Bank Insurance Fund (the "BIF") which provides deposit insurance
coverage of up to $100,000 per bank customer (as defined by the FDIC). 
There have been no BIF deposit insurance assessments for the highest-
rated depository institutions - which include all of the Community
Banking Subsidiaries - since 1995 when the BIF reached the target
funding level mandated by Congress.  All depositary institutions
covered by the BIF are, however, required to pay a special assessment
to cover interest on the FICO bonds that were issued to fund the
Savings and Loan industry bailout.  The Community Banking Subsidiaries
paid total FICO bond assessments of $43,341 in 1998, and expects to pay
total FICO bond assessments of approximately $11,607 in the first
quarter of 1999.

ITEM 2.      PROPERTIES.

     Community-Habersham's main office is located at 448 North Main
Street, Cornelia, Georgia.  Community-Jackson's main office is located
at 117 North Elm Street, Commerce, Georgia.  Community-Alabama's main
office is located at 202 N. Powell Street, Union Springs, Alabama. 
Community-Troup's main office is located at 201 Broad Street,
LaGrange, Georgia.  Community-Habersham has eleven branch offices (two
owned and nine leased, seven of which are operated in supermarkets)
located in Cornelia, Clarkesville, Cleveland, Demorest, and
Gainesville, Georgia.  In addition, the Bank leases the property
occupied by the Loan Production Office in Gainesville.  Community-
Jackson has five branch offices (one owned and four leased, three of
which are operated in supermarkets) located in Commerce and Jefferson,
Georgia.  Community-Alabama has one branch (leased and operated in a
supermarket) in Montgomery, Alabama.  Financial Supermarkets owns its
main office located in Cornelia, Georgia, and leases a division office
in Atlanta, Georgia.  Management of the Company believes that all of
its properties are adequately covered by insurance. 


ITEM 3.      LEGAL PROCEEDINGS. 

     The Company is not a party to, nor is any of its property the
subject of, any material pending legal proceedings. 


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

     No matters were submitted to a vote of security holders of the
Company during the fourth quarter of its fiscal year. 

                                 PART II

ITEM 5.     MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
            STOCKHOLDER MATTERS. 

     There is no established public trading market for the Common
Stock.  As of January 1, 1999, there were 475 holders of record of the
Common Stock.  Management is aware of  30 and 9 trades of Company
stock during 1998 and 1997, respectively.  During 1998, trades ranging
from 25 shares to 9,000 shares at prices ranging from $25.00 to $33.00
per share.  During 1997 trades ranges from 100 shares to 2,850 shares
at prices ranging from $20.00 to $26.50 per share. 

<PAGE>
     In 1998, the Company declared cash dividends of $.15 per share.
The Company declared cash dividends of $.14 in 1997.  The Company
intends to continue to pay cash dividends.  However, the amount and
frequency of dividends will be determined by the Company's Board of
Directors in light of the earnings, capital requirements and the
financial condition of the Company, and no assurances can be given
that dividends will be paid in the future. The Company's ability to
pay dividends will also be dependent on cash dividends paid to it by
the Community Banking Subsidiaries.  The ability of the Community
Banking Subsidiaries to pay dividends to the Company is restricted by
applicable regulatory requirements.  See "ITEM 1 -- BUSINESS --
Supervision and Regulation."

<PAGE>
<PAGE>
ITEM 6.          SELECTED FINANCIAL DATA
<TABLE>
<CAPTION
                                                                     Year Ended December 31,
                                                    1998        1997       1996        1995        1994
                                                  ---------------------------------------------------------
                                                     Dollars in Thousands, Except Per Share Amounts

<S>                                               <C>         <C>        <C>         <C>         <C>
SELECTED INCOME STATEMENT DATA:

     Total interest income                        $ 34,613    $ 28,703   $ 24,465    $ 21,871    $ 17,911

     Total interest expense                         15,951      13,191     11,236       9,875       7,553

     Net Interest income                            18,663      15,512     13,229      11,996      10,358

     Provision for loan losses                       1,165         936        757         849         750

     Non bank subsidiary income                      9,043       8,820      5,559       3,780       3,007

     Other operating income                          4,338       3,599      2,833       2,433       2,325

     Other operating expenses                       20,402      18,724     14,950      12,970      11,606

     Net income                                      7,032       5,647      4,044       3,125       2,419

     Diluted earnings per share of common stock       3.20        2.60       1.93        1.54        1.21

     Cash dividends per share                         0.15        0.14       0.14        0.13        0.12


SELECTED BALANCE SHEET DATA:

     Total assets                                $ 460,593   $ 377,080  $ 315,579   $ 270,007   $ 250,468

     Total deposits                                405,283     335,545    278,709     242,442     224,761

     Other borrowings                                5,808         462        616         787       2,233

     Redeemable common stock held 
       by ESOP                                      14,254      10,622      6,177         -           -  

     Shareholders' equity                           26,291      23,119     21,083      22,469      19,004

</TABLE>
<PAGE>
<PAGE>
Item 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATION.

     The following is a discussion and analysis of the Company's
financial condition at December 31, 1998 and the results of 
operations for the three year period ended December 31, 1998.  The
purpose of the discussion is to focus on information about the
Company's financial condition and results of operations which are not
otherwise apparent from the audited consolidated financial statements
included in this annual report.  This discussion and analysis should
be read in conjunction with the consolidated financial statements and
related notes and the selected financial information and statistical
data presented elsewhere in this Annual Report.

     BALANCE SHEET REVIEW.  The Company experienced significant growth
during 1998.  For the year ended December 31, 1998, consolidated
assets grew $83.5 million, or 22.15%, up from 1997 growth of $61.5
million or 19.49%.  During 1998, the Company's average assets were
$416.6 million, compared with $342.1 million during 1997.  This
represents an 22.35% increase in average assets during 1998 compared
with a 18.24% increase during 1997.

     Total earning assets, which include investment securities, loans,
Federal Funds sold, and interest-bearing deposits in banks increased
$76.9 million or 23.04% during 1998.  During 1997, earning assets
increased  $53.5 million, or 19.09%.  Average earning assets for 1998
were $371.3 million , an increase of 19.95% over average earning
assets in 1997 which were $309.5 million or an increase of 17.58% over
1996.  

     Total investments decreased by $8.6 million  or 10.44% over
1997.  Average investments were $75.3 million for 1998, a 1.22%
decrease compared to average investments for 1997.  This decrease
occurred mainly in the available for sale portfolio and it was offset
by increased loan demand.

     Total loans grew by $70.8 million during 1998 for an increase of
29.17% over 1997.  During 1998 average loans were $285.8 million or an
increase of 28.07% over 1997 compared to an increase during 1997 of
16.73% to 223.2 million.  The increase in loans is primarily the
result of loan growth in the new markets which the bank entered
in Hall and White Counties, along with the continued growth of the
LPO.

      Federal Funds sold increased by $16.9 million or 284.06% from
year end 1997 to 1998.  Average Federal Funds for 1998 were $9.5
million or an 2.20% decrease.  During 1997, average Federal Funds sold
had shown a decrease of $2.2 million or 18.21% compared to 1996. 

     The growth in assets for the year ended December 31, 1998 was
funded mainly by growth in deposits and advances from the Federal Home
Loan Bank.  Consolidated deposits grew $69.7 million or 20.78%  as
compared to $56.8 million or 20.4% in 1997.  This growth includes
the purchase and assumption of a branch of SunTrust Bank in Cleveland,
Georgia, which added approximately $5.8 million in deposits to the
Company's consolidated deposits.  Deposit growth was evenly spread
over every deposit product offered by the Company as stable interest
rates did little to influence deposit movement during 1998.  The
Company advanced $5 million in other borrowings from the Federal
Home Loan Bank.
<PAGE>
     At December 31, 1998, the Company reported net unrealized gains
of approximately $378,000 in the securities available for sale
portfolio as compared to net unrealized gains of approximately
$217,000 at December 31, 1997.  Net unrealized gains represent the
difference in the amortized cost compared to the fair value at those
dates and are included in shareholders' equity, net of the tax effect.
The Company sells securities to meet liquidity needs and may sell
securities in rising interest-rate environments to take advantage of
higher returns in the long run.  In 1998 the Company sold $14.2 million
of securities classified as available for sale, realizing net gains of
$78,653 on a consolidated basis. The held to maturity securities portfolio
included net unrealized gains of approximately $1,259,000 at December 31,
1998. Table 4 of the Selected Statistical Data summarizes the combined
investment portfolios by types of securities.  U.S. Treasury and other
U.S. Government agencies and corporations represent 35.4% of the total
portfolio, which typically provide reasonable returns with limited
risk.  The remaining portfolio is comprised of municipal securities,
mortgage-backed securities, and other investments which provide, in
general, higher returns on a tax equivalent basis, with greater risk
elements.   Management regularly monitors the investment portfolios
and utilizes forecasting models to project the Company's net interest
margin in various rising, flat, and falling interest-rate scenarios.
In a changing interest rate environment, management would act to change
the Company's asset or liability composition and interest sensitivity in
response to a definitive change in the direction of interest rates.
The Company actively manages the mix of asset and liability maturities
to control the effects of changes in the general level of interest rates
on net interest income.  Inflation does not have a material impact on the
Company due to the short-term maturities and the repricing of its earning
assets.

     LIQUIDITY AND CAPITAL RESOURCES.  The liquidity and capital
resources of the Company and the Community Banking Subsidiaries are
monitored by management  and on a periodic basis by state and federal
regulatory authorities.  The individual Community Banking
Subsidiaries' liquidity ratios at December 31, 1998 were considered
satisfactory under their own guidelines as well as regulatory
guidelines.  At that date, the Community Banking Subsidiaries' short-
term investments were adequate to cover any reasonably anticipated
immediate need for funds.

     The purpose of liquidity management is to ensure that cash flow
is sufficient to satisfy demands for credit, withdrawals, and other
needs of the Company.  Traditional sources of liquidity include asset
maturities and growth in core deposits.  A company may achieve its
desired liquidity objectives from the management  of assets and
liabilities, and through funds provided by operations.  Funds invested
in short-term marketable instruments and the continuous maturing of
other earning assets are sources of liquidity from the asset
perspective.  The liability base provides sources of liquidity through
deposit growth and accessibility to market sources of funds.
<PAGE>
     Scheduled loan payments are a relatively stable source of funds,
but loan payoffs and deposit flows are influenced by interest rates,
general economic conditions and competition and may fluctuate
significantly.  The Company attempts to price its deposits to meet its
asset/liability objectives consistent with local market conditions.

     Cash flows for the Company are of three major types.  Cash flows
from operating activities consist primarily of interest and fees
received on loans, interest received on investment securities, federal
funds sold, and interest bearing deposits less cash paid for interest
and operating expenses.  Investing activities use cash for the
purchase of interest-bearing deposits, investment securities, fixed
assets and to fund loans.  Investing activities also generate cash
from the proceeds of matured interest-bearing deposits, matured
investment securities, sales of investment securities, loan repayments
and principal prepayments of securities.  Cash flows from financing
activities generate cash from a net increase in deposit accounts, the
increases in other borrowed funds and the issuance of common stock. 
Financing activities use cash for the payment of cash dividends and
the repayment of other borrowed funds.

     For the year ended December 31, 1998, $33.4 million in cash flows
from operating activities were provided by interest and fees received
from loans, securities and federal funds.  Approximately $13.4 million
in cash flows were provided by service charges, nonbank subsidiary
income, sale of loans and other income.  Cash flows used in operating
activities consisted of  $14.8 million of interest paid on deposits
and borrowings,  $10.7 million paid for salaries and other personnel
benefits and $11.3 million paid for occupancy and equipment expenses,
income taxes and other operating expenses.  Cash flows of $41.2
million were provided by the proceeds of sales and maturities  of
investment securities.  Cash flows provided by financing activities
consisted primarily of $69.7 million in net increases in deposits and
an increase in other borrowings of $5.5 million.  The increases in
deposits and other borrowings was primarily used to fund the $71.6
million in net increase in loans.  The net increase in cash and due
from banks for the year ended December 31, 1998 was $2.8 million.

     For the year ended December 31, 1997, $28.7 million in cash flows
from operating activities were provided by interest and fees received
from loans, securities and federal funds.  Approximately $12.4 million
in cash flows were provided by service charges, nonbank subsidiary
income, sale of loans and other income.  Cash flows used in operating
activities consisted of $12.9 million of interest paid on deposits and
borrowings, $10.5 million paid for salaries and other personnel
benefits and $11.8 million paid for occupancy and equipment expenses,
income taxes and other operating expenses.  Cash flows of $21.1
million were provided by the proceeds of sales and maturities of
investment securities.  Cash flows provided by financing activities
consisted $56.8 million in net increases in deposits and were
primarily used to fund the $40.2 million net increase in loans.  The
net increase in cash and due from banks for the year ended December 31,
1997 was $4.5 million.

     At December 31, 1998, the Company's and Community Banking
Subsidiaries' capital ratios were considered adequate based on minimum
capital requirements of the FDIC and applicable state regulatory
agencies.  During 1998, the Company increased capital by retaining net
earnings of $6.7 million compared to an increase in 1997 of $5.3
million in retained net earnings and  $.9 million from issuance of
common stock. Management believes that the liquidity and capital ratios
of the Company and the Community Banking Subsidiaries are adequate.
<PAGE>
     The Company is capable of meeting its debt service requirements
related to existing long-term and other borrowings through dividends
available from its subsidiaries and current operations.  At December
31, 1998 , approximately $4.5 million was available to be paid as
dividends to the Company from the Community Banking Subsidiaries. 
Although the Company considers that it has adequate capital to meet it
short-term needs, the Company, at times, may seek additional capital
to support its long-term business goals, including expansion of its
fixed asset base, and for general corporate purposes.

     For a tabular presentation of the Community Banking Subsidiaries'
capital ratios at December 31, 1997 see "SUPERVISION AND REGULATION".

     Except for Year 2000 concerns, the Company is not aware of any other
trends, events or uncertainties that will have or that are reasonably
likely to have a material effect on the Company's liquidity, capital
resources or operations.  The Company is not aware of any current
recommendations by the regulatory authorities which, if they were
implemented, would have such an effect.

     EFFECTS OF INFLATION.  Inflation impacts banks differently than
non-financial institutions.  Banks, as financial intermediaries, have
assets which are primarily monetary in nature and which tend to
fluctuate with inflation.  A bank can reduce the impact of inflation
by managing its rate sensitivity gap, which represents the difference
between rate-sensitive assets and rate-sensitive liabilities.  The
Company, through its asset-liability committee, attempts to structure
the assets and liabilities and manage the rate-sensitivity gap,
thereby seeking to minimize the potential effects of inflation.  See
"Asset/liability Management".

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997

     NET INTEREST INCOME.  The Company's results of  operations are
influenced by management's ability to effectively manage interest
income and expense, to minimize loan and investment losses, to
generate non-interest income and to control operating expenses. 
Because interest rates are determined by market forces and economic
conditions beyond the control of the Company, the Company's ability to
generate net interest income is dependent upon its ability to obtain
an adequate net interest spread between the rate paid on interest-
bearing liabilities and the rate earned on interest-earning assets. 
The Company's net interest income increased by $3.2 million for the
year ended December 31, 1998 as compared to an increase of  $2.3
million for the same period in 1997.  The increase in net interest
income is attributable to increases in earning assets, particularly
loans.  The yield on interest-earning assets increased 5 basis points
in 1998 from 1997.  This increase combined with the increase in
average interest earning assets of $61.8 million, net of the increase
in average interest-bearing liabilities of  $58.1 million, accounts
for the 20.31% increase in net interest income.  Net interest income
increased for all Community Banking Subsidiaries as shown below, prior
to elimination entries:
<PAGE>
<TABLE>
<CAPTION>
                                                          Net interest income            Increase/
                                                           1998          1997           (Decrease)
                                                           ----          ----           ----------
                  <S>                                   <C>            <C>                 <C>
                  Community - Habersham                 $ 11,079       $ 9,546             1,533
                  Community - Jackson                      4,288         3,290               998
                  Community - Alabama                      1,775         1,332               443
                  Community - Troup                        1,544         1,379               165
                                                        --------       -------             -----
                                                          18,686        15,547             3,139
</TABLE>

     The 10 basis point increase in the net interest spread in Table 2
is due primarily to the increase in loans during 1998.  In addition,
the rates on deposits have decreased slightly due to decreases in the
prime rate during 1998.  The Company will continue to actively monitor
and maintain the net interest spread to counteract the current market
trends.  Net interest income for 1997 increased $2.3 million over 1996
despite the 4 basis point decrease in net interest spread.  The increase
is mainly attributable to growth in earning assets outpacing the growth
in interest bearing liabilities as shown in Table 1.

     PROVISION FOR LOAN LOSSES.  The provision for loan losses for the
year ended December 31, 1998 increased by $228,734 from $936,216 at
December 31, 1997.  This compares to an increase of $178,954 in 1997
from the December 31, 1996 level of $757,262.  The increase during
both 1998 and 1997 is associated with loan growth, as management
maintains an allowance for loan losses based on the evaluation of
potential problem loans as well as minimal reserves for all loans
based on past net charge-off experience. The guaranteed portion of
loans generated by the LPO are subsequently sold.  Because most loans
generated by the LPO are out-of market, the loans generated by the LPO
require additional allowances due to the greater risk of loss in the
event of a default.  These loans, however, are subjected to the same
underwriting standards and periodic loan review procedures as other
loans made by the Community Banking Subsidiaries.

     As shown in Table 8 of the Selected Statistical Data,
nonperforming loans, which includes nonaccrual and restructured loans,
increased $273,000 from December 31, 1997 compared to a $321,000
decrease over 1996.  Management has reviewed these loans and
determined that the likelihood of any loss in principal is minimal
because the loans are adequately collateralized.  The ratio of the
allowance for loan losses to nonperforming loans increased from 288%
at December 31, 1997 to 387% at December 31, 1998.   At December 31,
1998, impaired loans included all restructured loans, as well as all
nonaccrual loans. However, the Company determined that no reserves were
required because of the Company's collateral positions.

     The allowances for loan losses as a percentage of total loans
outstanding at December 31, 1998 and 1997 was 1.55% and 1.64%,
respectively.  Net charge-offs in 1998 were $325,940, a decrease of 
$178,063  from $504,003 in 1997, and the net charge-off ratio
decreased from .23% in 1997 to .11% in 1998.  Based on management's
evaluation of the loan portfolio, including a review of past loan
losses, current conditions which may affect borrowers' ability to
repay and the underlying collateral value of the loans, management
considers the allowance for loan losses to be adequate.
<PAGE>
     The Company continues to have a concentration in real estate
loans, representing 33.1% and 37.4%, respectively, of total loans at
December 31, 1998 and 1997.  Management has implemented policies to
limit extensions of credit to one borrower and its affiliates. By utilizing
these policies, along with proper underwriting standards, a fully implemented
loan review system and geographic diversification, management attempts
to minimize the risk associated with the concentrations of credit.

     OTHER INCOME. Other operating income consists of income from
operations (as shown in the following table prior to elimination entries)
of the Community Banking Subsidiaries and Financial
Supermarkets (not including Holding Company other income). Traditional
non-interest income of the Community Banking Subsidiaries accounts for
only 32.4%, or $4.3 million of total other income for 1998, 29.0% in
1997, and 33.8% in 1996.

<TABLE>
<CAPTION>
                                              Other operating income
                                              ----------------------   Increase
                                               1998           1997    (Decrease)
                                               ----           ----    ----------
                                                  (Dollars in Thousands)
<S>                                         <C>            <C>            <C>
Community Banking Subsidiaries
     Community - Habersham                  $ 2,578        $ 1,918        $ 660
     Community - Jackson                      1,142          1,160         (18)
     Community - Alabama                        307            249           58
     Community - Troup                          256            189           67
                                            -----------------------------------
                                            $ 4,283        $ 3,516        $ 767
                                            ===================================

     Financial Supermarkets(R)              $ 9,068        $ 8,820        $ 248
                                            ===================================
</TABLE>


     The majority of the increase in other operating income of the
Community Banking Subsidiaries is the continued growth in deposits. 
Service charges on deposit accounts increased by $ 510,919 and
$473,204, respectively, for the years ended December 31, 1998 and
1997.  These increases normally have a direct relationship with the
change in demand deposit and savings accounts.  Average Noninterest-
bearing demand deposit and savings accounts increased $14.8 million in
1998 compared to $10.7 million increase in 1997 over 1996.   Included
in other operating income of the Community Banking Subsidiaries are
gains on sale of loans recognized by Community-Habersham and Jackson
of $301,196 and $258,879, respectively.  This represents a slight
decrease from 1997 of $53,985.

