Filed Pursuant to Rule 424(b)(3)
                                                     Registration No. 333-819000



   PROXY STATEMENT                    PROXY STATEMENT / PROSPECTUS
   RIDGEWAY BANCSHARES, INC.          COMMUNITY BANKSHARES, INC.

                  MERGER PROPOSED - YOUR VOTE IS VERY IMPORTANT

         The boards of directors of Ridgeway  Bancshares,  Inc.,  and  Community
Bankshares,  Inc., have agreed that Community  Bankshares will acquire  Ridgeway
Bancshares in a merger.  If the merger is completed,  each outstanding  share of
Ridgeway  Bancshares  common stock will be exchanged  for 25 shares of Community
Bankshares  common  stock plus  $100.00  cash,  subject to the right of Ridgeway
Bancshares  shareholders  to make an election  to receive  more or less stock or
cash.

         Based on the $14.32  closing  price per share of  Community  Bankshares
common stock on March 1, 2002,  the value of 25 shares of  Community  Bankshares
common  stock was  $358.  Because  the  number  of  shares  Ridgeway  Bancshares
shareholders  will  receive in the  merger is fixed,  the value of the shares of
Community Bankshares common stock to be received in the merger will fluctuate as
the price of Community  Bankshares  common stock  changes.  We encourage  you to
obtain current market price  quotations for Community  Bankshares  common stock.
Community Bankshares common stock is traded on the American Stock Exchange under
the  symbol  "SCB."  Ridgeway  Bancshares  common  stock  is  not  traded  on an
established public trading market.

         The merger  cannot be  completed  unless the  shareholders  of Ridgeway
Bancshares and the  shareholders of Community  Bankshares  approve the agreement
and plan of merger.  Ridgeway  Bancshares  and  Community  Bankshares  have each
scheduled a special meeting for their shareholders to vote on these matters.

         The board of directors of Ridgeway  Bancshares  unanimously  recommends
that the holders of Ridgeway  Bancshares  common  stock vote for approval of the
Agreement and Plan of Merger.

         The board of directors of Community Bankshares  unanimously  recommends
that the holders of Community  Bankshares  common stock vote for approval of the
Agreement and Plan of Merger.

         Whether or not you plan to attend your special meeting, please take the
time to complete, sign and mail the enclosed proxy card to us so your shares can
be voted if you are absent.

         You should consider  carefully the risk factors beginning on page 10 of
this Proxy Statement /Prospectus.
                            ------------------------

         Neither the Securities and Exchange Commission nor any state securities
commission has approved or  disapproved  of these  securities or passed upon the
adequacy or accuracy of this document.  Any  representation to the contrary is a
criminal offense.
                            ------------------------

         The shares of  Community  Bankshares  stock are not  savings  accounts,
deposits or other  obligations  of any bank or savings  association  and are not
insured by the Federal Deposit Insurance  Corporation or any other  governmental
agency. Stock is subject to investment risks, including loss of value.

The date of this Proxy  Statement/Prospectus is March 4, 2002. It is first being
mailed on or about March 8, 2002.






                                TABLE OF CONTENTS




                                                                                                              
SUMMARY...........................................................................................................1
         The Companies............................................................................................1
         The Merger...............................................................................................1
         Comparative Per Share Market Price Information...........................................................1
         Reasons For The Merger...................................................................................2
         Ridgeway Bancshares Special Meeting......................................................................2
         Community Bankshares Special Meeting.....................................................................2
         Recommendations To Shareholders..........................................................................3
         Voting Rights At The Special Meetings....................................................................3
         Shareholder Vote Required................................................................................3
         Share Ownership Of Management And Certain Shareholders...................................................3
         Effective Time...........................................................................................3
         Exchange Of Stock Certificates...........................................................................3
         Regulatory Approvals And Other Conditions To Completion Of The Merger....................................4
         Waiver, Amendment and Termination Of The Merger Agreement................................................4
         Federal Income Tax Consequences..........................................................................4
         Accounting Treatment.....................................................................................5
         Interests Of Certain Persons In The Merger That May Be Different From Yours..............................5
         Dissenting Shareholders Of Ridgeway Bancshares...........................................................5
         Differences In Shareholders' Rights......................................................................5
         Comparative Per Share Data...............................................................................6
         Selected Financial Data..................................................................................7
RISK FACTORS.....................................................................................................10
         General.................................................................................................10
         Risks Relating To The Merger............................................................................10
         Post Merger Risks.......................................................................................11
THE RIDGEWAY BANCSHARES SPECIAL MEETING..........................................................................12
         General.................................................................................................12
         Record Date; Vote Required..............................................................................13
THE COMMUNITY BANKSHARES SPECIAL MEETING.........................................................................14
         General.................................................................................................14
         Record Date; Vote Required..............................................................................14
THE MERGER.......................................................................................................15
         General.................................................................................................15
         Background Of The Merger................................................................................16
         Ridgeway Bancshares' Reasons For The Merger.............................................................17
         Community Bankshares' Reasons For The Merger............................................................18
         Effective Time Of The Merger............................................................................19
         Distribution Of Community Bankshares Stock Certificates And Cash Payments...............................19
         Conditions To Completion Of The Merger..................................................................20
         Regulatory Approvals....................................................................................21
         Waiver, Amendment, And Termination Of The Merger Agreement..............................................21
         Management Following The Merger.........................................................................23
         Interests Of Some Persons In The Merger.................................................................31
         Dissenting Shareholders Of Ridgeway Bancshares..........................................................31
         Federal Income Tax Consequences Of The Merger...........................................................33
         Accounting Treatment....................................................................................35
         Expenses And Fees.......................................................................................35
         Resales Of Community Bankshares Common Stock............................................................36

                                       i


EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS...................................................................36
         Antitakeover Provisions Generally.......................................................................37
         Authorized Capital Stock................................................................................37
         Amendment Of Articles Of Incorporation And Bylaws.......................................................38
         Classified Board Of Directors And Absence Of Cumulative Voting..........................................38
         Removal Of Directors....................................................................................39
         Indemnification.........................................................................................39
         Shareholder Nominations.................................................................................40
         Mergers, Consolidations, Exchanges, Sale Of Assets Or Dissolution.......................................40
         Quorum..................................................................................................40
         Statutory Matters.......................................................................................40
COMPARATIVE MARKET PRICES AND DIVIDENDS..........................................................................41
INFORMATION ABOUT RIDGEWAY BANCSHARES............................................................................42
         Business And Properties.................................................................................43
         Legal Proceedings.......................................................................................43
         Management..............................................................................................44
         Management Compensation.................................................................................45
         Transactions With Management............................................................................46
         Voting Securities And Principal Shareholders............................................................46
         Management's Discussion And Analysis Of Financial Condition And Results Of Operations...................46
INFORMATION ABOUT COMMUNITY BANKSHARES...........................................................................65
         General.................................................................................................65
         Description of Properties...............................................................................66
         Legal Proceedings.......................................................................................67
         Management's Discussion and Analysis of Financial Condition and Results of Operations...................67
RECENT DEVELOPMENTS..............................................................................................95
SUPERVISION AND REGULATION.......................................................................................96
         Regulation Of Bank Holding Companies....................................................................97
         Capital Adequacy Guidelines For Bank Holding Companies And Banks........................................98
         Payment Of Dividends....................................................................................98
         Transactions By Bank Holding Companies With Their Affiliates............................................99
         FDIC Insurance Assessments..............................................................................99
         Regulation Of The Banks.................................................................................99
         Other Safety And Soundness Regulations.................................................................100
         Interstate Banking.....................................................................................100
         Recent Legislation.....................................................................................101
         Fiscal And Monetary Policy.............................................................................102
DESCRIPTION OF COMMUNITY BANKSHARES COMMON STOCK................................................................102
SHAREHOLDER PROPOSALS...........................................................................................103
FORWARD LOOKING STATEMENTS......................................................................................103
EXPERTS.........................................................................................................104
WHERE YOU CAN FIND MORE INFORMATION.............................................................................104

INDEX TO FINANCIAL STATEMENTS...................................................................................F-1
APPENDIX A-Agreement and Plan of Merger.........................................................................A-1
APPENDIX B-Copy of Chapter 13, South Carolina Business Corporation Act,  pertaining to dissenters' rights.......B-1



                                       ii




                                     SUMMARY

         This  summary   highlights   selected   information   from  this  Proxy
Statement/Prospectus.  It  does  not  contain  all of the  information  that  is
important to you. You should  carefully read this entire  document and all other
documents to which we refer in this  document in order to  understand  fully the
merger  and to obtain a more  complete  description  of the  legal  terms of the
merger.  See "Where You Can Find More Information" (page 104). Each item in this
summary  includes  a  page  reference  that  directs  you  to  a  more  complete
description in this document of the topic discussed.

The Companies (Pages 42 And 65)

RIDGEWAY BANCSHARES, INC.
100 Palmer Street
Ridgeway, South Carolina, 29130
(803) 337-2251

         Ridgeway  Bancshares is  incorporated  in South  Carolina and is a bank
holding company.  Ridgeway  Bancshares owns Bank of Ridgeway,  a commercial bank
which serves  customers  who are  primarily  located in  Fairfield  and northern
Richland Counties.  As of September 30, 2001, Ridgeway  Bancshares' total assets
were about $76.7 million,  deposits were about $64.9 million,  and shareholders'
equity was about $8.6 million.

COMMUNITY BANKSHARES, INC.
791 Broughton Street
Orangeburg, South Carolina 29115
(803) 535-1060

         Community  Bankshares is  incorporated  in South Carolina and is a bank
holding company. Through its subsidiaries, Community Bankshares provides banking
and other financial  services.  Community  Bankshares has banking  operations in
Orangeburg,  Sumter and Florence  Counties and mortgage  origination  offices in
Richland,  Sumter and Anderson  Counties.  As of September  30, 2001,  Community
Bankshares'  total assets were about $292.0  million,  deposits  were about $233
million, and shareholders' equity was about $25.5 million.

The Merger (Page 15)

         If we complete the merger,  Community  Bankshares will be the surviving
corporation.  When the merger is  completed,  if you are a  Ridgeway  Bancshares
shareholder,  you will  receive  25 shares of  Community  Bankshares  stock plus
$100.00  in cash  for each  share of  Ridgeway  Bancshares  stock  that you own.
Individual  Ridgeway  Bancshares  shareholders  will have the right  until after
completion  of the merger to elect to receive more or less stock or cash. If you
make this  election  you may not  receive  as much  stock or cash as you  elect,
depending upon the elections made by other Ridgeway Bancshares  shareholders and
the  total  Community  Bankshares  stock and cash  available  which are fixed at
1,000,000  shares of stock and  $4,000,000 in cash.  In any event,  you will not
receive any fraction of a share of Community  Bankshares common stock.  Instead,
you will  receive  a cash  payment  for any  fraction  of a share  of  Community
Bankshares common stock to which you may become entitled.

         If you are a Ridgeway  Bancshares  shareholder and you elect to dissent
from the merger under South Carolina law and follow the required procedures, you
will receive a cash payment for your shares of Ridgeway  Bancshares common stock
instead of receiving any Community  Bankshares common stock in the merger.  More
information about your rights to dissent from the merger, and the procedures you
must  follow  should you choose to do so, is  included  under the  heading  "The
Merger -- Dissenting  Shareholders of Ridgeway Bancshares" on page 31. Community
Bankshares shareholders do not have the right to dissent from the merger.




                                       1




         We   have    attached    the   merger    agreement    to   this   Proxy
Statement/Prospectus  as  Appendix  A.  We  encourage  you to  read  the  merger
agreement. It is the legal document that establishes the terms and conditions of
the merger.

Comparative Per Share Market Price Information (Page 41)

         Shares  of  Community  Bankshares  are  traded  on the  American  Stock
Exchange under the symbol "SCB." Shares of Ridgeway Bancshares are not quoted on
any  established  market.  The following table sets forth the last sale price of
Community  Bankshares  common  stock,  the last  known  sale  price of  Ridgeway
Bancshares common stock, and the equivalent per share price (as explained below)
of Ridgeway  Bancshares  common stock as of November 20, 2001,  the last trading
day immediately preceding public announcement of the merger, and March __, 2002,
the   latest   practicable   date   prior   to  the   mailing   of  this   Proxy
Statement/Prospectus:



                                                                                          Equivalent Per Share Price
                                   Community Bankshares            Ridgeway Bancshares      of Ridgeway Bancshares
   Market Price per Share At:           Common Stock               Common Stock                    Common Stock
   --------------------------           ------------               ------------                    ------------

                                                                                            
November 20, 2001                         $11.95                       $307.00*                      $398.75
March 1, 2002                             $14.32                              **                     $458.00
----------------------

*Sale date was August 2, 2001. **No sale has been reported since August 2, 2001.

         The equivalent per share price of Ridgeway  Bancshares common stock is
the market value of the  consideration  that  Ridgeway  Bancshares  shareholders
would have received if the merger had been  consummated  on the stated dates for
each share of Ridgeway Bancshares common stock based on the exchange ratio of 25
shares plus $100.00 in cash per share. Of course, even though the exchange ratio
is fixed, the market price of Community  Bankshares  common stock will fluctuate
prior to and after  completion  of the  merger.  Therefore,  you  should  obtain
current stock price quotations for Community Bankshares common stock.

Reasons For The Merger (Pages 17 and 18)

         Ridgeway  Bancshares and Community  Bankshares  believe that the merger
will result in a company with expanded  opportunities for profitable  growth. In
addition,  we anticipate that the combined resources of Ridgeway  Bancshares and
Community  Bankshares will improve Bank of Ridgeway's  ability to compete in its
market area.

         To review  the  background  of and  reasons  for the  merger in greater
detail, please see the discussion under the headings "The Merger - Background of
the Merger," "The Merger - Ridgeway Bancshares' Reasons for the Merger" and "The
Merger - Community Bankshares' Reasons for the Merger" on pages 16, 17 and 18.

Ridgeway Bancshares Special Meeting (Page 12)

         The  Ridgeway  Bancshares  special  meeting  will be  held at  Ridgeway
Bancshares' main office, 100 Palmer Street, Ridgeway, South Carolina,  29130, at
3:00 p.m.  on  Wednesday,  April 10,  2002.  At the  special  meeting,  Ridgeway
Bancshares  shareholders  will be asked to approve the merger  agreement and the
merger.

Community Bankshares Special Meeting (Page 14)

         The Community Bankshares special meeting will be held in the board room
of the  Orangeburg  National  Bank branch at 791 Broughton  Street,  Orangeburg,
South  Carolina,  29115,  at 3:00 p.m. on Monday,  April 8, 2002. At the special
meeting,  Community Bankshares  shareholders will be asked to approve the merger
agreement and the merger.




                                       2



Recommendations To Shareholders (Pages 18 and 19)

         The Ridgeway  Bancshares and Community  Bankshares  boards of directors
have approved the merger agreement and the merger and believe that the merger is
fair to their respective shareholders and in their best interests.  The board of
directors  of your  company  unanimously  recommends  that  you vote  "FOR"  the
proposal to approve the merger agreement and the merger.

Voting Rights At The Special Meetings (Pages 13 and 14)

         You can vote at the Ridgeway  Bancshares  special  meeting if you owned
Ridgeway  Bancshares  common  stock as of the close of business on February  28,
2002, the record date. On that date, 40,000 shares of Ridgeway Bancshares common
stock were outstanding and therefore are allowed to vote at the special meeting.
You will be able to cast one vote for each share of Ridgeway  Bancshares  common
stock you owned on February 28, 2002.

         You can vote at the Community  Bankshares  special meeting if you owned
Community  Bankshares  common  stock as of the close of  business on January 31,
2002, the record date. On that date,  3,299,674  shares of Community  Bankshares
common stock were  outstanding  and therefore are allowed to vote at the special
meeting.  You  will be able to  cast  one  vote  for  each  share  of  Community
Bankshares common stock you owned on January 22, 2002.

Shareholder Vote Required (Page 13 and 14)

         To approve  the  merger,  shareholders  who hold on the  record  date a
two-thirds  majority of the  outstanding  shares of Ridgeway  Bancshares  common
stock entitled to vote and shareholders who hold on the record date a two-thirds
majority of the outstanding shares of Community Bankshares common stock entitled
to vote must vote for the merger  agreement and the merger.  If you do not vote,
this will have the same effect as a vote against the merger.

Share Ownership Of Management And Certain Shareholders (Page 14)

         All  together,   the  directors  and  executive  officers  of  Ridgeway
Bancshares,  their  immediate  family members and entities they control can vote
13,519  shares  (approximately  33.8% of the  outstanding  shares) of the shares
entitled  to be  voted  at the  Ridgeway  Bancshares  special  meeting  and  the
directors and executive officers of Community Bankshares, their immediate family
members and entities they control can vote 888,714 shares  (approximately  26.9%
of the  outstanding  shares) of the shares entitled to be voted at the Community
Bankshares  special  meeting.  The directors and executive  officers of Ridgeway
Bancshares and Community  Bankshares  have agreed to vote all of the shares over
which they have voting  authority  (other than as a  fiduciary)  in favor of the
merger.

Effective Time (Page 19)

         The merger will become  final at the time  specified in the Articles of
Merger to be filed with the  Secretary of State of the State of South  Carolina.
If Ridgeway Bancshares and Community Bankshares  shareholders approve the merger
at the special meetings,  and all required regulatory approvals are obtained, we
currently anticipate that the merger will be completed during the second quarter
of 2002. Ridgeway Bancshares and Community  Bankshares cannot assure you that we
can obtain the necessary  shareholder and regulatory approvals or that the other
conditions to completion of the merger can or will be satisfied.

Exchange Of Stock Certificates (Page 19)

         Promptly  after  the  merger  is  completed,  if  you  are  a  Ridgeway
Bancshares  shareholder  you will  receive a letter and  instructions  on how to
surrender your Ridgeway  Bancshares stock certificates in exchange for Community
Bankshares stock  certificates and cash and how to elect to receive more or less
stock or cash and the  deadline  for  making  such  election.  You will  need to
carefully  review and complete  these  materials  and return them as  instructed
along with your stock  certificates  for Ridgeway  Bancshares  common stock. You
should  not  send  Ridgeway  Bancshares,   Community  Bankshares,  or  Community
Bankshares'  transfer  agent any stock  certificates  until  you  receive  these
instructions.



                                       3


Regulatory  Approvals  And Other  Conditions  To Completion Of The Merger (Pages
20 and 21)

         Community  Bankshares is required to notify and obtain  approvals  from
government regulatory agencies before the merger may be completed, including the
Federal Reserve and other federal and state banking  regulators.  We expect that
Community  Bankshares  will obtain all  required  regulatory  approvals,  but we
cannot assure you that these regulatory approvals will be obtained.

         In addition to the required  regulatory  approvals,  the merger will be
completed only if conditions,  including,  but not limited to the following, are
met or, if waivable, waived:

         o        Ridgeway  Bancshares  shareholders  and  Community  Bankshares
                  shareholders  approve the merger  agreement  and the merger at
                  the special meetings;

         o        Ridgeway  Bancshares and Community  Bankshares each receive an
                  opinion of counsel  that the merger will qualify as a tax-free
                  reorganization; and

         o        Neither  Community  Bankshares  nor  Ridgeway  Bancshares  has
                  breached in any material respect any of its representations or
                  obligations under the merger agreement.

         In addition to these conditions, the merger agreement, attached to this
Proxy  Statement/Prospectus  as Appendix A, describes other conditions that must
be met before the merger may be completed.

         In cases where the law permits, either Community Bankshares or Ridgeway
Bancshares  could elect to waive a  condition  that has not been  satisfied  and
complete the merger although it is entitled not to. We cannot be certain whether
or when any of the conditions we have listed will be satisfied (or waived, where
permissible), or that the merger will be completed.

Waiver, Amendment and Termination Of The Merger Agreement (Page 21)

         Community Bankshares and Ridgeway Bancshares may agree to terminate the
merger  agreement  and elect not to  complete  the merger at any time before the
merger is completed.

         Each of the parties also can  terminate  the merger  agreement in other
circumstances,  including  if the merger is not  completed by December 31, 2002.
However,  a party may not terminate the merger  agreement for this reason if the
merger has not been completed because of a breach of the merger agreement by the
party seeking termination.

         In addition,  the parties may also  terminate  the merger  agreement if
other circumstances occur which are described in the agreement, attached to this
Proxy Statement/Prospectus as Appendix A.

         The  merger  agreement  may be  amended  by the  written  agreement  of
Ridgeway Bancshares and Community  Bankshares.  The parties may amend the merger
agreement without shareholder approval, even if Ridgeway Bancshares shareholders
or Community Bankshares  shareholders have already approved the merger. However,
Ridgeway  Bancshares  shareholders and Community  Bankshares  shareholders  must
approve any amendments  that would modify,  in a material  respect,  the type or
amount of consideration to be paid and received in the merger.

         Under some circumstances, if the merger is not consummated and if other
corporate transactions occur with respect to Ridgeway Bancshares before November
20, 2002, Ridgeway Bancshares may become obligated to pay a $300,000 termination
fee to Community Bankshares.

Federal Income Tax Consequences (Page 33)

         We expect that Community Bankshares shareholders will not recognize any
gain or loss for U.S.  federal income tax purposes and that Ridgeway  Bancshares


                                       4


shareholders  will not recognize  any gain or loss for U. S. federal  income tax
purposes to the extent that they  exchange  their shares of Ridgeway  Bancshares
common stock for shares of Community  Bankshares common stock in the merger, but
that they will recognize gain or loss in connection with cash received.  We have
conditioned  the merger on our receipt of a legal  opinion that this will be the
case, but this opinion will not bind the Internal Revenue  Service,  which could
take a different view.

         The tax  treatment  applicable  to the receipt of Community  Bankshares
common stock may not apply to some Ridgeway Bancshares  shareholders,  including
the types of Ridgeway Bancshares shareholders discussed on page __, and will not
apply to any Ridgeway Bancshares  shareholder who dissents from the merger under
South  Carolina law. The extent to which cash received  would result in either a
capital  gain or loss or ordinary  income or loss will depend on the  individual
circumstances of each Ridgeway  Bancshares  shareholder.  Determining the actual
tax  consequences  of the merger to you can be complicated.  These  consequences
will  depend on your  specific  situation  and many  variables  not  within  our
control. You should consult your own tax advisor for a full understanding of the
merger's tax consequences.

Accounting Treatment (Page 35)

         Community  Bankshares  expects to account  for the merger as a purchase
transaction for accounting and financial  reporting  purposes,  meaning that the
assets  and  liabilities  of  Ridgeway  Bancshares  will be  recorded  at  their
estimated fair values and added to those of Community Bankshares. Therefore, the
financial  statements  of  Community  Bankshares  issued  after the merger  will
reflect  these  values  from  Ridgeway  Bancshares  and  will  not  be  restated
retroactively  to  reflect  the  historical  financial  position  or  results of
operations of Ridgeway Bancshares.

Interests  Of Certain  Persons In The Merger  That May Be  Different  From Yours
(Page 31)

         Some of the officers and directors of Ridgeway  Bancshares have or will
receive employment contracts that provide them with interests in the merger that
are  different  from,  or in addition to, their  interests  as  shareholders  of
Ridgeway  Bancshares.  In  addition,  members of Ridgeway  Bancshares'  board of
directors  and its  officers are  entitled to  indemnification  under the merger
agreement.  The  Ridgeway  Bancshares  board  of  directors  was  aware of these
interests and considered them in approving and recommending the merger.

         For  more  information  about  these  matters,   please  refer  to  the
discussion  under the  heading  "The  Merger-Interests  of Some  Persons  in the
Merger" on page 31.

Dissenting Shareholders Of Ridgeway Bancshares (Page 31)

         South  Carolina  law permits  shareholders  of Ridgeway  Bancshares  to
dissent from the merger and to have the fair value of their stock appraised by a
court  and  paid in cash.  To do this,  you  must  follow  required  procedures,
including the filing of certain  notices and refraining  from voting your shares
in favor of the merger. If you dissent from the merger,  your shares of Ridgeway
Bancshares common stock will not be exchanged for shares of Community Bankshares
common stock plus cash in the merger, and your only right will be to receive the
appraised value of your shares in cash.

         Community Bankshares shareholders do not have the right to dissent from
the merger.

Differences In Shareholders' Rights (Page 36)

         When the merger is  completed,  if you were a  shareholder  of Ridgeway
Bancshares you will  automatically  become a Community  Bankshares  shareholder,
unless  you  receive  all cash in the  merger  as a result  of  exercising  your
dissenters'  rights or if you elect to and receive all cash in exchange for your
Ridgeway  Bancshares  shares.  The rights of Community  Bankshares  shareholders
differ from the rights of Ridgeway Bancshares  shareholders in significant ways.
Many of these  differences  have to do with provisions in Community  Bankshares'
articles of incorporation  and bylaws.  Some of these provisions are intended to
make a  takeover  of  Community  Bankshares  more  difficult  if  the  Community
Bankshares board of directors does not approve it.




                                       5



Comparative Per Share Data

         The following table shows information  about Community  Bankshares' and
Ridgeway  Bancshares'  income per share,  dividends per share and book value per
share, and similar information reflecting the merger of Community Bankshares and
Ridgeway  Bancshares  (which is  referred  to as "pro  forma"  information).  In
presenting the comparative pro forma  information for the time periods shown, we
assumed  that  Community  Bankshares  and  Ridgeway  Bancshares  had been merged
throughout those periods.

         In presenting the  comparative pro forma  information,  we also assumed
that Community Bankshares will record Ridgeway Bancshares assets and liabilities
at their  estimated  fair values and add them to the assets and  liabilities  of
Community  Bankshares for accounting and financial  reporting purposes (a method
which is referred to as the "purchase"  method of accounting).  No adjustment to
income  was made to  reflect  the  effect  of  paying  $100 in cash per share of
Ridgeway Bancshares common stock at the beginning of the period.

         The  information  listed as " pro forma  equivalent  " was  computed by
multiplying  the pro forma combined  amounts by the exchange ratio of 25 shares.
It is intended to reflect the fact that Ridgeway Bancshares shareholders will be
receiving  25 shares of  Community  Bankshares  common  stock for each  share of
Ridgeway Bancshares common stock exchanged in the merger, plus $100.00 in cash.

         The pro forma information,  while helpful in illustrating the financial
attributes  of the  combined  company  under  one set of  assumptions,  does not
attempt to predict or suggest future results.  Also, the information we have set
forth for the nine-month  period ended September 30, 2001 does not indicate what
the results will be for the full 2001 fiscal year or any other time period.

         The  information  in the  following  table is  based on the  historical
financial  information  of Community  Bankshares  and Ridgeway  Bancshares.  See
"Index to Financial Statements" on page F-1.



                                       6






                                                                                       Nine Months Ended               Year ended
                                                                                         September 30                 December 31
                                                                                         ------------                 -----------
                                                                                             2001                         2000
                                                                                             ----                         ----
                                                                                          (Unaudited)              (Unaudited except
                                                                                                                      historical)

Net Income Per Common Share
                                                                                                             
Community Bankshares historical ................................................         $     0.87                $     0.99
Community Bankshares historical - diluted ......................................               0.87                      0.98
Ridgeway Bancshares historical .................................................              19.81                     25.72
Ridgeway Bancshares historical - diluted .......................................              19.81                     25.72
Community Bankshares and Ridgeway Bancshares
     pro forma combined(1) .....................................................               0.88                      1.04
Community Bankshares and Ridgeway Bancshares
     pro forma combined - diluted(1) ...........................................               0.88                      1.03
Ridgeway Bancshares pro forma equivalent(2) ....................................              22.00                     25.20
Ridgeway Bancshares pro forma equivalent - diluted(2) ..........................              22.00                     25.15

Dividends Declared Per Common Share
Community Bankshares historical ................................................               0.21                      0.22
Ridgeway Bancshares historical .................................................               4.00                      7.00
Ridgeway Bancshares pro forma equivalent(3) ....................................               4.75                      5.50

Book Value Per Common Share (Period End)
Community Bankshares historical ................................................               7.97                      7.23
Ridgeway Bancshares historical .................................................             214.93                    196.00
Community Bankshares and Ridgeway Bancshares pro forma combined(1) ............                8.12                      8.20
Ridgeway Bancshares pro forma equivalent(2) ....................................             203.00                    205.00

---------------
         (1)  Represents  the  combined  results  of  Community  Bankshares  and
Ridgeway Bancshares as if the merger were completed on January 1, 2000, and were
accounted for as a purchase.

         (2)  Represents  pro  forma  combined  information  multiplied  by  the
exchange ratio of 25 shares of Community  Bankshares common stock for each share
of Ridgeway Bancshares common stock.

         (3)  Represents  historical  dividends  declared per share by Community
Bankshares multiplied by the exchange ratio of 25 shares of Community Bankshares
common stock for each share of Ridgeway Bancshares common stock.

Selected Financial Data

         The following tables show summarized historical financial data for each
of Community  Bankshares and Ridgeway Bancshares and proforma financial data for
both of them combined.

         The  information  in the  following  tables is based on the  historical
financial  information of Community Bankshares and Ridgeway  Bancshares.  All of
the summary  financial  information  provided in the following  tables should be
read in connection with this historical financial  information and with the more
detailed financial information included in this Proxy Statement/Prospectus.  The
historical  financial  information  as of  or  for  the  interim  periods  ended
September 30, 2001 and 2000 has not been audited and in the respective  opinions
of management  reflects all  adjustments  (consisting  only of normal  recurring
adjustments) necessary to a fair presentation of such data.




                                       7


           Selected Historical Financial Data of Community Bankshares



                                                Nine Months Ended
                                                  September 30,                           Year ended December 31,
                                                  -------------                           -----------------------
                                                2001         2000         2000         1999         1998         1997        1996
                                                ----         ----         ----         ----         ----         ----        ----
Financial Condition (1)                                     (Dollar amounts in thousands, except per share data)
                                                                                                     
Investment securities ...................   $  35,151    $  47,948    $  53,566    $  43,935    $  34,148    $  32,452    $  25,787
Net loans  receivable ...................     216,364      184,137      192,653      155,153      116,336       90,811       67,953
Total assets ............................     292,281      259,844      273,323      228,030      182,281      134,574      105,461
Total deposits ..........................     233,791      211,291      218,811      184,364      147,630      117,167       89,851
Long-term obligations ...................      20,280       19,050       20,350       19,420        9,490        1,060        1,130
Shareholders' equity ....................   $  25,546    $  22,232    $  23,139    $  20,245    $  19,659    $  13,037    $  12,104

Earnings Summary
Interest income .........................   $  16,200    $  14,744    $  20,301    $  15,550    $  12,320    $   9,820    $   7,261
Interest expense ........................      (8,074)      (7,119)      (9,975)      (6,958)      (5,554)      (4,374)      (3,279)
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------
Net interest income .....................       8,126        7,625       10,326        8,592        6,766        5,446        3,982
Provision for loan losses ...............        (457)        (490)        (688)        (612)        (484)        (358)        (227)
Other operating income ..................       1,987        1,349        1,868        1,317        1,055          768          503
Other operating expenses ................      (5,322)      (4,852)      (6,552)      (6,066)      (5,107)      (4,004)      (3,097)
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------
Net income before taxes .................       4,334        3,632        4,954        3,231        2,230        1,852        1,161
Income taxes ............................      (1,541)      (1,290)      (1,807)      (1,049)        (663)        (636)        (411)
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------
Net income ..............................   $   2,793    $   2,342    $   3,147    $   2,182    $   1,567    $   1,216    $     750
                                            =========    =========    =========    =========    =========    =========    =========

Per share data (2)
 Basic earnings per share ...............   $    0.87    $    0.73    $    0.99    $    0.68    $    0.52    $    0.44    $    0.29
 Diluted earnings per share .............   $    0.87    $    0.73    $    0.98    $    0.68    $    0.51    $    0.43    $    0.29
 Dividends ..............................   $    0.21    $    0.16    $    0.22    $    0.19    $    0.15    $    0.14    $    0.14

(1)  At period end.
(2)  Per share  information  is adjusted for a 5% stock dividend paid on January
     31, 2000 and a two-for-one stock dividend paid on July 21, 1997.