     The allocation of services as a percentage of total income for
Financial Supermarkets is shown below:

                          FINANCIAL SUPERMARKETS(R)

          Consulting Services provided for Supermarket 
          bank installation and opening                     68%
          Supermarket consulting and ancillary services     28
          Other Miscellaneous Consulting Services            4
                                                           ---
                                                           100%
<PAGE>
     The primary business of Financial Supermarket(R) "FSI" is
services offered in connection with the establishment and operation of
Supermarket Bank(R)  service centers.  In 1998, Financial Supermarkets(R)
had net consulting revenue of $6.4 million compared to $6.6 million in
1997, a decrease of $.2 million or 3%.  The increase in net consulting
revenues in 1997 over 1996 was $2.4 million, or 56%.

     In 1997, FSI entered into a contract with NationsBanc Services,
Inc. ("NationsBanc") to provide consulting services with respect to
construction and installation of Supermarket Bank units in the State
of Florida.  This contract significantly increased net income as well
as other expenses in 1997.  During 1997 FSI provided agency and
consulting services with respect to a total of 46 banking center
units, of which 15 were part of the NationsBanc contract.  Income
related to the NationsBanc contract began to be recognized in the
fourth quarter of 1996 with the commencement of the first phase of the
project to open 40 banking  units.  In 1997, NationsBanc restructured
the contract to provide that FSI would not be providing services with
respect to the opening of any additional banking center units after
the first 40 units.  The contract provides, however, that FSI will
receive monthly ongoing consulting fees in connection with any
supermarket bank units opened by NationsBanc in Winn-Dixie Stores
located in the state of Florida.  These consulting fees will continue
for 15 years after the date the supermarket branch is opened,
decreasing gradually after each five year period.  Currently the FSI
is collecting consulting fees on 79 supermarket branches in operation
under this agreement.

     Although the Company has had fewer installations of supermarket
bank units during 1998 as compared to 1997, the income increased due
to compensation received as a result of the termination of the
Company's Master Consulting Agreement with NationsBanc on August 14,
1998.  Under the terms of the Agreement, Nationsbanc's on going obligation
under the Master Consulting Agreement are limited to paying monthly
consulting fees with respect to the seventy-nine supermarket locations
it will continue to operate in Winn-Dixie stores.

     While the NationsBanc contract accounted for a significant
extraordinary increase in consulting revenue in 1998 and 1997, FSI
continues to increase its number of units completed for each of the
last three years and this trend is expected to continue.

     NON-INTEREST EXPENSE.  Other expenses increased for the year
ended December 31, 1998 by $1.7 million compared to the $3.8 million
increase in 1997.  This represented a 8.97% increase in expenses for
1998 and 25.24% increase in 1997.  Salaries and benefits increased
$202,492 or 1.93% in 1998 over 1997.  This compares to an increase of
$2,208,689 or 26.72 % in 1997 over 1996.  Although salaries and
benefits continue to increase as a result of the growth in the banking
subsidiaries, incentive pay in FSI decreased in 1998 as compared to
1997 resulting in a smaller increase in the overall salaries and
benefits.  For the years ended 1998, 1997, and 1996 the Company had
total employees (F.T.E.) of 282, 249, and 216, respectively.  Data
processing expenses included the costs associated with the decision
to change from a client based software provider to a more traditional
software system.  The Company is attempting to recover some of the costs
associated with the setup of the client based system.  However, no
assurance can be given that the Company's efforts will be successful.
Other expenses increased by .3 million in 1998 and 1.2 million in 1997
primarily due to growth of the banking subsidiaries, increased costs
associated with data processing upgrades and  increased activity of
FSI.
<PAGE>
     Equipment and occupancy expenses increased by  $583,289 or 22.76%
in 1998 over 1997 and  $381,906 or 17.51% in 1997 over 1996.  The
increase is due to the additional number of facilities operated by the
Community banking subsidiaries as well as additions of data processing
equipment during 1998.  The Company operated 26, 23 and 18 locations
at the year ends 1998, 1997, and 1996, respectively.  As 1998 closed,
preparations were being made to open an additional facility in the
first quarter of 1999.  Management expects this location to add to the
continued growth and profitability of the Company.

<TABLE>
<CAPTION>
                                                       Other Expenses
                                                    -------------------      Increase/
                                                       1998       1997      (Decrease)
                                                    ---------  --------     ----------
                                                         (Dollars in Thousands)
<S>              <S>                                <C>        <C>           <C>
The Company
                 Salaries and benefits              $ 10,677   $ 10,474      $   203
                 Equipment expenses                    1,841      1,488          353
                 Occupancy expenses                    1,306      1,076          230
                 Data processing expenses                949        386          563
                 Travel expenses                         469        583        (114)
                 Office supply expenses                  460        437           23
                 Other operating expenses              4,700      4,280          420
                                                    --------------------------------
                                                    $ 20,402   $ 18,724      $ 1,678
                                                    ================================
</TABLE>


     INCOME TAXES.  The  Company incurred income tax expenses of $3.4
million in 1998 which represented an effective tax rate of  33%,
compared to tax expense of $2.6 million in 1997, or an effective tax
rate of  32%.  Income tax expense increased $ .8 million from 1996 to
$2.6 million in 1997.  The effective tax rate at December 31, 1996 was
32%. The increase in the effective tax rate is related to the
increased income of Financial Supermarkets, which does not have tax-free
income as do the Community Banking Subsidiaries.

     NET INCOME.  The Company's net income for 1998 was $7.0 million,
as compared to $5.6 million in 1997, an increase of  25%.  The
increase in net income between 1998 and 1997 is primarily attributable
to the additional interest and fees on loans related to growth and the
performance of Financial Supermarkets.  Net income for 1997 increased
to $5.6 million or 40% over 1996's net income of $ 4.0 million. 
Although the Company has experienced significant increases in income
over the past several years, management does not anticipate this same
percentage increase to continue in the coming year.

     ASSET/LIABILITY MANAGEMENT.  The Company's objective is to manage
assets and liabilities to maintain satisfactory and consistent
profitability.  Officers of each Community Banking Subsidiary are
charged with monitoring policies and procedures designed to ensure an
acceptable asset/liability mix.  Management's philosophy is to support
asset growth primarily through growth of core deposits within the
Community Banking Subsidiaries' market areas.

<PAGE>
     The Company's asset/liability mix is monitored regularly with a
report reflecting the interest rate sensitive assets and interest rate
sensitive liabilities is prepared and presented to the Board of
Directors of each Community Banking Subsidiary on at least a quarterly
basis.  Management's objective is to monitor interest rate
sensitive assets and liabilities so as to minimize the impact on
earnings of substantial fluctuations in interest rates.  An asset or
liability is considered to be interest rate-sensitive if it will
reprice or mature within the time period analyzed.  The interest
rate-sensitivity gap is the difference between the interest-earning
assets and interest-bearing liabilities scheduled to mature or reprice
within the relevant period.  A gap is considered positive when the amount
of interest rate-sensitive assets exceeds the amount of interest
rate-sensitive liabilities.  A gap is considered  negative when the amount
of interest rate-sensitive liabilities exceeds the interest rate-sensitive
assets.  During a period of rising interest rates, a negative gap would tend
to adversely affect net interest income, while a positive gap would tend
to result in an increase in net interest income.  Conversely, during a
period of falling interest rates, a negative gap would tend to result
in an  increase in net interest income, while a positive gap would
tend to adversely affect net interest income.  If the Company's assets
and liabilities were equally flexible and moved concurrently, the
impact of any increase or decrease in interest rates on net interest
income would be minimal.

     A simple interest rate "gap" analysis by itself may not be an
accurate indicator of how net interest income will be affected by
changes in interest rates.  Accordingly, the Company also evaluates
how changes in interest rates impacts the  repayment of particular
assets and liabilities.  Income associated with interest-earning
assets and costs associated with  interest-bearing liabilities may not
be affected uniformly by changes in interest rates.  In addition, the
magnitude and  duration of changes in interest rates may significantly
effect net interest income.  For example, although certain assets and
liabilities may have similar maturities or periods of repricing,  they
may react in different degrees to changes in market interest rates. 
Interest rates on certain types of assets and liabilities fluctuate in
advance of changes in general market rates, while interest rates on
other types may lag behind changes in general  market rates.  In
addition, certain assets, such as adjustable rate mortgage loans, have
features (generally referred to as "interest rate caps and floors")
which limit changes in interest rates.  Also, prepayments and early
withdrawal levels could deviate significantly from those assumed in
calculating the  interest rage gap.  The ability of many borrowers to
service their debts may decrease in the event of an interest rate
increase.  Changes in interest rates also effect the Company's
liquidity position, if deposits are not priced in response to market
rates, a loss of deposits could occur which would negatively effect
the Company's liquidity position.  The Company prepares a report
monthly that measures the potential impact on net interest margin by
rising or falling rates.  This report is reviewed monthly by the
Asset/Liability Committee and quarterly by each Board of Directors. 
(See "QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK")

     At December 31, 1998, the Company's cumulative one year interest
rate sensitivity gap ratio was 95%.  The Company was cumulatively
within its targeted range of  80% to 120% for all time horizons.

     The following table sets forth the distribution of the repricing
of the Company's earning assets and  interest-bearing liabilities as
of December 31, 1998, the interest rate sensitivity gap, the
cumulative interest rate-sensitivity gap, the interest rate-
sensitivity gap ratio and the cumulative interest rate-sensitivity gap
ratio.  The table also sets forth the time periods in which earning
assets and liabilities will mature or may reprice in accordance with<PAGE>
their contractual terms.  However, the table does not necessarily
indicate the impact of general interest rate movements on the net
interest margin since the repricing of various categories of assets
and liabilities is subject to competitive pressures and the needs of
the Company's customers.  In addition, various assets and liabilities
indicated as repricing within the same period may in fact, reprice at
different times within such period and at different rates. 

<TABLE>
<CAPTION>
Community Bankshares, Inc.
Consolidated Gap Report


                                                     After      After
                                                     Three       One
                                                     Months    Year but
                                        Within        But       Within      After
                                         Three       Within      Five        Five
                                         Months     One Year     Years      Years         Total
                                       --------     --------   --------    ------         -----
                                                       (Dollars in thousands)
<S>                                    <S>          <C>       <C>          <C>         <C>
Earning assets:
     Interest-bearing deposits             428        -           -          -              428
     Federal funds sold                 22,890        -           -          -           22,890
     Investment securities               3,016       4,031      27,859     38,534        73,440
     Loans                             115,763      69,658      93,823     34,893       314,137
                                       ------------------------------------------       -------
                                       142,097      73,689     121,682     73,427       410,895
                                       ------------------------------------------       -------
Interest-bearing liabilities:
     Interest-bearing demand            94,458        -           -          -           94,458
     Savings                            19,731        -           -          -           19,731
     Time deposits, $100,000
          and over                      23,312      32,595       8,519      2,577        67,003
     Time deposits, less than
          $100,000                      17,428      38,288     103,107       -          158,823
     Other borrowings                      808           0       5,000       -            5,808
                                      -------------------------------------------       -------
                                       155,737      70,883     116,626      2,577       345,823
                                      -------------------------------------------       -------
Interest rate sensitivity
     Gap                              (13,640)       2,806       5,056     70,850        65,072
                                      -------------------------------------------       -------
Cumulative interest rate
     Sensitivity gap                  (13,640)    (10,834)     (5,778)     65,072
                                      -------------------------------------------       -------
Interest rate sensitivity
     Gap                                  0.91        1.04        1.04      28.549
                                      -------------------------------------------       -------
Cumulative interest rate
     Sensitivity gap                      0.91        0.95        0.98       1.19
                                      -------------------------------------------
</TABLE>

<PAGE>
YEAR 2000 COMPLIANCE
 
     The following are forward-looking statements reflecting
management's current assessment and estimates with respect to the
Company's year 2000 compliance efforts and the impact of year 2000
issues on the Company's business and operations.  Various factors
could cause actual plans and results to differ materially from those
contemplated by such assessments, estimates and forward-looking
statements, many of which are beyond the control of the Company.  Some
of these factors include, but are not limited to representations by
the Company's vendors and counterparties, technological advances,
economic considerations, and consumer perceptions.  The Company's year
2000 compliance program is an ongoing process involving continual
evaluation and may be subject to change in response to new
developments. 

     The Company utilizes and depends upon data processing systems and
software to conduct its business.  The "year 2000 issue" arises from
the widespread use of computer programs that rely on two-digit codes
to perform computations or decision-making functions.  Many of these
programs may fail due to an inability to properly interpret date codes
beginning January 1, 2000.   For example, such programs may
misinterpret "00" as the year 1900, rather than 2000.  In addition,
some equipment, being controlled by microprocessor chips, may not deal
appropriately with the year "00".

The Company's State of Readiness

     The Company views year 2000 readiness as not only an information
or technology problem, but as a corporate-wide challenge and has
placed the issue at the forefront of all strategic planning.  The 
Company's readiness plan has been designed to cover all aspects of its
operations, which include the current operations, the conversion
period and contingency planning in the event of the failure of a
mission critical system.  Based on the complex nature of the Company's
operations, corporate wide objectives have been to: 1) minimize
disruptions of service to the institution and its customers, 2) ensure
timely resumption of operations, and 3) limit losses to earnings and
capital.

     The Company began evaluating its information technology ("IT")
systems and non-IT systems, which include microcontrollers and other
embedded computers, to ascertain the impact of year 2000 issues in
June of 1997.  In l997, a Year 2000 Task Force Committee was
organized and the Chief Financial Officer of the Company was appointed
to direct the Company's year 2000 remediation efforts.  The Committee
believes that it has identified and remediated all major internal business
and operational functions that will be impacted by the date changes.

     Remediation of the Company's IT and Non-IT Systems.  The
     --------------------------------------------------
Company's remediation program was implemented during the first quarter
of 1998.  In general, the Company believes that because the majority
of IT equipment and software is relatively new, and has been certified
by the developers as being year 2000 compliant, such equipment and
software will only require minor modification to become year 2000
compliant.   

     During the fourth quarter of 1998, management of the Company
determined that it would be necessary to proceed with its traditional
software provider, as opposed to the client based software as<PAGE>
originally planned.  As planned, modifications to the Company's IT
equipment and software were complete on March 8, 1999.  With respect
to the Company's non-IT systems, no remediations were required.

     Record retention policies have been amended to include all year
2000 due diligence documents and any new acquisition, upgrades to
existing systems, or written agreements are reviewed prior to
execution for year 2000 warrants or guarantees of readiness.

     Year 2000 Testing.  The Company considers the testing phase of
     -----------------
its year 2000 program to be a significant phase of its year 2000
program.  In May of l998, a Year 2000 Readiness-Key Milestones Testing
Plan was adopted that defined the Company's year 2000 testing strategy


<PAGE>
(the "Plan").  The Plan will continue to be modified to address any
change in the remediation plans as necessary.  The Company anticipates
that the results of testing will be reviewed by employees independent
of in-house testing.  In addition, test results will be presented to
the Board of Directors of each Community Banking Subsidiary for
evaluation.  The Company estimates that its year 2000 testing will be
complete by May 30, 1999. 

     Assessment of Third Party Readiness.  To the extent possible, the
     -----------------------------------
Company has also evaluated the systems of its major business partners,
borrowers and suppliers of products and services.  The Company has
sent out a letter and questionnaire to its major borrowers and
suppliers of products and services.  The Company has received a
majority of responses from these parties and notes no significant year
2000 issues.

Costs to Address Year 2000 Issues

     The Company does not anticipate that the related overall costs
will be material to the financial condition of the Company for any
single year or quarter.  The Company estimates that costs of
assessing, testing, and remediation issues associated with the year
2000 will total approximately $1,200,000. Total costs incurred to date with
respect to year 2000 remediations are $900,000.  The Company anticipates that
it will incur additional costs relating to the remaining modifications of
$300,000.   A majority of these costs have been capitalized, with
62% incurred in connection with the purchase of new software and 38%
required as a result of the replacement of hardware.  It is
anticipated that expenses relating to the independent audit of the
test results will be deducted from income.

     The Company has not used any independent verification and
validation processes to assure the reliability of year 2000 cost
estimates.  None of the Company's IT projects have been deferred due
to year 2000 efforts.  

Risks of the Year 2000

     The Company believes that all significant remediations with
respect to the Company's systems are complete.  However, no assurance
can be given that the Company will not be exposed to potential
losses resulting from system problems associated with the change in date.
There can also be no assurance that the Company's systems that have been
designed to be year 2000 compliant contain all of the necessary date code
changes and that systems have been correctly modified, or will be correctly
modified in contemplation of the year 2000.

     In addition to year 2000 compliance in the Company's internal
systems, the impact of year 2000 non-compliance by outside parties
with whom the Company may transact business cannot be accurately
gauged.  The year 2000 issue may have a material impact on the
financial condition of the Company if borrowers of the Company become
insolvent and are, therefore, unable to repay loans as they become due
as a result of the borrowers' year 2000 non-compliance.  

<PAGE>
     Certain risk controls to manage the year 2000 related  risks
posed by customers have been implemented and the broad categories of
customers have been identified.  They are: 1) Funds Takers, 2) Funds
Providers and 3) Capital Market/Asset Management Counterparties. 
Based on the analysis of the previously described groups, the Company
is able to look at different assumptions of risk, liquidity and
contingency.  A high level program of awareness continues in this area 
with sub-committees of the Board of Directors of each Community
Banking Subsidiary carefully monitoring year 2000 remediation efforts
to minimize financial risk.  Lending officers have been asked to
identify any economic factors in the bank's trade or assessment areas
that would have an impact on customers as a result of a potential year
2000 problem.  

     In addition, the Company is reliant upon the Federal Reserve
Company of Atlanta (the "Atlanta Reserve Bank") for electronic funds
transfers.  If the Atlanta Reserve Bank does not successfully complete
all modifications required by the date change, and is forced to
interrupt automated services to the Company, the Company could
experience difficulties with respect to making electronic funds
transfers.  The Company believes that the Atlanta Reserve Bank is
aggressively pursuing a year 2000 compliance strategy, and that the
risk associated with year 2000 non-compliance by the Atlanta Reserve
Bank is insignificant.  With the exception of the Atlanta Reserve
Bank, the Company is not aware of any other third party relationships
whose year 2000 non-compliance could result in a material adverse
effect on the Company's results of operations, liquidity and financial
condition due to the date change.

     Another area of review for year 2000 potential  liability  has
been that of fiduciary services.  Client assessment management through
the bank's trust department  has been identified and will continued to
be monitored.


Contingency Plans

     In order to fully recognize the risks presented to the Company,
"worse case scenarios" have been  reasonably identified along with
estimated costs for recovery, personnel and other budget items. The
Company is in the process of finalizing its contingency planning with
respect to the year 2000 date change and believes that should its own
systems fail, it could convert to a manual entry system for a period
of approximately one month without significant losses.  The Company
is in the process of contracting with a business recovery service for
a "hot site" location for disaster recovery or processing due to a
failure event.

     In addition, the Company's preliminary contingency plan also
takes into account the risk that the Atlanta Reserve Bank will not
make the necessary modifications that will enable it to handle
electronic funds transfers and check clearing operations.  Management
of the Company believes that so long as the Company is able to obtain
the necessary information from the Atlanta Reserve Bank in some
manner, such as by telephone or facsimile transmissions, and manually
post transactions, the resulting impact on the Company's financial
condition will not be material.
<PAGE>
<PAGE>
ITEM 7a.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company is exposed only to U.S. dollar interest rate changes
and accordingly, the Company manages exposure by considering the
possible changes in the net interest margin.  The Company does not
have any trading instruments nor does it classify any portion of the
investment portfolio as held for trading.  The Company does not engage
in any hedging activities or enter into any derivative instruments
with a higher degree of risk than mortgage backed securities which are
commonly pass through securities.  Finally, the Company has no
exposure to foreign currency exchange rate risk, commodity price risk,
and other market risks.

     Interest rates play a major part in the net interest income of a
financial institution.  The sensitivity to rate changes is known as
"interest rate risk."  The repricing of interest earning assets and
interest-bearing liabilities can influence the changes in net interest
income.  As part of the Company's asset/liability management program,
the timing of repriced assets and liabilities is referred to as Gap
management.  It is the policy of the Company to maintain Gap ratio in
the one-year time horizon of .80 to 1.20. See "ASSET/LIABILITY
MANAGEMENT".

     GAP management alone is not enough to properly manage interest
rate sensitivity, because interest rates do not respond at the same
speed or at the same level to market rate changes.  For example,
savings and money market rates are more stable than loans tied to a
"Prime" rate and thus respond with less volatility to a market rate
change.

     The Company uses a simulation model to monitor changes in net
interest income due to changes in market rates.  The model of rising,
falling and stable interest rate scenarios allows management to
monitor and adjust interest rate sensitivity to minimize the impact of
market rate swings.  The analysis of impact on net interest margins as
well as market value of equity over a twelve month period is subjected
to a 200 basis point increase and decrease in rate.  The February
model reflects an increase of 2% in net interest income and a 6%
decrease in market value equity for a 200 basis point increase in
rates.  The same model shows a 2% decrease in net interest income and
a 7% increase in market value equity for a 200 basis point decrease in
rates.  The Company's policy is to allow no more than +- 8% change in
net interest income and no more than +- 25% change in market value
equity for these scenarios.  Therefore, the Company is within its
policy guidelines and is protected from any significant impact due to
market rate changes.
<PAGE>
<PAGE>
SELECTED STATISTICAL INFORMATION

The tables and schedules on the following pages set forth certain
significant financial information and statistical data with respect to
the distribution of assets, liabilities and shareholders' equity of
the Company; the interest rates and interest differentials experienced
by the Company; the investment portfolio of the Company; the loan
portfolio of the Company, including types of loans, maturities and
sensitivity to changes in interest rates and information on
nonperforming loans; summary of the loan loss experience and reserves
for loan losses of the Company; types of deposits of the Company and
the return on equity and assets for the Company.<PAGE>
<PAGE>

DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY:
INTEREST RATES AND INTEREST DIFFERENTIALS

Table 1   Average Balances
<TABLE>
<CAPTION>

The condensed average balance sheets for the periods indicated are
presented below. <F1>

                                                                         1998            1997           1996
                                                                    -----------------------------------------
<S>                                                                  <C>             <C>             <C>
                             ASSETS

Cash and due from banks                                              $  25,330       $ 16,260        $ 13,539
Interest-bearing deposits in banks                                         747            488             364
Taxable securities                                                      42,262         50,957          43,337
Nontaxable securities                                                   32,991         25,223          16,520
Unrealized gains (losses) on securities
     available for sale                                                    200            (93)           (130)
Federal Funds Sold                                                       9,495          9,704          11,864
Loans <F2>                                                             285,809        223,170         191,180
Allowance for loan losses                                               (4,382)        (3,873)         (3,368)
Other assets                                                            26,098         20,243          16,013
                                                                     ----------------------------------------

                                                                     $ 418,550      $ 342,079       $ 289,319
                                                                     ========================================

Total interest-earning assets                                        $ 371,304      $ 309,542       $ 263,265
                                                                     ========================================

              LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits:
     Noninterest-bearing demand                                      $  52,966       $ 41,472        $ 33,052
     Interest-bearing demand                                            83,422         61,638          57,240
     Savings                                                            18,672         15,387          13,145
     Time                                                              217,831        185,936         153,814
                                                                     ----------------------------------------

          Total deposits                                               372,891        304,433         257,251
Other borrowings                                                         1,699            545             885
Other liabilities                                                        6,633          6,894           6,489
                                                                     ----------------------------------------

          Total liabilities                                            381,223        311,872         264,625
                                                                     ----------------------------------------

Shareholders' equity  <F3>                                              37,327         30,207          24,694
                                                                     ----------------------------------------

                                                                     $ 418,550      $ 342,079       $ 289,319
                                                                     ========================================

Total interest-bearing liabilities                                   $ 321,624      $ 263,506       $ 225,084
                                                                     ========================================
<FN>
<F1>  Average balances were determined using average daily balances
<F2>  Average balances of loans include nonaccrual loans and are net of deferred interest and fees
<F3>  Average unrealized gains (losses) on securities available for sale, net of tax, are
      included in shareholders' equity
/TABLE
<PAGE>
<PAGE>
 TABLE 2         INTEREST INCOME AND INTEREST EXPENSE

     The following tables set forth the amount of the Company's
interest income and interest expense for each category of interest-
earning asset and interest-bearing liabilities and the average
interest rate for total interest-earning assets and total interest-
bearing liabilities, net interest spread and net yield on average
interest-earning assets.
<TABLE>
<CAPTION>
                                                         Year Ended December 31,
                                         -----------------------------------------------------------
                                                1998                1997                1996
                                         -----------------   -----------------    -----------------
                                          Average             Average             Average
                                         Interest    Rate    Interest    Rate     Interest    Rate
                                         --------    ----    --------    ----     --------    ----
INTEREST INCOME:
<S>                                       <C>       <C>       <C>       <C>       <C>        <C>
     Interest and fees on loans           29,767    10.41%    23,562    10.56%    20,440     10.69%
     Interest on taxable securities        2,565     6.07%     3,108     6.10%     2,483      5.73%
     Interest on nontaxable <F1>           1,710     5.18%     1,327     5.26%       908      5.50%
     Interest on Federal Funds sold          535     5.63%       673     6.94%       625      5.27%
     Interest on deposits in banks            36     4.82%        33     6.76%         9      2.47%
                                          ------              ------              ------
          Total interest income           34,613     9.32%    28,703     9.27%    24,465      9.29%
                                          ------              ------              ------
INTEREST EXPENSE:
     Interest expense on interest-
          Demand deposits                  2,511     3.01%     2,009     3.26%     1,797      3.14%
     Interest on savings deposits            516     2.76%       436     2.83%       372      2.83%
     Interest on time deposits            12,812     5.88%    10,704     5.76%     9,002      5.85%
     Interest on other borrowings            111     6.53%        42     7.71%        65      7.34%
                                          ------              ------              ------
          Total interest expense          15,950     4.96%    13,191     5.01%    11,236      4.99%
                                          ------              ------              ------
NET INTEREST INCOME                       18,663              15,512              13,229
                                          ======              ======              =======

     Net interest spread                             4.36%               4.26%                4.30%
     Net yield on average
          Interest-earning assets                    5.03%               5.01%                5.02%
<FN>
<F1>  Yields on nontaxable securities are not presented on a tax equivalent basis
</FN>
</TABLE>



TABLE 3   RATE AND VOLUME ANALYSIS

     The following table describes the extent to which changes in
interest rates and changes in volume of interest-earning assets and
interest-bearing liabilities have affected the Company's interest
income and expense during the year indicated.  For each category of
interest-earning assets and interest-bearing liabilities, information
is provided on changes attributable to (1) change in volume (change in
volume multiplied by old rate); (2) change in rate (change in rate
multiplied by old volume); and (3) a combination of change in rate and
change in volume.  The changes in interest income and interest expense
attributable to both volume and rate have been allocated
proportionately to the change due to volume and the change due to
rate.<PAGE>
<PAGE>
<TABLE>
<CAPTION>
                                                                             Year Ended December 31,
                                                                                   1998 vs. 1997
                                                                                 Changes Due to:
                                                                                                         Increase
                                                                       Rate          Volume             (decrease)
                                                                    ----------------------------------------------
                                                                            (Dollars in Thousands)
<S>                                                                   <C>            <C>            <C>
Increase (decrease) in:
     Income from interest-earning assets:
     Interest and fees on loans                                      $ (323)         $ 6,528             $ 6,205
     Interest on taxable securities                                     (15)            (528)               (543)
     Interest on nontaxable securities                                  (20)             403                 383
     Interest on Federal Funds sold                                    (124)             (14)               (138)
     Interest on deposits in banks                                      (11)              14                   3
                                                                     -------------------------------------------
          Total interest income                                        (493)           6,403               5,910
                                                                     -------------------------------------------
     Expense from interest-bearing liabilities:
     Interest expense on interest-bearing deposits                     (163)             665                 502
     Interest on savings deposits                                       (11)              91                  80
     Interest on time deposits                                           237           1,871               2,108
     Interest on other borrowings                                        (7)              76                  69
                                                                     -------------------------------------------
         Total interest expense                                          56            2,703               2,759
                                                                     -------------------------------------------
          Net interest income                                          (549)           3,700               3,151
                                                                     ===========================================

                                                                             Year Ended December 31,
                                                                                   1997 vs. 1996
                                                                                 Changes Due to:
                                                                                                         Increase
                                                                       Rate          Volume             (decrease)
                                                                    ----------------------------------------------
                                                                            (Dollars in Thousands)
<S>                                                                   <C>            <C>            <C>
Increase (decrease) in:
     Income from interest-earning assets:
     Interest and fees on loans                                      $  (258)        $ 3,380             $ 3,122
     Interest on taxable securities                                      168             457                 625
     Interest on nontaxable securities                                   (40)            459                 419
     Interest on Federal Funds sold                                      175            (127)                 48
     Interest on deposits in banks                                        20               4                  24
                                                                     -------------------------------------------
          Total interest income                                           65           4,173               4,238
                                                                     -------------------------------------------
     Expense  from interest-bearing liabilities:
     Interest expense on interest-bearing deposits                   $    70         $   142             $   212
     Interest on savings deposits                                          0              64                  64
     Interest on time deposits                                          (149)          1,851               1,702
     Interest on other borrowings                                          3             (26)                (23)
                                                                     -------------------------------------------
          Total interest expense                                         (76)        $ 2,031             $ 1,955
                                                                     -------------------------------------------
          Net interest income                                        $   141         $ 2,142             $ 2,283
                                                                     ===========================================
/TABLE
<PAGE>
<PAGE>
                                    INVESTMENT PORTFOLIO

TABLE 4  TYPES OF INVESTMENTS

<TABLE>
<CAPTION>

The carrying amounts of securities at the dates indicated are summarized
as follows <F1>:

                                                                          December 31,
                                                              1998           1997           1996
                                                            -------------------------------------
                                                                  (Dollars in Thousands)
<S>                                                         <C>            <C>             <C>
U. S. Treasury and other U. S. Government
     Agencies and corporations                              $25,987        $29,094        $27,561
Municipal securities                                         36,753         29,497         19,788
Mortgage-backed securities                                    8,979         21,962         17,806
Equity securities                                             1,721          1,448            917
                                                            -------------------------------------
                                                            $73,440        $82,001        $66,072
                                                            =====================================
<FN>
<F1>     Securities include "held to maturity" securities carried at amortized cost and
         "available-for-sale" securities carried at fair value in accordance with FASB 115.
</FN>
</TABLE>

     The Community Banking Subsidiaries' mortgage-backed portfolio
consists of fifty-two U.S. Government corporation collateralized
mortgage obligations. The actual maturity of these securities will
differ from the contractual maturity because borrowers on the
underlying loans may have the right to prepay obligations with or
without prepayment penalties.  Decreases in interest rates will
generally cause prepayments to increase while increases in the
interest rates will have the opposite effect on prepayments.
Prepayments of the underlying loans may shorten the life of the
security, thereby adversely effecting the yield to maturity. In an
increasing interest rate, the Community Banking Subsidiaries may have
an obligation yielding a return less than the current yields on
securities.  However, because the majority of these in mortgage-backed
securities have adjustable rates, negative effects of changes in
interest rates on earnings and carrying values of these securities are
somewhat mitigated.<PAGE>
<PAGE>

     The amounts of securities in each category as of December 31,
1998 are shown in the following table according to maturity
classifications of one year or less, after one year through five
years, after five years through ten years, and after ten years.

<TABLE>
<CAPTION>

                            U. S. Treasury and Other
                            U. S. Government agencies
                               and corporations <F3>     Municipal securities <F2>   Other Securities <F4>
                            -------------------------    ------------------------    ---------------------
                              Amount       Yield<F1>     Amount       Yield<F1>      Amount      Yield<F1>
                              ------       -----         ------       -----          ------      -----
<S>                           <C>          <C>           <C>           <C>           <C>           <C>
One year or less               4,917        6.35%           409        5.04%         1,721         6.00%

After one year
   through five years         22,572        5.95%         5,287        5.06%          -             - 

After five years
   through ten years           4,360        6.10%         7,160        5.24%          -             - 

After ten years                3,117        6.05%        23,897        5.14%          -             - 
                              ------                     ------                      -----
     Total                    36,966        6.03%        36,753        5.18%         1,721         6.00%
                              ======                     ======                      =====
<FN>
<F1> Yields were computed using book value, coupon interest, adding
     discount accretion or subtracting premium amortization, as
     appropriate, on a ratable basis over the life of each security.
     The weighted average yield for each  maturity range was computed
     using the carrying value of each security in that range.

<F2> Yields on municipal securities have not been computed on a tax 
     equivalent basis.

<F3> The above schedule includes mortgage-backed securities based on
     their contractual maturity date. In practice, cash flow in these
     securities is significantly faster than their stated maturity
     schedules.

<F4> Other securities consists of equity securities and are included
     in the under one year maturity range because the securities have
     no contractual maturity date.
</FN>
/TABLE
<PAGE>
<PAGE>
LOAN PORTFOLIO

TABLE 6   Types of Loans

     The amount of loans outstanding at the indicated dates are in the
following table according to the type of loan.
<TABLE>
<CAPTION>
                                                                             December 31,
                                                  1998           1997            1996           1995           1994
                                                ---------------------------------------------------------------------
                                                                    (Dollars in Thousands)
<S>                                             <C>            <C>            <C>            <C>             <C>
Commercial, financial
     and agricultural <F1>                      $161,572       $118,376        $102,231        $77,871        $77,439
Real estate-construction                          21,327         21,234           9,506          8,036          8,703
Real estate-mortgage                              82,413         69,541          57,566         63,312         50,856
Consumer and other <F2>                           48,825         36,070          36,483         30,072         25,269
                                                ---------------------------------------------------------------------
                                                $314,137       $245,221        $205,786       $179,291       $162,267
Less allowance for loan losses                    (4,863)        (4,024)         (3,592)        (3,060)        (2,686)
                                                ---------------------------------------------------------------------
          Net loans                             $309,274       $241,197        $202,194       $176,231       $159,581
                                                =====================================================================

<FN>
<F1> Commercial, financial and agricultural loans include loans held
     for sale which are disclosed separately in the consolidated
     balance sheets.
<F2> Amounts are disclosed net of unearned loan income.
</FN>
</TABLE>

     See "Business Description of the Community Banking- Loans" for a
description of the composition of each loan, the underwriting criteria
and risks that are unique to each.<PAGE>
<PAGE>
TABLE 7   MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST 
          RATES

     Total loans as of December 31, 1998 are shown in the following
table according to maturity classifications one year or less, after
one year through five years and after five years.

<TABLE>
<CAPTION>
                                                                           December 31, 1998
                                                                        (Dollars in Thousands)
                                                                        ----------------------
<S>                                                                            <C>
Maturity:
   One year or less:
          Commercial, financial and agricultural                               $111,012
          Real estate-construction                                               21,327
          All other loans                                                        41,380
                                                                               --------
                                                                               $173,719
                                                                               --------
   After one year through five years:
          Commercial, financial and agricultural                                $22,604
          Real estate-construction
          All other loans                                                        60,001
                                                                               --------
                                                                                $82,605
                                                                               --------
   After five years:
          Commercial, financial and agricultural                                $27,956
          Real estate-construction
          All other loans                                                        29,857
                                                                               --------
                                                                                $57,813
                                                                               --------
                                                                               $314,137
                                                                               ========
</TABLE>

     The following table summarizes loans at December 31, 1998 with
due dates after one year which have predetermined and floating or
adjustable interest rates.
<TABLE>
<CAPTION>
                                                                          December 31, 1998
                                                                       (Dollars in Thousands)
                                                                       ----------------------
<C>                                                                            <C>
          Predetermined interest rates                                         $ 82,130
          Floating or adjustable interest rates                                  58,288
                                                                               --------
                                                                               $140,418
                                                                               --------
</TABLE>

     Records were not available to present the above information in each loan
category listed in the first paragraph above and could not be reconstructed
without undue burden and cost to the Company.
<PAGE>
<PAGE>
TABLE 8   Nonaccrual, Past Due and Restructured Loans

     Information with respect to nonaccrual past due and restructured loans at
the indicated dates is as follows:
<TABLE>

<CAPTION>
                                                                             December 31,
                                                         1998          1997         1996          1995          1994
                                                       --------------------------------------------------------------
                                                                            (Dollars in Thousands)
<S>                                                    <C>             <C>        <C>           <C>             <C>
Nonaccrual loans                                       $1,119          $714       $1,119        $1,456          $640

Loans contractually past due ninety days
     or more as to interest or principal
     Payments and still accruing                          706           533          445           345           310

Loans, the terms of which have been
     Renegotiated to provide a reduction
     or deferral of interest or principal
     because of deterioration in the
     financial position of the borrower                   572           704          620           629            64

Loans, now current about which there are
     serious doubts as to the ability of
     the borrower to comply with present
     loan repayment terms                                 -             -            -             -             -  
</TABLE>

         The reduction in interest income associated with nonaccrual and
renegotiated loans as of December 31, 1998 is as follows:

<TABLE>
<CAPTION>

                                                                                            December 31, 1998
                                                                                            -----------------
<S>                                                                                                 <C>
Interest income that would have been recorded on nonaccrual
     and restructured loans under original terms                                                    $96,300
                                                                                                    =======

Interest income that was recorded on nonaccrual and restructured loans                              $33,600
                                                                                                    =======
</TABLE>

     The Community Banking Subsidiaries' policy is to discontinue the
accrual of interest income when, in the opinion of management,
collection of such interest becomes doubtful. This status is accorded
such interest when (1) there is a significant deterioration in the
financial condition of the borrower and full repayment of principal
and interest is not expected and (2) the principal or interest is more
than ninety days past due, unless the loan is both well-secured and in
the process of collection. Accrual of interest on such loans is
resumed, in management's judgment, the collection of interest and
principal become probable. Loans classified for regulatory purposes as
loss, substandard, or special mention that have not been included in
the table above do not represent or result from trends or
uncertainties which management reasonably expects will materially
effect future operating results, liquidity or capital resources. These
classified loans do not represent material credits about which
management is aware and which causes management to have serious doubts
as to the ability of such borrowers to comply with the loan repayment
terms.<PAGE>
<PAGE>
COMMITMENTS AND LINES OF CREDIT

     The Community Banking Subsidiaries will, in the normal course of
business, commit to extend credit in the form of letters of credit or
lines of credit. The amount of outstanding loan commitments and
letters of credit at December 31, 1998 and 1997 were $28,756,057 and
$23,665,522, respectively.   Commitments to extend credit generally
have fixed expiration dates or other termination clauses and may
require payment of a fee.  Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements.

SUMMARY OF LOAN LOSS EXPERIENCE

TABLE 9

     The following table summarizes average loan balances for each
year determined using the daily average balances during the year;
changes in the reserve for possible loan losses arising from loans
charged off and recoveries on loans previously charged off; additions
to the reserve which have been charged to operating expense; and the
ratio of net charge-offs during the year to average loans.
<TABLE>
<CAPTION> 
                                                                          December 31,
                                                   1998          1997         1996          1995          1994
                                                ---------------------------------------------------------------
                                                                      (Dollars in Thousands)
<S>                                             <C>           <C>          <C>           <C>           <C>
Average amount of loans outstanding             $285,809      $223,170     $191,180      $170,525     $150,426
                                                ==============================================================
Balance of allowance for loan losses
     at beginning of year                       $  4,024      $  3,592     $  3,060      $  2,686     $  2,457
                                                --------------------------------------------------------------
Loans charged off
     Commercial                                     ($97)        ($136)       ($118)        ($221)       ($344)
     Real estate mortgage                             (7)          (35)           -             -            -
     Consumer                                       (391)         (424)        (211)         (331)        (244)
                                                 --------------------------------------------------------------
                                                   ($495)        ($595)       ($329)        ($552)       ($588)
                                                 --------------------------------------------------------------
Loans recovered
     Commercial                                  $    20      $     11     $      5      $     12      $    11
     Real estate mortgage                             19            28           35            12            5
     Consumer                                        130            52           64            53           51
                                                 -------------------------------------------------------------
                                                 $   169      $     91     $    104      $     77      $    67
                                                 -------------------------------------------------------------
Net charge-offs                                    ($326)        ($504)       ($225)        ($475)       ($521)
                                                 -------------------------------------------------------------
Additions to allowance charged
     to operating expense during year            $  1,165     $    936     $    757      $    849      $   750
                                                 -------------------------------------------------------------
Balance of allowance for loan losses
     at end of year                              $  4,863     $  4,024     $  3,592      $  3,060      $ 2,686
                                                 =============================================================
Ratio of net loans charged off during
     the year to average loans                     0.11%         0.23%        0.12%         0.28%        0.35%
                                                 =============================================================
</TABLE>
<PAGE>
<PAGE>
ALLOWANCE FOR LOAN LOSSES

     The provision for possible loan losses is created by direct
charges to income. Losses on loans are charged against the allowance
in the year in which such loans, in management's opinion, become
uncollectible. Recoveries during the year are credited to this
allowance. The factors that influence management's judgment in
determining the amount charged to income are past loan loss
experience, composition of the loan portfolio, evaluation of possible
future losses, current economic conditions and other relevant factors.
The Company's allowance for loan losses was $4,863,181 at December 31,
1998, representing 1.55% of total loans, compared with $4,024,171
at December 31, 1997, which represented 1.64% of total loans. The
allowance for loan losses is reviewed regularly based on management's
evaluation of current risk characteristics of the loan portfolio, as
well as the impact of prevailing and expected economic business
conditions. Management considers the allowance for loan losses
adequate to cover possible loan losses at December 31, 1998.