                                       8


            Selected Historical Financial Data of Ridgeway Bancshares



                                                Nine Months Ended
                                                  September 30,                           Year ended December 31,
                                                  -------------                           -----------------------
                                                2001         2000         2000         1999         1998         1997        1996
                                                ----         ----         ----         ----         ----         ----        ----
Financial Condition (1)                                      (Dollar amounts in thousands, except per share data)
                                                                                                      
Investment securities ...................    $ 27,222     $ 23,663     $ 23,740     $ 25,822     $ 21,955     $ 20,739     $ 20,166
Net loans  receivable ...................      40,291       37,960       39,417       33,390       30,211       29,033       25,942
Total assets ............................      76,664       70,846       74,141       64,455       62,436       56,038       53,247
Total deposits ..........................      64,899       58,131       63,690       54,972       54,457       48,702       46,752
Long-term obligations ...................           0            0            0            0            0            0            0
Shareholders' equity ....................       8,597        7,731        7,840        7,028        6,409        5,567        4,885

Earnings Summary
Interest income .........................       3,987        3,646        4,990        4,527        4,365        4,073        3,802
Interest expense ........................      (1,689)      (1,457)      (2,043)      (1,744)      (1,748)      (1,656)      (1,598)
                                             --------     --------     --------     --------     --------     --------     --------
Net interest income .....................       2,299        2,190        2,946        2,783        2,617        2,417        2,204
Provision for loan losses ...............         (54)         (45)         (75)         (60)         (54)         (42)         (42)
Other operating income ..................         538          498          671          563          550          508          529
Other operating expenses ................      (1,685)      (1,506)      (2,138)      (1,917)      (1,817)       1,690        1,620
                                             --------     --------     --------     --------     --------     --------     --------
Net income before taxes .................       1,097        1,136        1,405        1,369        1,296        1,193        1,071
Income taxes ............................        (305)        (311)        (376)        (359)        (252)        (321)        (285)
                                             --------     --------     --------     --------     --------     --------     --------
Net income ..............................         792          826        1,029        1,010        1,044          872          786
                                             ========     ========     ========     ========     ========     ========     ========

Per share data
 Basic earnings per share ...............       19.81        20.64        25.72        25.24        26.10        21.81        19.66
 Diluted earnings per share .............       19.81        20.64        25.72        25.24        26.10        21.81        19.66
 Dividends ..............................        4.00         3.50         7.00         6.30         5.70            -            -

(1)  At period end.



                                       9


                   Pro Forma Combined Selected Financial Data
                                  (Unaudited)



                                                Nine Months Ended
                                                  September 30,               Year ended December 31,
                                                  -------------               -----------------------
                                                      2001                              2000
                                                      ----                              ----
Financial Condition (1)                          (Dollar amounts in thousands, except per share data)
                                                                               
Investment securities ...................         $  62,553                          $  77,810
Net loans  receivable ...................           257,615                            232,870
Total assets ............................           372,721                            351,559
Total deposits ..........................           299,014                            282,819
Long-term obligations ...................            20,280                             20,350
Shareholders' equity ....................            37,596                             34,432

Earnings Summary
Interest income .........................            20,109                             25,187
Interest expense ........................            (9,763)                           (12,018)
                                                  ---------                          ---------
Net interest income .....................            10,346                             13,169
Provision for loan losses ...............              (511)                              (763)
Other operating income ..................             2,825                              2,939
Other operating expenses ................            (7,024)                            (8,713)
                                                  ---------                          ---------
Net income before taxes .................             5,636                              6,632
Income taxes ............................            (1,920)                            (2,281)
                                                  ---------                          ---------
Net income ..............................             3,716                              4,351
                                                  =========                          =========

Per share data(2)
 Basic earnings per share ...............              0.88                               1.04
 Diluted earnings per share .............              0.88                               1.03
 Dividends ..............................              0.20                               0.22


(1)  At period end.  Amounts  reflect the effect of  adjustments to estimate the
     fair market value of Ridgeway  Bancshares  assets and  liabilities  at such
     date.
(2)  Per share  information  is adjusted for a 5% stock dividend paid on January
     31, 2000 to holders of Community Bankshares common stock.

                                  RISK FACTORS

General

         If the  merger  is  completed,  if you are a  shareholder  of  Ridgeway
Bancshares  you will  receive  shares of  Community  Bankshares  common stock in
exchange  for shares of Ridgeway  Bancshares  common  stock  unless you elect to
receive all cash and only cash is  allocated  to you or unless you dissent  from
the merger.  You should be aware of risks and uncertainties  that are applicable
to an investment in Community Bankshares common stock.  Specifically,  there are
risks and  uncertainties  that bear on Community  Bankshares'  future  financial
results and that may cause Community  Bankshares'  future earnings and financial
condition to be less than Community Bankshares' expectations.

         Some of the  risks  and  uncertainties  involved  in an  investment  in
Community  Bankshares common stock relate to economic  conditions  generally and
would affect other financial institutions in similar ways. Some of these aspects
are   discussed  in  this  section  and  others  are  discussed  in  this  Proxy
Statement/Prospectus under the heading "Forward-Looking Statements" on page 103.



                                       10



         In  determining  how to vote on the  merger,  shareholders  of Ridgeway
Bancshares and Community Bankshares should give particular  consideration to the
following factors:

Risks Relating To The Merger

The  Exchange  Ratio Is Fixed And Will Not Be Adjusted To Reflect Any Changes In
Stock Value Prior To The Effective Time Of The Merger.

         The precise  value of the merger  consideration  to be paid to Ridgeway
Bancshares  shareholders  will not be known at the time of the special meetings.
The agreement and plan of merger provides that 25 shares of Community Bankshares
common stock will be issued in the merger plus $100 in cash in exchange for each
share of Ridgeway  Bancshares  common stock,  subject to the right of individual
Ridgeway Bancshares shareholders to elect to receive more or less stock or cash.
This exchange  ratio is fixed and will not be adjusted to reflect any changes in
the value of either  Ridgeway  Bancshares or Community  Bankshares  common stock
between the date of the agreement  and plan of merger and the effective  time of
the merger.  The value of  Community  Bankshares  common  stock,  however,  will
fluctuate  prior to the effective  time of the merger and may be higher or lower
than on the date of the  agreement and plan of merger or the date of the special
meetings.  There are no "walk away" or  termination  rights in the agreement and
plan of merger which would permit Ridgeway Bancshares to terminate the merger if
the market  price of  Community  Bankshares  common  stock falls below a certain
level,  or Community  Bankshares  to terminate the merger if the market price of
Community Bankshares stock rises beyond a certain amount. Similarly, there is no
"floor,"  "cap," or "collar"  limiting  the dollar  value of shares of Community
Bankshares  stock that can be received by Ridgeway  Bancshares  shareholders  or
assuring that Ridgeway  Bancshares  shareholders will receive at least a certain
dollar value of Community Bankshares stock.

Community Bankshares Shareholders Will Be Diluted By The Merger.

         The  merger  will  dilute  the   ownership   position  of  the  present
shareholders  of  Community  Bankshares.  Community  Bankshares  will  issue  to
Ridgeway  Bancshares  shareholders  one million  shares of Community  Bankshares
common stock in the merger. As a result,  Ridgeway Bancshares  shareholders will
hold  approximately  23% of the Community  Bankshares  common stock  outstanding
immediately after the completion of the merger.

Some Directors And Officers Of Ridgeway  Bancshares Will Receive Benefits In The
Merger In Addition To The Merger  Consideration  Received By All Other  Ridgeway
Bancshares Shareholders.

         Some of the officers and directors of Ridgeway  Bankshares have or will
receive employment contracts that provide them with interests in the merger that
are  different  from,  or in addition to, their  interests  as  shareholders  of
Ridgeway Bancshares. In addition, three members of Ridgeway Bancshares' board of
directors will be appointed to the Community  Bankshares  board and, if they are
not  employees  of the Bank of Ridgeway,  they will  receive  payments for their
service.  See "The Merger - Interests of Some Persons in the Merger" on page 31.
Accordingly,  some of  Ridgeway  Bancshares'  directors  and  officers  may have
interests in the merger that are different from, or in addition to, yours.

Post Merger Risks

If  Community  Bankshares  Does Not  Adjust To Rapid  Changes  In The  Financial
Services Industry, Its Financial Performance May Suffer.

         Community  Bankshares'  ability  to  maintain  its  history  of  strong
financial  performance and return on investment to  shareholders  will depend in
part on Community Bankshares' ability to expand its scope of available financial
services as needed to meet the needs and demands of its  customers.  In addition
to the challenge of attracting and retaining  customers for traditional  banking
services,  Community  Bankshares'  competitors now include  securities  dealers,
brokers,  mortgage  bankers,  investment  advisors  and  finance  and  insurance
companies who seek to offer one-stop  financial services to their customers that
may include  services that banks have not been able or allowed to offer to their


                                       11


customers in the past.  The  increasingly  competitive  environment  is a result
primarily of changes in regulation,  changes in technology and product  delivery
systems and the  accelerating  pace of  consolidation  among  financial  service
providers.

Difficulties  In Combining The  Operations Of Acquired  Entities With  Community
Bankshares' Own Operations May Prevent  Community  Bankshares From Achieving The
Expected Benefits From Its Acquisitions.

         Community  Bankshares  may not be able to achieve  fully the  strategic
objectives and operating efficiencies in all of its acquisitions,  including the
recent  acquisition  of Resource  Mortgage,  Inc.  and the merger with  Ridgeway
Bancshares,  which are the only acquisitions that Community  Bankshares has ever
undertaken.  Inherent  uncertainties  exist in integrating  the operations of an
acquired  company into  Community  Bankshares.  In addition,  the geographic and
product markets in which Community  Bankshares  operates are highly competitive.
Community  Bankshares  also may lose key  personnel,  either  from the  acquired
entities  or from  itself,  as a result of  acquisitions.  These  factors  could
contribute to Community  Bankshares not achieving the expected benefits from its
acquisitions within the desired time frames, if at all.

Future Governmental Regulation And Legislation Could Limit Community Bankshares'
Future Growth.

         Community  Bankshares  and its  subsidiaries  are subject to  extensive
state and federal regulation, supervision and legislation that govern almost all
aspects of the operations of Community  Bankshares and its  subsidiaries.  These
laws may change from time to time and are primarily  intended for the protection
of consumers,  depositors and deposit insurance funds. The impact of any changes
to these laws may negatively impact Community  Bankshares' ability to expand its
services and to increase the value of its business. While we cannot predict what
effect any presently  contemplated  or future changes in the laws or regulations
or their interpretations would have on Community Bankshares, these changes could
be materially adverse to Community Bankshares' shareholders.

Changes In Interest  Rates Could Reduce  Community  Bankshares'  Income And Cash
Flows.

         Community Bankshares' income and cash flows depend to a great extent on
the difference between the interest rates earned on interest-earning assets such
as  loans  and   investment   securities,   and  the  interest   rates  paid  on
interest-bearing  liabilities  such as deposits and borrowings.  These rates are
highly sensitive to many factors which are beyond Community Bankshares' control,
including general economic  conditions and the policies of various  governmental
and regulatory  agencies,  in particular,  the Federal Reserve Board. Changes in
monetary  policy,  including  changes in  interest  rates,  will  influence  the
origination of loans,  the purchase of  investments,  the generation of deposits
and the rates received on loans and investment  securities and paid on deposits.
Fluctuations in these areas may adversely affect Community Bankshares.

                     THE RIDGEWAY BANCSHARES SPECIAL MEETING

General

         This   proxy    statement    of   Ridgeway    Bancshares    and   proxy
statement/prospectus   of  Community   Bankshares  is  being  furnished  to  the
shareholders of Ridgeway  Bancshares in connection with the  solicitation by the
Ridgeway  Bancshares  board of directors of proxies for use at a special meeting
of shareholders, at which Ridgeway Bancshares shareholders will be asked to vote
upon a proposal to approve the agreement and plan of merger dated as of November
20, 2001, by and between Ridgeway  Bancshares and Community  Bankshares,  and in
connection with the proposed  exchange of Ridgeway  Bancshares  common stock for
common stock of Community Bankshares and cash.

         The  special  meeting  will  be  held  at 3:00  p.m.,  local  time,  on
Wednesday,  April 10, 2002, at the main offices of Ridgeway Bancshares,  located
at 100 Palmer Street, Ridgeway, South Carolina, 29130.

         Ridgeway  Bancshares  shareholders  are  requested to sign,  date,  and
return  promptly  the  accompanying  proxy card to  Ridgeway  Bancshares  in the
enclosed  postage-paid,  addressed envelope. A shareholder's failure to return a




                                       12


properly  executed  proxy card or to vote at the special  meeting  will have the
same effect as a vote against the merger agreement.

         Any  Ridgeway  Bancshares  shareholder  who has  delivered  a proxy may
revoke  it at any time  before it is voted by giving  notice  of  revocation  in
writing or submitting to Ridgeway Bancshares a signed proxy card bearing a later
date,  provided that such notice or proxy card is actually  received by Ridgeway
Bancshares  before the special meeting or in open meeting prior to the taking of
the shareholder vote at the special meeting.  Any notice of revocation should be
sent to Ridgeway Bancshares,  Inc., 100 Palmer Street, Ridgeway, South Carolina,
29130,  Attention:  M. S. Brakefield,  Corporate Secretary.  A proxy will not be
revoked by death of the  shareholder  executing the proxy, or if the shareholder
becomes  incompetent after submitting a signed proxy,  unless,  before the vote,
notice of such death or  incapacity is filed with the  Secretary.  The shares of
Ridgeway  Bancshares  common  stock  represented  by properly  executed  proxies
received at or prior to the special meeting and not subsequently revoked will be
voted as  directed  in such  proxies.  If  instructions  are not  given,  shares
represented by proxies  received will be voted for approval of the agreement and
plan of merger and in the discretion of the proxy holder as to any other matters
that  properly may come before the special  meeting.  If  necessary,  and unless
contrary  instructions are given or you have voted against the merger, the proxy
holder also may vote in favor of a proposal  to adjourn  the special  meeting to
permit further  solicitation of proxies in order to obtain  sufficient  votes to
approve  the  agreement  and  plan of  merger.  As of the  date  of  this  Proxy
Statement/Prospectus,  Ridgeway  Bancshares is unaware of any other matter to be
presented at the special meeting.

         Ridgeway  Bancshares  will  solicit  proxies by mail,  and  possibly by
telephone or telegram or in person by the  directors,  officers and employees of
Ridgeway  Bancshares,  who will  receive  no  additional  compensation  for such
solicitation but may be reimbursed for out-of-pocket expenses. Brokerage houses,
nominees,  fiduciaries  and  other  custodians  will  be  requested  to  forward
solicitation  materials to beneficial  owners and will be  reimbursed  for their
reasonable out-of-pocket expenses.

         Ridgeway   Bancshares   shareholders   should  not  forward  any  stock
certificates with their proxy cards.

Record Date; Vote Required

         Ridgeway  Bancshares'  board of directors has  established the close of
business on February 28, 2002, as the record date for  determining  the Ridgeway
Bancshares  shareholders  entitled  to  notice  of and to  vote  at the  special
meeting.  Only Ridgeway Bancshares  shareholders of record as of the record date
will be entitled to vote at the special  meeting.  As of the record date,  there
were  approximately 95 holders of the 40,000 shares of no par value common stock
of Ridgeway Bancshares  outstanding and entitled to vote at the special meeting.
Each share is  entitled  to one vote.  For  information  as to persons  known by
Ridgeway Bancshares to beneficially own more than 5.0% of the outstanding shares
of Ridgeway  Bancshares  common  stock as of the record date,  see  "Information
About Ridgeway Bancshares- Voting Securities and Principal Shareholders."

         The presence,  in person or by proxy,  of a majority of the outstanding
shares of  Ridgeway  Bancshares  common  stock  entitled  to vote at the special
meeting is necessary to constitute a quorum of the  shareholders.  A quorum must
be present  before a vote on the merger  agreement  can be taken at the  special
meeting. For these purposes, shares of Ridgeway Bancshares common stock that are
present,  or  represented by proxy,  at the special  meeting will be counted for
quorum purposes regardless of whether the holder of the shares or proxy fails to
vote  on the  merger  agreement  for  any  reason,  including  broker  nonvotes.
Generally,  a broker who holds  shares of Ridgeway  Bancshares  common  stock in
"street"  name on behalf of a  beneficial  owner  lacks  authority  to vote such
shares  in  connection   with  a  merger  in  the  absence  of  specific  voting
instructions from the beneficial owner.

         Once a quorum is  established,  approval of the  agreement  and plan of
merger  requires  the  affirmative  vote of the  holders  of  two-thirds  of the
outstanding  shares of Ridgeway  Bancshares common stock entitled to vote at the
special  meeting.  A failure  to vote,  in person or by proxy,  for any  reason,
including  failure to return a properly  executed  proxy,  an  abstention,  or a
broker nonvote,  has the same effect as a vote against the agreement and plan of
merger.


                                       13


         The  directors  and executive  officers of Ridgeway  Bancshares,  their
immediate  family  members and entities  they control can vote, as of the record
date,  13,519  shares  (or  approximately  33.8% of the  outstanding  shares) of
Ridgeway  Bancshares  common stock.  The  directors  and  executive  officers of
Ridgeway  Bancshares  have  agreed to vote such  shares of  Ridgeway  Bancshares
common stock over which they have voting  control (other than as a fiduciary) in
favor  of  the  merger.  The  directors  and  executive  officers  of  Community
Bankshares,   their   immediate   family  members  and  entities  they  control,
beneficially  owned,  as of the record  date,  no shares of Ridgeway  Bancshares
common stock.

                    THE COMMUNITY BANKSHARES SPECIAL MEETING

General

         This Proxy  Statement/Prospectus is being furnished to the shareholders
of  Community  Bankshares,  Inc.  in  connection  with the  solicitation  by the
Community  Bankshares board of directors of proxies for use at a special meeting
of shareholders,  at which Community  Bankshares  shareholders  will be asked to
vote upon a proposal to approve  the  agreement  and plan of merger  dated as of
November 20, 2001, by and between Ridgeway Bancshares and Community  Bankshares,
Inc.

         The special  meeting will be held at 3:00 p.m.,  local time, on Monday,
April 8, 2002, in the board room of the  Orangeburg  National Bank branch at 791
Broughton Street, Orangeburg, South Carolina, 29115.

         Community  Bankshares  shareholders  are requested to sign,  date,  and
return  promptly  the  accompanying  proxy card to Community  Bankshares  in the
enclosed  postage-paid,  addressed envelope. A shareholder's failure to return a
properly  executed  proxy card or to vote at the special  meeting  will have the
same effect as a vote against the merger agreement.

         Any  Community  Bankshares  shareholder  who has  delivered a proxy may
revoke  it at any time  before it is voted by giving  notice  of  revocation  in
writing or  submitting  to  Community  Bankshares  a signed proxy card bearing a
later date,  provided  that such  notice or proxy card is  actually  received by
Community  Bankshares before the special meeting or in open meeting prior to the
taking of the shareholder vote at the special meeting.  Any notice of revocation
should be sent to Community Bankshares,  Inc., 791 Broughton Street, Orangeburg,
South Carolina, 29115, Attention:  William W. Traynham,  President. A proxy will
not be  revoked  by death of the  shareholder  executing  the  proxy,  or if the
shareholder becomes incompetent after submitting a signed proxy, unless,  before
the vote,  notice of such death or incapacity is filed with the  Secretary.  The
shares of Community  Bankshares  common stock  represented by properly  executed
proxies received at or prior to the special meeting and not subsequently revoked
will be voted as directed in such proxies. If instructions are not given, shares
represented by proxies  received will be voted for approval of the agreement and
plan of merger and in the discretion of the proxy holder as to any other matters
that  properly may come before the special  meeting.  If  necessary,  and unless
contrary  instructions are given or you have voted against the merger, the proxy
holder also may vote in favor of a proposal  to adjourn  the special  meeting to
permit further  solicitation of proxies in order to obtain  sufficient  votes to
approve  the  agreement  and  plan of  merger.  As of the  date  of  this  Proxy
Statement/Prospectus,  Community Bankshares is unaware of any other matter to be
presented at the special meeting.

         Community  Bankshares  will  solicit  proxies by mail,  and possibly by
telephone or telegram or in person by the  directors,  officers and employees of
Community  Bankshares,  who will  receive no  additional  compensation  for such
solicitation but may be reimbursed for out-of-pocket expenses. Brokerage houses,
nominees,  fiduciaries  and  other  custodians  will  be  requested  to  forward
solicitation  materials to beneficial  owners and will be  reimbursed  for their
reasonable out-of-pocket expenses.

Record Date; Vote Required

         Community  Bankshares'  board of directors has established the close of
business on January 31, 2002, as the record date for  determining  the Community
Bankshares  shareholders  entitled  to  notice  of and to  vote  at the  special
meeting. Only Community Bankshares  shareholders of record as of the record date
will be entitled to vote at the special  meeting.  As of the record date,  there
were approximately  1,963 holders of the 3,299,674 shares of no par value common


                                       14


stock of Community  Bankshares  outstanding  and entitled to vote at the special
meeting. Each share is entitled to one vote. For information as to persons known
by Community  Bankshares to  beneficially  own more than 5.0% of the outstanding
shares  of  Community  Bankshares  common  stock  as of  the  record  date,  see
"Information  About  Community   Bankshares-  Voting  Securities  and  Principal
Shareholders."

         The presence,  in person or by proxy,  of one-third of the  outstanding
shares of  Community  Bankshares  common  stock  entitled to vote at the special
meeting is necessary to constitute a quorum of the  shareholders.  A quorum must
be present  before a vote on the merger  agreement  can be taken at the  special
meeting.  For these purposes,  shares of Community  Bankshares common stock that
are present, or represented by proxy, at the special meeting will be counted for
quorum purposes regardless of whether the holder of the shares or proxy fails to
vote  on the  merger  agreement  for  any  reason,  including  broker  nonvotes.
Generally,  a broker who holds  shares of Community  Bankshares  common stock in
"street"  name on behalf of a  beneficial  owner  lacks  authority  to vote such
shares  in  connection   with  a  merger  in  the  absence  of  specific  voting
instructions from the beneficial owner.

         Once a quorum is  established,  approval of the  agreement  and plan of
merger  requires  the  affirmative  vote of the  holders  of  two-thirds  of the
outstanding shares of Community  Bankshares common stock entitled to vote at the
special  meeting.  A failure  to vote,  in person or by proxy,  for any  reason,
including  failure to return a properly  executed  proxy,  an  abstention,  or a
broker nonvote,  has the same effect as a vote against the agreement and plan of
merger.

         The  directors and executive  officers of Community  Bankshares,  their
immediate  family  members and entities  they control can vote, as of the record
date,  888,714  shares (or  approximately  26.9% of the  outstanding  shares) of
Community  Bankshares  common stock.  The  directors  and executive  officers of
Community  Bankshares  have agreed to vote such shares of  Community  Bankshares
common stock over which they have voting  control (other than as a fiduciary) in
favor of the merger. The directors and executive officers of Ridgeway Bancshares
beneficially  owned,  as of the record date,  no shares of Community  Bankshares
common stock.  As of that date, no subsidiary of either  Ridgeway  Bancshares or
Community  Bankshares held any shares of Community  Bankshares common stock as a
fiduciary for others.

                                   THE MERGER

         The  following  material  describes  certain  aspects  of the merger of
Ridgeway  Bancshares with and into Community  Bankshares.  This description does
not purport to be complete  and is qualified in its entirety by reference to the
Appendices hereto, including the agreement and plan of merger, which is attached
as  Appendix A to this Proxy  Statement/Prospectus  and  incorporated  herein by
reference. All shareholders are urged to read the Appendices in their entirety.

General

         The merger agreement provides generally for the acquisition of Ridgeway
Bancshares by Community Bankshares pursuant to the merger of Ridgeway Bancshares
with and into Community  Bankshares,  with Community Bankshares as the surviving
corporation resulting from the merger. Bank of Ridgeway will continue to operate
separately as a subsidiary of Community Bankshares.

         On the date and at the time that the  merger  becomes  effective,  each
share of Ridgeway  Bancshares  common stock  (excluding  shares described below)
issued and  outstanding  at the  effective  time of the merger will be converted
into 25 shares of no par value common stock of Community Bankshares plus $100 in
cash, subject to the possible election by shareholders of Ridgeway Bancshares to
receive  more or less stock or cash as described  below.  Shares held by Bank of
Ridgeway,  Community Bankshares, or their respective subsidiaries,  in each case
other  than  shares  held as a  fiduciary  or as a result  of  debts  previously
contracted,  and all shares held by shareholders  who perfect their  dissenters'
rights will not be converted  into  Community  Bankshares  stock.  Each share of
Community Bankshares common stock outstanding immediately prior to the effective
time of the merger  will remain  outstanding  and  unchanged  as a result of the
merger.



                                       15




         If you are a Ridgeway Bancshares  shareholder,  you will have the right
to elect to receive  more or less stock or cash in  exchange  for your shares of
Ridgeway  Bancshares.  If you exercise this election you may not receive as much
stock or cash as you request.  The total amount of Community  Bankshares  common
stock  to be  issued  and the  total  amount  of  cash  to be paid by  Community
Bankshares  is fixed at 1,000,000  shares and  $4,000,000  in cash.  If Ridgeway
Bancshares  shareholders  request  a total  of more  than  1,000,000  shares  of
Community Bankshares common stock or more than $4,000,000 in cash, the amount of
Community  Bankshares common stock or cash available will be allocated among the
Ridgeway  Bancshares  shareholders on a pro rata basis to be agreed upon by Bank
of Ridgeway  and  Community  Bankshares.  If you elect and receive  more or less
stock or cash, the number of additional shares or amount of additional cash that
you receive will be based on a value of $13.825 per share,  which is the average
of the daily last  sales  prices of  Community  Bankshares  common  stock on the
American  Stock  Exchange  (as  reported by The Wall  Street  Journal or, if not
reported by The Wall Street Journal, by another authoritative source agreed upon
by us) for the ten consecutive full trading days in which the shares were traded
which   ended   five   business   days   before   the   mailing  of  this  proxy
statement/prospectus.  If you do not receive as much or as little  stock or cash
as you  request,  the  difference  will be made up in  stock or cash so that the
total value of the consideration  that you receive will be equal to the value of
25 shares of Community  Bankshares  common stock (as determined using a value of
$13.825)  and $100 in cash for each share of Ridgeway  Bancshares  common  stock
that you own. If you do not make an  election  to receive  more or less stock or
cash in exchange for your shares of Ridgeway  Bancshares,  then you will receive
25 shares of Community  Bankshares  common stock, plus $100 in cash. You will be
notified  shortly  after the  effectiveness  of the  merger  how to make such an
election and the deadline for making it.

         No  fractional  shares of  Community  Bankshares  common  stock will be
issued in connection with the merger.  Instead of Community  Bankshares  issuing
fractional  shares,  each Ridgeway  Bancshares  shareholder  will receive a cash
payment  equal to the  fractional  part of a share which the  shareholder  would
otherwise  receive  multiplied  by the most recent last sale price of  Community
Bankshares  common stock on the American Stock Exchange (as reported by The Wall
Street Journal,  or, if not reported thereby,  by another  authoritative  source
agreed upon by Community  Bankshares  and Ridgeway  Bancshares),  as of the last
trading day prior to the completion of the merger.

         The actual market value of a share of Community Bankshares common stock
at the time we complete the merger and at the time certificates for those shares
are delivered  following  surrender and exchange of  certificates  for shares of
Ridgeway  Bancshares common stock may be more or less than the market value of a
share of Community  Bankshares common stock on the date the merger agreement was
signed,  or the date of this proxy  statement/prospectus,  or on the date of the
shareholders'  meetings.  Therefore,  Ridgeway Bancshares  shareholders bear the
risk of any decline in the market value of Community Bankshares common stock. We
urge you to obtain current market  quotations  for Community  Bankshares  common
stock. See "Comparative Market Prices and Dividends."

Background Of The Merger

         Over the past  several  years and in the  normal  course  of  business,
Ridgeway  Bancshares has received various  inquiries as to its interest in being
acquired  by,  merging  with,  or  otherwise  affiliating  with other  financial
institutions.  In that same time,  major banks and other financial  institutions
have  established  new or expanded  presences  in the primary  market of Bank of
Ridgeway,  and the use of technology to provide financial  services and products
has increased dramatically. As a result, the cost for Bank of Ridgeway to remain
a leader in its markets has increased significantly.

         Changes  in  the  banking  laws  in  recent  years  have   resulted  in
competition  not only from  traditional  commercial  banks but also from savings
banks and credit unions as well as brokerage companies and insurance  companies.
All of these types of  institutions  are now directly  competing with commercial
banks for  customers of all sizes.  Increasingly,  the customer  base of Bank of
Ridgeway is becoming  more  sophisticated  in financial  matters and requires an
even larger array of services and products.

         As Bank of Ridgeway has  attempted to keep pace with the  technological
requirements of the financial world, this has required  significant  expense and
the development of additional products and services.  Increasingly,  the average
customer of Bank of  Ridgeway  is  expecting  services  with a higher  degree of
technology.



                                       16




         On June 30, 1999, the board of directors of Ridgeway  Bancshares held a
strategic  planning meeting,  at which it concluded to pursue activities to grow
Bank of Ridgeway.  At that  meeting the board also agreed that the  community of
Ridgeway remains a major source of strength for the business of Bank of Ridgeway
but has  probably  matured  as a  banking  market.  As a  result,  the  board of
directors  encouraged  management  to  investigate  the  prospects  and costs of
acquiring or opening one or more  additional  branches and of expanding  Bank of
Ridgeway  through  greater  technology  and  additional  financial  products and
services.  The board also decided to consider merger and affiliation offers that
might be made by  financially  strong  companies  that share Bank of  Ridgeway's
philosophies  of customer  service and  treatment  of  employees  and that could
provide value and liquidity for Ridgeway Bancshares shareholders.

         Management  determined that attractive branches of other banks were not
likely to be  available  for  acquisition  by Ridgeway  Bancshares;  that no new
technology,  product,  or service was likely to generate  significant  growth in
Bank of Ridgeway;  and that  establishing  one or more new branches would likely
impair Bank of  Ridgeway's  earnings  over the short term until the new branches
could become profitable.

         Ridgeway Bancshares received various expressions of interest from other
financial  institutions after that meeting.  The board decided to negotiate with
RHBT Financial  Corporation  and received a merger proposal from RHBT Financial.
Ridgeway  Bancshares and its advisors began negotiations with RHBT Financial and
on June 22, 2000,  Ridgeway  Bancshares  signed a letter of intent to merge with
RHBT Financial in an all stock transaction  valued at $15,800,000 (based on RHBT
Financial's  market price).  The parties then began  negotiating  the terms of a
definitive  agreement  and  conducting  reviews of  information  about the other
party.  During this process RHBT  Financial  announced  that it had been named a
defendant in a law suit that could have  materially  adversely  affected it. The
parties  suspended their  negotiations  by mutual consent.  The letter of intent
expired  August 31, 2000 with no definitive  agreement  having been reached on a
merger between Ridgeway Bancshares and RHBT Financial.

         Ridgeway Bancshares received inquiries and expressions of interest from
other financial institutions,  including Community Bankshares,  after the public
announcement that the RHBT Financial transaction would not be consummated. After
discussions with  representatives of Community  Bankshares and other prospective
merger  partners,  the board of directors  concluded that the  transaction  with
Community  Bankshares  was in the best  interests  of Ridgeway  Bancshares,  its
shareholders,  customers,  and  employees.  Ridgeway  Bancshares  and  Community
Bankshares  negotiated  a  definitive  merger  agreement  which was reviewed and
approved by both boards and was executed as of November  20, 2001.  Based on the
last reported sale price of Community  Bankshares stock prior to announcement of
the merger,  the merger would have a value of  $15,950,000.  The actual value of
the  merger  may be more or less  than  that  amount,  if the  market  price  of
Community  Bankshares stock is more or less than $11.95 as of the effective date
of the merger.

Ridgeway Bancshares' Reasons For The Merger

         In  approving  the  merger,   the  directors  of  Ridgeway   Bancshares
considered  a number of  factors.  Without  assigning  any  relative or specific
weights to the factors,  the Ridgeway  Bancshares board of directors  considered
the following material factors:

         o        the  information  presented to the directors by the management
                  of Ridgeway  Bancshares  concerning the business,  operations,
                  management,  earnings, asset quality,  financial condition and
                  future   prospects  of  Ridgeway   Bancshares   and  Community
                  Bankshares;

         o        the financial terms of the merger,  including the relationship
                  of the merger price to the prices received by other comparable
                  banking organizations in other financial institution mergers;

         o        the nonfinancial terms of the merger,  including the treatment
                  of a portion of the consideration  received in the merger as a
                  tax-free  exchange of  Ridgeway  Bancshares  common  stock for
                  Community Bankshares common stock for federal and state income
                  tax purposes;

         o        the  receipt by Ridgeway  shareholders  of cash as part of the
                  consideration;


                                       17



         o        the  possibility  that  Ridgeway  shareholders  may,  at their
                  option,  be able to  adjust  the  ratio of cash and  Community
                  Bankshares common stock they receive;

         o        the exchange ratio will enable Ridgeway  shareholders to own a
                  substantial portion of Community Bankshares;

         o        the continuation of a separate board of directors to supervise
                  Bank of Ridgeway; and

         o        the inclusion of three Bank of Ridgeway directors on the board
                  of directors of Community Bankshares.

         The board of  directors  of Ridgeway  Bancshares  also  considered  the
requirement  that Ridgeway  Bancshares  pay a termination  fee of $300,000 under
certain  circumstances  if the proposed merger with Community  Bankshares is not
completed.  This factor was considered negatively as a drawback but the Ridgeway
Bancshares  board of directors  felt it was  outweighed by the other benefits of
the transaction.

         The foregoing  discussion of the information and factors  considered by
the Ridgeway  Bancshares board of directors is not intended to be exhaustive but
includes all material factors considered by the board of directors.  In reaching
its determination to approve the merger and the merger  agreement,  the Ridgeway
Bancshares board of directors did not assign any relative or specific weights to
the foregoing factors, and individual directors may have given differing weights
to different factors.

         The terms of the  merger  were the result of  arms-length  negotiations
between  representatives of Ridgeway Bancshares and representatives of Community
Bankshares. Based upon the consideration of the foregoing and other factors, the
board of directors  of Ridgeway  Bancshares  unanimously  approved the merger as
being in the best interests of Ridgeway  Bancshares and its  shareholders.  Each
member of the board of directors of Ridgeway Bancshares has agreed to vote those
shares of  Ridgeway  Bancshares  common  stock over which such member has voting
authority  (other  than as a  fiduciary)  in favor of the  merger and the merger
agreement.

         Ridgeway  Bancshares'  board of directors  unanimously  recommends that
Ridgeway  Bancshares  shareholders  vote  "FOR"  approval  of the merger and the
merger agreement.

Community Bankshares' Reasons For The Merger

         In  approving  the  merger  agreement  and the  merger,  the  Community
Bankshares  board of  directors  considered a number of factors  concerning  the
benefits of the merger, including the following:

         o        Information  Concerning  Ridgeway  Bancshares:  The  Community
                  Bankshares   board   of   directors   considered   information
                  concerning the business, operations,  earnings, asset quality,
                  and financial condition of Ridgeway Bancshares, and aspects of
                  the  Ridgeway  Bancshares  franchise,   including  the  market
                  position  of  Ridgeway  Bancshares  in the markets in which it
                  operates  and  the   compatibility   of  the  community   bank
                  orientation of the  operations of Ridgeway  Bancshares to that
                  of Community  Bankshares.  The Community  Bankshares  board of
                  directors  concluded that Ridgeway Bancshares is a sound, well
                  managed financial  institution which is well positioned in its
                  market areas and which presents an attractive  opportunity for
                  Community  Bankshares  to add to its  franchise  in the  South
                  Carolina market.

         o        Financial Terms of the Merger: The Community  Bankshares board
                  of  directors  considered  various  financial  aspects  of the
                  merger  as  reported  by  Community   Bankshares'   management
                  including  (1)  the  anticipated   effect  of  the  merger  on
                  Community  Bankshares'  per share  earnings  (with the  merger
                  anticipated  to  have  no  significant   effect  on  Community
                  Bankshares' earnings per share), (2) the anticipated effect of
                  the merger on Community Bankshares' book value per share (with
                  the merger anticipated not to dilute  significantly  Community
                  Bankshares'  book  value  per  share),  (3)  a  comparison  of



                                       18


                  Ridgeway Bancshares to selected peer banks and a comparison of
                  pricing  aspects of the merger to pricing  characteristics  of
                  other merger transactions  involving  financial  institutions,
                  and (4) the accounting treatment of the merger as a purchase.

         o        Nonfinancial  Terms of the Merger:  The  Community  Bankshares
                  board of directors  considered various nonfinancial aspects of
                  the  merger,  including  the  treatment  of a  portion  of the
                  consideration  paid in the  merger as a tax-free  exchange  of
                  Ridgeway  Bancshares  common  stock for  Community  Bankshares
                  common   stock  for  federal   income  tax  purposes  and  the
                  likelihood   of  the  merger  being   approved  by  applicable
                  regulatory authorities without undue conditions or delay.

         The foregoing  discussion of the information and factors  considered by
the Community Bankshares board of directors is not intended to be exhaustive but
includes all material  factors  considered by the Community  Bankshares board of
directors.  In reaching its  determination  to approve the merger and the merger
agreement,  the  Community  Bankshares  board of  directors  did not  assign any
relative or specific weights to the foregoing factors,  and individual directors
may have given differing weights to different factors.

         The terms of the  merger  were the result of  arms-length  negotiations
between  representatives of Ridgeway Bancshares and representatives of Community
Bankshares. Based upon the consideration of the foregoing and other factors, the
board of directors of Community  Bankshares  unanimously  approved the merger as
being in the best interests of Community  Bankshares and its shareholders.  Each
member of the board of  directors  of  Community  Bankshares  has agreed to vote
those  shares of  Community  Bankshares  common stock over which such member has
voting  authority  (other  than as a  fiduciary)  in favor of the merger and the
merger agreement.

         Community  Bankshares' board of directors  unanimously  recommends that
Community  Bankshares  shareholders  vote "FOR"  approval  of the merger and the
merger agreement.

Effective Time Of The Merger

         After all  conditions to the merger are satisfied or waived,  Community
Bankshares  will file  articles of merger with the  Secretary  of State of South
Carolina. The merger will become effective on the date and at the time specified
in such filing,  or, if later or if no date and time is specified,  the date and
time  when the  articles  of  merger  have been  filed  with the South  Carolina
Secretary of State.  Unless  otherwise  agreed upon by Community  Bankshares and
Ridgeway Bancshares, and subject to the satisfaction or waiver of the conditions
to the  obligations of the parties to complete the merger,  the parties will use
their reasonable efforts to complete the merger not later than the last business
day of the month during which the last of the following  events occurs:  (1) the
effective date  (including the expiration of any applicable  waiting  period) of
the last federal or state regulatory  approval required for the merger,  and (2)
the date on which the  merger  and the  merger  agreement  are  approved  by the
requisite  vote of Ridgeway  Bancshares  shareholders  and Community  Bankshares
shareholders.

         No  assurance  can be  provided  that  the  necessary  shareholder  and
regulatory  approvals can be obtained or that other conditions  precedent to the
merger can or will be satisfied.  Community  Bankshares and Ridgeway  Bancshares
anticipate  that all conditions to completion of the merger will be satisfied so
that the merger can be  completed  during the second  quarter of 2002.  However,
delays in the completion of the merger could occur.

         The board of  directors  of either  Community  Bankshares  or  Ridgeway
Bancshares  generally may  terminate  the merger  agreement if the merger is not
completed by December  31, 2002,  unless the failure to complete by that date is
the result of a breach of the merger agreement by the party seeking termination.
See  "-Conditions  to  Completion  of the Merger" and  "-Waiver,  Amendment  and
Termination of the Agreement."

Distribution Of Community Bankshares Stock Certificates And Cash Payments

         If you are a shareholder  of Ridgeway  Bancshares,  promptly  after the
effective time of the merger,  Community Bankshares will cause an exchange agent
selected by  Community  Bankshares  to mail to you an  election  form for you to
request  more or less stock or cash and a form letter of  transmittal,  together
with  instructions  for the  completion  of the  election  form and  exchange of
certificates  representing  shares  of  Ridgeway  Bancshares  common  stock  for


                                       19


certificates representing shares of Community Bankshares common stock and cash.

         If you are a Ridgeway  Bancshares  shareholder,  you should not send in
your  certificates  until  you  receive  the  form  letter  of  transmittal  and
instructions.  Upon your  surrender to the exchange  agent of  certificates  for
Ridgeway  Bancshares common stock,  together with a properly completed letter of
transmittal,   there  will  be  issued  and  mailed  to  you  a  certificate  or
certificates  representing the number of shares of Community  Bankshares  common
stock to which you are  entitled,  if any, and a check for the amount to be paid
to you in cash,  if any,  without  interest.  After  the  effective  time of the
merger,  to the extent  permitted by law,  Ridgeway  Bancshares  shareholders of
record as of the  effective  time will be  entitled  to vote at any  meeting  of
holders of  Community  Bankshares  common  stock the  number of whole  shares of
Community  Bankshares  common stock into which their Ridgeway  Bancshares common
stock has been  converted,  regardless  of  whether  you have  surrendered  your
Ridgeway  Bancshares  common  stock  certificates.  No cash  dividend  or  other
distribution  payable  after the  effective  time of the merger with  respect to
Community  Bankshares common stock,  however,  will be paid to the holder of any
unsurrendered   Ridgeway  Bancshares  certificate  until  the  shareholder  duly
surrenders the certificate or complies with the  requirements for replacement of
a lost  certificate.  Upon such surrender,  all undelivered  dividends and other
distributions and, if applicable, a check for the amount to be paid in cash will
be delivered to the former Ridgeway Bancshares shareholder, in each case without
interest.

         After  the  effective  time  of  the  merger,  a  Ridgeway   Bancshares
shareholder  will be unable to  transfer  shares of Ridgeway  Bancshares  common
stock. If a certificate  representing shares of Ridgeway Bancshares common stock
is  presented  for  transfer  after the  completion  of the  merger,  it will be
canceled and  exchanged  for shares of Community  Bankshares  common stock and a
check for the amount due in cash, if any.

Conditions To Completion Of The Merger

          Completion  of the  merger  is  subject  to a  number  of  conditions,
including, but not limited to:

         o        the  approval of the merger by the Board of  Governors  of the
                  Federal  Reserve  System and the South Carolina State Board of
                  Financial  Institutions  and the  expiration of all applicable
                  waiting periods  associated  with such approvals,  without any
                  conditions or restrictions (excluding requirements relating to
                  the raising of additional capital or the disposition of assets
                  or deposits) that would, in the reasonable good faith judgment
                  of Community  Bankshares'  board of  directors,  so materially
                  adversely  impact the  economic  or  business  benefits of the
                  transactions contemplated by the merger agreement as to render
                  inadvisable the completion of the merger;

         o        the  approval  of the merger  agreement  by the holders of the
                  requisite number of shares of Ridgeway Bancshares common stock
                  and Community Bankshares common stock;

         o        the  absence  of any  action  by any  court,  or  governmental
                  authority,    or   regulatory   authority   with   appropriate
                  jurisdiction prohibiting,  restraining,  or making illegal the
                  completion   of  the   merger   and  the  other   transactions
                  contemplated by the merger agreement; and

         o        the  receipt of a  satisfactory  opinion  of counsel  that the
                  merger  qualifies  for  federal  income  tax  treatment  as  a
                  reorganization  under  Section  368(a) of the  Code,  with the
                  effects described under "-- Federal Income Tax Consequences of
                  the Merger,"  including,  among  others,  that the exchange of
                  Ridgeway  Bancshares  common  stock for  Community  Bankshares
                  common stock will not give rise to recognition of gain or loss
                  to Ridgeway Bancshares  shareholders,  except to the extent of
                  any cash received.

         Completion of the merger also is subject to the  satisfaction or waiver
of  various  other  conditions  specified  in the  merger  agreement  which  are
customary in  transactions  of this nature,  including,  among  others:  (1) the
delivery  by  Community  Bankshares  and  Ridgeway  Bancshares  of  certificates
executed by their respective duly authorized  officers as to the satisfaction of
certain conditions and obligations set forth in the merger agreement, and (2) as


                                       20


of the effective  time of the merger,  the accuracy under the standard set forth
in the  merger  agreement  of certain  representations  and  warranties  and the
compliance in all material  respects with the  agreements  and covenants of each
party.

Regulatory Approvals

         The merger may not proceed in the  absence of receipt of the  requisite
regulatory  approvals.  There can be no assurance that such regulatory approvals
will be obtained or as to the timing of such approvals. It is also possible that
any such approval may be accompanied by a conditional  requirement  which causes
such  approvals  to fail to  satisfy  the  conditions  set  forth in the  merger
agreement. Applications for the approvals described below have been submitted to
the appropriate regulatory agencies.

         Community  Bankshares  and  Ridgeway  Bancshares  are not  aware of any
material  governmental  approvals or actions that are required for completion of
the merger,  except as described  below.  Should any other approval or action be
required,  it presently is  contemplated  that such  approval or action would be
sought.

         The merger  requires the prior  approval of the Federal  Reserve Board,
pursuant to Section 3 of the Bank Holding  Company Act of 1956.  In granting its
approval  under Section 3 of the Bank Holding  Company Act, the Federal  Reserve
Board must take into  consideration,  among other  factors,  the  financial  and
managerial   resources  and  future   prospects  of  the  institutions  and  the
convenience  and needs of the  communities to be served.  The relevant  statutes
prohibit the Federal  Reserve  Board from  approving  the merger (1) if it would
result in a monopoly or be in  furtherance  of any  combination or conspiracy to
monopolize or attempt to  monopolize  the business of banking in any part of the
United  States or (2) if its  effect in any  section  of the  country  may be to
substantially lessen competition or to tend to create a monopoly, or if it would
be a restraint of trade in any other  manner,  unless the Federal  Reserve Board
finds that any  anticompetitive  effects  are  outweighed  clearly by the public
interest and the probable  effect of the  transaction in meeting the convenience
and needs of the  communities to be served.  Under the Bank Holding Company Act,
the merger may not be completed until the 30th day following the date of Federal
Reserve Board  approval,  which may be shortened by the Federal Reserve Board to
the 15th day,  during  which time the United  States  Department  of Justice may
challenge  the  transaction  on  antitrust  grounds.  The  commencement  of  any
antitrust  action would stay the  effectiveness  of the Federal  Reserve Board's
approval, unless a court specifically orders otherwise.

         The merger also requires the prior approval of the South Carolina State
Board of  Financial  Institutions,  pursuant  to Section  34-25-30  of the South
Carolina Code of Laws, as amended. The State Board of Financial  Institutions is
required  not to  approve  the  merger  if it  would  result  in any  depository
institution  affiliated with Community Bankshares controlling 30% or more of the
total deposits held by depository  institutions in South Carolina or if the Bank
of Ridgeway has not been in existence and in continuous  operation for more than
five years as of the proposed  date of the merger.  Neither of these  conditions
that would require the State Board of Financial  Institutions not to approve the
merger  is  expected  to exist.  However,  there  can be no  assurance  that the
approval of the State Board of Financial  Institutions will be obtained or as to
the timing of such approval.

Waiver, Amendment, And Termination Of The Merger Agreement

         Prior to the effective time of the merger,  and to the extent permitted
by law, any provision of the merger agreement generally may be (1) waived by the
party benefited by the provision or (2) amended by a written  agreement  between
Community Bankshares and Ridgeway Bancshares approved by their respective boards
of directors;  provided, however, that after approval by the Ridgeway Bancshares
shareholders or Community Bankshares shareholders, no amendment that pursuant to
the South Carolina  Business  Corporation Act requires  further  approval of the
Ridgeway  Bancshares  shareholders  or the  Community  Bankshares  shareholders,
including  changing the  consideration  for the merger,  may be made without the
further approval of such shareholders.

         The merger agreement may be terminated,  and the merger  abandoned,  at
any time  prior to the  effective  time of the  merger,  either  before or after
approval  by  Ridgeway   Bancshares   shareholders   or   Community   Bankshares
shareholders, under certain circumstances, including:

         o        by mutual  consent of the  boards of  directors  of  Community
                  Bankshares and Ridgeway Bancshares;


                                       21



         o        by the board of directors of either party upon final denial of
                  any  required  consent of any  regulatory  authority,  if such
                  denial is  nonappealable  or was not appealed  within the time
                  limit for appeal;

         o        by the board of directors of either  party,  if the holders of
                  the  requisite  number  of shares of  Ridgeway  Bancshares  or
                  Community  Bankshares common stock shall not have approved the
                  merger agreement;

         o        by the  board of  directors  of  either  party  (provided  the
                  terminating   party  is  not  in   material   breach   of  any
                  representation,  warranty,  covenant or agreement  included in
                  the merger  agreement),  in the event of any inaccuracy in any
                  representation  or  warranty  by the other  party  which meets
                  standards  specified in the merger  agreement and cannot be or
                  has not been cured  within 30 days after the giving of written
                  notice to the breaching party;

         o        by the  board of  directors  of  either  party  (provided  the
                  terminating   party  is  not  in   material   breach   of  any
                  representation or warranty included in the merger  agreement),
                  in the event of a breach by the other party of any covenant or
                  agreement  included  in the merger  agreement  that  cannot be
                  cured  within 30 days  after  giving  notice to the  breaching
                  party; and

         o        by the board of  directors of either party if the merger shall
                  not have been  completed by December 31, 2002, but only if the
                  failure  to  complete  the  merger  by such  date has not been
                  caused  by  the  terminating  party's  breach  of  the  merger
                  agreement.

         If the merger agreement is terminated, the parties will have no further
obligations, except with respect to a few provisions,  including those providing
for  payment  of  expenses  and  a  possible  termination  fee  and  restricting
disclosure of confidential information.  Further, termination generally will not
relieve the parties from the  consequences  of any uncured willful breach of the
merger agreement giving rise to such termination.

         Under  some  circumstances,  if the merger is not  consummated  and if,
before November 20, 2002, Ridgeway Bancshares participates in a transaction with
a party other than Community  Bankshares or if a transaction occurs with respect
to the  assets  or stock of  Ridgeway  Bancshares,  Ridgeway  Bancshares  may be
obligated to pay a $300,000 termination fee to Community Bankshares. In general,
those  types of  transactions  are  Ridgeway  Bancshares'  being  acquired by or
merging into another party; or another  party's  acquisition of more than 25% in
value of Ridgeway  Bancshares'  consolidated total assets,  whether by purchase,
liquidating or restructuring distribution,  or special dividend or distribution;
a repurchase or transfer of more than 25% of Ridgeway  Bancshares's  outstanding
common stock; or Ridgeway  Bancshares'  entry into an agreement to do any of the
foregoing. The details of this termination fee are in section 10.3 of the merger
agreement  which is attached  as Appendix A to this Proxy  Statement/Prospectus,
and all shareholders are urged to read that Appendix in its entirety.

Conduct Of Business Pending The Merger

         Each of Ridgeway  Bancshares  and  Community  Bankshares  generally has
agreed to operate its business only in the usual,  regular,  and ordinary course
of  business,  and to use its  reasonable  best  efforts to preserve  intact its
business  organizations and assets and maintain its rights and franchises.  Each
has also agreed to take no action which would  materially  adversely  affect the
ability of either  party to obtain any  consents  required  for the merger or to
perform its covenants and agreements  under the merger agreement and to complete
the merger. However, Community Bankshares and its subsidiaries are not prevented
from  discontinuing  or disposing of any of their assets or  businesses.  Nor is
Community  Bankshares  prevented from acquiring or agreeing to acquire any other
entity or any assets  thereof,  if such action is, in the  judgment of Community
Bankshares, desirable in the conduct of the business of Community Bankshares and
its subsidiaries.  In addition, the merger agreement includes other restrictions
applicable  to the  conduct of the  business  of  Ridgeway  Bancshares  prior to
completion of the merger, as described below.

         Ridgeway  Bancshares  has agreed not to take  actions  relating  to the
operation of its business  pending  completion  of the merger  without the prior
written consent of Community  Bankshares,  which Community Bankshares has agreed
it will not unreasonably  withhold.  The actions Ridgeway  Bancshares has agreed


                                       22


not to take are subject in some cases to exceptions  for actions in the ordinary
course of business consistent with Ridgeway Bancshares' past practice or subject
to  exceptions  expressly  recognized  in the  merger  agreement.  The  specific
agreements   not  to  take  certain   actions,   including  the  exceptions  and
contractually permitted actions, are set forth in the merger agreement, which is
attached  as  Appendix  A. See  Article 7 of the merger  agreement.  The actions
Ridgeway Bancshares has agreed not to take are in the general categories of:

         o        amending  its  articles  of  incorporation,  bylaws  or  other
                  governing instruments;

         o        incurring  indebtedness  in excess  of  $50,000  or  incurring
                  material liens;

         o        acquiring any of its outstanding shares of stock or the shares
                  of  stock  of its  subsidiaries  or  making  distributions  in
                  respect to its outstanding  shares,  except for the payment of
                  regular dividends consistent with past practice;

         o        issuing additional securities;

         o        reclassifying capital stock or selling or encumbering assets;

         o        increasing  employees'  salaries and benefits or  accelerating
                  the  vesting  of  any  stock-based  compensation  or  employee
                  benefits;

         o        entering into or amending employment contracts;

         o        adopting employee benefit plans or amending existing plans;

         o        changing accounting methods or practices;

         o        commencing or settling litigation; or

         o        entering into or terminating material contracts.

         In addition, Ridgeway Bancshares has agreed not to solicit, directly or
indirectly,  encourage,  or facilitate any  acquisition  proposal from any other
person or entity.  Ridgeway  Bancshares  also has agreed not to  negotiate  with
respect to any such proposal,  provide nonpublic information to any party making
such a proposal,  or enter into any agreement with respect to any such proposal,
except in compliance  with the fiduciary  obligations of its board of directors.
In addition,  Ridgeway  Bancshares has agreed to use reasonable efforts to cause
its officers, directors,  affiliates, advisors, and other representatives not to
engage in any of the foregoing activities.

Management Following The Merger

         Upon  completion of the merger,  the present  officers and directors of
Community  Bankshares  will retain their  respective  positions  with  Community
Bankshares.

Directors

      The table below sets forth the age, business  experience for the past five
years,  and term in office for each of the  directors of  Community  Bankshares.
Each of the  directors  of  Community  Bankshares  except Mr.  Douroux is also a
director  of  one  or  more  of  the  subsidiary  banks.  There  are  no  family
relationships  among any of the  directors  or  executive  officers of Community
Bankshares.


                                       23





Name, Address (and age)       Director Since            Business Experience During the Past 5 Years
-----------------------       ---------------           -------------------------------------------

                      Directors Whose Terms Expire in 2002

                                                  
Martha Rose C. Carson (66)          1987*               President,   Marty  Rae,   Inc.,   apparel  and   furniture
Orangeburg, S.C.                                        retailers

J. M. Guthrie (74)                  1987*               President, Superior Motors, Inc., car dealership; Chairman
Orangeburg, S.C.                                        of the Board of Directors of Orangeburg National Bank
                                                        since March 1998

Phil P. Leventis (55)               1996                President and Chief Executive Officer, Dixie Central
Sumter, S.C.                                            Distributing  Co., Inc.,  wholesale  beverage  distributor;
                                                        member of the South  Carolina  State  Senate;  Chairman  of
                                                        the Board of Directors of Sumter  National  Bank since June
                                                        1996

Wm. Reynolds Williams (55)          1998                Attorney, Managing Partner, Willcox, Buyck & Williams,
Florence, S.C.                                          P.A.;  Chairman  of the  Board  of  Directors  of  Florence
                                                        National Bank since July 1998

Michael A. Wolfe (44)               1992*               President and Chief Executive Officer of Orangeburg
Orangeburg, S.C.                                        National Bank

A. Wade Douroux (30)                2001                President and Chief Executive Officer of Community
Columbia, S. C.                                         Resource Mortgage, Inc. since 1995



                      Directors whose Terms Expire in 2003

                                                  
E. J. Ayers, Jr. (69)               1987*               Chairman of the Board of Directors and Chief Executive
Orangeburg, S.C.                                        Officer  of  Community  Bankshares  since  January,   1999;
                                                        retired  President,  C.M.  Dukes Oil Co.,  oil  distributor
                                                        and auto parts supplier

Alvis J. Bynum (64)                 1996                Retired President, Cities Supply Co., waterwork supplies
Sumter, S.C.                                            distributor

J. Otto Warren, Jr. (74)            1987*               President, Warren and Griffin Lumber Co., Inc. and Home
Orangeburg, S.C.                                        Builder's Supply Co., Inc., builders' supply and lumber
                                                        manufacturer

Jesse A. Nance (48)                 1998                President and Chief Executive Officer of Florence National
Florence S.C.                                           Bank  since  July  1998;   Vice   President   of  Community
                                                        Bankshares  from June 1997 to July 1998;  Vice President of
                                                        First Union  National Bank of South  Carolina from November
                                                        1989 to June 1997



                                       24





                      Directors whose Terms Expire in 2004

                                                  
Anna O. Dantzler (62)               1994                Retired; former customer service representative
Orangeburg, S.C.                                        for Orangeburg National Bank

Richard L. Havekost (61)            1998                Licensed professional engineer; Principal in Raldex, Inc.
Florence S.C.                                           (investor in motel  properties);  Principal  and  Secretary
                                                        of  RDBP,  Inc.   (retail   beverage   store);   1967-1993,
                                                        employed by Nucor Corp.  in various  capacities,  including
                                                        Vice  President of Nucor Corp.  and General  Manager of the
                                                        Florence Division

William H. Nock (56)                1996                President  and Chief  Executive  Officer,  Sumter  National
Sumter, S.C.                                            Bank


Samuel F. Reid, Jr. (53)            1994                Attorney, Horger, Barnwell & Reid
Orangeburg, S.C.

William W. Traynham (46)            1992*               President and Chief Financial Officer of Community
Orangeburg, S.C.                                        Bankshares


--------------------
* Includes service as Director of Orangeburg National Bank prior to formation of
Community Bankshares in 1992.

         Under the  terms of the  merger  agreement,  upon  consummation  of the
merger,  the board of  directors of  Community  Bankshares  will elect three new
directors  of  Community  Bankshares  from among the then  current  directors of
Ridgeway  Bancshares.  These new directors of Community  Bankshares will include
the Chairman of the Board of the Bank of  Ridgeway,  now J. V.  Nicholson,  Jr.,
and the President of the Bank of Ridgeway, now William A. Harwell.

Executive Officers

         Information  about Mr. Ayers, the Chief Executive  Officer of Community
Bankshares,  and Mr.  Traynham,  the  President and Chief  Financial  Officer of
Community Bankshares,  is set forth above under "Directors." Donald Newnham, age
64, is Senior Vice President,  Operations, of Community Bankshares.  Mr. Newnham
has been employed by Community  Bankshares since March 1998. Prior to that time,
from  1981 to 1998,  Mr.  Newnham  was  Senior  Vice  President  and  Operations
Administrator of First National Bank, Orangeburg, South Carolina.

Security Ownership Of Certain Beneficial Owners And Management

      The following  table sets forth,  as of December 31, 2001,  the number and
percentage  of  outstanding   shares  of  Community   Bankshares   common  stock
beneficially owned by (i) each person known by Community  Bankshares to own more
than 5% of the  outstanding  common  stock of  Community  Bankshares,  (ii) each
director  of  Community  Bankshares,  (iii)  each  person  named in the  Summary
Compensation  Table, and (iv) all executive  officers and directors of Community
Bankshares as a group.


                                       25





                                                                                  Number of              % of
                                                                                    Shares              Common
Name (and Address                                                                Beneficially           Stock
of 5% Shareholders)                  Position in Community Bankshares               Owned            Ownership**
-------------------                  --------------------------------               -----            -----------

                                                                                              
E. J. Ayers, Jr. .............            Director, Chairman and                  92,980  (1)           2.81%
                                         Chief Executive Officer
Alvis J. Bynum ...............                   Director                         32,685  (2)              **
Martha Rose C. Carson ........                   Director                         70,940  (3)           2.15%
Anna O. Dantzler .............                   Director                         99,500  (4)           3.01%
A. Wade Douroux ..............                   Director                         66,818  (5)           2.02%
J. M. Guthrie ................      Director and Chairman of Executive           167,750  (6)           5.08%
   Post Office Box 649                          Committee
   Orangeburg, SC 29116

Richard L. Havekost ..........                   Director                         12,450  (7)              **
Phil P. Leventis .............                   Director                         43,550  (8)           1.32%
Jesse A. Nance ...............                   Director                         16,668  (9)              **
William H. Nock ..............                   Director                         64,317  (10)          1.94%
Samuel F. Reid, Jr. ..........                   Director                         53,702  (11)          1.62%
William W. Traynham ..........   Director, President and Chief Financial          61,341  (12)          1.85%
                                                 Officer

J. Otto Warren, Jr. ..........          Director and Vice Chairman               176,519  (13)          5.34%
   Post Office Box 666
   Orangeburg, SC 29116

Wm. Reynolds Williams ........                   Director                         17,118  (14)             **
Michael A. Wolfe .............                   Director                         60,651  (15)          1.83%
All executive officers and
directors as a group (16 persons)                                              1,053,226  (16)         31.08%

----------------------
**Less than 1%.