     Historically, management has not allocated the Company's
allowance for loan losses to specific categories of loans. However,
based on management's best estimate and historical experience, the
allocation of the allowance for loan losses for December 31, 1998,
1997, 1996, 1995 and 1994 is summarized below:
<TABLE>
<CAPTION>

                                                              December 31,
                                     1998           1997           1996          1995             1994
                                   -------------------------------------------------------------------
                                                     (Dollars in Thousands)
<S>                                <C>            <C>            <C>           <C>              <C>
Commercial                         $2,160         $1,850         $1,830        $1,347           $1,508
Real estate                           270            230            105           467              599
Consumer                            2,433          1,944          1,657         1,246              579
                                   -------------------------------------------------------------------
                                   $4,863         $4,024         $3,592        $3,060           $2,686
                                   ===================================================================

                                        Percent of loans in Each Category of Total Loans

                                                              December 31,
                                     1998           1997           1996          1995             1994
                                   -------------------------------------------------------------------
                                                           (Dollars in Thousands)
Commercial                            51%            49%            50%           43%              48%
Real estate                           33%            35%            33%           40%              37%
Consumer                              16%            16%            17%           17%              15%
                                   -------------------------------------------------------------------
                                     100%           100%           100%          100%             100%
                                   ===================================================================
</TABLE>
<PAGE>
<PAGE>
DEPOSITS

TABLE 10

<TABLE>
<CAPTION>

     Average amount of deposits and average rates paid thereon,
classified as to noninterest-bearing demand deposits, interest-bearing
demand and savings deposits and time deposits, for the years indicated
are presented below. <F1>

                                                                     Year Ended December 31,
                                                    -------------------------------------------------------------
                                                           1998                1997                1996
                                                    -------------------- -------------------  -------------------
                                                                 Average             Average              Average
                                                    Interest      Rate   Interest     Rate    Interest     Rate
                                                    --------     ------- --------    -------  --------    -------
<S>                                                 <C>           <C>    <C>          <C>     <C>          <C>
Noninterest-bearing demand                          $ 52,966       -     $ 41,472       -     $ 33,052       -  
Interest-bearing demand deposits                      83,422      3.01%    61,638     3.26%     57,240     3.14%
Savings deposits                                      18,672      2.76%    15,387     2.83%     13,145     2.83%
Time deposits                                        217,831      5.88%   185,936     5.76%    153,814     5.85%
                                                    --------             --------             --------
          Total deposits                            $372,891             $304,433             $257,251
                                                    ========             ========             ========
<FN>

<F1> Average balances were determined using the daily average balances
     during the year for each category.

</FN>
</TABLE>

     The amounts of time certificates of deposit issued in amounts of
$100,000 or more as of December 31, 1998 are shown below by category,
which is based on time remaining until maturity of (1) three months or
less, (2) over three through six months, (3) over six through twelve
months and (4) over twelve months.

<TABLE>
<CAPTION>

                                                                                        December 31, 1998
                                                                                    (Dollars in Thousands)
<S>                                                                                         <C>
Three months or less                                                                        $23,312
Over three through six months                                                                12,630
Over six through twelve months                                                               19,965
Over twelve months                                                                           11,096
                                                                                            -------
                                                                                            $67,003
                                                                                            =======
</TABLE>
<PAGE>
<PAGE>
RETURN ON ASSETS AND SHAREHOLDERS' EQUITY

TABLE 11

         The following rate of return information for the years is presented
below.
<TABLE>
<CAPTION>
                                                            Year Ended December 31,
                                                      1998           1997           1996
                                                    ------------------------------------
<S>                                                 <C>            <C>            <C>
Return on assets <F1>                                1.68%          1.65%          1.40%
Return on equity <F2>                               18.84%         18.69%         16.38%
Dividend payout ratio <F3><F5>                       4.69%          5.38%          7.25%
Equity to assets ratio <F4>                          8.92%          8.83%          8.54%

<FN>
<F1> Net income divided by average total assets.
<F2> Net income divided by average equity.
<F3> Dividends declared per share divided by diluted earnings per
     share.
<F4> Average equity divided by average total assets.
<F5> Dividends declared per share as disclosed in the
     consolidated financial statements are $0.15, $0.14, and $0.14 per
     share for 1998, 1997 and 1996, respectively.
</FN>
</TABLE>
<PAGE>
<PAGE>
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The financial statements and the report of independent
accountants are included in this report beginning at page F-1.


ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
          AND FINANCIAL DISCLOSURE.

     During the Company's two most recent fiscal years, the Company
did not change accountants and had no disagreement with its
accountants on any matters of accounting principles or practices or
financial statement disclosure.

<PAGE>
<PAGE>
                                  PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 

     The following is a brief description, as of December 31, 1998, of
the business experience of each of the directors and executive
officers of the Company who, except as otherwise indicated, has been
or was engaged in his or her present of last principal employment, in
the same or a similar position, for more than five years:

    Steven C. Adams           Mr. Adams has been an attorney with the firm of
    (50)                      Adams, Ellard & Frankum, P.C. since 1973  and
                              President of Chatham Transport Company, a
                              trucking  company, since 1994.  He has been a
                              director of the Company, Community   Habersham,
                              and Financial Supermarkets since 1990.  He was
                              named a director of Financial Properties, Inc. in
                              1998.

    Edwin B. Burr             Mr. Burr has served as a director of the Company
    (65)                      since April of 1995 and Financial Supermarkets
                              since 1992.  Mr. Burr has  been President of
                              Financial Solutions, a bank consulting firm since
                              1988.  He has been a director of Community   
                              Alabama since 1997 and President of Financial
                              Solutions since 1988.

    Elton S. Collins          Mr. Collins has been the President, Chief
    (55)                      Executive Officer and a director of Community -
                              Jackson since 1982.

    Annette R. Fricks         Mrs. Fricks has been an Executive Vice President
    (54)                      and Corporate Secretary of the Company and
                              Community - Habersham since 1992 and 1967,
                              respectively, and has also served as Corporate
                              Secretary of Financial Supermarkets since 1984. 
                              She was named the Executive Vice President and
                              Corporate Secretary for Financial Properties in
                              1998.

    Charles M. Miller         Mr. Miller has served as an Executive Vice
    (57)                      President of Company, the President and Chief
                              Operating Officer and director of Community -
                              Habersham and the Executive Vice President and
                              director of Financial Supermarkets since 1990. 
                              Mr. Miller has served as a director of Community
                              - Troup since November 1995.   He was named a
                              director and Executive Vice President of
                              Financial Properties in 1998.

    Harry H. Purvis           Mr. Purvis has been a director of the Company
    (92)                      since 1981 and Community   Habersham since 1956. 
                              Mr. Purvis has also served as a director of
                              Financial Supermarkets since 1984.  He was named
                              a director of Financial Properties, Inc. in 1998.

    Harry L. Stephens         Mr. Stephens has been an Executive Vice President
    (52)                      and the Chief Financial Officer of the Company
                              and Community - Habersham since 1992 and has
                              served as Treasurer of Financial Supermarkets
                              since 1986.  He has been Executive Vice President
                              and Chief Financial Officer of Community   
                              Habersham since 1993.   He was named Executive
                              Vice President and Treasurer of Financial
                              Properties, Inc. in 1998<PAGE>

    H. Calvin Stovall, Jr.    Mr. Stovall, who is retired, was the President
    (83)                      and treasurer of Stovall Tractor Company, a
                              retail farm equipment dealer, from 1948 until
                              November 1995.  He has served as the Chairman of
                              the Company's Board of Directors since 1981-1998
                              and was named Chairman Emeritus in 1998. 
                              Mr. Stovall has also served as a director of
                              Community - Habersham, Community - Jackson,
                              Financial Supermarkets and Community - Troup since
                              1963, 1982, 1984 and November 1994, respectively.
                              He was also named a director of Financial
                              Properties, Inc. in 1998.

    Dean C. Swanson           Mr. Swanson was President of the Standard Group,
    (67)                      a telecommunications company until January 1999. 
                              He is a director of Independent
                              Telecommunications Network.  Mr. Swanson has
                              served as a director of the Company, Community -
                              Habersham and Financial Supermarkets since 1981,
                              1972, and 1984, respectively.  He was named a
                              director of Financial Properties, Inc. in 1998.

    George D. Telford         Mr. Telford is a retired bank executive and has
    (78)                      served as a director of the Company and Community
                              - Habersham since 1981 and 1965, respectively, as
                              well as of Financial Supermarkets since 1993.  He
                              was named a director of Financial Properties, Inc.
                              in 1998.

    J. Alton Wingate          Mr. Wingate has served as a director and the
    (59)                      President and Chief Executive Officer of the
                              Company, Community - Habersham and Financial
                              Supermarkets since 1981, 1977 and 1984,
                              respectively.  Mr. Wingate was named Chairman of
                              the Board in 1998.   He has also been the
                              Chairman of the Board of Directors and a director
                              of Community - Jackson, Community - Alabama, and
                              Community - Troup since 1982, 1990, and November
                              1994, respectively.  He was named President and
                              Chief Executive Officer of Financial Properties,
                              Inc. in 1998.  Mr. Wingate has been Chairman and
                              Chief Executive Officer  of Community - Habersham
                              since 1996 and has been Chairman and President
                              of Financial Supermarkets since 1984.

         Directors are elected at each annual meeting of shareholders and hold
office until the next annual meeting and until their successors are elected
and qualified.  The executive officers are elected by the Board of Directors
and serve at the will of the Board.  There are no family relationships
between executive officers and directors of the Company.

     The Company is not subject to Section 16(a) of the Securities Exchange
Act of 1934.
<PAGE>
ITEM 11.   EXECUTIVE COMPENSATION.

     The following table sets forth the annual and long-term compensation
paid by the Company to the Chief Executive Officer of the Company and the
three other most highly compensated officers of the Company whose salary and
bonus exceeded $100,000 during the last fiscal year (the "Named Executive
Officers").
<TABLE>
<CAPTION>
                                            Summary Compensation Table
   ----------------------------------------------------------------------------------------------------------
                   Annual Compensation                                   Long-Term Compensation
   -------------------------------------------------------------   ------------------------------------------
                                                                       Securities
    Name and Principal              Salary       Bonus                 Underlying         All Other
         Position          Year     $<F1>         <F2>              Options/SARS (#)    Compensation
    -------------------    ----    --------    ---------           -----------------    ------------
   <S>                     <C>      <C>         <C>                       <C>               <C>
     J. Alton Wingate      1998     245,500     1,360,258 <F7>                              30,499  <F3>
   President and Chief     1997     243,200       728,981 <F7>            --                30,687
    Executive Officer      1996     237,600       367,271 <F7>            --                19,203

    Charles M. Miller      1998     145,600        30,000                 --                23,512  <F4>
      Executive Vice       1997     145,600        20,000                 --                23,974

        President          1996     141,000        20,000                 --                17,846

    Harry L. Stephens      1998      98,000        52,500                 --                20,816  <F5>
      Executive Vice       1997      93,000        52,500                 --                19,811
   President and Chief     1996      88,000        43,000                 --                14,011
    Financial Officer

    Annette R. Fricks      1998      88,000        57,500                                   17,844  <F6>
      Executive Vice       1997      83,000        52,500                 --                17,088
      President and        1996      78,000        43,000                 --                12,959
   Corporate Secretary

<F1> Includes directors' fees.

<F2> Bonuses are included in this report in the year paid.

<F3> Includes premiums of $4,144.84 paid for Mr. Wingate's life
     insurance policies and estimated employee stock ownership plan
     ("ESOP") contributions of $16,500.  Final ESOP contributions have
     not yet been determined for 1998.

<F4> Includes premiums of $3,252.16 paid for Mr. Miller's life
     insurance policies and estimated  ESOP contributions of
     $16,000.00.  Final ESOP contributions have not yet been determined
      for 1998.

<F5> Includes premiums of $912.00 paid for Mr. Stephens's life
     insurance policies and estimated ESOP contributions of $15,500.
     ESOP contributions have not yet been determined for 1998..

<F6> Includes premiums of $660.00 paid for Mrs. Fricks' life insurance
     policies and estimated ESOP contributions of $15,000.  Final
     ESOP contributions have not yet been determined for 1998.

<F7> Mr. Wingate's bonus is contractually based on the performance of
     Financial Supermarkets, with caps and guaranteed rates of return
     before the bonus can be calculated and paid.
</FN>
</TABLE>
<PAGE>
<PAGE>

     DIRECTOR'S COMPENSATION.   The Chairman Emeritus of the Board of
the Company currently receives a fee of $2,250 per month for service
as the Chairman of the Board and other directors of the Board of the
Company  receive $2,000 a year for service on the Company's Board of
Directors.  The directors of Community - Habersham, Community -
Jackson, Community - Alabama,  Community - Troup and Financial
Supermarkets currently receive fees of $10,000, $4,600, $3,300,
$3,600, and $4,000 per year, respectively.

     AGREEMENTS WITH OFFICERS.   In 1990, Community - Habersham
entered into an employment agreement with Mr. Miller  pursuant to
which the parties agreed that Mr. Miller would serve as the President,
Chief Operating Officer and General Manager of Community - Habersham. 
The initial term of the agreement was one year, subject to successive
automatic renewals of one year each unless (i) either party gives
written notice at least 60 days prior to the annual renewal date of
the desire to terminate, or (ii) Community - Habersham terminates for
cause (as defined in the agreement).

     The agreement provides for Mr. Miller to receive an annual salary
of $125,000 plus certain benefits and perquisites. The agreement also
entitles Mr. Miller to certain severance payments following a change
of control (as defined in the agreement) of Community - Habersham. 
Further, Mr. Miller agrees that he will not compete with or solicit
certain customers from Community - Habersham within Habersham or
Jackson County (or any contiguous county) for a period of three years
after termination of Mr. Miller's employment with Community -
Habersham. 

     In 1987, Community - Habersham and Mr. Wingate entered into a
change-in-control agreement for a three year term, renewable for an
additional one year period annually thereafter in the sole discretion
of the compensation committee of the Board of Directors of Community -
Habersham.  The agreement also provides for the payment of certain
severance benefits to Mr. Wingate if there is a change in control (as
defined in the agreement) of Community - Habersham and Mr. Wingate's
employment is involuntarily terminated other than for cause,
disability or retirement or is voluntarily terminated as a result of a
material reduction of duties, compensation or benefits or a forced
relocation.   Such benefits include the continuation of salary
payments to Mr. Wingate for a period of 36 months from the date of
termination, the payment of certain bonuses for the year in which his
employment  is terminated and the following two calendar years, the
continuation of health and life insurance coverage and the continued
participation by Mr. Wingate in all employee retirement plans.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>

                Aggregated Option Exercises In Last Fiscal Year And FY-End Option Values

                                                              Number of
                                                              Securities           Value of
                                                              Underlying           Unexercised In-
                                                              Unexercised          The-Money Options
                                                              Options at Fiscal    At Fiscal Year-
                                                              Year-End             End ($)
                      Shares Acquired                         (Exercisable/        (Exercisable/
        Name          on Exercise (#)     Value Realized      Unexercisable)       Unexercisable)
        ----          ---------------     --------------      --------------       --------------
                                               ($)
 <S>                  <C>                 <C>                 <C>                  <C>
 Charles M. Miller           -0-                 -0-                3,000/0             88,050/0
 Harry L. Stephens           -0-                 -0-                6,000/0            176,100/0
 Annette R. Fricks           -0-                 -0-               15,000/0            440,250/0
</TABLE>


ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
           MANAGEMENT.

     The following table sets forth the percent and number of shares
of the Common Stock beneficially owned as of January 1, 1999 by (i)
each of the Named Executive Officers, (ii) each of the directors of
the Company, (iii) each shareholder who owns greater than five percent
(5%) of the Company's securities and (iv) all executive officers and
directors of the Company as a group, without naming such individuals.
There were 2,169,830 shares outstanding as of that date.

<TABLE>
<CAPTION>

 Name of                            Amount of Shares                                    Percent
 Beneficial Owner                   Beneficially Owned                                  Of Class
 ----------------                   ------------------                                  --------
 <S>                                <C>     <S>                                         <C>
 Joye H. Adams                      141,720 <F1>                                         6.53%
 Steven C. Adams                    478,456 <F2><F3><F4><F5><F6>                        22.05%
 Edwin B. Burr                        1,080 <F7>                                          *
 Elton S. Collins                   388,876 <F3><F8><F11>                               17.92%
 Community Bankshares, Inc.         363,616 <F9>                                        16.76%
   Employee Stock Ownership
   Plan and Trust
 Annette R. Fricks                   24,420 <F19>                                        1.13%
 Emmett D. Hart                     151,500 <F10>                                        6.98%
 Charles M. Miller                    9,860 <F11>                                          *
 Harry H. Purvis                     41,450                                               1.86%
 Harry L. Stephens                    7,700 <F12>                                          *
 H. Calvin Stovall                  166,660 <F13><F14>                                    7.68%
 Dean C. Swanson                     30,000                                               1.38%
 George D. Telford                   83,740                                               3.40%
 J. Alton Wingate                   725,265 <F2><F3><F4><F15><F16><F17>                  33.42%

 All executive officers and       1,139,735 <F18>                                        52.53%
 directors as a group (11
 Persons)

* less than one percent<PAGE>
<F1> Mrs. Adams' address is 664 Chenocetah Drive, Cornelia, Georgia 30531.
<F2> Includes an aggregate of 48,000 shares held by the Taft Chatham  Trusts I and II with 
     respect to which Messrs. Wingate and Adams are co-trustees and share voting and investment
     power.
<F3> Includes 363,616 shares held by Community Bankshares, Inc. ESOP with respect to which
     Messrs. Wingate, Adams and Collins are co-trustees and share voting and investment power.
<F4> Includes 19,500 shares held by Chatham Transport company with respect to which Messrs. 
     Wingate and Adams share voting power.
<F5> Includes 44,340 shares held by Mr. Adams as trustee for the F. Jack Adams Testamentary Trust,
     as to which Mr. Adams has voting and investment control.
<F6> Mr. Adam's address is 148 North Main Street, Cornelia Georgia 30531.
<F7> Does not include 750 shares of Common Stock owned by Mr. Burr's wife, as to which he 
     disclaims beneficial ownership.
<F8> Mr. Collins' address is 1851 North Elm Street, Commerce, Georgia 30329.
<F9> The address of the ESOP is 448 North Main Street, Cornelia, Georgia 30531.
<F10>Mr. Hart's address is 1729 Davis (By-Pass) Road, LaGrange, Georgia 30241.
<F11>Includes presently-exercisable options to acquire 3,000 shares of Common Stock.
     Does not include 420 shares owned by Mr. Miller's wife, as to which he disclaims
     beneficial ownership.
<F12>Includes presently-exercisable options to acquire 6,000 shares of Common Stock.
<F13>Mr. Stovall's address is 215 Grandview Circle, Cornelia, Georgia 30531.
<F14>Does not include 250 shares of Common Stock owned by Mr. Stovall's wife, as to which
     he disclaims beneficial ownership.
<F15>Includes 16,500 shares held by the Estate of H. Milton Stewart, Sr., of which Mr. Wingate is
     a co-trustee and has voting and investment control.
<F16>Includes 5,010 shares held by Mr. Wingate as Attorney-in-Fact for Virginia Hodgkinson as to
     which Mr. Wingate has voting and investment control.
<F17>Mr. Wingate's address is 186 Hillcrest Heights, Cornelia, Georgia 30531.
<F18>Includes presently-exercisable options to acquire 24,000 shares of Common Stock.
<F19>Includes presently-exercisable options to acquire 15,000 shares of Common Stock.
</TABLE>

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Each of the Community Banking Subsidiaries has had, and expects
to have in the future, banking transactions in the ordinary course of
business with directors and officers of the particular bank and the
Company and their associates, including corporations in which such
officers or directors are shareholders, directors and/or officers, on
the same terms (including interest rates and collateral) as those
prevailing at the time for comparable transactions with other persons. 
Such transactions have not involved more than the normal risk of
collectibility or presented other unfavorable features


ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a)    Financial Statements.

     The following financial statements and notes thereto of the
        Registrant are included in the Report:

     Independent Auditor's Report

     Consolidated Balance Sheets - December 31, 1998 and 1997

     Consolidated Statements of Income for the years ended
     December 31, 1998, 1997 and 1996

     Consolidated Statements of Comprehensive Income for the years ended
     December 31, 1998, 1997 and 1996

     Consolidated Statements of Shareholder's Equity for the years ended 
     December 31, 1998, 1997 and 1996
<PAGE>
     Consolidated Statements of Cash Flows for the years ended 
     December 31, 1998, 1997 and 1996 

      Notes to Consolidated Financial Statements

     (b)  Exhibits.

The following exhibits are required to be filed with this Report by
Item 601 of Regulation S-K:

Exhibit

3.1  Articles of Incorporation of the Registrant, as amended (included
     as Exhibit 3.1 to the Registrant's Form 10-K for the year ended
     December 31, 1995, previously filed with the Commission and
     incorporated herein by reference).

3.2  By-Laws of the Registrant (included as Exhibit 3.3 to the
     Registrant's Form S-4 Registration Statement, Commission File No.
     33-81890, previously filed with the Commission and incorporated
     herein by reference). 

4.1  See exhibits 3.1 and 3.2 for provisions of Articles of
     Incorporation and Bylaws, as amended, which define the rights of
     the holders of Common Stock of the Registrant (included as
     Exhibit 4.1 to the Registrant's Form S-4 Registration Statement,
     Commission File No. 33-81890, previously filed with the
     Commission and incorporated herein by reference).         

10.1 Incentive Stock Option Plan, as adopted August 17, 1987 (included
     as Exhibit 10.1 to the Registrant's Form S-4 Registration
     Statement, Commission File No. 33-81890, previously filed with
     the Commission and incorporated herein by reference).

10.2 Employment Agreement between Charles M. Miller and Community -
     Habersham, dated March 31, 1990(included as Exhibit 10.2 to the
     Registrant's Form S-4 Registration Statement, Commission File No.
     33-81890, previously filed with the Commission and incorporated
     herein by reference).    

10.3 Agreement Regarding Change in Control between J. Alton Wingate
     and Community - Habersham, dated August 17, 1987 (included as
     Exhibit 10.3 to the Registrant's Form S-4 Registration Statement,
     Commission File No. 33-81890, previously filed with the
     Commission and incorporated herein by reference).

10.4 Master Consulting Agreement between Financial Supermarkets, Inc.
     and NationsBanc Services, Inc.(included as Exhibit 10.1 to the
     Registrant's Form 10-QSB for the period ended March 31, 1996 and
     incorporated herein by reference).

10.5 Amendment to Master Consulting Agreement between Financial
     Supermarkets, Inc. and NationsBanc Services, Inc. dated July 3,
     1997.

10.6 Termination of Master Consulting Agreement between Financial
     Supermarkets, Inc. and NationsBanc Services, Inc.  (included as
     Exhibit 10.1 to the Registrant's Form 10-Q for the period ended
     September 30, 1998 and incorporated herein by reference).

10.7 Amended and Restated Revolving Credit/Term Loan Agreement between
     the Registrant and SunTrust Bank dated July 31, 1998.
<PAGE>
21   List of Subsidiaries of Registrant

27   Financial Data Schedule

(c)  No reports on Form 8-K were filed during the last quarter of
1998.
<PAGE>
<PAGE>
                              COMMUNITY BANKSHARES, INC.
                                   AND SUBSIDIARIES


                            CONSOLIDATED FINANCIAL REPORT
                                  DECEMBER 31, 1998
-------------------------------------------------------------------------------
                                           
                                  TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                         Page
     <S>                                                                  <C>
     INDEPENDENT AUDITOR'S REPORT  . . . . . . . . . . . . . . . . . . .  F-1


     FINANCIAL STATEMENTS

       Consolidated balance sheets   . . . . . . . . . . . . . . . . . .  F-2
       Consolidated statements of income   . . . . . . . . . . . . . . .  F-3
       Consolidated statements of comprehensive income   . . . . . . . .  F-4
       Consolidated statements of shareholders' equity   . . . . . . . .  F-5 and F-6
       Consolidated statements of cash flows   . . . . . . . . . . . . .  F-7 and F-8
       Notes to consolidated financial statements  . . . . . . . . . . .  F-8 through F-36
</TABLE>

<PAGE>
<PAGE>


                             INDEPENDENT AUDITOR'S REPORT
-------------------------------------------------------------------------------

To the Board of Directors
Community Bankshares, Inc. 
and Subsidiaries 
Cornelia, Georgia


We have audited the accompanying consolidated balance sheets of Community
Bankshares, Inc. and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of income, comprehensive income,
shareholders' equity and cash flows for each of the three years in the
period ended December 31, 1998.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation.  We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Community Bankshares, Inc. and subsidiaries as of December 31, 1998 and
1997, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.





   /s/ Mauldin & Jenkins, L.L.C.




Atlanta, Georgia
January 15, 1999




                                  F-1
<PAGE>
<PAGE>
<TABLE>
<CAPTION>

                                                COMMUNITY BANKSHARES, INC.
                                                     AND SUBSIDIARIES

                                               CONSOLIDATED BALANCE SHEETS
                                                DECEMBER 31, 1998 AND 1997
=========================================================================================================================
                                     Assets                                               1998                   1997
                                                                                     --------------        --------------
<S>                                                                                  <C>                   <C>
Cash and due from banks                                                              $    26,796,002       $   23,957,030
Interest-bearing deposits in banks                                                           427,870              768,914
Federal funds sold                                                                        22,890,000            5,960,000
Securities available-for-sale                                                             42,525,208           53,282,114
Securities held-to-maturity (fair value $32,173,821 and $29,557,804)                      30,915,014           28,718,651
Loans held for sale                                                                          699,498            2,560,915

Loans                                                                                    313,437,773          242,660,582
Less allowance for loan losses                                                             4,863,181            4,024,171
                                                                                     ---------------       --------------
          Loans, net                                                                     308,574,592          238,636,411

Premises and equipment                                                                    13,463,273           12,115,026
Other assets                                                                              14,301,983           11,080,455
                                                                                     ---------------       --------------
          Total assets                                                               $   460,593,440       $  377,079,516
                                                                                     ---------------       --------------
          Liabilities, Redeemable Common Stock and Shareholders' Equity

Deposits
    Noninterest-bearing demand                                                       $    65,266,672       $   50,768,168
    Interest-bearing demand                                                               94,458,133           72,854,181
    Savings                                                                               19,731,233           16,275,911
    Time, $100,000 and over                                                               67,003,184           55,848,885
    Other time                                                                           158,823,651          139,797,680
                                                                                    ----------------       --------------
          Total deposits                                                                 405,282,873          335,544,825
Other borrowings                                                                           5,808,200              462,299
Other liabilities                                                                          8,958,004            7,331,322
                                                                                     ---------------       --------------
          Total liabilities                                                              420,049,077          343,338,446
                                                                                     ---------------       --------------
Commitments and contingent liabilities 

Redeemable common stock held by ESOP, 363,616 and 344,531 shares outstanding
     at December 31, 1998 and 1997, respectively at fair value                            14,253,747           10,621,891
                                                                                     ---------------       --------------
Shareholders' equity 
    Common stock, par value $1; 5,000,000 shares authorized; 
        2,169,830 shares issued and outstanding                                            2,169,830            2,169,830
    Capital surplus                                                                        6,036,220            6,036,220
    Retained earnings                                                                     17,857,974           14,782,733
    Accumulated other comprehensive income                                                   226,592              130,396
                                                                                     ---------------       --------------
       Total shareholders' equity                                                         26,290,616           23,119,179
                                                                                     ---------------       --------------
       Total liabilities, redeemable common stock and 
           shareholders' equity                                                      $   460,593,440       $  377,079,516
                                                                                     ---------------       --------------
See Notes to Consolidated Financial Statements.
</TABLE>

                                                           F-2<PAGE>
<PAGE>
<TABLE>
<CAPTION>
                                               COMMUNITY BANKSHARES, INC.
                                                    AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENTS OF INCOME
                                      YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
=========================================================================================================================
                                                                 1998                  1997                   1996
                                                           ----------------      ----------------      ----------------
<S> <S>                                                    <C>                   <C>                   <C>
Interest income
    Loans                                                  $     29,767,173      $     23,562,784      $     20,439,949
    Taxable securities                                            2,564,894             3,107,805             2,482,767
    Nontaxable securities                                         1,710,141             1,326,884               907,794
    Deposits in banks                                                35,973                33,523                 8,855
    Federal funds sold                                              534,903               672,915               625,274
                                                           ----------------      ----------------      ----------------
       Total interest income                                     34,613,084            28,703,911            24,464,639
                                                           ----------------      ----------------      ----------------
Interest expense
    Deposits                                                     15,839,093            13,149,225            11,170,833
    Other borrowings                                                111,411                42,224                64,940
                                                           ----------------      ----------------      ----------------
       Total interest expense                                    15,950,504            13,191,449            11,235,773
                                                           ----------------      ----------------      ----------------

       Net interest income                                       18,662,580            15,512,462            13,228,866
Provision for loan losses                                         1,164,950               936,216               757,262
                                                           ----------------      ----------------      ----------------
      Net interest income after provision for 
          loan losses                                            17,497,630            14,576,246            12,471,604
                                                           ----------------      ----------------      ----------------
Other income
    Service charges on deposits accounts                          2,527,830             2,016,911             1,543,707
    Other service charges, commissions and fees                     523,438               431,729               498,401
    Trust department fees                                           112,061                93,450               103,085
    Nonbank subsidiary income                                     9,043,292             8,819,919             5,558,705
    Gain on sale of loans                                           560,075               614,060               381,636
    Net realized gains (losses) on sale of securities
       available-for-sale                                            78,653               (3,992)              (13,749)
    Other                                                           535,636               447,053               320,342
                                                           ----------------      ----------------      ----------------
       Total other income                                        13,380,985            12,419,130             8,392,127
                                                           ----------------      ----------------      ----------------
Other expenses
    Salaries and employee benefits                               10,676,957            10,474,465             8,265,776
    Equipment expenses                                            1,840,529             1,487,528             1,373,968
    Occupancy expenses                                            1,305,998             1,075,710               807,364
    Other operating expenses                                      6,578,930             5,686,110             4,503,199
                                                           ----------------      ----------------      ----------------
       Total other expenses                                      20,402,414            18,723,813            14,950,307
                                                           ----------------      ----------------      ----------------
       Income before income taxes                                10,476,201             8,271,563             5,913,424

Income tax expense                                                3,444,497             2,624,797             1,869,229
                                                           ----------------      ----------------      ----------------

       Net income                                          $      7,031,704      $      5,646,766      $      4,044,195
                                                           ----------------      ----------------      ----------------

Basic earnings per common share                            $           3.24      $           2.73      $           2.06
                                                           ----------------      ----------------      ----------------
Diluted earnings per common share                          $           3.20      $           2.60      $           1.93
                                                           ----------------      ----------------      ----------------
See Notes to Consolidated Financial Statements.
</TABLE>
                                                           F-3<PAGE>
<PAGE>
<TABLE>
<CAPTION>

                                               COMMUNITY BANKSHARES, INC.
                                                    AND SUBSIDIARIES

                                    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                      YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
=========================================================================================================================
                                                                         1998                1997              1996
                                                                     -------------     -------------      -------------
<S>                                                                  <C>               <C>                <C>
Net income                                                           $   7,031,704     $   5,646,766      $   4,044,195
                                                                     -------------     -------------      -------------
Other comprehensive income:

    Unrealized gains (losses) on securities available-for-sale:

        Unrealized holding gains arising during period,
            net of taxes of $95,593, $134,777, and 
            $675, respectively                                             143,388           202,167              1,013

         Reclassification adjustment for (gains) losses
            in net income, net of taxes (benefits) of $31,461
            $(1,597), and $(5,500), respectively                           (47,192)            2,395              8,249
                                                                     -------------     -------------      -------------

Other comprehensive income                                                  96,196           204,562              9,262
                                                                     -------------     -------------      -------------

Comprehensive income                                                 $   7,127,900     $   5,851,328      $   4,053,457
                                                                     -------------     -------------      -------------

See Notes to Consolidated Financial Statements.
</TABLE>
                                                           F-4

<PAGE>
<PAGE>
<TABLE>
<CAPTION>
                                             COMMUNITY BANKSHARES, INC.
                                                  AND SUBSIDIARIES

                                  CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                    YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
=========================================================================================================================

                                                         Common Stock
                                                ------------------------------        Capital            Retained
                                                   Shares         Par Value           Surplus            Earnings
                                                ----------      --------------    -------------      ---------------
<S>                                              <C>            <C>               <C>                <C>
BALANCE, DECEMBER 31, 1995                       1,954,500      $   1,954,500     $   4,323,055      $    16,274,898
    Net income                                        -                 -                  -               4,044,195
    Cash dividends declared, $.14 per share           -                 -                  -               (266,078)
    Issuance of common stock                        50,330            50,330            953,465                 -   
    Adjustment for shares owned by ESOP               -                 -                  -             (6,177,400)
    Other comprehensive income                        -                 -                  -                    -   
                                                ----------      --------------    -------------      ---------------
BALANCE, DECEMBER 31, 1996                       2,004,830          2,004,830         5,276,520           13,875,615
    Net income                                        -                 -                  -               5,646,766
    Cash dividends declared, $.14 per share           -                 -                  -               (295,157)
    Exercise of stock options                      165,000            165,000           759,700                 -   
    Adjustment for shares owned by ESOP               -                 -                  -             (4,444,491)
    Sale of treasury stock to ESOP                    -                 -                  -                    -   
    Other comprehensive income                        -                 -                  -                    -   
                                                ----------      --------------    -------------      ---------------
BALANCE, DECEMBER 31, 1997                       2,169,830          2,169,830         6,036,220           14,782,733
    Net income                                        -                 -                  -               7,031,704
    Cash dividends declared, $.15 per share           -                 -                  -               (324,607)
    Adjustment for shares owned by ESOP               -                 -                  -             (3,631,856)
    Other comprehensive income                        -                 -                  -                    -   
                                                ----------      --------------    -------------      ---------------
BALANCE, DECEMBER 31, 1998                       2,169,830      $   2,169,830     $   6,036,220      $    17,857,974
                                                ----------      --------------    -------------      ---------------

See Notes to Consolidated Financial Statements.
</TABLE>



                                                           F-5
<PAGE>
<PAGE>
<TABLE>
<CAPTION>

=========================================================================================================================
                                                                                   Accumulated
                                                                                      Other               Total
                                                       Treasury Stock             Comprehensive       Shareholder's
                                                  Shares           Amount          Income (Loss)          Equity
                                                ----------      ------------      -------------      ---------------
<S>                                             <C>             <C>               <C>                <C>
BALANCE, DECEMBER 31, 1995                               -      $          -      $     (83,428)     $    22,469,025
    Net income                                           -                 -                  -            4,044,195
    Cash dividends declared, $.14 per share              -                 -                  -             (266,078)
    Issuance of common stock                             -                 -                  -            1,003,795
    Adjustment for shares owned by ESOP                  -                 -                  -           (6,177,400)
    Other comprehensive income                           -                 -              9,262                9,262
                                                ----------      --------------    -------------      ---------------
BALANCE, DECEMBER 31, 1996                               -                 -            (74,166)          21,082,799
    Net income                                           -                 -                  -            5,646,766
    Cash dividends declared, $.14 per share              -                 -                  -             (295,157)
    Exercise of stock options                       35,661          (782,050)                 -              142,650
    Adjustment for shares owned by ESOP                  -                 -                  -           (4,444,491)
    Sale of treasury stock to ESOP                 (35,661)          782,050                  -              782,050
    Other comprehensive income                           -                 -            204,562              204,562
                                                ----------      --------------    -------------      ---------------
BALANCE, DECEMBER 31, 1997                               -                 -            130,396           23,119,179
    Net income                                           -                 -                  -            7,031,704
    Cash dividends declared, $.15 per share              -                 -                  -             (324,607)
    Adjustment for shares owned by ESOP                  -                 -                  -           (3,631,856)
    Other comprehensive income                           -                 -             96,196               96,196
                                                ----------      --------------    -------------      ---------------
BALANCE, DECEMBER 31, 1998                               -      $          -      $     226,592    $      26,290,616
                                                ----------      --------------    -------------      ---------------
</TABLE>


                                                           F-6

<PAGE>
<PAGE>
<TABLE>
<CAPTION>
                                               COMMUNITY BANKSHARES, INC.
                                                    AND SUBSIDIARIES

                                         CONSOLIDATED STATEMENTS OF CASH FLOWS
                                      YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
=========================================================================================================================

                                                                          1998              1997              1996
                                                                     -------------     -------------      -------------
<S>                                                                  <C>               <C>                <C>
OPERATING ACTIVITIES
    Net income                                                       $   7,031,704     $   5,646,766      $   4,044,195
    Adjustments to reconcile net income to net cash
        provided by operating activities:
        Depreciation                                                     1,585,729         1,154,306            926,807
        Amortization of intangibles                                        288,156           244,911              8,911
        Provision for loan losses                                        1,164,950           936,216            757,262
        Provision for other real estate losses                              10,000            65,000            110,000
        Deferred income tax benefits                                      (292,525)         (195,033)          (197,515)
        (Increase) decrease in loans held for sale                       1,861,417           (76,798)        (2,034,117)
        Net (gains) losses on sale of securities available-for-sale        (78,653)            3,992             13,749
        Net losses on sale of other real estate                             (3,563)           39,182              2,722
        Increase in interest receivable                                 (1,187,060)         (690,955)          (576,126)
        Increase in interest payable                                     1,180,385           277,325            395,738
        Increase (decrease) in taxes payable                               348,661          (661,580)           274,814
        (Increase) decrease in accounts receivable of 
             nonbank subsidiary                                           (618,731)        1,314,629         (1,127,313)
        (Increase) decrease in work in process of nonbank subsidiary      (513,252)        1,342,849         (1,383,105)
        Increase (decrease) in accruals and payables of 
             nonbank subsidiary                                            325,031        (3,773,361)         3,773,361
        Other operating activities                                      (1,145,989)          257,796          (437,924)
                                                                     -------------     -------------      -------------

              Net cash provided by operating activities                  9,956,260         5,885,245          4,551,459
                                                                     -------------     -------------      -------------

INVESTING ACTIVITIES
    Purchases of securities available-for-sale                         (29,111,438)      (25,373,331)       (21,318,882)
    Proceeds from sales of securities available-for-sale                14,296,060        10,687,389          3,465,702
    Proceeds from maturities of securities available-for-sale           25,811,265         9,158,723         13,119,694
    Purchases of securities held-to-maturity                            (3,323,556)      (11,403,699)        (7,042,587)
    Proceeds from maturities of securities held-to-maturity              1,127,193         1,338,890            668,954
    Net (increase) decrease in Federal funds sold                      (16,930,000)        2,385,000          3,850,000
    Net (increase) decrease  in interest-bearing deposits in banks         341,044          (560,690)          (208,224)
    Net increase in loans                                              (71,584,937)      (40,109,318)       (24,980,798)
    Purchase of premises and equipment                                  (2,931,496)       (5,334,330)        (3,495,693)
    Disposal of premises and equipment                                        -                 -               194,650
    Net cash acquired in branch acquisition                                170,667            99,612               -   
    Proceeds from sale of other real estate                                252,492           383,638            189,463
                                                                     -------------     -------------      -------------

              Net cash used in investing activities                    (81,882,706)      (58,728,116)       (35,557,721)
                                                                     -------------     -------------      -------------
</TABLE>


                                                          F-7

<PAGE>
<PAGE>
<TABLE>
<CAPTION>
                                                COMMUNITY BANKSHARES, INC.
                                                     AND SUBSIDIARIES

                                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                       YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
=========================================================================================================================

                                                                          1998              1997               1996
                                                                     -------------     -------------      -------------
<S>                                                                  <C>               <C>                <C>
FINANCING ACTIVITIES
    Net increase in deposits                                         $  69,738,048     $  56,835,456      $  36,267,717
    Increase in other borrowings                                         5,500,000                 -          1,616,399
    Repayment of other borrowings                                         (154,099)         (154,100)        (1,786,939)
    Proceeds from the issuance of common stock                                   -           924,700          1,003,795
    Dividends paid                                                        (318,531)         (285,728)          (261,023)
                                                                     -------------     -------------      -------------

          Net cash provided by financing activities                     74,765,418        57,320,328         36,839,949
                                                                     -------------     -------------      -------------

Net increase in cash and due from banks                                  2,838,972         4,477,457          5,833,687

Cash and due from banks at beginning of year                            23,957,030        19,479,573         13,645,886
                                                                     -------------     -------------      -------------

Cash and due from banks at end of year                              $   26,796,002     $  23,957,030      $  19,479,573
                                                                     -------------     -------------      -------------
SUPPLEMENTAL DISCLOSURES
    Cash paid for:
        Interest                                                    $   14,957,440     $  12,914,124      $  10,840,035

        Income taxes                                                $    3,445,529     $   3,526,919      $   1,791,930

NONCASH TRANSACTIONS
    Unrealized (gains) losses on securities available-              $     (160,328)    $     340,936      $     (12,031)

    Principal balances of loans transferred to other 
        real estate                                                 $      481,806     $     426,273      $     294,787

BRANCH ACQUISITIONS
    Net cash acquired                                               $      170,667     $      99,612
                                                                     -------------     -------------

    Loans                                                                2,981,087         4,357,901
    Premises and equipment                                                  10,085           608,071
    Other assets                                                             9,063             1,828
    Core deposit intangible                                                760,597         2,190,765
    Deposits                                                            (5,837,754)      (12,387,583)
    Other liabilities                                                      (20,687)          (62,790)
                                                                     -------------     ------------- 
    Net liabilities assumed, net of cash and due from
        banks of $170,667 and $99,612                                $  (2,097,609)    $  (5,291,808)
                                                                     -------------     -------------
See Notes to Consolidated Financial Statements.
</TABLE>

                                                          F-8
<PAGE>
<PAGE>
                       COMMUNITY BANKSHARES, INC.
                            AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------



NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

            Community Bankshares, Inc. (the "Company") is a multi-bank
            holding company whose business is presently conducted by
            its wholly-owned subsidiaries: Community Bank & Trust -
            Habersham located in Cornelia, Georgia; Community Bank &
            Trust - Jackson located in Commerce, Georgia; Community
            Bank & Trust - Alabama located in Union Springs, Alabama;
            and Community Bank & Trust - Troup located in LaGrange,
            Georgia.  Financial Supermarkets, Inc. is a wholly-owned
            subsidiary of Community Bank & Trust - Habersham which
            provides a variety of bank related products and services
            to the financial institution industry.   Financial
            Properties, inc. is a wholly-owned subsidiary of Community
            Bank & Trust-Habersham which is a real estate sales agency
            which provides a variety of real estate related services.