(1)  Includes  1,680 shares  owned by Nancy R. Ayers,  Mr.  Ayers'  wife;  2,730
     shares owned by an IRA for the benefit of Nancy R. Ayers; 1,680 shares held
     by an IRA for the benefit of Mr. Ayers;  and 11,250 shares subject to stock
     options which are currently  exercisable  or which will become  exercisable
     within 60 days after December 31, 2001.
(2)  Includes  5,874 shares owned by Marjorie F. Bynum,  Mr.  Bynum's wife;  and
     8,150 shares  subject to stock options which are currently  exercisable  or
     which will become exercisable within 60 days after December 31, 2001.
(3)  Includes  10,250  shares  subject  to stock  options  which  are  currently
     exercisable or which will become  exercisable within 60 days after December
     31, 2001.
(4)  Includes  10,250  shares  subject  to stock  options  which  are  currently
     exercisable or which will become  exercisable within 60 days after December
     31, 2001.
(5)  Includes  44,548 shares held in escrow pending the  satisfaction of certain
     financial performance results by Community Resource Mortgage, Inc.


                                       26


(6)  Includes  157,500 shares owned jointly with Lou D. Guthrie,  Mr.  Guthrie's
     wife;  and 10,250  shares  subject  to stock  options  which are  currently
     exercisable or which will become  exercisable within 60 days after December
     31, 2001.
(7)  Includes  4,050  shares  subject  to  stock  options  which  are  currently
     exercisable or which will become  exercisable within 60 days after December
     31, 2001.
(8)  Includes  10,891 shares owned by LPT  Enterprises,  a limited  partnership;
     2,422  shares  owned by an IRA for the benefit of Mr.  Leventis;  and 8,150
     shares  subject to stock options which are currently  exercisable  or which
     will become exercisable within 60 days after December 31, 2001.
(9)  Includes  4,771  shares owned by an IRA for the benefit of Mr.  Nance,  541
     shares  owned by Martha F.  Nance,  Mr.  Nance's  wife;  and 11,250  shares
     subject to stock  options  which are  currently  exercisable  or which will
     become exercisable within 60 days after December 31, 2001.
(10) Includes  1,359 shares owned by the Nock Family Trust;  468 shares owned by
     an IRA for the benefit of Linda H. Nock,  Mr.  Nock's wife;  39,697  shares
     held by Paine Webber for benefit of Mr. Nock;  2,760 shares held by Scott &
     Stringfellow  for the benefit of Linda Nock;  and 19,650 shares  subject to
     stock  options  which  are  currently  exercisable  or  which  will  become
     exercisable within 60 days after December 31, 2001.
(11) Includes  14,052 shares held by Mr. Reid as trustee for his minor children;
     16,800  shares owned by Rosa G. Reid,  Mr.  Reid's wife;  and 10,250 shares
     subject to stock  options  which are  currently  exercisable  or which will
     become exercisable within 60 days after December 31, 2001.
(12) Includes  18,436  shares  owned  jointly  with  Margaret S.  Traynham,  Mr.
     Traynham's wife; 2,038 shares owned jointly with minor children; and 19,650
     shares  subject to stock options which are currently  exercisable  or which
     will become exercisable within 60 days after December 31, 2001.
(13) Includes  53,000 shares owned by Mildred J. Warren,  Mr. Warren's wife; and
     10,250 shares  subject to stock options which are currently  exercisable or
     which will become exercisable within 60 days after December 31, 2001.
(14) Includes  4,738 shares owned jointly with Mary T. Williams,  Mr.  Williams'
     wife;  and 4,050  shares  subject  to stock  options  which  are  currently
     exercisable or which will become  exercisable within 60 days after December
     31, 2001.
(15) Includes  2,151 shares owned by Joye McGrady  Wolfe as custodian  for minor
     children;  and 19,650  shares  subject to stock options which are currently
     exercisable or which will become  exercisable within 60 days after December
     31, 2001.
(16) Includes  164,512  shares  subject  to stock  options  which are  currently
     exercisable or which will become  exercisable within 60 days after December
     31, 2001.

Executive Officer Compensation

         The following  table  summarizes for the years ended December 31, 2001,
2000, and 1999 the compensation paid to the Chairman and Chief Executive Officer
of Community Bankshares and to executive officers of Community Bankshares or its
subsidiaries who received compensation greater than $100,000 in 2001.




                                       27



                           Summary Compensation Table



                                                                                                         Long-Term
                                                                                                         ---------
                                                                                                        Compensation
                                                                                                        ------------
                                                                                                           Awards
                                                                                                           ------
                                                                                     Annual              Securities
                                                                                  Compensation
                                                                                  ------------           Underlying     All Other
                                                                Year          Salary         Bonus       Options(1)  Compensation(2)
                                                                ----          ------         -----       ----------  ---------------

                                                                                                          
E. J. Ayers, Jr ........................................        2001        $ 82,000                        6,000        $  2,460
Chairman and Chief Executive Officer of ................        2000          82,000               -            -          12,163
Community Bankshares ...................................        1999          82,000               -        5,250           8,200

William W. Traynham ....................................        2001        $135,000        $  9,450        6,000        $  4,333
President of Community Bankshares ......................        2000         135,000           9,450            -          23,562
                                                                1999         130,000           9,100        5,250          21,250

Michael A. Wolfe .......................................        2001        $135,000        $  9,450        6,000        $  5,869
President and Chief Executive Officer ..................        2000         135,000           9,450            -          26,268
of Orangeburg National Bank ............................        1999         130,000           9,100        5,250          21,250

William H. Nock ........................................        2001        $135,000        $  4,050        6,000        $  4,185
President and Chief Executive Officer ..................        2000         135,000           4,050            -           4,050
of Sumter National Bank ................................        1999         130,000          13,000        5,250           3,900

Jesse A. Nance(4) ......................................        2001        $117,874        $  5,337        6,000        $  3,248
President and Chief Executive Officer ..................        2000         109,847           5,737            -           3,220
of Florence National Bank ..............................        1999         101,840               -        5,250           3,055


-----------------------------------------
(1)  Adjusted to reflect the 5% stock dividend issued January 31, 2000.
(2)  The column sets forth Company contributions to the 401(k) plan on behalf of
     the  executive  officers.  For Mr.  Wolfe  in 2001  it also  includes  loan
     incentive  payments of $1,819.  For  Messrs.  Wolfe and  Traynham,  it also
     includes  unused sick and vacation leave  payments.  Such payments  totaled
     $7,780 and $7,500 in 2000 and 1999, respectively,  to each of Mr. Wolfe and
     Mr. Traynham.

Aggregated Option Exercises in 2001 and 2001 Year End Option Values

         The following table sets forth  information about stock options held at
December 31, 2001 by the executive  officers listed in the Summary  Compensation
Table. No options were exercised in 2001.



                                                                    Number of Securities                  Value of Unexercised
                                                                   Underlying Unexercised                      In-the-Money
                                                                     Options 12/31/01                      Options 12/31/01
                                                                     ----------------                      ----------------
Name                                                         Exercisable        Unexercisable      Exercisable(1)      Unexercisable
----                                                         -----------        -------------      --------------      -------------

                                                                                                              
E. J. Ayers ....................................                5,250                6,000           $   893              $12,000
Jesse A. Nance .................................                5,250                6,000               893               12,000
William H. Nock ................................               13,650                6,000            58,085               12,000
William W. Traynham ............................               13,650                6,000            58,085               12,000
Michael A. Wolfe ...............................               13,650                6,000            58,085               12,000

(1)      Based on a fair value of $13.00 per share, the closing price of a share
         of Community  Bankshares common stock on December 31, 2001. Each of the


                                       28


         above persons  holds options for 5,250 shares at an exercise  price per
         share of  $12.83.  Messrs.  Nock,  Traynham  and  Wolfe  also each have
         options for 8,400 shares at an exercise price per share of $7.62.  Each
         of the above persons also holds options for 6,000 shares at an exercise
         price of $11.00, which are not currently exercisable.

Option Grants in Last Fiscal Year

         The following table sets forth information about options granted to the
executive officers listed in the Summary Compensation Table in 2001.



                                                  Individual Grants
                                                  -----------------
                                                Number of    % of Total
                                               Securities     Options                                 Potential Realizable Value at
                                               Underlying    Granted to    Exercise                   Assumed Annual Rates of Stock
                                                 Options     Employees       Price      Expiration    Price Appreciation for 10-Year
Name                                           Granted(1)      in 2001    (per share)       Date               Option Term(2)
----                                           ----------      -------    -----------       ----               --------------
                                                                                                               5%             10%
                                                                                                               --             ---
                                                                                                          
E. J. Ayers .........................            6,000           6.4%       $   11.00      2/26/11         $ 41,507         $105,187
Jesse A. Nance ......................            6,000           6.4%       $   11.00      2/26/11         $ 41,507         $105,187
William H. Nock .....................            6,000           6.4%       $   11.00      2/26/11         $ 41,507         $105,187
William W. Traynham .................            6,000           6.4%       $   11.00      2/26/11         $ 41,507         $105,187
Michael A. Wolfe ....................            6,000           6.4%       $   11.00      2/26/11         $ 41,507         $105,187

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

(1)  These options were granted on February 26, 2001 and become  exercisable  on
     February 26, 2002.
(2)  The amounts in these  columns are the result of  calculations  based on the
     assumption that the market price of Community  Bankshares common stock will
     appreciate  in value  from  the  date of  grant to the end of the  ten-year
     option  term  at  rates  of 5% and  10% per  year.  The 5% and  10%  annual
     appreciation  assumptions  are  required  by the  Securities  and  Exchange
     Commission; they are not intended to forecast possible future appreciation,
     if any, of Community Bankshares' stock price.

Compensation Committee Interlocks And Insider Participation

         The members of the  Compensation  Committee for the year ended December
31, 2001 were Richard L. Havekost, Chair, Alvis J. Bynum, J. M. Guthrie, Phil P.
Leventis, Samuel F. Reid and Wm. Reynolds Williams.

         The law firm of Horger,  Barnwell and Reid,  in which Samuel F. Reid, a
director of  Community  Bankshares,  is a partner,  provided  legal  services to
Community  Bankshares in 2001,  and is  continuing to provide legal  services to
Community Bankshares in 2002. The law firm of Willcox, Buyck and Williams,  P.A.
in which Wm. Reynolds Williams, a director of Community Bankshares,  is a member
provided  legal  services to Community  Bankshares in 2001, and is continuing to
provide legal services to Community Bankshares in 2002.

Change of Control and Employment Agreements

         In 1999, Community Bankshares entered into Change of Control Agreements
with Messrs.  Ayers,  Traynham,  Wolfe, Nock and Nance. The principal purpose of
the  agreements  is to protect these  executives  against a change in control of
Community  Bankshares.  The agreements  provide that, if within five years after
the date of the  agreements,  any change of control of Community  Bankshares  is
effected,  then the executive will be entitled to certain benefits.  A change of
control  of  Community  Bankshares  will be  deemed to have  been  effected  for
purposes of the  Agreement  if: (i) voting  control of Community  Bankshares  is
acquired, directly or indirectly, by any person or group acting in concert, (ii)
Community  Bankshares  is merged  with or into any other  entity  and  Community
Bankshares is not the surviving  entity of the merger,  (iii) voting  control of
any  subsidiary of Community  Bankshares  by which the executive is  principally
employed is acquired,  directly or indirectly,  by any person or group acting in
concert,  or (iv) any subsidiary of Community  Bankshares by which the executive
is principally employed is merged with or into another entity that is not also a
subsidiary  of Community  Bankshares  and such  subsidiary  is not the surviving


                                       29


entity of the merger. If the executive  terminates his employment with Community
Bankshares or his  employment is terminated by Community  Bankshares at any time
within six months  following  the  effective  date of a change in  control,  the
executive  will be  entitled  to a lump sum  payment  equal to twice his  annual
salary in effect at the date of  termination.  The Agreement  requires  downward
adjustments in the event that the lump sum payment exceeds the amount prescribed
by Section 280G of the Internal Revenue Code. The term of the Agreement  extends
automatically for an additional year on each annual anniversary thereof,  unless
Community  Bankshares  gives 30 days prior notice to the executive that the term
will not be extended.

         In 2001,  Community  Bankshares  acquired  Community Resource Mortgage,
Inc.  A.  Wade  Douroux,  President  and  Chief  Executive  Officer  of this new
subsidiary  and  a  new  director  of  Community  Bankshares,  entered  into  an
Employment   Agreement  with  Community  Resource  Mortgage.   Pursuant  to  the
Employment Agreement,  Mr. Douroux will serve as President of Community Resource
Mortgage for a period of three years until  October 31, 2004.  During this three
year period,  Mr.  Douroux  will be paid a base annual  salary of $96,000 and he
will be subject  to  covenants  not to  compete  with  Community  Bankshares  or
Community Resource Mortgage.  Mr. Douroux's  Employment  Agreement also contains
provisions  regarding a change of control that are substantially the same as the
provisions of the Change of Control  Agreements  with certain other  officers of
Community  Bankshares  or its  subsidiaries  that are  described in the previous
paragraph.

Director Compensation

         Community  Bankshares pays directors who are not employees of Community
Bankshares  or its  subsidiaries  $200 per month for  service as  directors.  In
addition, Orangeburg National Bank pays monthly fees of $600 to its non-employee
directors.  Sumter National Bank and Florence  National Bank pay monthly fees of
$300 to their non-employee  directors.  Community Resource Mortgage does not pay
director fees. Each of the non-employee directors of Community Bankshares serves
as a director of one of Community  Bankshares'  subsidiary banks.  Director fees
paid by Community  Bankshares  in 2001 totaled  $161,550.  Director fees paid by
Orangeburg  National Bank in 2001 totaled $72,000.  Director fees paid by Sumter
National Bank in 2001 totaled $39,150.  Director fees paid by Florence  National
Bank in 2001 totaled $21,600.

Some Relationships And Related Transactions

         The subsidiary banks have loan and deposit  relationships  with some of
the  directors  of  Community  Bankshares  and  some  of  the  directors  of the
subsidiaries of Community Bankshares and with companies with which the directors
are  associated  as  well as  with  members  of the  immediate  families  of the
directors.  The term  members of the  immediate  families  for  purposes of this
paragraph includes each person's spouse, parents,  children,  siblings,  mothers
and fathers-in-law, sons and daughters-in-law,  and brothers and sisters-in-law.
The total  loans  outstanding  to these  parties at  September  30,  2001,  were
$9,102,000.  All of these loans were made in the  ordinary  course of  business,
were  made on  substantially  the  same  terms,  including  interest  rates  and
collateral,  as those  prevailing at the time for comparable  transactions  with
other  persons,  and did not, at the time they were made  involve  more than the
normal risk of collectibility or present other unfavorable features.

         The law firm of Horger,  Barnwell and Reid,  in which Samuel F. Reid, a
director of  Community  Bankshares,  is a partner,  provided  legal  services to
Community  Bankshares in 2001,  and is  continuing to provide legal  services to
Community Bankshares in 2002. The law firm of Willcox, Buyck and Williams,  P.A.
in which Wm. Reynolds Williams, a director of Community Bankshares,  is a member
also provided legal services to Community  Bankshares in 2001, and is continuing
to provide legal services to Community Bankshares in 2002.




                                       30


Interests Of Some Persons In The Merger

         It is a  condition  to  consummation  of the  merger  that  William  A.
Harwell,  the president of Bank of Ridgeway,  enter into an employment agreement
with Bank of Ridgeway  and  Community  Bankshares.  Pursuant  to the  employment
agreement,  Mr. Harwell will serve as President of Bank of Ridgeway for a period
of five years  after the  effectiveness  of the  merger.  During  this five year
period,  Mr. Harwell will be paid a base annual salary of $135,000,  and he will
be subject to covenants  not to compete with Bank of Ridgeway.  Mr.  Harwell may
terminate the employment agreement at any time. Mr. Harwell will also enter into
a Change of Control Agreement with Bank of Ridgeway that includes  substantially
the same provisions as the Change of Control Agreements with certain officers of
Community Bankshares or its subsidiaries that are described above.

         The merger agreement generally provides that Community  Bankshares will
indemnify  and hold  harmless  each  person  entitled  to  indemnification  from
Ridgeway  Bancshares or any of its  subsidiaries to the full extent permitted by
law,  and that such rights will  continue in full force and effect for six years
from the  effective  time of the merger with respect to matters  occurring at or
prior to the effective time.

         The  merger  agreement  also  requires  Community   Bankshares  to  use
commercially  reasonable  efforts  to  maintain  in effect for a period of three
years  after the  effective  time of the merger  Ridgeway  Bancshares'  existing
directors'  and  officers'  liability  insurance  policy with  respect to claims
arising from acts or events which  occurred  prior to the effective  time of the
merger.  Community  Bankshares  may  substitute  policies  of at least  the same
coverage  and  amounts  containing  terms  and  conditions  which  are not  less
advantageous.

         The merger  agreement also provides  that,  after the effective time of
the  merger,  Community  Bankshares  will  provide  generally  to  officers  and
employees  of  Ridgeway  Bancshares  and its  subsidiaries  who, at or after the
effective  time,  become  officers or employees of Community  Bankshares  or its
subsidiaries,  employee  benefits under employee benefit plans (other than stock
option or other plans involving the potential  issuance of Community  Bankshares
common stock) on terms and conditions that, taken as a whole, are  substantially
similar to those currently provided by Community Bankshares and its subsidiaries
to  their   similarly   situated   officers  and  employees.   For  purposes  of
participation  and vesting (but not benefit accrual) under such employee benefit
plans,  service  with  Ridgeway  Bancshares  or its  subsidiaries  prior  to the
effective  time  of the  merger  will  be  treated  as  service  with  Community
Bankshares  or its  subsidiaries.  The merger  agreement  further  provides that
Community  Bankshares  will cause Ridgeway  Bancshares to honor all  employment,
severance,  consulting, and other compensation contracts previously disclosed to
Community  Bankshares  between  Ridgeway  Bancshares or its subsidiaries and any
current or former director,  officer, or employee, and all provisions for vested
amounts  earned or  accrued  through  the  effective  time of the  merger  under
Ridgeway Bancshares' benefit plans.

         Under  the  terms of the  merger  agreement,  directors  of the Bank of
Ridgeway,  who are not employees of the bank, will each receive a director's fee
from the bank of $300 per month.

         As of the record date,  directors  and  executive  officers of Ridgeway
Bancshares owned no shares of Community Bankshares common stock.

Dissenting Shareholders Of Ridgeway Bancshares

         Any shareholder of Ridgeway  Bancshares  entitled to vote on the Merger
has the right to dissent  from the merger and receive  payment of the fair value
of his shares of Ridgeway  Bancshares common stock upon compliance with Sections
33-13-210  and  33-13-230  of the South  Carolina  Business  Corporation  Act. A
shareholder  may  not  dissent  as to  less  than  all of  the  shares  that  he
beneficially  owns or over which he has power to direct  the vote.  A nominee or
fiduciary may not dissent on behalf of any beneficial  owner as to less than all
of the  shares  of such  beneficial  owner  held of record  by such  nominee  or
fiduciary. A beneficial owner asserting dissenters' rights to shares held on his
behalf must notify Ridgeway  Bancshares in writing of the names and addresses of
the record  holders of the  shares,  if known to him.  Any  Ridgeway  Bancshares
shareholder  intending to enforce this right may not vote in favor of the Merger
and must file a written  notice of intent to demand  payment for his shares (the


                                       31


"Objection  Notice") with the Corporate  Secretary of Ridgeway Bancshares either
before Ridgeway  Bancshares'  Special Meeting or before the vote is taken at the
meeting.  The Objection Notice must state that the shareholder intends to demand
payment for his shares of  Ridgeway  Bancshares'  common  stock if the Merger is
effected.  Although  any  Ridgeway  Bancshares  shareholder  who  has  filed  an
Objection  Notice must not vote in favor of the  Merger,  a vote in favor of the
Merger  cast  by  the  holder  of a  proxy  appointment  solicited  by  Ridgeway
Bancshares (whether pursuant to the instruction of the shareholder or otherwise)
will not disqualify the shareholder from demanding  payment for his shares under
the South  Carolina  Business  Corporation  Act. A vote against  approval of the
Merger will not, in and of itself, constitute an Objection Notice satisfying the
requirements  of Section  33-13-210 of the South Carolina  Business  Corporation
Act. If the Merger is approved by Ridgeway Bancshares'  shareholders at Ridgeway
Bancshares' Special Meeting,  each shareholder who has filed an Objection Notice
will be notified by Ridgeway  Bancshares of such  approval  within 10 days after
Ridgeway Bancshares' Special Meeting (the "Dissenters' Notice"). The Dissenters'
Notice will (i) state where  dissenting  shareholders  must (a) send the Payment
Demand (as defined below) and (b) deposit their common stock  certificates  (the
"Certificates"),  (ii)  inform  holders  of  uncertificated  shares of  Ridgeway
Bancshares'   common   stock  of  the   extent  of  any   restrictions   on  the
transferability  of such shares;  (iii) be  accompanied  by a form for demanding
payment that includes the date of the first announcement to the news media or to
shareholders of the terms of the proposed  Merger,  (iv) set a date by which (x)
Ridgeway Bancshares must receive the Payment Demand, which may not be fewer than
30 or more than 60 days after the date the  Dissenters'  Notice is delivered and
(y) the Certificates must be deposited as instructed in the Dissenters'  Notice,
which  may not be  earlier  than 20 days  after the date the  Payment  Demand is
received by Ridgeway  Bancshares  and (v) be  accompanied  by a copy of Sections
33-13-101  through  33-13-310 of the South Carolina  Business  Corporation  Act.
Within the time prescribed in the Dissenters' Notice, a shareholder  electing to
dissent must make a demand for payment (the "Payment  Demand"),  certify whether
he (or the beneficial  shareholder  on whose behalf he is asserting  dissenters'
rights)  acquired  beneficial  ownership  of the shares of Ridgeway  Bancshares'
common stock before November 21, 2001 (the date of the first public announcement
of the terms of the Merger) and deposit his  Certificates in accordance with the
terms of the Dissenters'  Notice.  Upon filing the Payment Demand and depositing
the Certificates,  the shareholder will retain all other rights of a shareholder
until these  rights are  cancelled  or modified by  consummation  of the Merger.
Failure to comply substantially with these procedures will cause the shareholder
to lose his  dissenters'  rights to payment  for the shares.  Consequently,  any
Ridgeway  Bancshares  shareholder  who desires to exercise his rights to receive
payment for his shares is urged to consult his legal advisor  before  attempting
to exercise such rights.

         As soon as the  Merger is  consummated,  or upon  receipt  of a Payment
Demand,  Ridgeway  Bancshares shall,  pursuant to Section 33-13-250 of the South
Carolina  Business  Corporation Act, pay to each dissenting  shareholder who has
substantially  complied with the requirements of Section  33-13-230 of the South
Carolina Business Corporation Act, the amount that Ridgeway Bancshares estimates
to be the fair value of the shares of  Ridgeway  Bancshares'  common  stock plus
accrued interest.  Section 33-13-250 of the South Carolina Business  Corporation
Act  requires  that  payment  to be  accompanied  by  (i)  certain  of  Ridgeway
Bancshares'  financial  statements,  (ii) a statement  of  Ridgeway  Bancshares'
estimate of fair value of the shares and explanation of how Ridgeway Bancshares'
estimate of fair value and the interest were calculated,  (iii)  notification of
rights to  demand  additional  payment,  and (iv) a copy of  Sections  33-13-101
through 33-13-310 of the South Carolina Business  Corporation Act. As authorized
by Section  33-13-270,  Ridgeway  Bancshares  intends to delay any payments with
respect  to any  shares  (the  "After-acquired  shares")  held  by a  dissenting
shareholder  which  were not held by such  shareholder  on the date of the first
public announcement of the terms of the Merger,  unless the beneficial ownership
devolved upon him by operation of law from a person who was the beneficial owner
on  such  date.  Where  payments  are so  withheld,  Sections  33-13-270(b)  and
33-13-280(a)  of the  South  Carolina  Business  Corporation  Act  will  require
Ridgeway   Bancshares,   after  the  Merger,  to  send  to  the  holder  of  the
after-acquired  shares an offer to pay the  holder an amount  equal to  Ridgeway
Bancshares' estimate of their fair value plus accrued interest, together with an
explanation of the calculation of fair value and interest and a statement of the
holder's right to demand additional payment under Section 33-13-280 of the South
Carolina Business Corporation Act.

         If the Merger is not consummated  within 60 days after the date set for
demanding payment and depositing Certificates,  Ridgeway Bancshares,  within the
60 day period, shall return the deposited  Certificates and release the transfer
restrictions  imposed on uncertificated  shares.  If, after returning  deposited
Certificates  and releasing  transfer  restrictions,  the Merger is consummated,
Ridgeway  Bancshares must send a new  Dissenters'  Notice and repeat the payment
demand procedure.


                                       32



         If the dissenting shareholder believes that the amount paid by Ridgeway
Bancshares  pursuant  to  Section  33-13-250  of  the  South  Carolina  Business
Corporation  Act or  offered  under  Section  33-13-270  of the  South  Carolina
Business  Corporation  Act is less than the fair value of his shares or that the
interest due is calculated incorrectly,  or if Ridgeway Bancshares fails to make
payment or offer payment (or, if the Merger has not been  consummated,  Ridgeway
Bancshares  does not return the deposited  Certificates  or release the transfer
restrictions  imposed on uncertificated  shares),  within 60 days after the date
set in the  Dissenters'  Notice,  then the dissenting  shareholder may within 30
days after Ridgeway  Bancshares made or offered payment for the shares or failed
to pay for the shares, notify Ridgeway Bancshares in writing of his own estimate
of the fair value of such shares (including  interest due) and demand payment of
such estimate (less any payment previously received). Failure to notify Ridgeway
Bancshares in writing of any demand for additional  payment within 30 days after
Ridgeway Bancshares has made payment for such shares will constitute a waiver of
the right to demand additional payment.

         If Ridgeway Bancshares and the dissenting shareholder cannot agree on a
fair price within 60 days after Ridgeway  Bancshares  receives such a demand for
additional payment, the statute provides that Ridgeway Bancshares will institute
judicial  proceedings  in the South  Carolina Court of Common Pleas in Fairfield
County (the "Court") to fix (i) the fair value of the shares  immediately before
consummation  of the Merger,  excluding  any  appreciation  or  depreciation  in
anticipation of the Merger,  unless such exclusion would be inequitable and (ii)
the accrued  interest.  The "fair  value" of Ridgeway  Bancshares'  common stock
could be more  than,  the same as, or less than that  produced  by the  exchange
ratio set by the Merger.  Ridgeway  Bancshares  must make all  dissenters  whose
demands for additional  payment remain  unsettled  parties to the proceeding and
all such parties must be served with a copy of the  petition.  The Court may, in
its  discretion,  appoint an  appraiser  to receive  evidence  and  recommend  a
decision  on the  question  of fair  value.  The  Court is  required  to issue a
judgment  for the  amount,  if any,  by which the fair value of the  shares,  as
determined  by the Court,  plus  interest,  exceeds  the amount paid by Ridgeway
Bancshares.  If Ridgeway  Bancshares does not institute such  proceeding  within
such 60 day period,  Ridgeway  Bancshares shall pay each dissenting  shareholder
whose  demand  remains   unsettled  the  respective   amount  demanded  by  each
shareholder.

         The  Court  will  assess  the  costs and  expenses  of such  proceeding
(including  reasonable  compensation  for and the expenses of the  appraiser but
excluding fees and expenses of counsel and experts) against Ridgeway Bancshares,
except that the Court may assess such costs and expenses as it deems appropriate
against any or all of the dissenting  shareholders if it finds that their demand
for additional payment was arbitrary,  vexatious or otherwise not in good faith.
The Court may award fees and  expenses  of counsel  and  experts in amounts  the
Court finds equitable:  (i) against Ridgeway  Bancshares if the Court finds that
Ridgeway Bancshares did not comply substantially with the relevant  requirements
of the South Carolina  Business  Corporation Act or (ii) against either Ridgeway
Bancshares  or any  dissenting  shareholder,  if the Court  finds that the party
against whom the fees and expenses are assessed acted  arbitrarily,  vexatiously
or not in good faith.

         Community  Bankshares  shareholders  are not  entitled  to  dissenter's
rights.

         The  foregoing is a summary of the  applicable  provisions  of Sections
33-13-101 through  33-13-310 of the South Carolina Business  Corporation Act. It
is not intended to be a complete statement of such provisions,  and is qualified
in its entirety by reference to such sections,  which are included as Appendix B
hereof.  It is not  intended  to give any right of  dissent  or  payment  to any
shareholder  and should  not be so read.  Shareholders'  rights of  dissent  and
payment are limited to those provided by law.

Federal Income Tax Consequences Of The Merger

         The  following  is a  discussion  of the  material  federal  income tax
consequences of the merger to holders of Ridgeway  Bancshares common stock. This
discussion  may not apply to special  situations,  such as  Ridgeway  Bancshares
shareholders,  if any, who hold Ridgeway Bancshares common stock other than as a
capital asset, who received  Ridgeway  Bancshares common stock upon the exercise
of employee  stock  options or  otherwise  as  compensation,  who hold  Ridgeway
Bancshares common stock as part of a "straddle" or "conversion  transaction," or
who are insurance  companies,  securities  dealers,  financial  institutions  or
foreign  persons,  and does not discuss any aspects of state,  local, or foreign
taxation. This discussion is based upon laws, regulations, rulings and decisions
now in effect and on  proposed  regulations,  all of which are subject to change
(possibly with retroactive  effect) by legislation,  administrative  action,  or


                                       33


judicial  decision.  No ruling has been or will be  requested  from the internal
revenue service on any matter relating to the tax consequences of the merger.

         Completion  of the merger is  conditioned  upon  receipt  by  Community
Bankshares and Ridgeway  Bancshares of an opinion from Haynsworth  Sinkler Boyd,
P.A.,  counsel to Community  Bankshares,  concerning the material federal income
tax  consequences  of the merger.  Based upon the assumption  that the merger is
completed in accordance  with the merger  agreement and upon factual  statements
and  factual   representations   made  by  Community   Bankshares  and  Ridgeway
Bancshares,  it is such firm's opinion that the merger will be a  reorganization
for federal income tax purposes within the meaning of Internal  Revenue Code ss.
368(a)(1)(A),  and Ridgeway Bancshares and Community  Bankshares will each be "a
party to a  reorganization"  within the  meaning of  Internal  Revenue  Code ss.
368(b) and that:

         If you  are a  holder  of  Ridgeway  Bancshares  common  stock  and you
exchange all of your  Ridgeway  Bancshares  common  stock  solely for  Community
Bankshares  common stock (and a cash payment in lieu of any fractional share) in
the merger:

         o        You will not  recognize  any gain or loss (except for any cash
                  you  receive  in  lieu  of  a  fractional  share  interest  in
                  Community Bankshares common stock);

         o        The tax basis of the  Community  Bankshares  common  stock you
                  receive  (including any fractional  share deemed  received and
                  redeemed)  will be the same as the tax  basis of the  Ridgeway
                  Bancshares   common  stock  you   surrender  in  exchange  for
                  Community Bankshares common stock; and

         o        The holding  period of the Community  Bankshares  common stock
                  you receive  (including any fractional  share deemed  received
                  and  redeemed)  will be the same as the holding  period of the
                  Ridgeway Bancshares common stock you surrender in exchange for
                  Community Bankshares common stock, provided that your Ridgeway
                  Bancshares  common  stock  is held as a  capital  asset at the
                  effective time of the merger.

         If you  are a  holder  of  Ridgeway  Bancshares  common  stock  and you
exchange  all of your  Ridgeway  Bancshares  common stock for a  combination  of
Community Bankshares common stock and cash in the merger:

         o        You will  recognize  gain (but not loss) to the  extent of the
                  lesser of (i) your realized  gain for all Ridgeway  Bancshares
                  common stock you surrender in the merger or (ii) the amount of
                  cash you receive;

         o        If the  exchange  with you does  not  have the  effect  of the
                  distribution  of a  dividend  within the  meaning of  Internal
                  Revenue  Code ss.  356(a)(2)  (which must be  determined  on a
                  shareholder-by-shareholder basis), the gain will be treated as
                  gain from the sale or exchange of an asset,  and any such gain
                  will be  treated  as  capital  gain if you hold  the  Ridgeway
                  Bancshares  common stock you  surrender as a capital  asset at
                  the effective time of the merger;

         o        If  the  exchange  with  you  does  have  the  effect  of  the
                  distribution  of a dividend,  then the gain will be treated as
                  ordinary  income  (not  capital  gain) to the  extent  of your
                  ratable share of Ridgeway Bancshares' accumulated earnings and
                  profits,  and the  balance of any such gain will be treated as
                  gain from the sale or exchange of an asset;

         o        The  aggregate tax basis of the  Community  Bankshares  common
                  stock you receive  will equal (i) the  aggregate  tax basis of
                  the  Ridgeway  Bancshares  common  stock you  surrender in the
                  merger,  reduced by (ii) the amount of cash you  receive,  and
                  increased by (iii) the amount of any gain you recognize;

         o        The holding  period of the Community  Bankshares  common stock
                  you receive will be the same as the holding period of Ridgeway
                  Bancshares  common  stock you  surrender  in the merger if you
                  hold your Ridgeway  Bancshares common stock as a capital asset
                  at the effective time of the merger.



                                       34


         If you  are a  holder  of  Ridgeway  Bancshares  common  stock  and you
exchange all of your Ridgeway  Bancshares  common stock for cash pursuant to the
merger or by exercise of dissenters' rights, then more likely than not,

         o        You will be  treated  as if (i) you sold all of your  Ridgeway
                  Bancshares  common stock to Community  Bankshares  for cash or
                  (ii) Community  Bankshares  issued to you the number of shares
                  of  Community  Bankshares  common  stock  that you could  have
                  received  instead of cash and then  redeemed  those shares for
                  the amount of cash  distributed to you and unless the exchange
                  with you is  essentially  equivalent to a dividend  within the
                  meaning of Internal  Revenue Code ss. 302(b)(1) (which must be
                  determined on a shareholder-by-shareholder basis) and:

         o        You will recognize gain (to the extent that the amount of cash
                  you  receive  exceeds  your basis in the  Ridgeway  Bancshares
                  common  stock you  exchange)  or loss (to the extent that your
                  basis in the  Ridgeway  Bancshares  common  stock you exchange
                  exceeds the amount of cash you receive);

         o        Your  gain or loss  will be  treated  as gain or loss from the
                  sale or exchange of an asset; and

         o        Your gain or loss will be treated as capital  gain if you hold
                  the  Ridgeway  Bancshares  common  stock  you  surrender  as a
                  capital asset at the effective time of the merger;


         o        If the exchange with you is treated as if Community Bankshares
                  issued to you the  number of  shares of  Community  Bankshares
                  common stock that you could have received  instead of cash and
                  then redeemed those shares for the amount of cash  distributed
                  to you, and if the exchange with you is essentially equivalent
                  to a dividend within the meaning of Code ss.  302(b)(1),  then
                  the payment to you will be treated as a dividend  distribution
                  and  taxed as  ordinary  income  to you to the  extent  of the
                  accumulated  and current  earnings  and  profits of  Community
                  Bankshares.

         The tax opinion does not address any state,  local,  foreign,  or other
tax consequences of the merger.  If you are a Ridgeway  Bancshares  shareholder,
you should consult your own tax advisors with respect to the tax consequences of
the proposed  transaction  to you  individually,  including the tax treatment of
cash payments,  tax reporting  requirements,  and tax consequences  under state,
local, and foreign law.

Accounting Treatment

         It  is  anticipated  that  the  merger  will  be  accounted  for  as  a
"purchase,"  as that term is used  pursuant to accounting  principles  generally
accepted in the United States, for accounting and financial  reporting purposes.
Under the purchase method of accounting,  the assets and liabilities of Ridgeway
Bancshares  as of the  effective  time of the merger  will be  recorded at their
estimated  respective  fair values and added to those of  Community  Bankshares.
Financial  statements of Community  Bankshares  issued after the effective  time
will reflect such values and will not be restated  retroactively  to reflect the
historical financial position or results of operations of Ridgeway Bancshares.

Expenses And Fees

         The merger  agreement  provides,  in general,  that each of the parties
will  bear  and  pay  its own  expenses  in  connection  with  the  transactions
contemplated  by the merger  agreement,  including  fees and expenses of its own
financial or other consultants,  investment bankers,  accountants,  and counsel,
except that  Community  Bankshares  will bear and pay all of the filing fees and
one-half   of   the   printing    costs   in   connection    with   this   Proxy
Statement/Prospectus.




                                       35



Resales Of Community Bankshares Common Stock

         The  Community  Bankshares  common  stock  to  be  issued  to  Ridgeway
Bancshares  shareholders in the merger has been registered  under the Securities
Act of 1933,  but that  registration  does not cover  resales of those shares by
persons who  control,  are  controlled  by, or are under  common  control  with,
Ridgeway  Bancshares  (such persons are referred to hereinafter as  "affiliates"
and generally include executive  officers,  directors,  and 10% shareholders) at
the time of the special  meeting.  Affiliates  may not sell shares of  Community
Bankshares common stock acquired in connection with the merger,  except pursuant
to an effective registration statement under the Securities Act or in compliance
with Rule 145 promulgated under the Securities Act or in accordance with a legal
opinion  satisfactory  to  Community  Bankshares  that such sale or  transfer is
otherwise exempt from the Securities Act registration requirements.

         Rule 145  promulgated  under the  Securities  Act restricts the sale of
Community  Bankshares  common  stock  received in the merger by  affiliates  and
certain of their family members and related  interests.  Under the rule,  during
the one-year  period  following the effective time of the merger,  affiliates of
Ridgeway  Bancshares may resell publicly the Community  Bankshares  common stock
received by them in the merger  subject to certain  limitations as to the amount
of Community  Bankshares  common stock sold in any three-month  period and as to
the manner of sale,  and  subject to the  timeliness  of  Community  Bankshares'
periodic  reporting  obligations  with the Securities  and Exchange  Commission.
After the one-year  period and within two years  following the effective time of
the  merger,  affiliates  of  Ridgeway  Bancshares  who  are not  affiliates  of
Community  Bankshares may effect such resales  subject only to the timeliness of
Community  Bankshares'  periodic reporting  requirements.  After two years, such
affiliates of Ridgeway Bancshares who are not affiliates of Community Bankshares
may resell their  shares  without  restriction.  Persons who are  affiliates  of
Community  Bankshares after the effective time of the merger may publicly resell
the Community  Bankshares common stock received by them in the merger subject to
similar limitations and subject to certain filing requirements  specified in SEC
Rule 144. Affiliates will receive additional information regarding the effect of
Rule 145 on their ability to resell Community  Bankshares  common stock received
in the merger. Affiliates also would be permitted to resell Community Bankshares
common  stock  received  in the merger  pursuant  to an  effective  registration
statement under the Securities Act or an available exemption from the Securities
Act registration  requirements.  This Proxy  Statement/Prospectus does not cover
any resales of Community  Bankshares common stock received by persons who may be
deemed to be affiliates of Ridgeway Bancshares or Community Bankshares.

         Each person who Ridgeway Bancshares reasonably believes is an affiliate
of Ridgeway Bancshares has delivered to Community Bankshares a written agreement
providing  that such  person  generally  will not  sell,  pledge,  transfer,  or
otherwise  dispose of any  Community  Bankshares  common stock to be received by
such  person  upon  completion  of the  merger,  except in  compliance  with the
Securities Act and the rules and regulations promulgated thereunder.

                 EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS

         As a result of the merger,  holders of Ridgeway Bancshares common stock
will be exchanging their shares of a South Carolina  corporation governed by the
South Carolina  Business  Corporation Act and Ridgeway  Bancshares'  articles of
incorporation and bylaws, for shares of Community  Bankshares,  a South Carolina
corporation  governed  by  the  South  Carolina  Business  Corporation  Act  and
Community   Bankshares'  articles  of  incorporation  and  bylaws.   Significant
differences  exist between the rights of Ridgeway  Bancshares  shareholders  and
those  of  Community  Bankshares  shareholders.  The  material  differences  are
summarized below. In particular, Community Bankshares' articles of incorporation
and bylaws contain several  provisions  that may have an antitakeover  effect in
that they could impede or prevent an acquisition of Community  Bankshares unless
the potential acquirer has obtained the approval of Community  Bankshares' board
of  directors.  The  following  discussion  is  necessarily  general;  it is not
intended to be a complete  statement of all differences  affecting the rights of
shareholders and their respective entities,  and it is qualified in its entirety
by  reference  to the  South  Carolina  Business  Corporation  Act as well as to
Community   Bankshares'  articles  of  incorporation  and  bylaws  and  Ridgeway
Bancshares' articles of incorporation and bylaws.




                                       36



Antitakeover Provisions Generally

         The term  "protective  provisions"  herein refers to the  provisions of
Community Bankshares' articles of incorporation and bylaws described below under
the  headings,   "-Authorized   Capital  Stock,"   "-Amendment  of  Articles  of
Incorporation  and  Bylaws,"  "-Classified  Board of  Directors  and  Absence of
Cumulative   Voting,"   "-Removal  of  Directors,"   "-Limitations  on  Director
Liability,"  "-Special  Meetings of  Shareholders,"  "-Actions  by  Shareholders
Without a Meeting," "-Shareholder  Nominations," and "-Mergers,  Consolidations,
and Sales of Assets Generally," and the provisions of the South Carolina General
Corporation Law described under the heading "-Business Combinations With Certain
Persons."  In general,  one purpose of the  protective  provisions  is to assist
Community  Bankshares'  board of directors in playing a role in connection  with
attempts  to  acquire  control  of  Community  Bankshares,  so that the board of
directors can further and protect the interests of Community  Bankshares and its
shareholders as appropriate under the circumstances,  including, if the board of
directors  determines  that a sale of  control is in their  best  interests,  by
enhancing the board of  directors'  ability to maximize the value to be received
by the shareholders upon such a sale.

         Although  Community  Bankshares'  management  believes  the  protective
provisions are, therefore, beneficial to Community Bankshares' shareholders, the
protective  provisions  also may tend to  discourage  some  takeover  bids. As a
result,  Community Bankshares'  shareholders may be deprived of opportunities to
sell some or all of their  shares  at  prices  that  represent  a  premium  over
prevailing market prices. On the other hand, defeating  undesirable  acquisition
offers can be a very expensive and  time-consuming  process.  To the extent that
the protective provisions discourage undesirable proposals, Community Bankshares
may be able to avoid those expenditures of time and money.

         The protective  provisions also may discourage open market purchases by
a potential acquirer.  Such purchases may increase the market price of Community
Bankshares common stock temporarily,  enabling shareholders to sell their shares
at a price higher than that which  otherwise  would  prevail.  In addition,  the
protective  provisions  may decrease  the market  price of Community  Bankshares
common  stock by making  the stock  less  attractive  to  persons  who invest in
securities  in  anticipation  of  price  increases  from  potential  acquisition
attempts.  The  protective  provisions  also may make it more difficult and time
consuming  for a potential  acquirer to obtain  control of Community  Bankshares
through  replacing  the board of  directors  and  management.  Furthermore,  the
protective  provisions  may make it more  difficult  for  Community  Bankshares'
shareholders to replace the board of directors or management, even if a majority
of the  shareholders  believes  such  replacement  is in the best  interests  of
Community  Bankshares.  As a  result,  the  protective  provisions  may  tend to
perpetuate the incumbent board of directors and management.

Authorized Capital Stock

         Community  Bankshares.  The  articles of  incorporation  authorize  the
issuance of up to 12,000,000  shares of Community  Bankshares  common stock.  At
September 30, 2001, there were 3,204,220 shares of Community  Bankshares  common
stock issued and  outstanding.  Community  Bankshares'  board of  directors  may
authorize the issuance of additional shares of Community Bankshares common stock
without further action by Community Bankshares' shareholders, unless such action
is required in a particular  case by applicable  laws or  regulations  or by any
stock exchange upon which Community Bankshares' capital stock may be listed. The
articles of incorporation provide that Community Bankshares  shareholders do not
have preemptive rights.

         The  authority  to issue  additional  shares  of  Community  Bankshares
capital stock provides  Community  Bankshares with the flexibility  necessary to
meet its future  needs  without the delay  resulting  from  seeking  shareholder
approval.  The authorized  but unissued  shares of Community  Bankshares  common
stock will be issuable from time to time for any corporate  purpose,  including,
without  limitation,  stock  splits,  stock  dividends,   employee  benefit  and
compensation  plans,  acquisitions,  and public or  private  sales for cash as a
means of  raising  capital.  Such  shares  could  be used to  dilute  the  stock
ownership  of persons  seeking to obtain  control of  Community  Bankshares.  In
addition,  the sale of a  substantial  number of shares of Community  Bankshares
common  stock to persons who have an  understanding  with  Community  Bankshares
concerning the voting of such shares,  or the  distribution  or declaration of a
dividend of shares of Community Bankshares common stock (or the right to receive
Community  Bankshares common stock) to Community  Bankshares  shareholders,  may
have the effect of discouraging  or increasing the cost of unsolicited  attempts
to acquire control of Community Bankshares.



                                       37


         Ridgeway  Bancshares.  Ridgeway  Bancshares'  authorized  capital stock
consists of 100,000 shares of Ridgeway  Bancshares common stock. As of September
30, 2001,  there were 40,000 shares of Ridgeway  Bancshares  common stock issued
and outstanding.

         Pursuant  to the South  Carolina  Business  Corporation  Act,  Ridgeway
Bancshares'  board of directors may authorize the issuance of additional  shares
of  Ridgeway   Bancshares  common  stock  without  further  action  by  Ridgeway
Bancshares' shareholders. Ridgeway Bancshares' articles of incorporation provide
that shareholders of Ridgeway Bancshares do not have preemptive rights.

Amendment Of Articles Of Incorporation And Bylaws

         Community  Bankshares.  The South  Carolina  Business  Corporation  Act
generally provides that a South Carolina corporation's articles of incorporation
may be  amended by the  affirmative  vote of at least  two-thirds  of the shares
entitled to vote  thereon,  unless the articles of  incorporation  provide for a
higher or lower  requirement.  The Community  Bankshares  articles provide that,
unless  an  amendment  has been  approved  by the  affirmative  vote of at least
two-thirds of the full board of  directors,  no amendment  that amends,  alters,
repeals  or is  inconsistent  with  the  provisions  of the  articles  regarding
mergers, consolidations,  exchanges, sales of assets or dissolution,  classified
board of  directors,  nomination of  directors,  removal of  directors,  duty of
directors,  preemptive rights or cumulative voting, shall be effective unless it
is  approved  by the  affirmative  vote  of 80% of  the  outstanding  shares  of
Community Bankshares.

         Ridgeway Bancshares.  Ridgeway Bancshares' articles of incorporation do
not  include  special  provisions  relating  to  amendment  of the  articles  of
incorporation.

         The boards of directors of Community Bankshares and Ridgeway Bancshares
each have the power to adopt,  amend,  or repeal the bylaws of their  respective
companies  by a  majority  vote,  subject  to the right of the  shareholders  by
majority vote to adopt, amend or repeal the bylaws by majority vote.

Classified Board Of Directors And Absence Of Cumulative Voting

         Community  Bankshares.  The  articles of  incorporation  provides  that
Community  Bankshares'  board of directors is divided into three  classes,  with
each class to be as nearly  equal in number as possible.  The  directors in each
class serve three-year terms of office.

         The  effect  of  Community  Bankshares'  having a  classified  board of
directors  is that only  approximately  one-third of the members of the board of
directors  are  elected  each  year;  consequently,   two  annual  meetings  are
effectively required for Community Bankshares' shareholders to change a majority
of the members of the board of directors.

         Pursuant to the articles of incorporation,  each shareholder  generally
is entitled to one vote for each share of Community Bankshares stock held and is
not entitled to  cumulative  voting  rights in the election of  directors.  With
cumulative  voting,  a shareholder has the right to cast a number of votes equal
to the  total  number  of such  holder's  shares  multiplied  by the  number  of
directors to be elected, and may cast all of such holder's votes in favor of one
candidate or may  distribute  such holder's votes in any manner among any number
of  candidates.  Directors are elected by a plurality of the total votes cast by
all  shareholders.  With  cumulative  voting,  it may be possible  for  minority
shareholders  to  obtain  representation  on the  board  of  directors.  Without
cumulative  voting,  the  holders  of more than 50% of the  shares of  Community
Bankshares  common  stock  generally  have  the  ability  to  elect  100% of the
directors. As a result, the holders of the remaining Community Bankshares common
stock effectively may not be able to elect any person to the board of directors.
The absence of cumulative voting, therefore,  could make it more difficult for a
shareholder  who  acquires  less than a  majority  of the  shares  of  Community
Bankshares common stock to obtain  representation on Community Bankshares' board
of directors.

         Ridgeway Bancshares.  Ridgeway Bancshares' articles of incorporation do
not provide for a classified board of directors.  Holders of Ridgeway Bancshares
common stock are not afforded cumulative voting rights.




                                       38



Removal Of Directors

         Community Bankshares. Under the articles of incorporation, any director
or the  entire  board of  directors  may be  removed  without  cause only by the
affirmative vote of the holders of at least 80% of Community  Bankshares' voting
stock.

         Ridgeway  Bancshares.  Pursuant to  Ridgeway  Bancshares'  bylaws,  any
director or the entire board of directors may be removed, with or without cause,
by a vote of the  holders of a majority  of the shares  entitled  to vote on the
election of directors.

Duty Of Directors

         Community  Bankshares.  The articles of incorporation provide that when
evaluating any proposed plan of merger, consolidation, share exchange or sale of
all, or  substantially  all, of the assets of  company,  the board of  directors
shall  consider the  interests of the employees of the company and the community
or communities in which it and its subsidiaries, if any, do business in addition
to the interests of the company's  shareholders.  Absent this  provision,  under
existing common law, directors would be required to give paramount consideration
with respect to such matters to the best interests of shareholders.

         Ridgeway Bancshares.  The articles and bylaws of Ridgeway Bancshares do
not include any comparable provision.

Indemnification

         Community  Bankshares.  Under the South Carolina  Business  Corporation
Act, a  corporation  has the power to indemnify  directors and officers who meet
the standards of good faith and reasonable  belief that their conduct was lawful
and in the corporate  interest (or not opposed thereto) set forth by statute.  A
corporation  may also provide  insurance  for  directors  and  officers  against
liability  arising out of their positions even though the insurance  coverage is
broader than the power of the  corporation  to indemnify.  Unless limited by its
articles of  incorporation,  a corporation  must indemnify a director or officer
who is wholly  successful,  on the merits or  otherwise,  in the  defense of any
proceeding  to  which he was a party  because  he is or was a  director  against
reasonable expenses incurred by him in connection with the proceeding. Community
Bankshares' articles of incorporation do not limit such indemnification.

         Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors,  officers and controlling
persons  of  Community  Bankshares  pursuant  to the  foregoing  provisions,  or
otherwise,  Community  Bankshares  has been  advised  that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.

         Ridgeway  Bancshares.  The bylaws provide that Ridgeway Bancshares will
indemnify all persons whom it may indemnify to the full extent  permitted by the
South Carolina  Business  Corporation Act so long as such persons have conducted
themselves in good faith and reasonably believed their conduct not to be opposed
to the  corporation's  best  interests.  Under  Section  33-8-510  of the  South
Carolina Business  Corporation Act as currently in effect, other than in actions
brought by or in the right of Ridgeway Bancshares,  such  indemnification  would
apply if it were  determined in the specific  case that the proposed  indemnitee
acted in good faith and in a manner such person reasonably  believed to be in or
not opposed to the best  interests of Ridgeway  Bancshares  and, with respect to
any criminal proceeding,  if such person had no reasonable cause to believe that
the  conduct  was  unlawful.  In actions  brought by or in the right of Ridgeway
Bancshares,  such  indemnification  would be limited to reasonable  expenses and
would  apply if it were  determined  in the  specific  case  that  the  proposed
indemnitee acted in good faith and in a manner such person  reasonably  believed
to be in or not opposed to the best  interests  of Ridgeway  Bancshares,  except
that no indemnification  may be made with respect to any proceeding by or in the
right of the  corporation as to which such person is adjudged liable to Ridgeway
Bancshares or in connection with any other proceeding charging improper personal
benefit to him,  whether or not involving  action in his official  capacity,  in
which he was adjudged  liable on the basis that personal  benefit was improperly
received by him. Ridgeway  Bancshares also provides  insurance for its directors
and officers against  liability  arising out of their service in such positions.


                                       39


The scope of the acts and  omissions  covered  by such  insurance  policy may be
broader than the power of the corporation to indemnify.

Shareholder Nominations

         Community  Bankshares.  Community Bankshares' articles of incorporation
provide that any nomination by  shareholders  of individuals for election to the
board of directors must be made by delivering  written notice of such nomination
to the  Secretary  of  Community  Bankshares  not less than 30 days  before  any
meeting of the shareholders called for the election of directors.

         Ridgeway Bancshares.  Ridgeway Bancshares' bylaws contain substantially
the same shareholder nominating procedures for election of directors.

Mergers, Consolidations, Exchanges, Sale Of Assets Or Dissolution

         Community  Bankshares.  The articles of incorporation provide that with
respect to any plan of merger,  consolidation  or  exchange  or any plan for the
sale of all, or substantially all, the property and assets,  with or without the
good will,  of Community  Bankshares  or any  resolution  to dissolve  Community
Bankshares,  which  plan or  resolution  shall  not  have  been  adopted  by the
affirmative  vote of at least  two-thirds of the full board of  directors,  such
plan or resolution must be approved by the affirmative vote of holders of 80% of
the outstanding  shares of Community  Bankshares.  If at least two-thirds of the
full  board of  directors  approve  any  such  plan or  resolution,  the plan or
resolution  need  only  be  approved  by the  affirmative  vote  of  holders  of
two-thirds  of the  outstanding  shares of Community  Bankshares.  Consequently,
unless  two-thirds of the directors  favor such a plan or resolution,  it may be
very difficult to effect any such transaction.

         Ridgeway Bancshares.  The articles and bylaws of Ridgeway Bancshares do
not provide for special  requirements  for approval of mergers,  consolidations,
exchanges,  sales  of  assets  or  dissolution.   The  South  Carolina  Business
Corporation  Act  generally  requires  approval  of at least  two-thirds  of the
outstanding  shares  of a  corporation's  voting  stock  to  approve  a  merger,
consolidation,  share  exchange,  sale  of  all  or  substantially  all  of  the
corporation's assets or similar corporate  transaction.  The corporation's board
of directors by resolution may require a different percentage of votes necessary
for approval.

Quorum

         Community Bankshares. Under its articles of incorporation, one-third of
the shares entitled to vote  constitutes a quorum at any meeting of shareholders
of Community Bankshares.

         Ridgeway  Bancshares.  Under  its  bylaws,  a  majority  of the  shares
entitled to vote constitutes a quorum at any meeting of shareholders of Ridgeway
Bancshares.

Statutory Matters

         Business Combinations Statute. The South Carolina business combinations
statute  provides  that a 10% or  greater  shareholder  of a  resident  domestic
corporation  cannot  engage  in a  "business  combination"  (as  defined  in the
statute) with such  corporation  for a period of two years following the date on
which the 10% shareholder  became such,  unless the business  combination or the
acquisition of shares is approved by a majority of the disinterested  members of
such  corporation's  board  of  directors  before  the 10%  shareholder's  share
acquisition  date. This statute further provides that at no time (even after the
two-year  period  subsequent  to  such  share  acquisition  date)  may  the  10%
shareholder  engage in a  business  combination  with the  relevant  corporation
unless certain approvals of the board of directors or disinterested shareholders
are obtained or unless the consideration  given in the combination meets certain
minimum  standards set forth in the statute.  The law is very broad in its scope
and is  designed  to inhibit  unfriendly  acquisitions  but it does not apply to
corporations whose articles of incorporation contain a provision electing not to
be covered by the law.  Neither  Community  Bankshares nor Ridgeway  Bancshares'
articles of incorporation contain such a provision. An amendment of the articles



                                       40


of incorporation  to that effect will,  however,  permit a business  combination
with an interested shareholder even though that status was obtained prior to the
amendment.

         Control Share  Acquisitions.  The South Carolina  corporations law also
contains  provisions  that,  under  certain  circumstances,  would  preclude  an
acquiror of the shares of a South Carolina  corporation who crosses one of three
voting  thresholds  (20%,  33 1/3%,  or 50%) from  obtaining  voting rights with
respect  to such  shares  unless a majority  in  interest  of the  disinterested
shareholders of the corporation votes to accord voting power to such shares.

         The  legislation  provides  that,  if  authorized  by the  articles  of
incorporation or bylaws prior to the occurrence of a control share  acquisition,
the  corporation  may  redeem  the  control  shares  for their fair value if the
acquiring  person  has  not  complied  with  certain   procedural   requirements
(including the filing of an "acquiring  person  statement"  with the corporation
within 60 days after the control share acquisition) or if the control shares are
not  accorded  full  voting  rights  by  the  shareholders.   Neither  Community
Bankshares  nor Ridgeway  Bancshares  is authorized by its articles or bylaws to
redeem control shares pursuant to such legislation.

                     COMPARATIVE MARKET PRICES AND DIVIDENDS

         Community  Bankshares  common  stock is  traded on the  American  Stock
Exchange under the symbol "SCB." Ridgeway  Bancshares common stock is not traded
in any established  market.  The following  table sets forth,  for the indicated
periods,  the high and low closing sale prices for Community  Bankshares  common
stock as reported on the American Stock Exchange and the cash dividends declared
per share of Community  Bankshares and Ridgeway Bancshares common stock. For the
indicated  period there has been only a very limited number of  transactions  in
Ridgeway Bancshares common stock and all such transactions have involved limited
numbers of shares.



                                                                             Community Bankshares             Ridgeway Bancshares
                                                                             --------------------             -------------------
                                                                                                    Cash                Cash
                                                                       Price Range               Dividends          Dividends
                                                                       -----------               Declared           Declared
                                                                                                 per Share          per Share
                                                                                                 ---------          ---------
                                                                  High            Low
                                                                  ----            ---
1999
                                                                                                         
First Quarter .............................                   $  13.78          $ 12.29          $ 0.045             $    0
Second Quarter ............................                      13.48            11.51            0.045               3.15
Third Quarter .............................                      14.01            11.29            0.050                  0
Fourth Quarter ............................                      13.78            11.16            0.050               3.15

2000
First Quarter .............................                   $  12.88          $ 10.88          $ 0.05              $    0
Second Quarter ............................                      12.50            10.75            0.05                3.50
Third Quarter .............................                      12.56            11.13            0.06                   0
Fourth Quarter ............................                      11.87            10.56            0.06                3.50

2001
First Quarter .............................                   $  11.25          $ 10.20          $ 0.07              $    0
Second Quarter ............................                      11.49            10.65            0.07                4.00
Third Quarter .............................                      12.60            10.30            0.07                   0
Fourth Quarter ............................                      13.20            11.00            0.07                4.00


         Although the common stock of Ridgeway Bancshares is traded from time to
time on an individual  basis,  no  established  trading market has developed and
none is expected to develop in the foreseeable  future.  The common stock is not
traded on the NASDAQ  National  Market  System,  nor are there any market makers
known  to  management.  Management  of  Ridgeway  Bancshares  is  aware of a few
transactions  in which the  common  stock has been  traded  in the  period  from
January 1, 2000 through August 2, 2001. Prices in such transactions  ranged from


                                       41


$300 to $350.  However,  management has not ascertained that these  transactions
are the result of arm's length negotiations  between the parties, and because of
the  limited  number  of  shares  involved,  such  prices,  if  any,  may not be
indicative of the market value of Ridgeway Bancshares common stock.

         On March 1, 2002, the last reported sale price of Community  Bankshares
common stock as reported on the American  Stock  Exchange,  was $14.32,  and the
reported price of Ridgeway Bancshares common stock in the last known transaction
was $307, on August 2, 2001.  On November 20, 2001,  the last business day prior
to public  announcement of the proposed merger,  the last reported sale price of
Community Bankshares common stock as reported on the American Stock Exchange was
$11.95,  and the reported sale price of Ridgeway  Bancshares common stock in the
last known transaction was $307, on August 2, 2001.

         The  holders of  Community  Bankshares  common  stock are  entitled  to
receive  dividends  when and if declared by the board of directors  out of funds
legally available therefor. Community Bankshares has paid regular cash dividends
since 1991. Although Community  Bankshares  currently intends to continue to pay
quarterly cash dividends on the Community  Bankshares common stock, there can be
no assurance that Community  Bankshares'  dividend policy will remain  unchanged
after  completion  of the  merger.  The  declaration  and  payment of  dividends
thereafter will depend upon business conditions,  operating results, capital and
reserve  requirements,  and the  board  of  directors'  consideration  of  other
relevant factors.

         Community  Bankshares is a legal entity  separate and distinct from its
subsidiaries  and its  revenues  depend in  significant  part on the  payment of
dividends  from its subsidiary  financial  institutions.  Community  Bankshares'
subsidiary  depository  institutions  are subject to legal  restrictions  on the
amount  of  dividends   they  are  permitted  to  pay.  See   "Supervision   and
Regulation-Payment of Dividends."

         The  holders of  Ridgeway  Bancshares'  common  stock are  entitled  to
receive  dividends  when and if declared by the board of directors  out of funds
legally available  therefor.  Ridgeway  Bancshares has paid regular  semi-annual
cash dividends  since June 2000,  and Bank of Ridgeway paid regular  semi-annual
cash dividends for more than 20 years prior to that date. Pursuant to the merger
agreement,  Ridgeway  Bancshares  may only declare and pay dividends  consistent
with past  practices.  There can be no assurance that Ridgeway  Bancshares  will
continue to pay dividends. The declaration and payment of dividends depends upon
business conditions,  operating results,  capital and reserve requirements,  and
the  board  of  directors'   consideration  of  other  relevant   factors.   See
"Supervision and Regulation - Payment of Dividends."