            The banking subsidiaries are commercial banks operating
            independently of one another in their respective market
            areas.  The banking subsidiaries in Georgia have
            identified their primary market areas to be the county in
            which they are located and all surrounding counties.  The
            Georgia banking subsidiaries are all located approximately
            85 miles from the metropolitan Atlanta area.  Community
            Bank & Trust - Alabama is located approximately 50 miles
            from Montgomery, Alabama.  The Banks provide a full range
            of banking services to individual and corporate customers. 
            Financial Supermarkets, Inc. currently provides products
            and services primarily in the southeastern United States;
            however, their products and services are marketed
            internationally.  Financial Properties, Inc. currently
            operates primarily in Cornelia, Habersham County, Georgia. 

Basis of Presentation

            The consolidated financial statements include the accounts
            of the Company and its subsidiaries.  Significant
            intercompany transactions and accounts are eliminated in
            consolidation.

            The preparation of financial statements in conformity with
            generally accepted accounting principles requires
            management to make estimates and assumptions that affect
            the reported amounts of assets and liabilities and
            disclosures of contingent assets and liabilities at the
            date of the consolidated financial statements and the
            reported amounts of revenues and expenses during the
            reporting period.  Actual results could differ from those
            estimates.

Cash and Due From Banks

            Cash on hand, cash items in process of collection, and
            amounts due from banks are included in cash and due from
            banks.


            The Company maintains amounts due from banks which, at
            times, may exceed Federally insured limits.  The Company
            has not experienced any losses in such accounts. 

                                      F-9
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Securities 

            Securities are classified based on management's intention
            on the date of purchase.  Securities which management has
            the intent and ability to hold to maturity are classified
            as held-to-maturity and reported at amortized cost.  All
            other securities are classified as available-for-sale and
            carried at fair value with net unrealized gains and losses
            included in shareholders' equity, net of tax.  Equity
            securities without a readily determinable fair value are
            included in securities available-for-sale and carried at
            cost.

            Interest and dividends on securities, including
            amortization of premiums and accretion of discounts, are
            included in interest income.  Realized gains and losses
            from the sale of securities are determined using the
            specific identification method.  

Loans Held for Sale 

            Loans held for sale include mortgage and other loans and
            are carried at the lower of aggregate cost or fair value. 

Loans 

            Loans are carried at their principal amounts outstanding
            less unearned income and the allowance for loan losses. 
            Interest income on loans is credited to income based on
            the principal amount outstanding.

            Loan origination fees and certain direct origination costs
            of most loans are recognized at the time the loan is
            recorded.  Loan origination fees and costs incurred for
            other loans are deferred and recognized as income over the
            life of the loan.  Because net origination loan fees and
            costs are not material, the results of operations are not
            materially different than the results which would be
            obtained by accounting for all loan fees and costs in
            accordance with generally accepted accounting principles.

            The allowance for loan losses is maintained at a level
            that management believes to be adequate to absorb
            potential losses in the loan portfolio.  Management's
            determination of the adequacy of the allowance is based on
            an evaluation of the portfolio, past loan loss experience,
            current economic conditions, volume, growth, composition
            of the loan portfolio, and other risks inherent in the
            portfolio.  This evaluation is inherently subjective as it
            requires material estimates that are susceptible to
            significant change including the amounts and timing of
            future cash flows expected to be received on impaired
            loans.  In addition, regulatory agencies, as an integral
            part of their examination process, periodically review the
            Company's allowance for loan losses, and may require the
            Company to record additions to the allowance based on
            their judgment about information available to them at the
            time of their examinations.


                                      F-10
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loans (Continued)

            The accrual of interest on loans is discontinued when, in
            management's opinion, the borrower may be unable to meet
            payments as they become due.  Interest income is
            subsequently recognized only to the extent cash payments
            are received.

            A loan is considered to be impaired when it is probable
            the Company will be unable to collect all principal and
            interest payments due in accordance with the terms of the
            loan agreement.  Individually identified impaired loans
            are measured based on the present value of payments
            expected to be received, using the contractual loan rate
            as the discount rate.  Alternatively, measurement may be
            based on observable market prices or, for loans that are
            solely dependent on the collateral for repayment,
            measurement may be based on the fair value of the
            collateral.  If the recorded investment in the impaired
            loan exceeds the measure of fair value, a valuation
            allowance is established as a component of the allowance
            for loan losses.  Changes to the valuation allowance are
            recorded as a component of the provision for loan losses.

Premises and Equipment 

            Premises and equipment are stated at cost less accumulated
            depreciation.  Depreciation is computed principally by the
            straight-line method over the estimated useful lives of
            the assets.

Other Real Estate Owned 

            Other real estate owned represents properties acquired
            through foreclosure.  Other real estate owned is held for
            sale and is carried at the lower of the recorded amount of
            the loan or fair value of the properties less estimated
            selling costs.  Any write-down to fair value at the time
            of transfer to other real estate owned is charged to the
            allowance for loan losses.  Subsequent gains or losses on
            sale and any subsequent adjustment to the value are
            recorded in current operating income.

Income Taxes 

            Income tax expense consists of current and deferred taxes. 
            Current income tax provisions approximate taxes to be paid
            or refunded for the applicable year.  Deferred income tax
            assets and liabilities are determined using the balance
            sheet method.  Under this method, the net deferred tax
            asset or liability is determined based on the tax effects
            of the differences between the book and tax bases of the
            various balance sheet assets and liabilities and gives
            current recognition to changes in tax rates and laws.


                                      F-11
<PAGE>
<PAGE>
                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes (Continued) 


            Recognition of deferred tax balance sheet amounts is based
            on management's belief that it is more likely than not
            that the tax benefit associated with certain temporary
            differences, tax operating loss carryforwards and  tax
            credits will be realized.  A valuation allowance is
            recorded for those deferred tax items for which it is more
            likely than not that realization will not occur.

            The Company and subsidiaries file a consolidated income
            tax return.  Each entity provides for income taxes based
            on its contribution to income taxes (benefits) of the
            consolidated group.

Sale of Loans

            The Banks originate and sell participations in certain
            loans.  Gains are recognized at the time the sale is
            consummated.  The amount of gain recognized on the sale of
            a specific loan is equal to the percentage resulting from
            determining the fair value of the portion of the loan sold
            relative to the fair value of the entire loan including
            servicing rights.  

Trust Department

            Trust income is recognized on the cash basis in accordance
            with established industry practices.  The results of
            operations are not materially different than the results
            which would be obtained by accounting for such fees on the
            accrual basis.

Nonbank Subsidiary Revenue Recognition 

            Financial Supermarkets, Inc., a wholly-owned subsidiary of
            Community Bank & Trust - Habersham, recognizes revenue and
            costs on its installation contracts on the completed-
            contract method of accounting.  Under this method,
            billings and costs are accumulated during the period of
            installation, but no profits are recorded before the
            completion of the work.  Provisions for estimated losses
            on uncompleted contracts are made at the time such losses
            are identified.  The results of operations are not
            materially different than the results which would be
            obtained by accounting for these contracts in accordance
            with generally accepted accounting principles.  Operating
            expenses, including indirect costs and administrative
            expenses, are charged as incurred to periodic income and
            not allocated to contract costs.  Income from other
            consulting services is recognized as services are provided
            and costs and expenses are incurred for each individual
            contract.

                                      F-12
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


Earnings Per Common Share

            Basic earnings per common share are computed by dividing
            net income by the weighted-average number of shares of
            common stock outstanding.  Diluted earnings per share are
            computed by dividing net income by the sum of the
            weighted-average number of shares of common stock
            outstanding and potential common shares.  Potential common
            shares consist of stock options.  

Comprehensive Income

            In 1998, the Company adopted Statement of Financial
            Standards No. 130 ("SFAS No. 130"), "Reporting
            Comprehensive Income".  This statement establishes
            standards for reporting and display of comprehensive
            income and its components in the financial statements. 
            This statement requires that all items that are required
            to be recognized under accounting standards as components
            of comprehensive income be reported in a financial
            statement that is displayed in equal prominence with the
            other financial statements.  The Company has elected to
            report comprehensive income in a separate financial
            statement titled "Consolidated Statements of Comprehensive
            Income".  SFAS No. 130 describes comprehensive income as
            the total of all components of comprehensive income
            including net income.  This statement uses other
            comprehensive income to refer to revenues, expenses, gains
            and losses that under generally accepted accounting
            principles are included in comprehensive income but
            excluded from net income.  Currently, the Company's other
            comprehensive income consists of items previously reported
            directly in equity under SFAS No. 115, "Accounting for
            Certain Investments in Debt and Equity Securities".  As
            required by SFAS No. 130, the financial statements for the
            prior year have been reclassified to reflect application
            of the provisions of this statement.  The adoption of this
            statement did not affect the Company's financial position,
            results of operations or cash flows.

Recent Developments

            In June 1998, the Financial Accounting Standards Board
            issued Statement of Financial Accounting Standards No. 133
            ("SFAS No. 133"), "Accounting for Derivative Instruments
            and Hedging Activities".  This statement is required to be
            adopted for fiscal years beginning after June 15, 1999. 
            However, the statement permits early adoption as of the
            beginning of any fiscal quarter after its issuance.  The
            Company expects to adopt this statement effective January
            1, 2000.  SFAS No. 133 requires the Company to recognize
            all derivatives as either assets or liabilities in the
            consolidated balance sheet at fair value.  For derivatives
            that are not designated as hedges, the gain or loss must
            be recognized in earnings in the period of change.  For
            derivatives that are designed as hedges, changes in the
            fair value of the hedged assets, liabilities, or firm

            commitments must be recognized in earnings or recognized
            in other comprehensive income until the hedged item is
            recognized in earnings, depending on the nature of the
            hedge.  The ineffective portion of a derivative's change
            in fair value must be recognized in earnings immediately. 
            Management has not yet determined what effect the adoption
            of SFAS No. 133 will have on the Company's earnings or
            financial position.   


                                      F-13
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------


NOTE 2.  SECURITIES 

     The amortized cost and fair value of securities are summarized as
follows:
<TABLE>
<CAPTION>
                                                                   Gross              Gross
                                                Amortized        Unrealized         Unrealized          Fair
                                                   Cost             Gains             Losses            Value
                                             --------------     -------------     -------------    --------------
         <S>                                 <C>                <C>              <C>              <C>
         SECURITIES AVAILABLE-FOR-SALE 
            DECEMBER 31, 1998:

            U. S. GOVERNMENT AND AGENCY
              SECURITIES                     $   25,704,416     $     324,048     $     (41,299)   $   25,987,165 
            STATE AND MUNICIPAL SECURITIES        5,791,730            67,382           (21,121)        5,837,991 
            MORTGAGE-BACKED SECURITIES            8,930,047            85,267           (36,623)        8,978,691 
            EQUITY SECURITIES                     1,721,361               -                  -          1,721,361 
                                             --------------     -------------     -------------    --------------
                                             $   42,147,554     $     476,697     $     (99,043)   $   42,525,208 
                                             ==============     =============     =============    ==============
         Securities Available-for-Sale 
             December 31, 1997:
             U. S. Government and agency
                 securities                  $   28,936,320     $     189,522     $    (31,253)    $  29,094,589
             State and municipal securities         746,476            31,399               -            777,875
             Mortgage-backed securities          21,934,402           156,624         (128,968)       21,962,058
             Equity securities                    1,447,592               -                 -          1,447,592
                                             --------------     -------------     ------------     -------------
                                             $   53,064,790     $     377,545     $   (160,221)    $  53,282,114
                                             ==============     =============     ============     =============

                                                                   Gross              Gross
                                                Amortized        Unrealized         Unrealized          Fair
                                                   Cost             Gains             Losses            Value
                                             --------------     -------------     -------------    --------------

         SECURITIES HELD-TO-MATURITY
             DECEMBER 31, 1998:
             State and municipal securities  $   30,915,014     $   1,300,295     $   (41,488)     $  32,173,821
                                              ==============    =============     ============     =============

             December 31, 1997:
             State and municipal securities  $   28,718,651     $     859,383     $    (20,230)    $  29,557,804
                                             ==============     =============     ============     =============
</TABLE>


                                      F-14
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------

NOTE 2.  SECURITIES (Continued)

           The amortized cost and fair value of securities as of December 31,
           1998 by contractual maturity are shown below.  Maturities may
           differ from contractual maturities in mortgage-backed securities
           because the mortgages underlying the securities may be called or
           prepaid with or without penalty.  Therefore, these securities and
           equity securities are not included in the categories in the
           following summary.
<TABLE>
<CAPTION>

                                              Securities Available-for-Sale         Securities Held-to-Maturity
                                            --------------------------------     --------------------------------
                                              Amortized            Fair             Amortized           Fair
                                                 Cost              Value               Cost             Value
                                            -------------     --------------     -------------     -------------
              <S>                           <C>               <C>                <C>               <C>
              Due in one year or less       $   2,701,759     $    2,711,628     $     788,916     $     808,349
              Due from one year to five        21,996,728         22,285,361         5,034,373         5,149,846
              years
              Due from five years to ten        2,037,504          2,037,059         6,797,865         7,099,498
              years
              Due after ten years               4,760,155          4,791,108        18,293,860        19,116,128
              Mortgage-backed securities        8,930,047          8,978,691                -                 - 
              Equity securities                 1,721,361          1,721,361                -                 - 
                                            -------------     --------------     -------------     -------------
                                            $  42,147,554     $   42,525,208     $  30,915,014     $  32,173,821
                                            =============     ==============     =============     =============
</TABLE>

          Securities with a carrying value of $36,621,313 and $36,160,837 at
          December 31, 1998 and 1997, respectively, were pledged to secure
          public deposits and for other purposes.

          Gross gains and losses on sales of securities available-for-sale
          consist of the following:

<TABLE>
<CAPTION>
                                                                                     December 31,
                                                                      -----------------------------------------
                                                                         1998            1997           1996
                                                                      ---------      ----------      ----------
              <S>                                                     <C>            <C>             <C>
              Gross gains                                             $  114,546     $   47,843      $   21,143
              Gross losses                                               (35,893)       (51,835)        (34,892)
                                                                      ----------     ----------      ----------
              Net realized gains (losses)                             $   78,653     $   (3,992)     $  (13,749)
                                                                      ==========     ==========      ==========
</TABLE>
                                      F-15
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------


NOTE 3.  LOANS AND ALLOWANCE FOR LOAN LOSSES 

          The composition of loans is summarized as follows:
<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                           -----------------------------------
                                                                                 1998                1997
                                                                           ---------------     ---------------
       <S>                                                                 <C>                 <C>
       Commercial, financial, and agricultural                             $   160,872,954     $   115,815,084 
       Real estate - construction                                               21,327,303          21,234,000 
       Real estate - mortgage                                                   82,413,280          69,541,000 
       Consumer                                                                 46,047,519          33,378,000 
       Other                                                                     3,042,663           3,011,992 
                                                                           ---------------     ---------------
                                                                               313,703,719         242,980,076 
       Unearned income                                                            (265,946)           (319,494)
       Allowance for loan losses                                                (4,863,181)         (4,024,171)
                                                                           ---------------     ---------------
       Loans, net                                                          $   308,574,592     $   238,636,411 
                                                                           ===============     ===============
</TABLE>
          Changes in the allowance for loan losses for the years ended
          December 31, 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
                                                                    1998              1997              1996
                                                                ------------      ------------      ------------
       <S>                                                      <C>               <C>               <C>
       Balance, beginning of year                               $  4,024,171      $  3,591,958      $  3,060,479 
         Provision charged to operations                           1,164,950           936,216           757,262 
         Loans charged off                                          (495,008)         (595,258)         (329,592)
         Recoveries of loans previously charged off                  169,068            91,255           103,809 
                                                                ------------      ------------      ------------
       Balance, end of year                                     $  4,863,181      $  4,024,171      $  3,591,958
                                                                ============      ============      ============
</TABLE>

          The total recorded investment in impaired loans was $1,690,592 and
          $1,418,094 at December 31, 1998 and 1997, respectively. None of
          these loans had a specific allowance for loan losses at December 31,
          1998 and 1997 determined in accordance with generally accepted
          accounting principles.  The average recorded investment in impaired
          loans for 1998 and 1997 was $1,404,191 and $1,577,977,
          respectively.  Interest income recognized by the Company on
          impaired loans was not significant.




                                      F-16
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------


NOTE 3.  LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)

          The Banks have granted loans to certain related parties,
          including directors, executive officers and their related
          entities.  The interest rates on these loans were
          substantially the same as rates prevailing at the time of

          the transaction and repayment terms are customary for the
          type of loan involved.  Changes in related party loans for
          the year ended December 31, 1998 are as follows:

                    Balance, beginning of year                  $    7,399,598
                       Advances, including renewals                  6,834,520
                       Repayments, including renewals               (5,921,748)
                       Changes in directors                            (30,031)
                                                                --------------
                    Balance, end of year                        $    8,282,339
                                                                ==============

NOTE 4.PREMISES AND EQUIPMENT

Premises and equipment are summarized as follows:

                                                           December 31,
                                                      1998              1997
                                                -------------     -------------
          Land                                  $   2,408,053     $   1,966,267
          Buildings                                 9,749,186         7,080,247
          Equipment                                10,399,876         9,362,724
          Construction in process                       1,250         1,392,330
                                                -------------     -------------
                                                   22,558,365        19,801,568
          Accumulated depreciation                 (9,095,092)       (7,686,542)
                                                -------------     -------------
                                                $  13,463,273     $  12,115,026
                                                =============     =============

                                      F-17
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------

NOTE 5. DEPOSITS

          At December 31, 1998, the scheduled maturities of time deposits
          are as follows:

             1999                                           $   177,718,081
             2000                                                21,890,436
             2001                                                 6,373,446
             2002                                                 5,261,078
             2003                                                14,425,972
             Thereafter                                             157,822
                                                            ---------------
                                                            $   225,826,835
                                                            ===============

           At December 31, 1998, the Company has brokered time deposits of
           $1,584,000.


NOTE 6. OTHER BORROWINGS

          Other borrowings consist of the following:
<TABLE>
<CAPTION>
                                                                                                      December 31,
                                                                                               -------------------------
                                                                                                   1998           1997
                                                                                               -----------     ---------
              <S>                                                                              <C>             <C>
              Note payable to bank, interest due quarterly at prime minus 1% or
               6.75% at December 31, 1998, collateralized by 50,000 shares of common
               stock of Community Bank & Trust-Habersham.  Matures July 31, 1999.              $   808,200     $ 462,299


               Advance from the Federal Home Loan Bank with interest due 
                 quarterly at 4.96%, due September 15, 2003.                                     5,000,000             -
                                                                                               -----------     ---------
                                                                                               $ 5,808,200     $ 462,299
                                                                                               ===========     =========
          Advances are collateralized by blanket floating liens on qualifying
          first mortgages.  At December 31, 1998, aggregate maturities of other
          borrowings are as follows: 

                <S>                                                                                         <C>
                1999                                                                                        $    808,200
                2003                                                                                           5,000,000
                                                                                                            ------------
                                                                                                            $  5,808,200
                                                                                                            ============
</TABLE>
                                      F-18
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------


NOTE 7.  EMPLOYEE BENEFIT PLANS

Incentive Stock Option Plan

            The Company has an Incentive Stock Option Plan in which the
            Company can grant to key personnel options for an aggregate of
            225,000 shares of the Company's common stock at not less than
            the fair market value of such shares on the date the option is
            granted.  If the optionee owns shares of the Company
            representing more than 10% of the total combined voting power,
            then the price shall not be less than 110% of the fair market
            value of such shares on the date the option is granted.  Also,
            the option period will not exceed ten years from date of grant. 
            Other pertinent information related to the options is as
            follows:
<TABLE>
<CAPTION>
                                                    1998                      1997                       1996 
                                            ----------------------   -----------------------    -----------------------
                                                        Weighted-                  Weighted-                  Weighted-
                                                         Average                    Average                    Average
                                                         Exercise                   Exercise                   Exercise
                                             Number        Price       Number        Price        Number        Price
                                             ------     ----------     ------     ----------     -------      ----------
         <S>                                 <C>        <C>          <C>          <C>            <C>         <C>
         Under option, beginning of year     39,000     $    9.85     204,000     $    6.42      204,000     $     6.42 
           Granted                              -              -           -             -           330          11.50 
           Exercised                            -              -     (165,000)         5.60         (330)         11.50 
                                             ------     ---------    --------     ---------      -------     ----------
         Under option, and
             exercisable, end of year        39,000     $    9.85      39,000     $    9.85      204,000     $     6.42 
                                             ======                  ========                    =======
</TABLE>
            The weighted average remaining contractual life of options
            and options exercisable at December 31, 1998 was six
            years.