         Ridgeway  Bancshares  is a legal entity  separate and distinct from its
subsidiaries  and its  revenues  depend in  significant  part on the  payment of
dividends  from Bank of Ridgeway.  Bank of Ridgeway is subject to certain  legal
restrictions on the amount of dividends it is permitted to pay. See "Supervision
and Regulation - Payment of Dividends."

         Under the  terms of the  merger  agreement,  Community  Bankshares  and
Ridgeway  Bancshares have agreed to cooperate in selecting the date on which the
merger becomes effective,  or in permitting Ridgeway Bancshares to pay a special
dividend so that, for the semi-annual period in which the merger occurs, holders
of Ridgeway  Bancshares  common stock do not become  entitled to dividends  from
both Ridgeway Bancshares and Community Bankshares,  and do not fail to receive a
dividend  of less than a pro-rata  portion of the regular  semi-annual  dividend
amount of $4.00 per share  that was paid  during  2001 to  holders  of  Ridgeway
Bancshares common stock.

                      INFORMATION ABOUT RIDGEWAY BANCSHARES

         Ridgeway  Bancshares is a bank holding company organized under the laws
of the state of South  Carolina with its principal  executive  office located in
Ridgeway, South Carolina.  Ridgeway Bancshares operates principally through Bank
of Ridgeway,  which is a  state-chartered  commercial  bank and which provides a
range of consumer and  commercial  banking  services  through  three  offices in
Fairfield and Richland Counties.  At September 30, 2001, Ridgeway Bancshares had
total  consolidated  assets of approximately  $76.6 million,  total consolidated
deposits of approximately  $64.9 million,  and total consolidated  shareholders'
equity of approximately $8.6 million.  Ridgeway Bancshares'  principal executive


                                       42


office is located at 100 Palmer Street,  Ridgeway, South Carolina, 29130 and its
telephone number at such address is (803) 337-2251.

Business And Properties

         Ridgeway  Bancshares  was  organized as a bank holding  company for the
Bank of Ridgeway in 1999.  Ridgeway  Bancshares  offers a  diversified  range of
commercial  and retail  banking  services for customers  located  principally in
Fairfield and northern Richland Counties.  Ridgeway Bancshares' customer base is
composed  primarily  of  individuals  who  either  work or  reside  in  Ridgeway
Bancshares' market areas and commercial  enterprises  engaged in a wide range of
businesses throughout Ridgeway Bancshares' market areas.

         Through  its  banking  subsidiary,  Ridgeway  Bancshares  provides  its
customers  with a variety  of banking  services,  including  checking  accounts,
savings accounts,  certificates of deposit,  bank-by-mail and 24-hour depository
facilities,  cashier's checks,  travelers checks, savings bonds, consumer loans,
automobile  loans,  commercial  loans, real estate loans, home improvement loans
and safe deposit boxes.

         At December 31, 2001,  Ridgeway  Bankshares had 29 full-time  employees
and four part-time employees through its banking subsidiary.

         Ridgeway  Bancshares  conducts  business  at three  banking  locations.
Ridgeway  Bancshares  owns all of the buildings in which its banking offices are
located.

         The  following  table  sets  forth  specific  information  on  Ridgeway
Bancshares'  headquarters  location and each of its three  full-service  banking
offices:



                                                                                                   Deposits at
Location                      Address                                                           September 30, 2001
--------                      -------                                                           ------------------

                                                                                            
Ridgeway                      100 Palmer Street, Ridgeway, South Carolina                         $26,816,381
Winnsboro                     610 West Moultrie Street, Winnsboro South Carolina                  $21,530,260
Blythewood                    115 McNulty Street, Blythewood, South Carolina                      $16,558,992


Competition

         Ridgeway Bancshares encounters vigorous competition in its market areas
for the provision of depository  institution financial services from a number of
sources, including bank holding companies and commercial banks, savings and loan
associations  and other thrift  institutions,  credit  unions,  other  financial
institutions and financial  intermediaries that operate in Ridgeway  Bancshares'
market area. Regional interstate banking laws and other recent federal and state
laws have  resulted in  increased  competition  from both  conventional  banking
institutions and other businesses offering financial services and products. Bank
of Ridgeway  also  competes  for interest  bearing  funds with a number of other
financial  intermediaries and nontraditional  consumer investment  alternatives,
including  brokerage  firms,  consumer  finance  companies,  commercial  finance
companies,  credit unions,  money market funds and federal,  state and municipal
issuers  of short  term  obligations.  Many of these  competitors  have  greater
financial  resources than Bank of Ridgeway.  At June 30, 2001,  there were three
commercial  banks or thrift  institutions  competing  with Bank of  Ridgeway  in
Fairfield and northern Richland Counties.

Legal Proceedings

         Ridgeway  Bancshares  and  Bank  of  Ridgeway  are not  parties  to any
material legal proceedings other than ordinary routine litigation  incidental to
their business.



                                       43


Management

         The  following  table  presents  information  about the  directors  and
executive  officers of Ridgeway  Bancshares.  Unless otherwise  indicated,  each
person  has  sole  voting  and  investment  powers  over the  indicated  shares.
Information relating to beneficial ownership of Ridgeway Bancshares common stock
is based upon  "beneficial  ownership"  concepts set forth in rules  promulgated
under the Securities  Exchange Act of 1934.  Under such rules a person is deemed
to be a  "beneficial  owner" of a security if that person has or shares  "voting
power,"  which  includes  the  power to vote or to  direct  the  voting  of such
security,  or  "investment  power,"  which  includes  the power to dispose or to
direct the disposition of such security.  Under the rules,  more than one person
may be deemed to be a beneficial owner of the same securities.  A person is also
deemed to be a  beneficial  owner of any  security  of which that person has the
right to acquire beneficial ownership within 60 days from the record date.



                                          Present Occupation And               Number Of Shares
                                         Principal Occupation For           Beneficially Owned At
             Name                            Last Five Years                   The Record Date         Percent of Class
             ----                            ---------------                   ---------------         ----------------

                                                                                                       
William A. Harwell              Director; President and Chief Executive              4,824(1)                12.06
                                Officer Bank of Ridgeway since 1982 and
                                Ridgeway Bancshares, Inc. since 1999

M. S. Brakefield                Senior Vice President and Secretary Bank               300(2)                  *
                                of Ridgeway since 1988; Secretary
                                Ridgeway Bancshares, Inc. since 1999

T. Heyward Mattox               Director; Vice President and Cashier Bank              200                     *
                                of Ridgeway since 1964; Treasurer
                                Ridgeway Bancshares, Inc. since 1999

Thomas W. Copeland              Vice President Bank of Ridgeway,                         0                     *
                                Blythewood, SC since 1994

Robert D. Drake                 Vice President Bank of Ridgeway,                        20                     *
                                Winnsboro, SC since 1996

Herbert C. Humphries            Vice President Bank of Ridgeway,                        70                     *
                                Ridgeway, SC since 1992

Thomas B. Edmunds               Director; Retired financial consultant                 800(3)                2.00
                                Merrill Lynch

Roger A. Gaddy                  Director; Family practitioner Fairfield                240(4)                  *
                                Medical Associates, P.A., Winnsboro, SC

J. V. Nicholson, Jr.            Director; Retired dentist; Chairman Bank             5,400(5)                13.50
                                of Ridgeway and Ridgeway Bancshares, Inc.
                                since 2001

Eleanor T. Parrish              Director; Retired teacher Kershaw County               690(6)                1.98
                                School District

Daniel W. Ruff, III             Director; Co-owner Ruff & Co., Inc.                    605(7)                1.51
                                hardware and furniture retailer


                                       44

                                          Present Occupation And               Number Of Shares
                                         Principal Occupation For           Beneficially Owned At
             Name                            Last Five Years                   The Record Date         Percent of Class
             ----                            ---------------                   ---------------         ----------------

Joseph E. Sharpe                Director; Owner Joe Sharpe's Service                   150                     *
                                Station, Blythewood, SC; Chairman
                                Fairfield Electric Cooperative

David G. Traylor, Jr.           Director; Attorney Nelson, Mullins, Riley              120                     *
                                & Scarborough

All executive officers and                                                          13,519                   33.8%
directors as a group (13
persons)

------------------------
*less than 1%

(1)  Shares shown as  beneficially  owned by William A.  Harwell  consist of 564
     shares belonging jointly to William A. Harwell and his spouse,  Kathryne B.
     Harwell; 360 shares held by Smith Barney, Inc. as custodian for the William
     A. Harwell IRA; 200 shares held by Smith Barney,  Inc. as custodian for the
     Kathryne B.  Harwell  IRA; and 3,700 shares held in an estate for which Mr.
     Harwell shares voting power.
(2)  Shares shown as beneficially owned by M. S. Brakefield consist of 50 shares
     owned individually by M. S. Brakefield and 250 shares held by A. G. Edwards
     & Sons as custodian for the M. S. Brakefield IRA.
(3)  Shares  shown as  beneficially  owned by Thomas B.  Edmunds  consist of 400
     shares in the name of Thomas B.  Edmunds and 400 shares in the name of Lucy
     S. Edmunds, Mr. Edmunds' spouse.
(4)  Shares shown as  beneficially  owned by Roger A. Gaddy consist of 50 shares
     belonging  jointly to Roger A. Gaddy and Beth M. Gaddy;  165 shares held by
     Scott & Stringfellow as custodian for the Roger A. Gaddy IRA; and 25 shares
     held by Scott & Stringfellow as custodian for the Beth M. Gaddy IRA
(5)  Shares shown as beneficially owned by J. V. Nicholson, Jr. consist of 2,700
     shares in the name of John V.  Nicholson,  Jr. and 2,700 shares in the name
     of Ellen M. Nicholson, Dr. Nicholson's spouse.
(6)  Shares shown as  beneficially  owned by Eleanor T.  Parrish  consist of 420
     shares in the name of Eleanor  Thomas  Parrish and 270 shares owned jointly
     by Eleanor T. Parrish and James E. Parrish.
(7)  Shares shown as  beneficially  owned by Daniel W. Ruff,  III consist of 580
     shares  owned  individually  by Daniel W. Ruff,  III and 25 shares owned by
     Daniel W. Ruff, IV, Mr. Ruff's son.

Management Compensation

       The following  table  summarizes  for the years ended  December 31, 2001,
2000 and 1999 the compensation paid to the President and Chief Executive officer
of  Ridgeway  Bancshares.  There were no other  executive  officers  of Ridgeway
Bancshares or its subsidiaries who received  compensation  greater than $100,000
in 2001.

                           Summary Compensation Table



                                                                          Annual
                                                                       Compensation
                                                                       ------------                All Other
                                                       Year             Salary(1)              Compensation (2)
                                                       ----             ---------              ----------------
                                                                          Bonus

                                                                                         
William A. Harwell ................................    2001      $101,520         $9,762             $4,808(3)
President and Chief Executive Officer of Ridgeway      2000        99,000          9,360              4,697
Bankshares                                             1999        93,900          8,100              4,315

-------------------
(1)  This column includes salary and director's fees
(2)  This column includes Ridgeway  Bancshares'  contribution to the 401(K) plan
     on behalf of Mr.  Harwell  totaling  $2,929,  $2,808  and $2,700 in each of
     2001, 2000 and 1999, respectively.


                                       45


(3)  This  number  includes a  contribution  to the 401(k) plan on behalf of Mr.
     Harwell of $2,929,  a  contribution  to Mr.  Harwell's PS58 savings plan of
     $263 and life insurance premiums of $1,616.

Transactions With Management

         In the  ordinary  course  of  business,  Bank of  Ridgeway  has  loans,
deposits and other  transactions  with its executive  officers and directors and
organizations  with which such persons are associated.  Such transactions are on
substantially the same terms, including interest rates and collateral,  as those
prevailing at the time for comparable  transactions  with others.  The aggregate
amount of loans to such persons and any company in which they have a 10% or more
ownership interest as of September 30, 2001, were approximately $920,000.

Voting Securities And Principal Shareholders

         The  following  table sets forth  certain  information  concerning  the
beneficial owners of more than five percent of Ridgeway Bancshares common stock,
as of the record date.



                Name and Address                       Amount and Nature                     Percent of
              Of Beneficial Owner                     Beneficial Ownership                    Class (1)
              -------------------                     --------------------                    ---------

                                                                                         
J. V. Nicholson, Jr.                                       5,400 (2)                           13.50%
219 Tuckahoe Road
Ridgeway, South Carolina 29130

Estate of Joseph N. Crumpton                               3,700 (3)                            9.25%
c/o W. A. Harwell, Personal Representative
P. O. Box 434
Ridgeway, South Carolina 29130

Sara Beth Salley                                             2,800                              7.00%
258 Voyager Road
Salley, South Carolina 29137

Jo-Anne K. Urwick                                            2,080                              5.20%
1211 Overland Drive
High Point, North Carolina 27262

(1)  The  information  shown above is based upon  information  furnished  by the
     named persons.  Information  relating to beneficial ownership is based upon
     "beneficial  ownership"  concepts set forth in rules  promulgated under the
     Securities  Exchange Act of 1934. Under such rules a person is deemed to be
     a  "beneficial  owner" of a security if that  person has or shares  "voting
     power,"  which  includes  the power to vote or to direct the voting of such
     security,  or "investment power," which includes the power to dispose or to
     direct the  disposition  of such security.  Under the rules,  more than one
     person may be deemed to be a  beneficial  owner of the same  securities.  A
     person is also  deemed to be a  beneficial  owner of any  security of which
     that person has the right to acquire  beneficial  ownership  within 60 days
     from the record date.
(2)  Shares shown as beneficially owned by J. V. Nicholson, Jr. consist of 2,700
     shares in the name of John V.  Nicholson,  Jr. and 2,700 shares in the name
     of Ellen M. Nicholson, Dr. Nicholson's spouse.
(3)  Voting  power is  shared by the  personal  representatives,  Zack  Thompson
     Crumpton and William A. Harwell.

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Basis of Presentation

         The  following  discussion  should  be read  in  conjunction  with  the
"Selected  Financial Data" in the "Summary" and Ridgeway  Bancshares'  Financial
Statements and the Notes thereto and the other financial data included elsewhere


                                       46



in this Proxy Statement/Prospectus. The financial information provided below has
been  rounded in order to simplify  its  presentation.  However,  the ratios and
percentages   provided  below  are  calculated  using  the  detailed   financial
information  contained in the  Financial  Statements,  the Notes thereto and the
other financial data included elsewhere in this Proxy Statement/Prospectus.

General

         Ridgeway  Bancshares,  Inc.  was  organized  in 1999 to serve as a bank
holding  company  for  Bank  of  Ridgeway.   Bank  of  Ridgeway  is  the  oldest
state-chartered bank headquartered in South Carolina. The corporate headquarters
are located in Ridgeway,  South  Carolina.  The principal  business  activity of
Ridgeway  Bancshares  is  to  provide  banking  services  to  domestic  markets,
principally in Fairfield and northern Richland counties in South Carolina.  Bank
of Ridgeway also has a wholly-owned subsidiary,  Ridgeway Insurance Agency. This
agency  has  been  inactive  for the  last  few  years.  The  bank  also has two
additional offices in Winnsboro and Blythewood, South Carolina.

         On December 1, 1999, the  stockholders  of Bank of Ridgeway  approved a
plan of  corporate  reorganization  under which the bank  became a  wholly-owned
subsidiary of Ridgeway Bancshares,  Inc. The original authorized common stock of
Ridgeway Bancshares,  Inc. is 100,000 shares with no par value.  Pursuant to the
reorganization,  Ridgeway Bancshares issued 40,000 shares of its common stock in
exchange  for all of the  40,000  outstanding  common  shares of the  bank.  The
effective date of the  reorganization was December 31, 1999 and it was accounted
for as if it were a pooling of interests.

FOR THE YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 31, 1999:

Results of Operations

Year ended December 31, 2000, compared with year ended December 31, 1999

         Net interest income increased $163,305, or 5.87%, to $2,946,415 in 2000
from  $2,783,110 in 1999. The increase in net interest  income was due primarily
to an increase in average  earning  assets.  Average  earning  assets  increased
approximately  $3,730,000,  or  6.14%,  due  to  continued  growth  by  Ridgeway
Bancshares.

         Ridgeway  Bancshares'  net interest spread and net interest margin were
3.71% and 4.57%, respectively,  in 2000 compared to 3.87% and 4.58% in 1999. The
decreases in net  interest  spread and net interest  margin were  primarily  the
result of an increase in the yields on interest bearing  liabilities.  Yields on
interest bearing liabilities increased from 3.59% in 1999 to 4.03% in 2000.

         The  provision  for loan losses was $75,000 in 2000 compared to $60,000
in 1999. Ridgeway Bancshares continues to maintain the allowance for loan losses
at a level sufficient to cover known and inherent losses in the loan portfolio.

         Noninterest income increased  $108,370,  or 19.25%, to $671,374 in 2000
from $563,004 in 1999,  primarily as a result of an increase in service  charges
on deposit accounts.  Service charges on deposit accounts increased $74,466,  or
18.32%,  to $480,961  for the year ended  December  31,  2000.  The  increase in
service charges on deposit  accounts was  attributable to an increase of $47,430
in NSF charges.  Other  charges,  commissions,  and fees increased  $36,128,  or
28.80%, to $161,589 for the year ended December 31, 2000.

         Noninterest  expense  increased  $221,626,  or 11.56%, to $2,138,246 in
2000 from  $1,916,620 in 1999. The largest  increase in noninterest  expense was
attributable to an increase in other operating expense.  Other operating expense
increased  $107,970,  or 16.94%,  to $745,510 in 2000 from $637,540 in 1999. The
increase was partially  attributable to expenses of $74,600  associated with the
proposed merger with RHBT Financial  Corporation that did not occur.  Additional
data  processing  charges of $45,447 in 2000 also  contributed  to the increase.
Salaries and employee  benefits  increased  $89,743,  or 8.29%, to $1,172,132 in
2000 from $1,082,389 in 1999.



                                       47


         Net income was  $1,028,718 in 2000 compared to net income of $1,009,694
in 1999. The increase in net income was comprised of a $163,305  increase in net
interest  income  and  $108,370  increase  in  noninterest  income,  which  were
partially  offset by the  increases  of  $221,626  and  $16,025  in  noninterest
expenses  and the income tax  provision,  respectively.  The  increase in income
taxes was the result of increased income before taxes.  Return on average assets
during  2000 was 1.50%  compared  to 1.55%  during  1999,  and return on average
equity was 13.62% during 2000 compared to 15.01% during 1999.

Year ended December 31, 1999, compared with year ended December 31, 1998

         Net interest income increased $166,039, or 6.34%, to $2,783,110 in 1999
from  $2,617,071 in 1998. The increase in net interest  income was due primarily
to an increase in average  earning  assets.  Average  earning  assets  increased
$4,966,600, or 8.91%, due to continued growth by Ridgeway Bancshares.

         Ridgeway  Bancshares'  net interest spread and net interest margin were
3.87% and 4.58%, respectively,  in 1999 compared to 3.91% and 4.69% in 1998. The
decreases in net  interest  spread and net interest  margin were  primarily  the
result of a decrease in the yields on earning  assets.  Yields on earning assets
decreased from 7.83% in 1998 to 7.46% in 1999.

         The  provision  for loan losses was $60,000 in 1999 compared to $54,000
in 1998. Ridgeway Bancshares continues to maintain the allowance for loan losses
at a level sufficient to cover known and inherent losses in the loan portfolio.

         Noninterest  income  increased  $12,943,  or 2.35%, to $563,004 in 1999
from  $550,061 in 1998,  primarily  as a result of an increase in other  service
charges and fees. Other service charges and fees increased  $33,846,  or 36.94%,
to $125,461 for the year ended  December 31, 1999. The increase in other service
charges and fees was partially  attributable  to the increase in fees charged to
noncustomers  for the use of the  bank's  ATMs.  Other  income,  which  consists
primarily of credit life insurance commissions, decreased $19,260, or 38.28%, to
$31,048 for the year ended December 31, 1999.

         Noninterest  expense increased $99,482, or 5.47%, to $1,916,620 in 1999
from  $1,817,138  in 1998.  The  largest  increase  in  noninterest  expense was
attributable to an increase in other operating expense.  Other operating expense
increased  $66,490,  or 11.64%,  to $637,540 in 1999 from $571,050 in 1998.  The
increase was partially  attributable to additional  data  processing  charges of
$39,867 in 1999.  In  addition,  expenses  totaling  approximately  $25,000 were
incurred  to form the holding  company.  Net  occupancy  and  equipment  expense
increased  $34,863,  or 21.54%,  to $196,691 in 1999 from $161,828 in 1998. This
increase  was  primarily  attributable  to the land leases  acquired for the two
additional ATMs and increased depreciation expense.

         Net income was  $1,009,694 in 1999 compared to net income of $1,044,296
in  1998.  The  decrease  in net  income  was  due  primarily  to  increases  in
noninterest  expense.  The  increase in income taxes was the result of increased
income before taxes.  Return on average assets during 1999 was 1.55% compared to
1.75% during 1998,  and return on average equity was 15.01% during 1999 compared
to 15.05% during 1998.

Net Interest Income

General.  The largest  component of Ridgeway  Bancshares'  net income is its net
interest income, which is the difference between the income earned on assets and
interest  paid on deposits  and  borrowings  used to support  such  assets.  Net
interest  income is  determined  by the yields  earned on  Ridgeway  Bancshares'
interest-earning assets and the rates paid on its interest-bearing  liabilities,
the   relative   amounts  of   interest-earning   assets  and   interest-bearing
liabilities,  and  the  degree  of  mismatch  and  the  maturity  and  repricing
characteristics of its interest-earning assets and interest-bearing liabilities.
Net  interest  income  divided by  average  interest-earning  assets  represents
Ridgeway Bancshares' net interest margin.

Average Balances, Income and Expenses and Rates. The following table sets forth,
for the periods indicated,  certain information related to Ridgeway  Bancshares'
average  balance  sheet and its average  yields on assets and  average  costs of



                                       48


liabilities.  Such  yields  are  derived  by  dividing  income or expense by the
average balance of the  corresponding  assets or liabilities.  Average  balances
have been derived from the daily balances throughout the periods indicated.


                 Average Balances, Income and Expenses and Rates



                                                                                     Year Ended December 31,
                                                                                     -----------------------
                                                                           2000                                  1999
                                                                           ----                                  ----
  (Dollars in thousands)                                     Average      Income/     Yield/        Average      Income/      Yield/
                                                             Balance      Expense      Rate         Balance      Expense       Rate
                                                             -------      -------      ----         -------      -------       ----
 Assets:
 Earning Assets
                                                                                                             
   Loans (1) ...........................................    $ 36,223      $3,410       9.41%        $ 31,713      $2,941       9.27%
   Securities, taxable (2) .............................      15,631         912       5.83%          15,459         919       5.94%
   Securities, non-taxable .............................       8,962         438       4.89%           9,016         445       4.94%
   Nonmarketable equity securities .....................          64         226       6.35%              64           5       7.81%
   Federal funds sold and other ........................       3,561           4       6.25%           4,459         217       4.87%
                                                            --------      ------                    --------      ------
       Total earning assets ............................      64,441       4,990       7.74%          60,711       4,527       7.46%
                                                            --------      ------                    --------      ------
 Cash and due from banks ...............................       2,691                                   2,685
 Premises and equipment ................................         801                                     738
 Other assets ..........................................       1,192                                   1,129
 Allowance for loan losses .............................        (361)                                   (321)
                                                            --------                                --------
       Total assets ....................................    $ 68,764                                $ 64,942
                                                            ========                                ========

 Liabilities:
 Interest-Bearing Liabilities
   Interest-bearing transaction  accounts ..............    $ 16,145         383       2.37%        $ 16,393         384       2.34%
   Savings deposits ....................................       7,305         170       2.33%           7,048         166       2.36%
   Time deposits .......................................      24,319       1,329       5.46%          23,182       1,109       4.78%
   Federal funds purchased and securities ..............       2,939         161       5.48%           1,950          85       4.36%
                                                            --------      ------                    --------      ------
    sold under agreements to repurchase
       Total interest-bearing liabilities ..............      50,708       2,043       4.03%          48,573       1,744       3.59%
                                                            --------      ------                    --------      ------
 Demand deposits .......................................      10,193                                   9,298
 Accrued interest and other liabilities ................         313                                     343
 Shareholders' equity ..................................       7,550                                   6,728
                                                            --------                                --------
       Total liabilities and shareholders' equity ......    $ 68,764                                $ 64,942
                                                            ========                                ========
Net interest spread ....................................                               3.71%                                   3.87%
Net interest income ....................................                  $2,947                                  $2,783
                                                                          ======                                  ======
Net interest margin ....................................                               4.57%                                   4.58%

(1)  Excludes  nonaccrual  loans.  The effect of fees  collected on loans is not
     significant to the computations. All loans and deposits are domestic.
(2)  Average investment securities exclude the valuation allowance on securities
     available-for-sale.

Analysis of Changes in Net Interest  Income.  The following tables set forth the
effect  which  the  varying  levels  of  earning  assets  and   interest-bearing
liabilities and the applicable  rates have had on changes in net interest income
from 1999 to 2000 and 1998 to 1999.




                                       49



                 Average Balances, Income and Expenses and Rates



                                                                                                   2000 Compared with 1999
                                                                                                       Variance Due to
 (Dollars in thousands)                                                                    Volume (1)       Rate (1)         Total
                                                                                           ----------       --------         -----
Earning Assets
                                                                                                                     
  Loans ............................................................................          $ 424           $  45           $ 469
  Securities, taxable ..............................................................             10             (17)             (7)
  Securities, nontaxable ...........................................................             (3)             (4)             (7)
  Nonmarketable equity securities ..................................................            (49)             58               9
  Federal funds sold and other .....................................................              -              (1)             (1)
                                                                                              -----           -----           -----
      Total interest income ........................................................            382              81             463
                                                                                              -----           -----           -----

Interest-Bearing Liabilities Interest-bearing deposits:
    Interest-bearing transaction accounts ..........................................             (6)              5              (1)
    Savings deposits ...............................................................              6              (2)              4
    Time deposits ..................................................................             56             164             220
                                                                                              -----           -----           -----
      Total interest-bearing deposits ..............................................             56             167             223
  Federal funds purchased and securities sold under agreements .....................             50              26              76
                                                                                              -----           -----           -----
   to repurchase
      Total interest expense .......................................................            106             193             299
                                                                                              -----           -----           -----

      Net interest income ..........................................................          $ 276           $(112)          $ 164
                                                                                              =====           =====           =====


(1)  Volume-rate  changes  have been  allocated  to each  category  based on the
     percentage of the total change.




                                       50



          Average Balances, Income and Expenses and Rates -- continued



                                                                                                  1999 Compared with 1998
                                                                                                       Variance Due to
 (Dollars in thousands)                                                                    Volume (1)       Rate (1)          Total
                                                                                           ----------       --------          -----
Earning Assets
                                                                                                                     
  Loans ............................................................................          $ 151           $(105)          $  46
  Securities, taxable ..............................................................            192             (50)            142
  Securities, nontaxable ...........................................................             44             (11)             33
  Nonmarketable equity securities ..................................................              -               2               2
  Federal funds sold and other .....................................................            (41)            (20)            (61)
                                                                                              -----           -----           -----
      Total interest income ........................................................            346            (184)            162
                                                                                              -----           -----           -----

Interest-Bearing Liabilities Interest-bearing deposits:
    Interest-bearing transaction accounts ..........................................             44             (32)             12
    Savings deposits ...............................................................              6             (12)             (6)
    Time deposits ..................................................................             66             (97)            (31)
                                                                                              -----           -----           -----
      Total interest-bearing deposits ..............................................            116            (141)            (25)
  Federal funds purchased and securities sold under agreements .....................             26              (5)             21
                                                                                              -----           -----           -----
   to repurchase
      Total interest expense .......................................................            142            (146)             (4)
                                                                                              -----           -----           -----

      Net interest income ..........................................................          $ 204           $ (38)          $ 166
                                                                                              =====           =====           =====



(1)  Volume-rate  changes  have been  allocated  to each  category  based on the
percentage of the total change.

Interest  Sensitivity.  Ridgeway Bancshares monitors and manages the pricing and
maturity  of its assets  and  liabilities  in order to  diminish  the  potential
adverse  impact that  changes in interest  rates could have on its net  interest
income. The principal  monitoring  technique employed by Ridgeway  Bancshares is
the measurement of Ridgeway Bancshares' interest sensitivity "gap," which is the
positive or negative dollar  difference  between assets and liabilities that are
subject to interest rate repricing within a given period of time.  Interest rate
sensitivity  can  be  managed  by  repricing  assets  or  liabilities,   selling
securities  available-for-sale,  replacing an asset or liability at maturity, or
adjusting the interest  rate during the life of an asset or liability.  Managing
the amount of assets and liabilities  repricing in this same time interval helps
to hedge the risk and minimize  the impact on net  interest  income of rising or
falling interest rates.




                                       51



         The  following  table sets forth  Ridgeway  Bancshares'  interest  rate
sensitivity at December 31, 2000.

                          Interest Sensitivity Analysis



                                                                        After One   After Three                   Greater
                                                                         Through      Through                    Than One
                                                           Within One     Three        Twelve     Within One   Year or Non-
(Dollars in thousands)                                        Month       Months       Months        Year        Sensitive    Total
                                                              -----       ------       ------        ----        ---------    -----
Assets
  Earning Assets:
                                                                                                          
    Loans (1) ...........................................   $  3,341     $  6,680     $  2,402     $ 12,423     $ 27,157    $ 39,580
    Securities ..........................................      2,800        4,484        7,284       16,456       23,740
    Federal funds sold and securities
     purchased under agreements to resell ...............      5,960                                  5,960                    5,960
    Time deposits with other banks ......................                                   37           37          100         137
                                                            --------     --------     --------     --------     --------    --------
        Total earning assets ............................      9,301        9,480        6,923       25,704       43,713      69,417
                                                            --------     --------     --------     --------     --------    --------

Liabilities
  Interest-bearing liabilities:
    Interest-bearing deposits:
      Demand deposits ...................................     19,373                                 19,373                   19,373
      Savings deposits ..................................      7,622                                  7,622                    7,622
      Time deposits .....................................      3,958        4,930       15,556       24,444        2,412      26,856
                                                            --------     --------     --------     --------     --------    --------
        Total interest-bearing deposits .................     30,953        4,930       15,556       51,439        2,412      53,851
  Securities sold under agreements  to repurchase .......      2,419                                  2,419                    2,419
                                                            --------     --------     --------     --------     --------    --------

        Total interest-bearing liabilities ..............     33,372        4,930       15,556       53,858        2,412      56,270
                                                            --------     --------     --------     --------     --------    --------
Period gap ..............................................   $(24,071)    $  4,550     $ (8,633)    $(28,154)    $ 41,301
                                                            ========     ========     ========     ========     ========
Cumulative gap ..........................................   $(24,071)    $(19,521)    $(28,154)    $(28,154)    $ 13,147
                                                            ========     ========     ========     ========     ========
Ratio of cumulative gap to total earning assets .........     (34.68)%     (28.12)%     (40.56)%     (40.56)%      18.94%

(1)  Excludes  nonaccrual  loans.  The effect of fees  collected on loans is not
     significant to the computations.