            As permitted by Statement of Financial Accounting Standard
            No. 123 "Accounting for Stock-Based Compensation", the
            Company recognizes compensation cost for stock-based
            employee compensation awards in accordance with APB
            Opinion No. 25, ("Accounting for Stock Issued to
            Employees").  The Company recognized no compensation cost
            for stock-based employee compensation awards for the year
            ended December 31, 1996.  The pro forma expense related to
            the grant of options for the year ended December 31, 1996
            was approximately $1,000, and would not have changed
            earnings per share.


                                      F-19
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------


NOTE 7. EMPLOYEE BENEFIT PLANS (Continued)

401(K) Plan


            The Company has a contributory 401(K) retirement plan
            covering substantially all employees.  Contributions to
            the plan charged to expense for the years ended December 31,
            1998, 1997 and 1996 amounted to $77,668, $77,799 and
            $26,237, respectively.  


Employee Stock Ownership Plan

            In 1996 the Company established an Employee Stock
            Ownership Plan (ESOP) for the benefit of employees who
            meet certain eligibility requirements.  The Plan was
            established on January 1, 1996 in connection with the
            termination of the Company's Profit Sharing Plan. 
            Contributions to the Plan are determined by the Board of
            Directors of the Company taking into consideration the
            financial condition and fiscal requirements of the Company
            and such other factors as the Board of Directors may deem
            pertinent and applicable under the circumstances.  For the
            years ended December 31, 1998, 1997 and 1996, the Company
            made cash contributions of $820,007, $644,133 and
            $488,500, respectively, to the Plan.

            In accordance with the Plan, the Company is expected to
            honor the rights of certain participants to diversify
            their account balances or to liquidate their ownership of
            the common stock in the event of distribution.  The
            purchase price of the common stock would be based on the
            fair market value of the Company's common stock as of the
            annual valuation date which precedes the date the put
            option is exercised.  No participant has exercised these
            rights since the inception of the Plan, and no significant
            cash outlay is expected during 1999.  However, since the
            redemption of common stock is outside the control of the
            Company, the Company's maximum cash obligation based on
            the approximate market prices of common stock as of the
            reporting date has been presented outside of shareholders'
            equity. The amount presented as redeemable common stock
            held by the ESOP in the consolidated balance sheet
            represents the Company's maximum cash obligation and has
            been reflected as a reduction of retained earnings.

            At December 31, 1998, the ESOP held 344,531 shares and
            19,085 committed-to-be-released shares.  Shares held by
            the ESOP are considered outstanding for purposes of
            calculating the Company's earnings per share.


                                      F-20
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------


NOTE 8. INCOME TAXES

          Income tax expense consists of the following:
<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                    ------------------------------------------------
                                                                          1998            1997               1996
                                                                    ------------     -------------     -------------
              <S>                                                   <C>              <C>               <C>
              Current                                               $  3,782,531     $   2,865,339     $  2,112,253 
              Deferred                                                  (292,525)         (195,033)        (197,515)
              Current tax effect of net operating loss carryforward      (45,509)          (45,509)         (45,509)
                                                                    ------------     -------------     ------------
                          Income tax expense                        $  3,444,497     $   2,624,797     $  1,869,229 
</TABLE>

          The Company's income tax expense differs from the amounts computed by
          applying the Federal income tax statutory rates to income before
          income taxes.  A reconciliation of the differences is as follows:
<TABLE>
<CAPTION>
                                                                            December 31,
                                        -------------------------------------------------------------------------------
                                                    1998                        1997                       1996
                                        -------------------------    ----------------------      ----------------------
                                             Amount      Percent         Amount     Percent         Amount      Percent
                                        --------------   --------    ------------   -------      ------------   -------
           <S>                          <C>                <C>       <C>              <C>        <C>              <C>
           Tax provision at statutory   $   3,561,908      34  %     $  2,812,331     34  %      $  2,010,564     34  %
           rate
              Tax-exempt interest            (615,376)     (6)           (477,425)    (6)            (351,027)    (6)
              Disallowed interest              93,901       1              70,054      1               47,859      1
              Current tax effect of net
                operating loss                (45,509)      -             (45,509)     -              (45,509)    (1)
                carryforward
              Nondeductible expenses           17,445       -              38,012      -               59,692      1
              State income taxes              454,555       4             264,672      3              154,777      3
              Other items                     (22,427)      -             (37,338)     -               (7,057)     -
                                        -------------      -----     ------------     -----      ------------     -----
            Income tax expense          $   3,444,497      33  %     $  2,624,797     32  %      $  1,869,299     32  %
                                        =============      =====     ============     =====      ============     =====
</TABLE>


                                      F-21
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------


NOTE 8.  INCOME TAXES (Continued)

            The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>

                                                                                               December 31,
                                                                                    --------------------------------
                                                                                          1998              1997
                                                                                    --------------     -------------
               <S>                                                                  <C>                <C>
               Deferred tax assets:
                 Loan loss reserves                                                 $   1,506,432      $  1,181,092 
                 Net operating loss carryforward                                          139,622           185,131 
                 Valuation allowance                                                     (139,622)         (185,131)
                                                                                    -------------      ------------
                                                                                        1,506,432         1,181,092 
                                                                                    -------------      ------------
               Deferred tax liabilities:
                 Depreciation                                                              96,907            90,688 
                 Accretion                                                                141,942           145,792 
                 Unrealized gain on securities available-for-sale                         151,062            86,930 
                 Other                                                                     30,670               224 
                                                                                    -------------      ------------
                                                                                          420,581           323,634 
                                                                                    -------------      ------------

               Net deferred tax assets                                              $   1,085,851      $    857,458 
                                                                                    =============      ============
</TABLE>
          At December 31, 1998, the Company has available net
          operating loss carryforwards of approximately $410,000 for
          Federal income tax purposes.  If unused, the carryforwards
          will expire in 2009.


NOTE 9. EARNINGS PER COMMON SHARE

          Earnings per common share and common equivalent share were
          computed by dividing net income by the weighted average
          number of shares of common stock and common stock
          equivalents outstanding.  The number of common shares was
          increased by the number of shares issuable upon the exercise
          of the stock options described in Note 6.  This theoretical
          increase in the number of common shares was reduced by the
          number of common shares which are assumed to have been
          repurchased for the treasury with the proceeds from the
          exercise of the options; these purchases were assumed to
          have been made at the price per share that approximates
          average market price.  The treasury stock method for
          determining the amount of dilution of stock options is based
          on the concept that common shares which could have been
          purchased with the proceeds of the exercise of common stock
          options at market price are not actually outstanding common
          shares.  


                                      F-22
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------

NOTE 9. EARNINGS PER COMMON SHARE (Continued)

          Presented below is a summary of the components used to
          calculate basic and diluted earnings per share for the years
          ended December 31, 1998, 1997, and 1996.
<TABLE>
<CAPTION>
                                                                                     Year Ended December 31,
                                                                        --------------------------------------------------
                                                                              1998               1997              1996
                                                                        -------------     --------------     -------------
                     <S>                                                <C>               <C>                <C>
                     Basic Earnings Per Share:
                       Weighted average common shares outstanding           2,169,830          2,065,908         1,961,597
                                                                        =============     ==============     =============

                       Net income                                       $   7,031,704     $    5,646,766     $   4,044,195
                                                                        =============     ==============     =============

                       Basic earnings per share                         $        3.24     $         2.73     $        2.06
                                                                        =============     ==============     =============

                     Diluted Earnings Per Share:
                       Weighted average common shares outstanding           2,169,830          2,065,908         1,961,597
                      Net effect of the assumed exercise of stock
                        options based on the treasury stock method
                        using average market price for the year         $      28,029     $      107,203     $     129,822
                                                                        -------------     --------------     -------------


                      Total weighted average common shares and
                        common stock equivalents outstanding                2,197,859          2,173,111         2,091,419
                                                                        =============     ==============     =============

                      Net income                                        $   7,031,704     $    5,646,766     $   4,044,195
                                                                        =============     ==============     =============

                      Diluted earnings per share                        $        3.20     $         2.60     $        1.93
                                                                        =============     ==============     =============
</TABLE>



                                      F-23
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------
NOTE 10. COMMITMENTS AND CONTINGENT LIABILITIES

          In the normal course of business, the Company has entered
          into off-balance-sheet financial instruments which are not
          reflected in the financial statements.  These financial
          instruments include commitments to extend credit and standby
          letters of credit.  Such financial instruments are included
          in the financial statements when funds are disbursed or the
          instruments become payable.  These instruments involve, to
          varying degrees, elements of credit risk in excess of the
          amount recognized in the consolidated balance sheet.

          The Company's exposure to credit loss in the event of nonperformance
          by the other party to the financial instrument for commitments to
          extend credit and standby letters of credit is represented by the
          contractual amount of those instruments.  A summary of the Company's
          commitments is as follows:
<TABLE>
<CAPTION>
                                                                         December 31,
                                                               ---------------------------------
                                                                    1998                1997
                                                               -------------      --------------
               <S>                                             <C>                <C>
               Commitments to extend credit                    $  24,022,572      $   20,312,022
               Standby letters of credit                           4,733,485           3,353,500
                                                               -------------      --------------
                                                               $  28,756,057      $   23,665,522
                                                               =============      ==============
</TABLE>

          Commitments to extend credit generally have fixed expiration
          dates or other termination clauses and may require payment
          of a fee.  Since many of the commitments are expected to
          expire without being drawn upon, the total commitment
          amounts do not necessarily represent future cash
          requirements.  The credit risk involved in issuing these
          financial instruments is essentially the same as that
          involved in extending loans to customers.  The Company
          evaluates each customer's creditworthiness on a case-by-case
          basis.  The amount of collateral obtained, if deemed
          necessary by the Company upon extension of credit, is based
          on management's credit evaluation of the customer. 
          Collateral held varies but may include real estate and
          improvements, marketable securities, accounts receivable,
          inventory, equipment, crops, and personal property.

          Standby letters of credit are conditional commitments issued
          by the Company to guarantee the performance of a customer to
          a third party.  Those guarantees are primarily issued to
          support public and private borrowing arrangements.  The
          credit risk involved in issuing letters of credit is
          essentially the same as that involved in extending loan
          facilities to customers.  Collateral held varies as
          specified above and is required in instances which the
          Company deems necessary.

          In the normal course of business, the Company is involved in
          various legal proceedings.  In the opinion of management of
          the Company, any liability resulting from such proceedings
          would not have a material effect on the Company's financial
          statements.

                                      F-24
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------

NOTE 10. COMMITMENTS AND CONTINGENT LIABILITIES (Continued)

          The Company has leased thirteen various properties and
          telephone equipment under various noncancelable agreements
          which expire between January 1, 1998 to January 8, 2011 and
          require various minimum annual rentals.  The leases related
          to properties also require the payment of property taxes,
          normal maintenance and insurance.


          The total minimum rental commitment at December 31, 1998 is due as
          follows:

             During the year ending December 31:
               1999                                          $   469,500
               2000                                              408,684
               2001                                              310,700
               2002                                              186,706
               2003                                               18,651
               Due thereafter                                     85,467
                                                             -----------
                                                             $ 1,479,708
                                                             ===========

          The total rental expense for the years ended December 31, 1998, 1997
          and 1996 was $467,546, $512,293 and $360,978, respectively.

Year 2000

          The Year 2000 issue is the result of computer programs being
          written using two digits rather than four to define the
          applicable year.  Systems that do not properly recognize the
          year "2000" could generate erroneous data or cause systems
          to fail.  The Company is heavily dependent on computer
          processing and telecommunication systems in the daily
          conduct of business activities.  In addition, the Company
          must rely on intermediaries, vendors and customers to
          appropriately modify their systems in order that all may
          continue normal operations and operate without significant
          disruptions.  The Company has conducted a review of its
          computer systems to identify the systems that could be
          affected by the Year 2000 issue.  The Company presently
          believes that, with modifications to its computer systems
          and conversions to new systems, the Year 2000 issue will not
          pose significant operational problems for the Company or
          have a material adverse effect on future operating results. 
          However, absolute assurance cannot be given that; (1) the
          modifications and conversions will remedy all deficiencies,
          (2) failure of any of the Company's systems will not have a
          material impact on operations, or (3) failure of any other
          companies' systems with whom the Company conducts business
          will not have a material impact on operations.

                                      F-25
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------

NOTE 11. CONCENTRATIONS OF CREDIT


          The banking subsidiaries originate primarily commercial,
          residential, and consumer loans to customers in their local
          communities and surrounding counties.  The ability of the
          majority of the Banks' customers to honor their contractual
          loan obligations is dependent on their local economy as well
          as the economy in the metropolitan Atlanta and Montgomery
          areas.  

          Thirty-seven percent of the Company's loan portfolio is
          concentrated in loans secured by real estate.  A substantial
          portion of these loans is in the Banks' primary market
          areas.  In addition, a substantial portion of the other real
          estate owned is located in those same markets.  Accordingly,
          the ultimate collectibility of the Company's loan portfolio
          and the recovery of the carrying amount of other real estate
          owned is susceptible to changes in market conditions in the
          Banks' primary market areas.

          The Company's loan portfolio also includes a concentration,
          51% of the total portfolio, of commercial, financial, and
          agricultural loans.  These loans represent loans made
          primarily to local businesses in the Banks' market areas.  A
          portion of these loans are small business loans and
          residential loans originated by the loan production office,
          a division of Community Bank & Trust - Habersham, which are
          outside the Banks' primary market areas.  The Company's
          lending policies require loans of all types to be adequately
          collateralized and supported by adequate cash flows.

          Other significant concentrations of credit by type of loan
          are set forth in Note 3.  The Banks, as a matter of policy,
          do not generally extend credit to any single borrower or
          group of related borrowers in excess of 25% of each
          individual Bank's statutory capital, or approximately
          $3,000,000, $1,075,000, $500,000, and $987,500 for Community
          Bank & Trust - Habersham; Jackson; Alabama; and Troup;
          respectively.


NOTE 12.  REGULATORY MATTERS


          The Banks are subject to certain restrictions on the amount
          of dividends that may be declared without prior regulatory
          approval.  At December 31, 1998, approximately $4,503,000 of
          retained earnings were available for dividend declaration
          without regulatory approval.

          The Company and Banks are subject to various regulatory
          capital requirements administered by the federal banking
          agencies.  Failure to meet minimum capital requirements can
          initiate certain mandatory, and possibly additional
          discretionary  actions by regulators that, if undertaken,
          could have a direct material effect on the financial
          statements.  Under capital adequacy guidelines and the
          regulatory framework for prompt corrective action, the
          Company and Banks must meet specific capital guidelines that<PAGE>
          involve quantitative measures of the assets, liabilities,
          and certain off-balance-sheet items as calculated under
          regulatory accounting practices.  The Company and Banks
          capital amounts and classification are also subject to
          qualitative judgments by the regulators about components,
          risk weightings, and other factors.

                                      F-26
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------


NOTE 12.  REGULATORY MATTERS (Continued)


          Quantitative measures established by regulation to ensure
          capital adequacy require the Company and the Bank to
          maintain minimum amounts and ratios of Total and Tier I
          capital to risk-weighted assets and Tier I capital to
          average assets.  Management believes, as of December 31,
          1998, the Company and the Banks meet all capital adequacy
          requirements to which they are subject.

          As of December 31, 1998, the most recent notification from
          the FDIC categorized the Banks as well capitalized under the
          regulatory framework for prompt corrective action.  To be
          categorized as well capitalized, the Banks must maintain
          minimum Total risk-based, Tier I risk-based, and Tier I
          leverage ratios as set forth in the following table.  There
          are no conditions or events since that notification that
          management believes have changed the Banks' category.
          The Company and Banks' actual capital amounts and ratios are
          presented in the following tables.
<TABLE>
<CAPTION>
                                                                                                             To Be Well
                                                                                    For Capital           Capitalized Under
                                                                                      Adequacy            Prompt Corrective
                                                              Actual                  Purposes            Action Provisions
                                                     ----------------------     -------------------    ----------------------
                                                       Amount        Ratio        Amount      Ratio      Amount        Ratio
                                                     ----------    --------     ----------  --------   ---------     --------
                                                                              (Dollars in Thousands)
                                                     ------------------------------------------------------------------------
          <S>                                        <C>             <C>        <C>           <C>      <C>             <C>
          As of December 31, 1998
            Total Capital 
                (to Risk Weighted Assets):
               Consolidated                          $   41,630      12.12%     $   27,474    8.00%    $   34,342      10.00% 
               Community Bank & Trust - Habersham    $   24,918      13.01%     $   15,321    8.00%    $   19,511      10.00% 
               Community Bank & Trust - Jackson      $    8,524      10.14%     $    6,724    8.00%    $    8,405      10.00% 
               Community Bank & Trust - Alabama      $    3,315      11.70%     $    2,267    8.00%    $    2,834      10.00% 
               Community Bank & Trust - Troup        $    4,389      14.30%     $    2,455    8.00%    $    3,069      10.00% 
            Tier I Capital                                                                                        
                (to Risk Weighted Assets):
               Consolidated                          $   37,330      10.87%     $   13,737    4.00%    $   20,605       6.00% 
               Community Bank & Trust - Habersham    $   22,521      11.76%     $    7,660    4.00%    $   11,491       6.00% 
               Community Bank & Trust - Jackson      $    7,470       8.89%     $    3,362    4.00%    $    5,043       6.00% 
               Community Bank & Trust - Alabama      $    2,960      10.44%     $    1,134    4.00%    $    1,700       6.00% 
               Community Bank & Trust - Troup        $    4,004      13.05%     $    1,228    4.00%    $    1,841       6.00% 
            Tier I Capital (to Average Assets):                                                                   
                 Consolidated                        $   37,330       8.42%     $   17,737    4.00%    $   22,171       5.00% 
               Community Bank & Trust - Habersham    $   22,521       8.58%     $   10,500    4.00%    $   13,125       5.00% 
               Community Bank & Trust - Jackson      $    7,470       6.71%     $    4,455    4.00%    $    5,569       5.00% 
               Community Bank & Trust - Alabama      $    2,960       7.19%     $    1,648    4.00%    $    2,059       5.00% 
               Community Bank & Trust - Troup        $    4,004       9.31%     $    1,721    4.00%    $    2,151       5.00% 
</TABLE>
                                      F-27
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------

NOTE 12.  REGULATORY MATTERS (Continued)
<TABLE>
<CAPTION>
                                                                                                             To Be Well
                                                                                    For Capital           Capitalized Under
                                                                                      Adequacy            Prompt Corrective
                                                              Actual                  Purposes            Action Provisions
                                                     ----------------------     -------------------    ----------------------
                                                       Amount        Ratio        Amount      Ratio      Amount        Ratio
                                                     ----------    --------     ----------  --------   ---------     --------
                                                                              (Dollars in Thousands)
                                                     ------------------------------------------------------------------------
          <S>                                        <C>             <C>        <C>           <C>      <C>             <C>
                 As of December 31, 1997
            Total Capital 
                (to Risk Weighted Assets):
               Consolidated                          $   34,644      12.43%     $   22,297    8.00%    $   27,871      10.00%
               Community Bank & Trust - Habersham    $   20,147      13.21%     $   12,201    8.00%    $   15,251      10.00%
               Community Bank & Trust - Jackson      $    6,456      11.11%     $    4,649    8.00%    $    5,811      10.00%
               Community Bank & Trust - Alabama      $    2,827      12.02%     $    1,882    8.00%    $    2,352      10.00%
               Community Bank & Trust - Troup        $    4,117      16.39%     $    2,010    8.00%    $    2,512      10.00%
            Tier I Capital
                (to Risk Weighted Assets):
               Consolidated                          $   31,441      11.28%     $   11,149    4.00%    $   16,724       6.00% 
               Community Bank & Trust - Habersham    $   18,237      11.96%     $    6,099    4.00%    $    9,149       6.00% 
               Community Bank & Trust - Jackson      $    5,726       9.86%     $    2,323    4.00%    $    3,484       6.00% 
               Community Bank & Trust - Alabama      $    2,532      10.77%     $      940    4.00%    $    1,411       6.00% 
               Community Bank & Trust - Troup        $    3,801      15.13%     $    1,005    4.00%    $    1,507       6.00% 
            Tier I Capital (to Average Assets):
                 Consolidated                        $   31,441       8.26%     $   15,226    4.00%    $   19,032       5.00% 
               Community Bank & Trust - Habersham    $   18,237       8.34%     $    8,747    4.00%    $   10,933       5.00% 
               Community Bank & Trust - Jackson      $    5,726       7.24%     $    3,164    4.00%    $    3,954       5.00% 
               Community Bank & Trust - Alabama      $    2,532       7.00%     $    1,447    4.00%    $    1,809       5.00% 
               Community Bank & Trust - Troup        $    3,801      10.58%     $    1,437    4.00%    $    1,796       5.00% 
</TABLE>



                                      F-28
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------

NOTE 13.  FAIR VALUE OF FINANCIAL INSTRUMENTS

          The following methods and assumptions were used by the
          Company in estimating its fair value disclosures for
          financial instruments.  In cases where quoted market prices
          are not available, fair values are based on estimates using
          discounted cash flow models.  Those models are significantly
          affected by the assumptions used, including the discount
          rates and estimates of future cash flows.  In that regard,
          the derived fair value estimates cannot be substantiated by
          comparison to independent markets and, in many cases, could
          not be realized in immediate settlement of the instrument. 
          The use of different methodologies may have a material
          effect on the estimated fair value amounts.  Also, the fair
          value estimates presented herein are based on pertinent
          information available to management as of December 31, 1998
          and 1997.  Such amounts have not been revalued for purposes
          of these financial statements since those dates and,
          therefore, current estimates of fair value may differ
          significantly from the amounts presented herein.


Cash, Due From Banks, Interest-Bearing Deposits in Banks, and Federal
Funds Sold:

            The carrying amounts of cash, due from banks, interest-
            bearing deposits in banks, and Federal funds sold
            approximate their fair value.

Securities:

            Fair values for securities are based on available quoted
            market prices.  The carrying values of equity securities
            with no readily determinable fair value approximate fair
            values.

Loans:

            For variable-rate loans that reprice frequently and have
            no significant change in credit risk, fair values are
            based on carrying values.  For other loans, the fair
            values are estimated using discounted cash flow models
            using current market interest rates offered for loans with
            similar terms to borrowers of similar credit quality. 
            Fair values for impaired loans are estimated using
            discounted cash flow models or based on the fair value of
            underlying collateral.

Deposits:

            The carrying amounts of demand deposits, savings deposits,
            and variable-rate certificates of deposit approximate
            their fair values.  Fair values for fixed-rate
            certificates of deposit are estimated using discounted
            cash flow models, using current market interest rates
            being offered on certificates with similar remaining
            maturities.

                                      F-29
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------


NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

Other Borrowings:

            The fair values of the Company's other borrowings are
            estimated using discounted cash flow methods based on the
            Company's current incremental borrowing rates for similar
            types of borrowing arrangements.

Accrued Interest:

            The carrying amounts of accrued interest approximate their
            fair values.

Redeemable Common Stock:

            The fair values of the Company's redeemable common stock
            approximates the recorded amounts.

Off-Balance Sheet Instruments:

            Fair values of the Company's off-balance sheet financial
            instruments are based on fees charged to enter into
            similar agreements.  However, commitments to extend credit
            and standby letters of credit do not represent a
            significant value to the Company until such commitments
            are funded.  The Company has determined that these
            instruments do not have a distinguishable fair value and
            no fair value has been assigned.

          The estimated fair values of the Company's financial
          instruments were as follows:
<TABLE>
<CAPTION>
                                                             December 31, 1998                 December 31, 1997
                                                 ---------------------------------    -----------------------------------
                                                      Carrying            Fair             Carrying            Fair
                                                       Amount             Value             Amount             Value
                                                 ---------------    --------------    ---------------    ----------------
   <S>                                           <C>                <C>               <C>                <C>
   Financial assets:
      Cash, due from banks, interest-bearing
        deposits in banks, and Federal           $    50,113,872    $   50,113,872    $    30,685,944    $    30,685,944 
        funds sold
      Securities available-for-sale                   42,525,208        42,525,208         53,282,114         53,282,114 
      Securities held-to-maturity                     30,915,014        32,173,821         28,718,651         29,557,804 
      Loans held for sale                                699,498           699,498          2,560,915          2,560,915 
      Loans                                          308,574,592       312,879,502        238,636,411        244,449,085 
      Accrued interest receivable                      5,976,235         5,976,235          4,789,175          4,789,175 

   Financial liabilities:
      Deposits                                       405,282,873       403,726,281        335,544,825        335,320,418 
      Other borrowings                                 5,808,200         5,808,200            462,299            462,299 
      Accrued interest payable                         4,313,396         4,313,396          3,133,011          3,133,011 
      Redeemable common stock                         14,253,747        14,253,747         10,621,891         10,621,891 
</TABLE>

                                      F-30
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------

NOTE 14.  SEGMENT INFORMATION

          The Company's operations have been classified into two
          reportable segments, banking and bank consulting services. 
          The banking segment involves traditional banking services
          offered through its four wholly-owned bank subsidiaries. 
          Financial Supermarkets, Inc. provides various consulting and
          licensing services to financial institutions in connection
          with the establishment of bank branches in supermarkets.  In
          connection with the establishment of a Supermarket Bank,
          Financial Supermarkets provides consulting services ranging
          from providing alternative construction designs to
          coordinating employee training.  Financial Solutions, a
          division of Financial Supermarkets, Inc. was formed to
          provide various consulting services to the financial
          institution industry including compliance, operational,
          advertising, marketing and travel related services.

          The Company's reportable segments are organizations that
          offer different products and services.  They are managed
          separately because of products and services, marketing
          strategies, and the regulatory environments in which the
          Banks operate.  In addition, the Banks geographically are
          located in the Southeast and employ similar business
          strategies and are evaluated using similar performance
          expectations.  The bank consulting segment operates
          throughout the United States.

          Total revenue by industry segment includes revenues from
          unaffiliated customers and affiliates. Revenues from
          affiliates are eliminated in consolidation.  Interest
          income, interest expenses, data processing fees, management
          fees and other various revenues and expenses between
          affiliates are recorded on the accrual basis of accounting
          consistent with similar transactions with customers outside
          the consolidated group.   In 1996, Financial Supermarkets,
          Inc. sold Supermarket Banks to affiliates recognizing gross
          profits of $128,113 which were eliminated in consolidation. 
          The current depreciation expense related to the gross profit
          for each purchase was eliminated in consolidation and the
          remaining amount will be eliminated over their estimated
          useful lives.
<PAGE>
          Selected segment information by industry segment for the
          years ended December 31, 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
                                                                                    Reportable Segments
                                                               ------------------------------------------------------------
                                                                                 Financial          All
               For the Year Ended December 31, 1998               Banking       Supermarkets       Other           Total
               -------------------------------------------     ------------    -------------   ------------    -----------
               <S>                                             <C>             <C>             <C>             <C>
               Interest income                                 $ 34,903,053    $    434,067    $      7,636    $ 35,344,756
               Interest expense                                  16,651,395              -           30,781      16,682,176
               Intersegment net interest income (expense)          (403,187)        395,551           7,636              - 
               Net interest income                               18,251,658         434,067         (23,145)     18,662,580
               Other revenue from external customers              4,185,170       9,043,292         152,523      13,380,985
               Intersegment other revenues                                -         126,195       1,451,520       1,577,715
               Depreciation and amortization                      1,476,554         132,464         264,867       1,873,885
               Provision for loan losses                          1,164,950              -               -        1,164,950
               Segment profit                                     4,505,680       3,485,106        (971,896)      7,018,890
               Segment assets                                   470,906,187      13,756,048       2,195,710     486,857,945
               Expenditures for premises and equipment            2,620,509         260,104          50,883       2,931,496
</TABLE>


                                      F-31
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------

NOTE 14. SEGMENT INFORMATION (Continued)
<TABLE>
<CAPTION>
                                                                                  Reportable Segments
                                                               -------------------------------------------------------------
                                                                                 Financial           All
               For the Year Ended December 31, 1997                Banking      Supermarkets        Other           Total
               -------------------------------------------     -------------    ------------    ------------   -------------
               <S>                                             <C>              <C>             <C>            <C>
               Interest income                                 $  28,484,716    $    360,350    $      7,515   $  28,852,581
               Interest expense                                   13,298,033              -           42,086      13,340,119
               Intersegment net interest income (expense)           (334,340)        326,825           7,515              - 
               Net interest income                                15,186,683         360,350         (34,571)     15,512,462
               Other revenue from external customers               3,517,131       8,819,917          82,082      12,419,130
               Intersegment other revenues                                -          117,221       1,365,200       1,482,421
               Depreciation and amortization                       1,203,921         129,460          65,836       1,399,217
               Provision for loan losses                             936,216              -               -          936,216
               Segment profit                                      3,480,412       2,548,043        (394,503)      5,633,952
               Segment assets                                    380,142,578       9,933,018       2,055,595     392,131,191
               Expenditures for premises and equipment             4,074,703         163,420       1,096,207       5,334,330
</TABLE>

<TABLE>
<CAPTION>
                                                                                  Reportable Segments
                                                               -------------------------------------------------------------
                                                                                 Financial           All
               For the Year Ended December 31, 1996               Banking       Supermarkets        Other           Total
               -------------------------------------------     -------------    ------------    ------------   -------------
               <S>                                             <C>             <C>              <C>            <C>
               Interest income                                 $  24,457,630   $     166,820    $      4,641   $  24,629,091
               Interest expense                                   11,336,860              -           63,365      11,400,225
               Intersegment net interest income (expense)           (162,606)        157,965           4,641              - 
               Net interest income                                13,120,770         166,820         (58,724)     13,228,866
               Other revenue from external customers               2,794,059       5,544,966          53,102       8,392,127
               Intersegment other revenues                                -          221,476       1,155,600       1,377,076
               Depreciation and amortization                         762,328         112,218          61,172         935,718
               Provision for loan losses                             757,262              -               -          757,262
               Segment profit                                      3,211,433       1,342,933        (388,335)      4,166,031
               Segment assets                                    311,705,177       9,299,430       1,200,572     322,205,179
               Expenditures for premises and equipment             3,266,025         168,461          61,207       3,495,693
</TABLE>
                                      F-32
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------


NOTE 14. SEGMENT INFORMATION (Continued)
<TABLE>
<CAPTION>
                                                                           1998             1997             1996 
                                                                      ------------    --------------    -------------
                 <S>                                                  <C>             <C>              <C>
                 Net Interest Income
                 -------------------

                 Total net interest income for reportable segments    $ 18,685,725    $   15,547,033    $  13,287,590
                 Non-reportable segment net interest income                (23,145)          (34,571)         (58,724)
                                                                      ------------    --------------    -------------
                     Total consolidated net interest income           $ 18,662,580    $   15,512,462    $  13,228,866
                                                                      ============    ==============    =============

                 Other Income
                 ------------

                 Total other income for reportable segments           $ 14,806,177    $   12,454,269    $   8,560,501
                 Non-reportable segment other income                       152,523         1,447,282        1,208,702
                 Elimination of intersegment other income               (1,577,715)       (1,482,421)      (1,377,076)
                                                                      ------------    --------------    -------------
                     Total consolidated other income                  $ 13,380,985    $   12,419,130    $   8,392,127
                                                                      ============    ==============    =============

                 Net Income
                 ----------

                 Total profit for reportable segments                 $  7,990,786    $    6,028,455    $   4,554,366
                 Non-reportable segment loss                              (971,896)         (394,503)        (388,335)
                 Elimination of intersegment (gains) losses                 12,814            12,814         (121,836)
                                                                      ------------    --------------    -------------
                      Total consolidated other income
                                                                      $  7,031,704    $    5,646,766    $   4,044,195
                                                                      ============    ==============    =============

                 Total Assets

                 Total assets for reportable segments                 $484,662,235    $  390,075,596    $ 321,004,607
                 Non-reportable segment assets                           2,195,710         2,055,595        1,200,572
                 Elimination of intersegment assets                    (26,264,505)      (15,051,675)      (6,626,265)
                                                                      ------------    --------------    -------------
                      Total consolidated assets                       $460,593,440    $  377,079,516    $ 315,578,914
                                                                      ============    ==============    =============
</TABLE>
                                      F-33
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------


NOTE 15. SUPPLEMENTAL FINANCIAL DATA

             Components of other operating expenses in excess of 1% of
             total revenue are as follows:
<TABLE>
<CAPTION>

                                                                                             December 31,
                                                                            --------------------------------------------
                                                                                1998            1997             1996
                                                                            ------------     ----------      -----------
                       <S>                                                  <C>              <C>             <C>
                       Data processing                                      $    948,644     $  385,795      $   422,188
                       Travel expenses                                           469,126        583,208          531,488
                       Office supply expenses                                    460,341        437,375          373,163
</TABLE>


NOTE 16. PARENT COMPANY ONLY FINANCIAL INFORMATION


            The following information presents the condensed balance sheets
            as of December 31, 1998 and 1997 and the statements of income
            and cash flows as of and for the years ended December 31,
            1998, 1997 and 1996:
<TABLE>
<CAPTION>

                                                               CONDENSED BALANCE SHEETS
                                                              DECEMBER 31, 1998 AND 1997
                                                                                       1998              1997
                                                                                  --------------    -------------
               <S>                                                                <C>               <C>
               Assets
                 Cash                                                             $      547,686    $     104,201 
                 Investment in subsidiaries                                           39,703,016       32,379,558 
                 Equipment                                                               923,645        1,162,677 
                 Other assets                                                            593,572          788,717 
                                                                                  --------------    -------------
                           Total assets                                           $   41,767,919    $  34,435,153 
                                                                                  ==============    =============
               Liabilities
                 Other borrowings                                                 $      808,200    $     462,299 
                 Other liabilities                                                       385,082          197,515 
                                                                                  --------------    -------------
                           Total liabilities                                           1,193,282          659,814 
                                                                                  --------------    -------------
               Redeemable common stock                                                14,253,747       10,621,891 
                                                                                  --------------    -------------
                Shareholders' equity                                                  26,320,890       23,153,448 
                                                                                  --------------    -------------
                           Total liabilities, redeemable common stock, 
                              and shareholders' equity                            $   41,767,919    $  34,435,153 
                                                                                  ==============    =============
</TABLE>
                                      F-34
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------

NOTE 16.  PARENT COMPANY ONLY FINANCIAL INFORMATION (Continued)
<TABLE>
<CAPTION>
                                                               CONDENSED STATEMENTS OF INCOME
                                                        YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

                                                                   1998               1997               1996
                                                              ------------       ------------       ------------
        <S>                                                   <C>                <C>                <C>
        Income
          Dividends from subsidiaries                         $  1,250,000       $  1,120,000       $     800,000
          Interest                                                   7,636              7,515               4,641
          Other income                                           1,506,545          1,447,282           1,208,703
                                                              ------------       ------------       -------------
                                                                 2,764,181          2,574,797           2,013,344
                                                              ------------       ------------       -------------

        Expense
          Interest                                                  30,781             42,086              63,365
          Salaries and employee benefits                         1,335,771          1,174,798           1,109,826
          Equipment expense                                        349,484            306,851             213,985
          Other expense                                          1,027,698            425,565             367,183
                                                              ------------       ------------       -------------
                                                                 2,743,734          1,949,300           1,754,359
                                                              ------------       ------------       -------------


                  Income before income tax  benefits and
                    equity in undistributed earnings of             20,447            625,497             258,985 
                    subsidiaries

        Income tax benefits                                       (280,000)          (100,000)           (152,680)
                                                              ------------       ------------       -------------
                  Income before equity in undistributed
                  income of subsidiaries                           300,447            725,497             411,665

        Equity in undistributed income of subsidiaries           6,727,261          4,917,273           3,754,367
                                                              ------------       ------------       -------------

                  Net income                                  $  7,027,708       $  5,642,770       $   4,166,032
                                                              ============       ============       =============
</TABLE>

                                      F-35
<PAGE>
<PAGE>

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

------------------------------------------------------------------------------


NOTE 16.  PARENT COMPANY ONLY FINANCIAL INFORMATION (Continued)
<TABLE>
<CAPTION>

                                                              CONDENSED STATEMENTS OF CASH FLOWS
                                                         YEARS ENDED DECEMBER 31, 1998 ,1997 AND 1996

                                                                     1998              1997               1996
                                                                -------------     -------------     --------------
        <S>                                                     <C>               <C>               <C>
        OPERATING ACTIVITIES
          Net income                                            $   7,027,708     $   5,642,770     $    4,166,032 

          Adjustments to reconcile net income to net
             cash provided by operating activities:
             Depreciation and amortization                            270,799            65,836             61,172 
             Undistributed earnings of subsidiaries                (6,727,261)       (4,917,273)        (3,754,367)
             Other operating activities                               367,725          (518,268)            60,433 
                                                                -------------     -------------     --------------

                    Net cash provided by operating activities         938,971           273,065            533,270 
                                                                -------------     -------------     --------------
        INVESTING ACTIVITIES

          Purchases of premises and equipment                         (22,856)       (1,115,771)           (61,207)
          Investment in subsidiary                                   (500,000)               -          (1,000,000)
          Disposal of premises and equipment                               -             19,564            167,979 
                                                                -------------     -------------     --------------
                    Net cash used in investing activities            (522,856)       (1,096,207)          (893,228)
                                                                -------------     -------------     --------------

        FINANCING ACTIVITIES
          Increase in other borrowings                                500,000                -           1,616,399 
          Repayment of other borrowings                              (154,099)         (154,100)        (1,786,939)
          Proceeds from the issuance of common stock                       -            924,700          1,003,795 
          Dividends paid                                             (318,531)         (285,728)          (261,023)
                                                                -------------     -------------     --------------

                    Net cash provided by financing activities          27,370           484,872            572,232 
                                                                -------------     -------------     --------------

        Net increase (decrease) in cash                               443,485          (338,270)           212,274 

        Cash at beginning of year                                     104,201           442,471            230,197 
                                                                -------------     -------------     --------------

        Cash at end of year                                     $     547,686     $     104,201     $      442,471 
                                                                =============     =============     ==============
       SUPPLEMENTAL DISCLOSURE
          Cash paid during the year for interest                $      30,781     $      42,086     $       63,365 

        NONCASH TRANSACTION
          Unrealized (gains) losses on securities available-    $      96,196     $    (204,562)    $       (9,262)
           for-sale
</TABLE>
                                      F-36
<PAGE>

                            SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
Report on Form 10-K to be signed on its behalf by the, thereunto duly
authorized, in the City of Cornelia, State of Georgia, on the 25th of
March, 1999. 

                              COMMUNITY BANKSHARES, INC.
                              By:  /s/ J. Alton Wingate
                                   J. Alton Wingate 
                                   President and Chief
                                   Executive Officer

                          POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS that each person whose signature
appears below constitutes and appoints J. Alton Wingate or Harry L.
Stephens and either of them (with full power in each to act alone), as
true and lawful attorneys-in-fact, with full power of substitution,
for him and in his name, place and stead, in any and all capacities,
to sign any amendments to this Report on Form 10-K and to file the
same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorney-in-fact, or their
substitute or substitutes, may lawfully do or cause to be done by
virtue thereof.

     Pursuant to the requirements of the Securities Act of, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 25th day of March, 1999.

     Signature                                    Title
     ---------                                    -----
/s/ J. Alton Wingate                    President and Chief Executive
J. Alton Wingate                        Officer (Principal Executive
                                        Officer) and Director

/s/ Steven C. Adams                     Director
Steven C. Adams

/s/ Edwin B. Burr                       Director
Edwin B. Burr

/s/ Harry H. Purvis                     Director
Harry H. Purvis

/s/ H. Calvin Stovall, Jr.              Director
H. Calvin Stovall, Jr.

/s/ Dean C. Swanson                     Director
Dean C. Swanson

/s/ George D. Telford                   Director
George D. Telford

/s/ Harry L. Stephens                   Executive Vice President and
Harry L. Stephens                       Chief Financial Officer
                                        (Principal Financial and
                                        Accounting Officer)


<PAGE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT
TO SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT.

     The Registrant has furnished annual reports and proxy material to
security holders, and copies of such documents have been furnished to
the Commission for its information.



<PAGE>
                                 EXHIBIT INDEX


Exhibit No.                Description

10.7      Amended and Restated Revolving Credit/Term Loan Agreement
          between the Registrant and SunTrust Bank dated July 31,
          1998.

21.0      List of Subsidiaries of Registrant

24.0      A Power of Attorney is set forth on the signature pages to
          this Form 10-K.

27        Financial Data Schedule (for SEC use only).