         The above table  reflects the balances of  interest-earning  assets and
interest-bearing  liabilities  at the  earlier of their  repricing  or  maturity
dates.  Overnight  federal funds are reflected at the earliest  pricing interval
due to the immediately available nature of the instruments. Securities purchased
under agreements to resell are reflected at the maturity date of each agreement,
which  ranges  from  one to 30  days.  Debt  securities  are  reflected  at each
instrument's  ultimate  maturity  date.  Time  deposits  with  other  banks  are
reflected at their scheduled  maturity date.  Scheduled payment amounts of fixed
rate amortizing  loans are reflected at each scheduled  payment date.  Scheduled
payment  amounts  of  variable  rate  amortizing  loans  are  reflected  at each
scheduled  payment  date  until  the loan  may be  repriced  contractually;  the
unamortized  balance is  reflected at that point.  Interest-bearing  liabilities
with no  contractual  maturity,  such as savings  deposits and  interest-bearing
transaction  accounts,  are  reflected in the earliest  repricing  period due to
contractual  arrangements which give Ridgeway Bancshares the opportunity to vary
the rates paid on those deposits  within a thirty-day or shorter  period.  Fixed
rate time deposits,  principally certificates of deposit, are reflected at their
contractual  maturity date.  Securities sold under  agreements to repurchase are
reflected at the maturity date of each repurchase  agreement,  which ranges from
one to 30 days.



                                       52


         Ridgeway  Bancshares  generally  would benefit from  increasing  market
rates of interest  when it has an  asset-sensitive  gap position  and  generally
would   benefit  from   decreasing   market   rates  of  interest   when  it  is
liability-sensitive.  Ridgeway Bancshares is cumulative liability-sensitive over
the one month to 12 month time frame. However, Ridgeway Bancshares' gap analysis
is not a precise indicator of its  interest-sensitivity  position.  The analysis
presents  only  a  static  view  of  the  timing  of  maturities  and  repricing
opportunities,  without taking into consideration that changes in interest rates
do not affect all assets and liabilities equally.  For example,  rates paid on a
substantial  portion  of  core  deposits  may  change   contractually  within  a
relatively  short  time  frame,  but those  rates are  viewed by  management  as
significantly less interest-sensitive than market-based rates such as those paid
on noncore deposits. Accordingly,  management believes a liability-sensitive gap
position is not as indicative of Ridgeway Bancshares' true  interest-sensitivity
as it  would  be for an  organization  which  depends  to a  greater  extent  on
purchased funds to support  earning assets.  Net interest income may be impacted
by other  significant  factors in a given interest rate  environment,  including
changes  in  the  volume  and  mix  of  earning   assets  and   interest-bearing
liabilities.

Provision and Allowance for Loan Losses

General.   Ridgeway   Bancshares  has  developed  policies  and  procedures  for
evaluating  the  overall  quality  of  its  credit   portfolio  and  the  timely
identification  of potential  problem credits.  On a quarterly  basis,  Ridgeway
Bancshares'  Board of Directors  reviews and approves the appropriate  level for
Ridgeway   Bancshares'   allowance  for  loan  losses  based  upon  management's
recommendations,  the results of the internal  monitoring and reporting  system,
and  an  analysis  of  economic  conditions  in its  market.  The  objective  of
management has been to fund the allowance for loan losses at approximately 1% of
total loans outstanding.

         Additions to the allowance  for loan losses,  which are expensed as the
provision for loan losses on Ridgeway  Bancshares'  income  statement,  are made
periodically  to  maintain  the  allowance  at an  appropriate  level  based  on
management's  analysis of the potential risk in the loan portfolio.  Loan losses
and recoveries are charged or credited directly to the allowance.  The amount of
the  provision  is a function  of the level of loans  outstanding,  the level of
nonperforming loans, historical loan loss experience,  the amount of loan losses
actually  charged  against the reserve  during a given  period,  and current and
anticipated economic conditions.

         Ridgeway Bancshares'  allowance for loan losses is based upon judgments
and assumptions of risk elements in the portfolio,  future economic  conditions,
and other factors affecting borrowers.  The process of determining the amount of
the allowance includes  identification and analysis of loss potential in various
portfolio  segments utilizing a credit risk grading process and specific reviews
and evaluations of significant problem credits. In addition, management monitors
the  overall  portfolio  quality  through   observable  trends  in  delinquency,
charge-offs,  and general and  economic  conditions  in the  service  area.  The
adequacy  of the  allowance  for loan losses and the  effectiveness  of Ridgeway
Bancshares' monitoring and analysis system are also reviewed periodically by the
banking regulators and Ridgeway Bancshares' independent auditors.

         Based on  present  information  and an ongoing  evaluation,  management
considers the allowance for loan losses to be adequate to meet  presently  known
and  inherent  risks in the loan  portfolio.  Management's  judgment  about  the
adequacy of the  allowance  is based upon a number of  assumptions  about future
events, which it believes to be reasonable but which may or may not be accurate.
Thus,  there can be no assurance  that  charge-offs  in future  periods will not
exceed  the  allowance  for loan  losses  or that  additional  increases  in the
allowance  for loan losses will not be required.  Ridgeway  Bancshares  does not
allocate  the  allowance  for loan  losses to specific  categories  of loans but
evaluates the adequacy on an overall  portfolio  basis  utilizing a risk grading
system.

         The  following  table sets forth  certain  information  with respect to
Ridgeway   Bancshares'   allowance  for  loan  losses  and  the  composition  of
charge-offs and recoveries for the years ended December 31, 2000, 1999 and 1998.




                                       53



                            Allowance for Loan Losses



 (Dollars in thousands)                                                                   2000             1999              1998
                                                                                          ----             ----              ----
                                                                                                                   
Total loans outstanding at end of period .....................................          $39,805           $33,724           $30,516
                                                                                        =======           =======           =======

Average loans outstanding ....................................................          $36,311           $31,713           $30,112
                                                                                        =======           =======           =======

Balance of allowance for loan losses at beginning of period ..................          $   335           $   305           $   287
Loan losses:
  Real estate - construction .................................................                -                 -                 -
  Real estate - mortgage .....................................................                -                 1                 -
  Commercial and industrial ..................................................                1                14                25
  Consumer ...................................................................               43                32                21
                                                                                        -------           -------           -------
    Total loan losses ........................................................               44                47                46
                                                                                        -------           -------           -------
Recoveries of previous loan losses:
  Real estate - construction .................................................                -                 -                 -
  Real estate - mortgage .....................................................                -                 -                 -
  Commercial and industrial ..................................................               16                 8                 5
  Consumer ...................................................................                6                 9                 5
                                                                                        -------           -------           -------
    Total recoveries .........................................................               22                17                10
                                                                                        -------           -------           -------
Net loan losses ..............................................................               22                30                36
Provision for loan losses ....................................................               75                60                54
                                                                                        -------           -------           -------
Balance of allowance for loan losses at end of period ........................          $   388           $   335           $   305
                                                                                        =======           =======           =======

Allowance for loan losses to period end loans ................................             0.97%             0.99%             1.00%
Net charge-offs to average loans .............................................             0.06%             0.09%             0.12%


Nonperforming Assets

Nonperforming  Assets.  The  following  table  sets forth  Ridgeway  Bancshares'
nonperforming assets for the dates indicated.



                                                                                                           December 31,
 (Dollars in thousands)                                                                        2000            1999            1998
                                                                                               ----            ----            ----
                                                                                                                      
Nonaccrual loans ...................................................................           $225            $ 19            $ 10
Restructured or impaired loans .....................................................              -               -               -
                                                                                                                               ----
    Total nonperforming loans ......................................................           $225            $ 19            $ 10
Other real estate owned ............................................................              -               -               -
                                                                                                                               ----
    Total nonperforming assets .....................................................           $225            $ 19            $ 10
                                                                                               ====            ====            ====
Loans 90 days or more past due and still accruing interest .........................           $355            $103            $ 52
Nonperforming assets to period end loans and foreclosed property ...................           0.57%           0.06%           0.03%



         Accrual of interest is discontinued on a loan when management believes,
after considering economic and business conditions, and collection efforts, that
the  borrower's  financial  condition is such that the collection of interest is
doubtful.  A delinquent  loan is generally  placed in nonaccrual  status when it
becomes 90 days or more past due.  When a loan is placed in  nonaccrual  status,
all interest, which has been accrued on the loan but remains unpaid, is reversed
and deducted from current  earnings as a reduction of reported  interest income.
No additional  interest is accrued on the loan balance  until the  collection of
both principal and interest becomes reasonably  certain.  When a problem loan is


                                       54


finally resolved,  there may ultimately be an actual write down or charge-off of
the principal balance of the loan which would necessitate  additional charges to
earnings. For all periods presented, the additional interest income, which would
have been recognized into earnings if Ridgeway Bancshares'  nonaccrual loans had
been current in accordance with their original terms, is immaterial.

Potential Problem Loans. At December 31, 2000,  Ridgeway Bancshares reviewed its
loan  portfolio to identify  any  criticized  or  classified  loans  through its
internal  review  mechanisms.  The results of this internal  review  process are
considered  in  determining  management's  assessment  of  the  adequacy  of the
allowance for loan losses. The overall objective of Ridgeway Bancshares has been
to maintain the allowance for loan losses at  approximately 1% of total loans to
provide for potential problem loans.

Noninterest Income and Expense

Noninterest  Income.  The largest  component  of  noninterest  income is service
charges on deposit accounts,  which totaled $480,961 in 2000, an 18.32% increase
over the 1999 amount of  $406,495.  The $74,466  increase in service  charges on
deposit  accounts  is  primarily  attributable  to the  $47,430  increase in NSF
charges.  Other  service  charges  and fees  increased  to $161,589 in 2000 from
$125,461 in 1999. The primary cause for this increase was  attributable  to fees
generated from ATMs used by noncustomers.

         Other  service  charges  and fees  increased  to  $125,461 in 1999 from
$91,615 in 1998. This increase was primarily attributable to fees generated from
ATMs used by noncustomers.  In 1999, service charges on deposit accounts totaled
$406,495, a .40% decrease from the 1998 amount of $408,138.

         The following table sets forth the principal  components of noninterest
income for the years ended December 31, 2000, 1999 and 1998.

(Dollars in thousands)                                2000       1999       1998
                                                      ----       ----       ----
Service charges on deposit accounts ...........       $481       $407       $408
Other service charges and fees ................        161        125         92
Other income ..................................         29         31         50
                                                      ----       ----       ----
Total noninterest income ......................       $671       $563       $550
                                                      ====       ====       ====

Noninterest Expense.  Other operating expense increased $107,970,  or 16.94%, to
$745,510 in 2000 from  $637,540 in 1999.  The increase was primarily a result of
additional  expenses of $74,600  associated  with the proposed  merger with RHBT
Financial  Corporation  that did not occur.  Additional data processing  charges
were  approximately  $43,000  in  2000.  Net  occupancy  and  equipment  expense
increased  $23,913  from  $196,691  in 1999 to $220,604  in 2000.  Salaries  and
benefits are the largest component of noninterest expense totaling $1,172,132 in
2000, an increase of $89,743, or 8.29%.  Ridgeway Bancshares'  efficiency ratio,
which is noninterest expense as a percentage of the total of net interest income
plus  noninterest  income,  net of gains and losses on the sale of  assets,  was
59.10% in 2000 compared to 57.28% in 1999.

         Other operating  expense increased  $66,490,  or 11.64%, to $637,540 in
1999 from  $571,050 in 1998.  The increase was  primarily a result of additional
data  processing  charges and  expenses  associated  with the  formation  of the
holding company.  Additional data processing charges were approximately  $40,000
in 1999. Net occupancy and equipment  expense increased from $161,828 in 1998 to
$196,691  in 1999.  The  increase  was  primarily  attributable  to the  expense
associated  with land leases  obtained for two additional ATM machines and to an
increase in  depreciation  expense.  While  salaries and  benefits  comprise the
largest  component of noninterest  expense at $1,082,389 in 1999, these expenses
were virtually  unchanged from 1998. Ridgeway  Bancshares'  efficiency ratio was
57.28% in 1999 compared to 57.37% in 1998.

         The following  table sets forth the primary  components of  noninterest
expense for the years ended December 31, 2000, 1999 and 1998.



                                       55


 (Dollars in thousands)                            2000        1999       1998
                                                   ----        ----       ----
Salaries and employee benefits .............     $1,172      $1,082      $1,084
Net occupancy and equipment expense ........        221         197         162
Stationery and printing expense ............         59          58          65
Postage and freight ........................         56          59          54
Data processing services ...................        194         149         109
Merger expenses ............................         75           -           -
Intangible costs ...........................         42          51          62
Other ......................................        319         321         281
                                                 ------      ------      ------
    Total noninterest expense ..............     $2,138      $1,917      $1,817
                                                 ======      ======      ======

Efficiency ratio ...........................      59.10%      57.28%      57.37%

Earning Assets

Loans.  Loans are the largest  category of earning assets and typically  provide
higher yields than the other types of earning assets. Associated with the higher
loan  yields  are the  inherent  credit and  liquidity  risks  which  management
attempts to control  and  counterbalance.  Loans  averaged  $36,223,378  in 2000
compared  to  $31,713,429  in 1999,  an increase of  $4,509,949,  or 14.22%.  At
December 31,  2000,  total loans were  $39,804,725  compared to  $33,723,521  at
December 31, 1999.

         The  increase  in loans  during  2000 was  primarily  due to the steady
growth of Ridgeway Bancshares. The following table sets forth the composition of
the loan portfolio by category at the dates  indicated and  highlights  Ridgeway
Bancshares' general emphasis on consumer and mortgage lending.

                          Composition of Loan Portfolio



                                                                                             December 31,
                                                                             2000                                 1999
                                                                             ----                                 ----
 (Dollars in thousands)                                            Amount          Percent of Total      Amount           Percent of
                                                                   ------          ----------------      ------           ----------
                                                                                                               
Commercial and industrial ..........................             $ 5,045                 12.67%          $ 4,716            13.98%
Real estate
  Construction .....................................                 290                  0.73               154             0.46
  Mortgage-residential .............................              16,784                 42.17            16,464            48.82
  Mortgage-nonresidential ..........................               8,949                 22.48             3,925            11.64
Consumer ...........................................               8,020                 20.15             7,914            23.47
Other ..............................................                 717                  1.80               550             1.63
                                                                 -------                ------           -------           ------
    Total loans ....................................              39,805                100.00%           33,723           100.00%
                                                                                        ======           =======           ======
Allowance for loan losses ..........................                 388                                     334
                                                                 -------                                 -------
  Net loans ........................................             $39,417                                 $33,389
                                                                 =======                                 =======


         Ridgeway Bancshares' loan portfolio is largely comprised of real estate
mortgage  loans.  At December  31,  2000,  real estate  mortgage  loans  totaled
$25,733,008  and  represented  64.65% of the total loan  portfolio,  compared to
$20,389,286, or 60.46%, at December 31, 1999.

         In the context of this  discussion,  a "real estate  mortgage  loan" is
defined as any loan, other than loans for construction purposes, secured by real
estate,  regardless  of the  purpose  of the  loan.  It is common  practice  for
financial  institutions in Ridgeway Bancshares' market area to obtain a security
interest in real estate  whenever  possible,  in addition to any other available
collateral. This collateral is taken to reinforce the likelihood of the ultimate
repayment  of the loan and tends to increase  the  magnitude  of the real estate
loan portfolio component.



                                       56


         Residential mortgage loans increased $320,247, or 1.95%, to $16,784,482
at December 31, 2000, from  $16,464,235 at December 31, 1999.  Residential  real
estate loans  consist of first and second  mortgages  on single or  multi-family
residential dwellings.  Nonresidential  mortgage loans, which include commercial
loans and other loans secured by multi-family properties and farmland, increased
$5,023,159,  or 127.97%,  to $8,948,526 at December 31, 2000, from $3,925,367 at
December  31,  1999.   This  increase  in  real  estate  lending  was  primarily
attributable  to the purchase of residential  and  commercial  real estate loans
from other institutions.

         Commercial  and  industrial  loans  increased  $329,406,  or 6.99%,  to
$5,045,202 at December 31, 2000, from $4,715,796 at December 31, 1999.  Ridgeway
Bancshares  continues to focus on real estate and consumer  lending  rather than
commercial and industrial lending.

         Consumer loans increased $105,294,  or 1.33%, to $8,019,601 at December
31, 2000, from $7,914,307 at December 31, 1999. Consumer lending continues to be
an important focus of the bank's loan portfolio.

         Ridgeway  Bancshares'  loan  portfolio  reflects  the  diversity of its
market.  Ridgeway Bancshares' three office locations are in Fairfield County and
northern Richland County, South Carolina.  The economy of Fairfield and northern
Richland  counties contains  elements of medium and light  manufacturing,  local
health  care,  and  distribution  facilities.  Due to its  proximity  to a major
interstate highway,  management expects the area to remain stable with continued
growth.  The  diversity of the economy  creates  opportunities  for all types of
lending. Ridgeway Bancshares does not engage in foreign lending.

         The  repayment of loans in the loan  portfolio as they mature is also a
source of liquidity  for Ridgeway  Bancshares.  The  following  table sets forth
Ridgeway  Bancshares' loans maturing within specified  intervals at December 31,
2000.

       Loan Maturity Schedule and Sensitivity to Changes in Interest Rates



                                                                                        Over One
                                                                                          Year
                                                                        One Year         Through          Over Five
(Dollars in thousands)                                                  or Less         Five Years          Years             Total
                                                                        -------         ----------          -----             -----

                                                                                                                 
Commercial and industrial ..................................           $ 3,236           $ 1,551           $   258           $ 5,045
Real estate ................................................             7,014             9,563             9,446            26,023
Consumer and other .........................................             2,173             6,452               112             8,737
                                                                       -------           -------           -------           -------
                                                                        12,423            17,566             9,816            39,805
                                                                       -------           -------           -------           -------
Loans maturing after one year with:
   Fixed interest rates ....................................                                                                $ 27,382
   Floating interest rates .................................                                                                       -
                                                                                                                                   -
                                                                                                                            --------
                                                                                                                            $ 27,382
                                                                                                                            ========


         The  information   presented  in  the  above  table  is  based  on  the
contractual  maturities of the individual  loans,  including  loans which may be
subject  to  renewal  at their  contractual  maturity.  Renewal of such loans is
subject to review  and credit  approval  as well as  modification  of terms upon
their maturity. Consequently, management believes this treatment presents fairly
the maturity and repricing  structure of the loan  portfolio  shown in the above
table.

Investment  Securities.  The  investment  securities  portfolio is a significant
component  of  Ridgeway  Bancshares'  total  earning  assets.  Total  securities
averaged  $24,656,924 in 2000,  compared to $24,539,334 in 1999. At December 31,
2000, the total securities portfolio was $23,740,091.  All securities designated
as  available-for-sale  were  recorded at their  estimated  fair  market  value.
Securities  designated as held-to-maturity were recorded at their amortized cost
and totaled $16,116,759 at December 31, 2000.



                                       57


         The following table sets forth the book value of the securities held by
Ridgeway Bancshares at the dates indicated.

                            Book Value of Securities

                                                                December 31,
                                                             2000          1999
                                                             ----          ----
 (Dollars in thousands)
U.S. Treasury ..........................................     $ 1,497     $ 2,689
U.S. Government agencies ...............................      12,956      13,574
Obligations of state and political subdivisions ........       9,223       9,495
                                                             -------     -------
    Total securities ...................................     $23,676     $25,758
                                                             =======     =======


         The  following  table sets forth the scheduled  maturities  and average
yields of securities held at December 31, 2000.

             Investment Securities Maturity Distribution and Yields



                                                            After One But      After Five But
                                        Within One Year   Within Five Years   Within Ten Years   Over Ten Years          Total
                                        ---------------   -----------------   ----------------   --------------          -----
(Dollars in thousands)                  Amount   Yield     Amount   Yield     Amount    Yield    Amount    Yield     Amount    Yield
----------------------                  ------   -----     ------   -----     ------    -----    ------    -----     ------    -----
                                                                                                    
U.S. Treasury ....................   $ 1,497     5.59%    $    -       -%     $    -        -%   $   -         -%   $ 1,497    5.59%
U.S. Government agencies .........     4,992     5.42      7,964    6.12           -        -        -         -     12,956    5.85
Obligations of state
  and political subdivisions......       786     8.11      4,006    7.13       4,344     6.57       87      8.25      9,223    6.96
                                     -------     ----    -------    ----     -------     ----    -----      ----    -------    ----
     Total securities ............   $ 7,275     5.75    $11,970    6.46     $ 4,344     6.57    $  87      8.25    $23,676    6.27
                                     =======     ====    =======    ====     =======     ====    =====      ====    =======    ====


         Other  attributes of the  securities  portfolio,  including  yields and
maturities,   are  discussed  above  in  "---Net  Interest   Income---  Interest
Sensitivity."

Short-Term  Investments.  Short-term  investments,  which  consist  primarily of
federal funds sold and securities purchased under agreements to resell, averaged
$3,425,246  in 2000,  compared to  $4,329,466  in 1999.  At December  31,  2000,
short-term  investments totaled $5,960,000.  These funds are an important source
of Ridgeway  Bancshares'  liquidity.  Federal funds are generally invested in an
earning capacity on an overnight basis. Securities purchased under agreements to
resell are invested on a seven to thirty-one day period,  depending on the terms
of each agreement.

Deposits and Other Interest-Bearing Liabilities

         Average interest-bearing liabilities increased $2,135,032, or 4.40%, to
$50,707,663 in 2000, from $48,572,631 in 1999. Average interest-bearing deposits
increased  $1,146,830,  or 2.46%,  to $47,769,131 in 2000,  from  $46,622,301 in
1999.   These   increases   resulted  from  increases  in  most   categories  of
interest-bearing  liabilities,  primarily as a result of the continued growth of
Ridgeway Bancshares.

Deposits.  Average total deposits increased $2,047,347, or 3.65%, to $57,963,646
during 2000, from $55,920,299  during 1999. At December 31, 2000, total deposits
were $63,690,415 compared to $54,971,646 a year earlier, an increase of 15.86%.


                                       58


         The following  table sets forth the deposits of Ridgeway  Bancshares by
category at the dates indicated.

                                    Deposits



                                                                                               December 31,
                                                                                 2000                            1999
                                                                                 ----                            ----
                                                                                       Percent of                      Percent of
(Dollars in thousands)                                                  Amount          Deposits        Amount          Deposits
                                                                        ------          --------        ------          --------
                                                                                                             
Demand deposit accounts ....................................           $ 9,839           15.45%        $ 9,552           17.38%
NOW accounts ...............................................             9,211           14.46           8,414           15.31
Money market accounts ......................................            10,161           15.95           7,172           13.05
Savings accounts ...........................................             7,622           11.97           6,773           12.32
Time deposits less than $100,000 ...........................            19,993           31.39          18,866           34.32
Time deposits of $100,000 or over ..........................             6,864           10.78           4,195            7.62
                                                                       -------          ------         -------          ------
          Total deposits ...................................           $63,690          100.00%        $54,972          100.00%
                                                                       =======          ======         =======          ======


         Core  deposits,  which exclude  certificates  of deposit of $100,000 or
more,  provide a relatively stable funding source for Ridgeway  Bancshares' loan
portfolio and other earning assets. Ridgeway Bancshares' core deposits increased
$6,049,228 in 2000 due to the continued growth of Ridgeway Bancshares.

         Deposits,   and   particularly   core  deposits,   have  been  Ridgeway
Bancshares'  primary source of funding and have enabled  Ridgeway  Bancshares to
meet successfully both its short-term and long-term liquidity needs.  Management
anticipates that such deposits will continue to be Ridgeway  Bancshares' primary
source of funding in the future. Ridgeway Bancshares'  loan-to-deposit ratio was
62.50% at  December  31,  2000,  and  61.35%  at the end of 1999;  and the ratio
averaged 62.49% during 2000. The maturity  distribution of Ridgeway  Bancshares'
time  deposits over $100,000 at December 31, 2000, is set forth in the following
table:

            Maturities of Certificates of Deposit of $100,000 or More



                                                                                                 After Six
                                                                      Wintin      After Three     Through         After
                                                                      Three       Through Six     Twelve         Twelve
(Dollars in thousands)                                                Months        Months        Months         Months       Total
                                                                      ------        ------        ------         ------       -----
                                                                                                               
Certificates of deposit of $100,000 or more ..................        $1,968        $2,061        $2,071        $  764        $6,864


         Approximately   28.67%  of  Ridgeway  Bancshares'  time  deposits  over
$100,000 had scheduled maturities within three months, and 58.70% had maturities
within six months.  Large  certificate of deposit customers tend to be extremely
sensitive to interest rate levels,  making these deposits less reliable  sources
of funding for liquidity planning purposes than core deposits.

Borrowed Funds.  Borrowed funds consist of short-term  borrowings in the form of
federal funds purchased and securities sold under agreements to repurchase.

         Average  short-term  borrowings  were  $2,938,538 in 2000,  compared to
$1,950,330 in 1999.  At December 31, 2000,  Ridgeway  Bancshares  had no federal
funds  purchased and  securities  sold under  agreements  to repurchase  totaled
$2,418,501.  The average balance in 2000 related mostly to securities sold under
agreements to repurchase  with several  customers.  These  agreements  typically
range  from  one to 30  days.  Although  management  may  from  time to time use


                                       59


short-term borrowings as a secondary funding source, core deposits will continue
to be Ridgeway Bancshares' primary funding source.

Capital

         Ridgeway  Bancshares  and its  subsidiary  bank 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 material effect on Ridgeway Bancshares' financial statements. Under
capital adequacy  guidelines and the regulatory  framework for prompt corrective
action,   Ridgeway  Bancshares'  subsidiary  bank  must  meet  specific  capital
guidelines that involve quantitative measures of the bank's assets, liabilities,
and certain  off-balance-sheet  items as calculated under regulatory  accounting
practices.  Ridgeway  Bancshares' and its subsidiary  bank's capital amounts and
classifications  are also subject to  qualitative  judgments  by the  regulators
about components, risk weightings, and other factors.

         Quantitative  measures  established  by  regulation  to ensure  capital
adequacy require Ridgeway Bancshares' subsidiary bank to maintain minimum ratios
of Tier 1 and total  capital as a  percentage  of assets  and  off-balance-sheet
exposures,  adjusted  for risk weights  ranging from 0% to 100%.  Tier 1 capital
consists of common shareholders'  equity,  excluding the unrealized gain or loss
on  securities  available-for-sale,  minus  certain  intangible  assets.  Tier 2
capital   consists  of  the  allowance  for  loan  losses   subject  to  certain
limitations. Total capital for purposes of computing the capital ratios consists
of the sum of Tier 1 and Tier 2 capital. The regulatory minimum requirements are
4% for Tier 1 and 8% for total risk-based capital.

         Ridgeway  Bancshares'  subsidiary  bank is also  required  to  maintain
capital at a minimum level based on quarterly average assets,  which is known as
the leverage ratio.  Only the strongest banks are allowed to maintain capital at
the minimum  requirement of 3%. All others are subject to maintaining  ratios 1%
to 2% above the minimum.

         Ridgeway  Bancshares  is  currently  not  subject to direct  regulatory
capital  requirements.  Under  Federal  Reserve Board  guidelines,  bank holding
companies  such  as  Ridgeway   Bancshares   with  less  than   $150,000,000  in
consolidated assets are exempt from these requirements.

         Ridgeway  Bancshares  and its  subsidiary  bank exceeded the regulatory
capital  ratios at  December  31,  2000 and 1999 as set  forth in the  following
table.

                     Analysis of Capital and Capital Ratios



                                                                          Ridgeway Bancshares                   Bank of Ridgeway
 (Dollars in thousands)                                                2000               1999              2000               1999
                                                                       ----               ----              ----               ----
                                                                                                                
Tier 1 capital .............................................          $ 7,505           $ 6,715           $ 7,492           $ 6,731
Tier 2 capital .............................................              388               334               388               334
                                                                      -------           -------           -------           -------
    Total qualifying capital ...............................          $ 7,893           $ 7,049           $ 7,880           $ 7,065
                                                                      =======           =======           =======           =======

Risk-adjusted total assets .................................          $37,214           $35,692           $37,204           $35,690
                                                                      =======           =======           =======           =======
 (including off-balance sheet exposures)

Tier 1 risk-based capital ratio ............................            20.17%            18.81%            20.14%            18.86%
Total risk-based capital ratio .............................            21.21             19.75             21.18             19.80
Tier 1 leverage ratio ......................................            10.41             10.35             10.40             10.31




                                       60


Liquidity Management and Capital Resources

         Liquidity  management involves monitoring Ridgeway  Bancshares' sources
and uses of funds in order to meet its day-to-day cash flow  requirements  while
maximizing profits.  Liquidity  represents the ability of Ridgeway Bancshares to
convert assets into cash or cash  equivalents  without  significant  loss and to
raise  additional  funds by increasing  liabilities.  Without  proper  liquidity
management,  Ridgeway  Bancshares  would  not be able  to  perform  the  primary
function of a financial intermediary and, therefore, would be unable to meet the
needs of the communities it serves.

         Liquidity  management is made more complex  because  different  balance
sheet  components  are subject to varying  degrees of  management  control.  For
example,   the  timing  of  maturities  of  the  investment  portfolio  is  very
predictable  and  subject to a high  degree of  control  at the time  investment
decisions  are made.  However,  net deposit  inflows and  outflows  are far less
predictable and are not subject to nearly the same degree of control.

Accounting and Financial Reporting Issues

         In June 1998, the Financial  Accounting  Standards  Board (FASB) issued
Statement  (SFAS) No. 133,  Accounting  for Derivative  Instruments  and Hedging
Activities,  effective  for fiscal years  beginning  after June 15,  2000.  This
Statement   establishes   accounting  and  reporting  standards  for  derivative
instruments and hedging  activities,  including certain  derivative  instruments
embedded  in  other  contracts,  and  requires  that  an  entity  recognize  all
derivatives  as assets or  liabilities  in the balance sheet and measure them at
fair value. The accounting for changes in the fair value of a derivative depends
on how the  derivative is used and how the  derivative is  designated.  Ridgeway
Bancshares  adopted  SFAS No. 133 on July 1, 2000.  The adoption of SFAS No. 133
did not have a material impact on the consolidated financial statements.

Impact of Inflation

         Unlike  most  industrial  companies,  the  assets  and  liabilities  of
financial  institutions  such as Ridgeway  Bancshares are primarily  monetary in
nature.  Therefore,  interest rates have a more  significant  effect on Ridgeway
Bancshares'  performance  than do the effects of changes in the general  rate of
inflation and change in prices.  In addition,  interest rates do not necessarily
move in the same  direction or in the same  magnitude as the prices of goods and
services. As discussed previously,  management seeks to manage the relationships
between  interest  sensitive  assets and liabilities in order to protect against
wide interest rate fluctuations, including those resulting from inflation.

FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2001 AND SEPTEMBER 30, 2000:

Results of Operations

Net Interest Income

         For the nine months  ended  September  30, 2001,  net  interest  income
increased  $109,075,  or 4.98%,  to $2,298,599 as compared to $2,189,524 for the
same  period  in 2000.  The net  interest  margin  realized  on  earning  assets
decreased  from 3.77% for the nine months ended  September 30, 2000 to 3.55% for
the same period in 2001.  The  interest  rate spread also  decreased by 28 basis
points from 4.61% at September 30, 2000 to 4.33% at September 30, 2001.

         Net interest  income  increased  from  $730,543 for the quarter  ending
September 30, 2000 to $784,285 for the quarter ending  September 30, 2001.  This
represents an increase of $53,742, or 7.36%. The net interest margin realized on
earning assets  increased from 4.49% for the quarter ended September 30, 2000 to
4.32% for the quarter  ended  September  30, 2001.  The interest rate spread was
3.58% at September 30, 2000 and 3.59% at September 30, 2001.



                                       61


Provision and Allowance for Loan Losses

         The provision for loan losses is the charge to operating  earnings that
management  believes is necessary to maintain the  allowance  for possible  loan
losses at an adequate  level.  For the nine months ended  September 30, 2001 and
2000, the provisions charged to expense were $54,000 and $45,000,  respectively.
For the quarters ended  September 30, 2001 and 2000,  the provisions  charged to
expense  were  $18,000 and $15,000,  respectively.  There are risks  inherent in
making all loans,  including risks with respect to the period of time over which
loans may be repaid,  risks  resulting  from  changes in economic  and  industry
conditions,  risks inherent in dealing with  individual  borrowers,  and, in the
case of a  collateralized  loan,  risks resulting from  uncertainties  about the
future value of the collateral.  Ridgeway Bancshares  maintains an allowance for
loan losses based on, among other things,  historical experience,  an evaluation
of economic conditions,  and regular reviews of delinquencies and loan portfolio
quality. Management's judgment about the adequacy of the allowance is based upon
a number of assumptions about future events, which it believes to be reasonable,
but which may not prove to be accurate. Thus, there is a risk that chargeoffs in
future  periods could exceed the  allowance for loan losses or that  substantial
additional  increases  in the  allowance  for loan  losses  could  be  required.
Additions  to the  allowance  for loan  losses  would  result in a  decrease  of
Ridgeway Bancshares' net income and, possibly, its capital.

Noninterest Income

         Noninterest  income during the nine months ended September 30, 2001 was
$538,119,  an increase of $39,797 from $498,322 during the comparable  period in
2000.  The increase is  primarily a result of an increase in service  charges on
deposit  accounts  from  $377,537 at September 30, 2000 to $435,984 at September
30, 2001. However,  other service charges and fees resulted in income of $85,199
during the nine months ended September 30, 2001, compared to $107,008 during the
comparable  period in 2000. This decrease was primarily  because of decreases in
non-customer  ATM  fees,  credit  insurance   commissions,   and  mortgage  loan
origination fees.

         For the quarter ended September 30, 2001,  noninterest income increased
$86, or 0.05%,  from  $172,085 for the same period in 2000.  Service  charges on
deposit accounts  increased  $8,601,  or 6.47%, from the quarter ended September
30, 2000.  Other service charges and fees decreased from $35,053 for the quarter
ended September 30, 2000 to $25,142 for the quarter ended September 30, 2001.

Noninterest Expense

         Total noninterest  expense for the nine months ended September 30, 2001
was $1,685,475, or 11.89%, higher than the $1,506,405 amount for the nine months
ended September 30, 2000. The largest increase was in other operating  expenses,
which  increased  from  $470,128 at September  30, 2000 to $626,743 for the nine
months ended September 30, 2001. Of this $156,615 increase,  $108,628 is for the
increase in data processing services created by the outsourcing of proof work to
an  independent  contractor.  Salaries  and  employee  benefits  also  increased
$30,454, or 3.52%, to $896,781 at September 30, 2001.

         For the quarter ended September 30, 2001, noninterest expense increased
$52,289,  or 10.14%,  over the same period in 2000. The largest increase between
the  quarters  ended  September  30,  2001 and  September  30, 2000 was in other
operating  expense,  which increased $46,397,  or 27.31%.  Salaries and employee
benefits also increased  from $289,638 for the quarter ended  September 30, 2000
to $297,400 at September 30, 2001.

Income Taxes

         The income tax provision  for the nine months ended  September 30, 2001
was $305,000 as compared to $310,700 for the same period in 2000.  The effective
tax rates were 27.80% and 27.34% at September  30, 2001 and  September 30, 2000,
respectively.  The  effective  tax rates were  27.53% and 26.85% for the quarter
ended September 30, 2001 and September 30, 2000, respectively.




                                       62


Net Income

         The  combination  of the above  factors  resulted in net income for the
nine months ended September 30, 2001 of $792,243 as compared to $825,741 for the
same period in 2000.  This  represents  a decrease  of $33,498.  For the quarter
ended September 30, 2001, net income was $268,544, or $3,561 lower than $272,105
for the quarter ended September 30, 2000. This decrease is primarily a result of
the decline in interest rates and an increase in other operating expenses.

Assets and Liabilities

         During  the  first  nine  months  of  2001,   total  assets   increased
$2,522,329,  or 3.40%, when compared to December 31, 2000. The primary source of
growth in assets was investment  securities,  which increased  $3,482,367 during
the first nine  months of 2001.  Federal  funds sold and  repurchase  agreements
decreased $1,356,000 from December 31, 2000 to $4,604,000 at September 30, 2001.
Total deposits also increased  $1,208,486,  or 1.90%, from the December 31, 2000
amount  of  $63,690,415.  Within  the  deposit  area,  certificates  of  deposit
increased $3,318,778, or 12.36%, during the first nine months of 2001.

Investment Securities

         Investment  securities  increased from $23,740,091 at December 31, 2000
to  $27,222,458  at September  30, 2001.  The increase can be  attributed to the
purchase of several  available-for-sale  securities during the first nine months
of the year.  The funds to purchase  these  securities  were provided from lower
yielding federal funds sold and the increase in deposits.  Ridgeway  Bancshares'
investment  securities  designated as  available-for-sale  at September 30, 2001
totaled $9,260,563. Held-to-maturity securities totaled $17,961,895 at September
30, 2001.

Loans

         Ridgeway Bancshares continued its trend of loan growth during the first
nine months of 2001. Net loans increased $874,049,  or 2.22%, during the period.
As shown  below,  the main  component of growth in the loan  portfolio  was real
estate loans,  which  increased  5.08%,  or $1,198,236,  from December 31, 2000.
Also, consumer and other loans increased $89,909, or 1.03%.  Balances within the
major loans receivable categories as of September 30, 2001 and December 31, 2000
are as follows:

                                                September 30,       December 31,
                                                -------------       ------------
                                                     2001               2000
                                                     ----               ----
Real estate ............................         $24,800,728         $23,602,492
Home equity ............................           2,272,717           2,420,481
Commercial and industrial ..............           4,810,403           5,045,202
Consumer and other .....................           8,826,459           8,736,550

                                                 $40,710,307         $39,804,725


Risk Elements in the Loan Portfolio

         The following is a summary of risk elements in the loan portfolio:

                                                                September 30,
                                                            2001           2000
                                                            ----           ----
Loans:
Nonaccrual loans ...................................      $360,744      $185,762

 Accruing loans more than 90 days past due .........      $105,980      $ 33,017



                                       63


  Activity in the Allowance for Loan Losses is as follows:


                                                         September 30,
                                                         -------------
                                                       2001              2000
                                                       ----              ----
 Balance, January 1, ..........................   $    387,529     $    334,209
Provision for loan losses for the period .....         54,000           45,000
Net loans (charged-off) for the period .......        (22,467)          (2,512)
                                                                  ------------

Balance, end of period .......................   $    419,062     $    376,697
                                                 ============     ============

Gross loans outstanding, end of period .......   $ 40,710,307     $ 38,337,145

Allowance for loan losses to loans outstanding           1.03%            0.98%

Deposits

         At September 30, 2001,  total deposits had increased by $1,208,486,  or
1.90%,  from  December 31, 2000.  The largest  increase was in  certificates  of
deposit,  which  increased  $3,318,778,  or 12.36%,  from  December  31, 2000 to
September  30, 2001.  Expressed  in  percentages,  noninterest-bearing  deposits
decreased 1.27% and interest-bearing deposits increased 2.48%.

         Balances  within the major deposit  categories as of September 30, 2001
and December 31, 2000 are as follows:

                                                   September 30,    December 31,
                                                   -------------    ------------
                                                       2001             2000
                                                       ----             ----
 oninterest-bearing demand deposits ..........      $ 9,714,465      $ 9,839,029
Interest-bearing demand deposits .............        9,016,304        9,211,538
Money-market accounts ........................        8,457,583       10,161,177
Savings deposits .............................        7,534,858        7,621,758
Time deposits $100,000 and over ..............        8,095,969        6,864,350
Other time deposits ..........................       22,079,722       19,992,563
                                                    -----------      -----------

                                                    $64,898,901      $63,690,415
                                                    ===========      ===========

Liquidity

         Liquidity  needs  are  met by  Ridgeway  Bancshares  through  scheduled
maturities  of loans and  investments  on the  asset  side and  through  pricing
policies on the liability side for interest-bearing  deposit accounts. The level
of liquidity is measured by the loan-to-total borrowed funds ratio, which was at
60.11% at September 30, 2001 and 60.21% at December 31, 2000.

         Securities  available-for-sale,  which totaled  $9,260,563 at September
30, 2001,  serves as a ready source of liquidity.  Ridgeway  Bancshares also has
lines of credit available with correspondent banks to purchase federal funds for
periods from one to seven days.  At September  30, 2001,  unused lines of credit
totaled $5,000,000.

Capital Resources

         Total  shareholders'  equity  increased from $7,840,482 at December 31,
2000 to $8,597,286 at September 30, 2001.  The increase is due to net income for
the period of $792,243, partially offset by dividends of $160,000. Shareholder's
equity  was  also  increased  by the  $124,561  increase  in the  fair  value of
securities available-for-sale.



                                       64


         The following table summarizes Ridgeway Bancshares'  risk-based capital
at September 30, 2001:

Shareholders' equity ..........................................     $ 8,597,286
Less: unrealized gains on available-for-sale securities .......         106,148
Less: disallowed intangible assets ............................         322,000
                                                                    -----------
Tier 1 capital ................................................       8,169,138

Plus: allowance for loan losses (1) ...........................         418,533
                                                                    -----------
Total capital .................................................     $ 8,587,671
                                                                    ===========

Risk-weighted assets ..........................................     $42,321,000
                                                                    ===========

Risk-based capital ratios
Total capital (to risk-weighted assets) .......................           20.29%
Tier 1 capital (to risk-weighted assets) ......................           19.30%
Tier 1 capital (to average assets) ............................           10.66%

                     INFORMATION ABOUT COMMUNITY BANKSHARES

General

         Community Bankshares is a South Carolina corporation and a bank holding
company.  Community  Bankshares  commenced  operations  on  July 1,  1993,  upon
effectiveness  of the  acquisition of the  Orangeburg  National Bank as a wholly
owned subsidiary.  In June 1996 Community  Bankshares  acquired all the stock of
Sumter  National  Bank,  which is also a wholly owned  subsidiary.  In July 1998
Community  Bankshares acquired all the stock of Florence National Bank, which is
also a wholly owned subsidiary.

         Orangeburg  National  Bank  is a  national  bank,  chartered  in  1987,
operating from two offices located in Orangeburg, South Carolina.

         Sumter National Bank is a national bank,  chartered in 1996,  operating
from one office located in Sumter, South Carolina. The Sumter bank plans to open
its second office in February 2002.

         Florence National Bank is a national bank, chartered in 1998, operating
from one office located in Florence, South Carolina.

Business of Banking

         The  Orangeburg,  Sumter  and  Florence  banks  offer a full  array  of
commercial  bank  services.  Deposit  services  include  business  and  personal
checking  accounts,  NOW  accounts,  savings  accounts,  money market  accounts,
various term certificates of deposit, IRA accounts,  and other deposit services.
The Federal  Deposit  Insurance  Corporation  insures  deposits up to applicable
limits.  Most of the subsidiary  banks' deposits are attracted from  individuals
and small businesses.

         The subsidiary banks offer secured and unsecured, short-to-intermediate
term loans,  with floating and fixed  interest rates for commercial and consumer
purposes.  Consumer  loans include:  car loans,  home equity  improvement  loans
secured by first and second mortgages,  personal  expenditure  loans,  education
loans, and the like.  Commercial loans include short-term unsecured loans, short
and  intermediate  term real  estate  mortgage  loans,  loans  secured by listed
stocks,  loans secured by equipment,  inventory,  accounts  receivable,  and the
like.  The  subsidiary  banks  do not and  will  not  discriminate  against  any
applicant  for credit on the basis of race,  color,  creed,  sex,  age,  marital
status,  familial  status,   handicap,  or  derivation  of  income  from  public
assistance programs.



                                       65


         Other  services  offered by the  subsidiary  banks include safe deposit
boxes,  night depository  service,  VISA and Master Card charge cards (through a
correspondent),  tax deposits,  sale of U.S. Treasury bonds, notes and bills and
other U. S. government  securities  (through a  correspondent),  and twenty-four
hour automated  teller service.  Each of the subsidiary  banks has ATMs and they
are all part of the Star and Cirrus networks.

Competition

         The  market for  financial  institutions  in  Orangeburg,  Sumter,  and
Florence is highly  competitive.  Banks  generally  compete with other financial
institutions  through the banking services and products offered,  the pricing of
services,  the level of service  provided,  the convenience and  availability of
services,  and the degree of expertise and personal  concern with which services
are offered.  The subsidiary banks encounter strong competition from most of the
financial institutions in their market areas.

         The market area for the Orangeburg  bank generally  encompasses an area
extending  nine miles  around the city of  Orangeburg.  The market  area for the
Sumter bank generally  encompasses the county of Sumter. The market area for the
Florence  bank  generally  encompasses  the city of Florence.  In the conduct of
certain banking business,  the subsidiary banks also compete with credit unions,
consumer finance companies,  insurance companies, money market mutual funds, and
other financial  institutions,  some of which are not subject to the same degree
of regulation and  restrictions  imposed upon banks.  Many of these  competitors
have  substantially  greater  resources and lending  limits than the  subsidiary
banks  and offer  certain  services,  such as  international  banking  and trust
services,  that  the  subsidiary  banks do not  provide.  The  subsidiary  banks
believe,  however,  that their  relatively small size permits them to offer more
personalized  services  than many of their  competitors.  The  subsidiary  banks
attempt to compensate  for their lower lending  limits by  participating  larger
loans with other institutions, often with each other.

         Most of the other financial institutions in the Orangeburg, Sumter, and
Florence areas are branch offices of large,  regional  banks.  At June 30, 2001,
there  were  eight  commercial  banks  or  thrift  institutions  competing  with
Community  Bankshares in Orangeburg  County,  seven  commercial  banks or thrift
institutions  competing  with  Community  Bankshares  in  Sumter  County  and 18
commercial banks or thrift institutions  competing with Community  Bankshares in
Florence County. In Sumter County, the SAFE Federal Credit Union is also a major
competitor.

Dependence on Major Customers

         The subsidiary banks do not consider themselves dependent on any single
customer or small group of customers, either in the deposit or lending areas.

Employees

         At  December  31,  2000  Community  Bankshares  employed  84 full  time
equivalent employees. Of these, the Orangeburg bank employed 38, the Sumter bank
employed 19, the Florence  bank  employed 11 and 16 were employed by the holding
company. Management believes that its employee relations are excellent.

Description of Properties

         Community  Bankshares'  Orangeburg  bank  owns  land  located  at  1820
Columbia Road NE, in Orangeburg,  South Carolina.  The Orangeburg bank maintains
its main office at this  address.  The total  investment in this real estate was
$245,000.  The bank operates from a one-story  building of  approximately  7,000
square feet. The bank's investment in the building is $536,000.

         The Orangeburg bank also owns a building, which was previously a branch
of the bank, at the corner of Broughton and Glover  Streets in  Orangeburg.  The
bank's investment in the land is $120,000. The bank's investment in the building
plus its improvements and renovations is $83,000.  The Orangeburg bank currently
rents this facility to Community  Bankshares for office space.  In June 1999 the
bank moved into a new branch facility located adjacent to the old building. This
new branch office is approximately 6,500 square feet and the total investment in


                                       66


it was approximately  $790,000, with an additional investment of $78,000 in land
improvements.

         The  foregoing  properties  are owned in fee  simple by the  Orangeburg
bank. Management believes that insurance coverage on the foregoing properties is
adequate.

         Community  Bankshares'  Sumter  bank owns land  located at 683  Bultman
Drive, in Sumter,  South Carolina.  The Sumter bank maintains its main office at
this address.  The total  investment in this real estate was $317,000.  The bank
operates  from a one-story  building of  approximately  6,500 square  feet.  The
bank's investment in the building is $606,000.

         The  foregoing  property  is owned in fee  simple by the  Sumter  bank.
Management  believes  that  insurance  coverage on the  foregoing  properties is
adequate.

         The Florence bank is leasing approximately 1.7 acres of land located at
2009 Hoffmeyer Road in Florence,  South  Carolina.  This land is the site of the
main office for Florence  National  Bank. The details of the lease are discussed
in  Note 6 to  the  financial  statements  contained  elsewhere  in  this  Proxy
Statement/Prospectus.  Community Bankshares has constructed a one-story building
for the Florence bank of approximately 7,500 square feet on the leased site. The
building  cost  approximately  $724,000.   Management  believes  that  insurance
coverage on the foregoing properties is adequate.

Legal Proceedings

         Community  Bankshares  and  its  subsidiaries  are not  parties  to any
material legal proceedings other than ordinary routine litigation  incidental to
their business.


                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 31, 1999:

General

         The  discussion  and data  presented  below  analyze  major factors and
trends  regarding the financial  position and results of operations of Community
Bankshares and its subsidiary banks for the three year period ended December 31,
2000.

Business of Community Bankshares and its Subsidiaries

         Community   Bankshares  Inc.  is  a  bank  holding   company.   It  was
incorporated  on November 30, 1992,  and commenced  operations  July 1, 1993, by
acquiring  Orangeburg National Bank. Community Bankshares now owns three banking
subsidiaries:  Orangeburg  National  Bank,  Sumter  National  Bank, and Florence
National Bank.  Community Bankshares provides item and data processing and other
technical  services for its banking  subsidiaries.  The  consolidated  financial
report for 2000  represents the operations of the holding  company and its three
banks.  (Parent-only  financial statements are presented in the footnotes to the
consolidated financial statements.)

         Orangeburg   National  Bank  is  a  national  banking  association  and
commenced  operations in November  1987. It operates two offices in  Orangeburg,
South  Carolina.  Sumter  National Bank is a national  banking  association  and
commenced  operations  in June 1996.  It  operates  one office in Sumter,  South
Carolina. Florence National Bank is a national banking association and commenced
operations in July 1998. It operates one office in Florence, South Carolina. The
banks provide commercial banking services in their respective communities. Their
primary customer markets are consumers and small businesses.



                                       67



Stock Split and Stock Dividend

         On January 31, 2000 Community  Bankshares effected a five-percent stock
dividend.  All references to per share information  contained in this discussion
have been adjusted accordingly.

Distribution of Assets and Liabilities

         The following table presents the average  balance  sheets,  the average
yield and the interest  earned on earning  assets,  and the average rate and the
interest paid on interest  bearing  liabilities for the years ended December 31,
2000, 1999 and 1998.



Years ended December 31,                       2000                             1999                              1998
                                             Interest                         Interest                          Interest
                                  Average    Income/    Yields/    Average     Income/    Yields/     Average   Income/     Yields/
           Assets                 Balance   Expense(1)  Rates(1)    Balance    Expense(1)  Rates(1)   Balance  Expense(1)  Rates(1)
                                  -------   ----------  --------    -------    ----------  --------   -------  ----------  --------
                                                                   (Dollar amounts in thousands)
                                                                                                    
Interest bearing deposits       $  1,024      $    64      6.25%  $  1,937    $   101       5.21%   $  2,385      $   126      5.28%
Investment securities taxable     47,377        3,025      6.38%    39,856      2,458       6.17%     30,096        1,915      6.36%
Investment securities--tax           807           32      6.01%       783         30       5.81%        341           14      6.22%
exempt
Federal funds sold                 6,670          430      6.45%    10,967        555       5.06%     10,626          568      5.35%
Loans receivable (2)             179,654       16,750      9.32%   139,215     12,406       8.91%    103,500        9,697      9.37%
                                --------      -------      -----  --------    -------       -----   --------      -------      -----
Total interest earning assets    235,532       20,301      8.62%   192,758     15,550       8.07%    146,948       12,320      8.38%
Cash and due from banks            8,582                             8,896                             6,499
Allowance for loan losses         (2,186)                           (1,692)                           (1,281)
Premises and equipment             4,564                             4,549                             3,622
Other assets                       3,232                             2,251                             1,718
                                --------                          --------                          --------
Total assets                    $249,724                          $206,762                          $157,506
                                ========                          ========                          ========

Liabilities and
Shareholders' Equity
Interest bearing deposits
Savings                         $ 33,445      $ 1,358      4.06%  $ 28,321    $   943       3.33%   $ 22,235      $   774      3.48%
Interest bearing transaction      21,039          329      1.56%    17,417        269       1.54%     14,028          253      1.80%
accounts
Time deposits                    119,949        6,905      5.76%    96,761      4,901       5.07%     73,045        4,018      5.50%
                                --------      -------      -----  --------    -------       -----   --------      -------      -----
Total interest bearing           174,433        8,592      4.93%   142,499      6,113       4.29%    109,308        5,045      4.62%
deposits
Short term borrowing               4,501          218      4.84%     5,210        170       3.26%      3,225          119      3.69%
FHLB advances                     19,385        1,165      6.01%    12,335        675       5.47%      6,905          390      5.65%
                                --------      -------      -----  --------    -------       -----   --------      -------      -----
Total interest bearing           198,319        9,975      5.03%   160,044      6,958       4.35%    119,438        5,554      4.65%
liabilities
Noninterest bearing demand        28,531                            26,124                            19,536
deposits
Other liabilities                  1,421                               978                               942
Shareholders' equity              21,453                            19,616                            17,590
                                --------                          --------                          --------
Total liabilities and           $249,724                          $206,762                          $157,506
                                ========                          ========                          ========
shareholders' equity

Interest rate spread  (3)                                  3.59%                            3.72%                              3.73%
Net int. income and net yield on earning
  assets   (4)                                $10,326      4.38%              $ 8,592       4.46%                  $6,766      4.60%

(1)  Computed on a fully  taxable  equivalent  basis using a federal tax rate of
     34%.
(2)  Nonaccruing loans are included in the average loan balances and income from
     such loans is recognized on a cash basis.
(3)  Total interest earning assets yield less total interest bearing liabilities
     rate.
(4)  Net yield  equals net interest  income  divided by total  interest  earning
     assets.



                                       68



Earnings Performance, 2000 compared to 1999

         Community  Bankshares'  net income was  $3,147,000 or $.99 per share in
2000.  This  compares to  $2,182,000  or $.68 per share in 1999,  an increase of
$965,000, or 44.2%.

         This increase in earnings  resulted  from improved  profit at all three
banks.  Earnings at the Sumter bank  increased to $908,000 in 2000 from $559,000
in 1999,  an increase of 62.4% or  $349,000.  Earnings  at the  Orangeburg  bank
increased to $2,243,000 in 2000 from  $2,054,000 in 1999, an increase of 9.2% or
$189,000. Earnings at the Florence bank increased to $78,000 in 2000 from a loss
of $314,000 for 1999, an improvement of $392,000.

Interest Income and Interest Expense, 2000 compared to 1999

         Community  Bankshares' interest income increased  substantially in 2000
from 1999. In 2000  Community  Bankshares  earned  $20,301,000 in total interest
income, up from the prior year's $15,550,000. This represented a $4,751,000 or a
30.6%  increase.  This growth was mostly the result of  increased  volume in the
loan and investment portfolios at the three banks.

         Interest  bearing  deposits  in  other  banks  contributed  $64,000  to
interest  income in 2000,  down from  $101,000  the prior  year,  a decrease  of
$37,000 or 36.6%.  In 2000 Community  Bankshares had an average of $1,024,000 in
interest bearing deposits, down from the prior year's $1,937,000,  a decrease of
$913,000 or 47.1%. The average yield on these deposits during 2000 was 6.25%, up
from the prior year's 5.21%.

         Investments  contributed $3,025,000 to interest income in 2000, up from
$2,458,000  the prior year,  an increase  of $567,000 or 23.1%.  The  investment
portfolio averaged $47,377,000 in 2000, up from the prior year's $39,856,000, an
increase of  $7,521,000 or 18.9%.  Community  Bankshares'  investment  portfolio
consists  primarily of short-term U. S.  government and agency debt issues.  The
average yield on investments during 2000 was 6.38%, up from 6.17% in 1999.

         Community  Bankshares'  tax-exempt  securities portfolio earned $32,000
during 2000, up from $30,000 the prior year, an increase of $2,000 or 6.7%.  The
portfolio  averaged  $807,000 in 2000,  up from $783,000 in 1999, an increase of
$24,000 or 3.1%. The average yield was 6.01%,  compared to 5.81% the prior year,
on a fully taxable equivalent basis.

         Federal  funds sold  represent  temporary  surplus  funds that one bank
lends to another.  These funds are a source of day to day  operating  liquidity.
Federal funds sold  contributed  $430,000 to interest  income in 2000, down from
$555,000  in the  prior  year,  a  decrease  of  $125,000  or  22.5%.  Community
Bankshares had an average of $6,670,000 in federal funds during 2000,  down from
the prior year's  $10,967,000,  a decrease of $4,297,000  or 39.2%.  The average
yield on federal funds during 2000 was 6.45%, up from 5.06% in 1999. The decline
in federal funds sold was directly related to continued strong loan demand.

         Community  Bankshares'  major  source  of  interest  income is the loan
portfolio,  which  contributed  $16,750,000 to interest  income in 2000, up from
$12,406,000  in the prior year,  an increase of  $4,344,000  or 35%. The average
loan  portfolio  for  2000  was  $179,654,000   compared  to  the  prior  year's
$139,215,000,  an increase of  $40,439,000  or 29%.  The average  yield on loans
during 2000 was 9.32%, up from 8.91% in 1999.

         Community   Bankshares   had   average   earning   assets  in  2000  of
$235,532,000,  which earned a yield of 8.62%.  Community  Bankshares had average
earning assets in 1999 of $192,758,000,  which earned a yield of 8.07%.  Average
earning assets increased $42,774,000 or 22.2%.

         The  category  savings  accounts  consists of savings and money  market
accounts.   Total  savings  accounts  averaged  $33,445,000  in  2000,  up  from
$28,321,000  in the prior year, an increase of $5,124,000 or 18.1%.  The cost of
these funds increased to 4.06% in 2000 from 3.33% in the prior year.

                                       69



         Interest bearing transaction accounts are the primary checking accounts
that the banks offer  customers.  This overall category was $21,039,000 in 2000,
up from  $17,417,000  in 1999, an increase of  $3,622,000 or 20.8%.  The average
cost of these funds was 1.56% in 2000 compared to 1.54% in the prior year.

         Time  deposits  are  the  largest   category  of  deposits,   averaging
$119,949,000  in 2000,  up from  $96,761,000  in the prior year,  an increase of
$23,188,000 or 24%. The cost of time deposits increased to 5.76% from 5.07%.

         Short-term  borrowing  includes  federal funds purchased and securities
sold under agreements to repurchase.  The repurchase agreements are entered into
with a number of larger commercial  customers.  These accounts are not deposits;
they are considered other obligations of the subsidiary banks. Balances in these
accounts are subject to wide fluctuation, but they constitute a relatively small
portion of the balance sheet. The average balance for 2000 was $4,501,000,  down
from $5,210,000 in the prior year, a decrease of $709,000 or 13.6%.  The cost of
these funds increased to 4.84% from 3.26%.

         The subsidiary banks are members of and have the ability to borrow from
the  Federal  Home  Loan Bank  (FHLB).  The  banks  had an  average  $19,385,000
outstanding borrowing balance during 2000 at an average cost of 6.01%. The banks
had an average $12,335,000  outstanding during 1999 at an average cost of 5.47%.
Borrowings  increased by $7,050,000 or 57.2%.  These  borrowings  are mostly for
longer terms than other interest bearing  liabilities and are part of the banks'
on-going  asset/liability  management  strategy.  These  loans are  secured by a
blanket lien on the subsidiary banks' one-to-four  family  residential  mortgage
loan  portfolios or portions of their  investment  portfolios or the  subsidiary
banks' FHLB stock.

         Community  Bankshares had total interest bearing liabilities in 2000 of
$198,319,000  costing  an  average  of  5.03%  compared  with  interest  bearing
liabilities  in 1999 of  $160,044,000  costing  an  average  of  4.35%.  Average
interest bearing liabilities increased $38,275,000 or 23.9%.

Earnings Performance, 1999 compared to 1998

         Community Bankshares' net income was $2,182,000,  or $.68 per share, in
1999.  This compares to $1,567,000,  or $.52 per share,  in 1998, an increase of
$615,000, or 39%.

         Management views this increase in earnings as primarily the result of a
212%  increase in earnings at the Sumter bank to $559,000 in 1999 from  $179,000
in 1998 and a $317,000 increase in earnings at the Orangeburg bank to $2,054,000
in 1999 from $1,737,000 in 1998. The Florence bank showed a net loss of $314,000
for the  twelve-month  period in 1999 compared to a net loss of $331,000 for six
months of operation in 1998.

Interest Income and Interest Expense, 1999 compared to 1998

         Community  Bankshares' interest income increased  substantially in 1999
from 1998. In 1999  Community  Bankshares  earned  $15,550,000 in total interest
income, up from the prior year's $12,320,000. This represented a $3,230,000 or a
26.2%  increase.  This growth was mostly the result of  increased  volume in the
loan and investment portfolios at each of the three subsidiary banks.

         Interest  bearing  deposits  in other  banks  contributed  $101,000  to
interest  income in 1999,  down from  $126,000  the prior  year,  a decrease  of
$25,000 or 19.8%.  In 1999 Community  Bankshares had an average of $1,937,000 in
interest bearing deposits, down from the prior year's $2,385,000,  a decrease of
$448,000 or 18.8%.  The average yield on these  deposits  during 1999 was 5.21%,
down from the prior year's 5.28%.

         Investments  contributed $2,458,000 to interest income in 1999, up from
$1,915,000  the prior year,  an increase  of $543,000 or 28.4%.  The  investment
portfolio averaged $39,856,000 in 1999, up from the prior year's $30,096,000, an
increase of  $9,760,000 or 32.4%.  Community  Bankshares'  investment  portfolio
consists  primarily of short-term U. S.  government and agency debt issues.  The
average yield on investments during 1999 was 6.17%, down from 6.36% in 1998.

         Community  Bankshares'  tax-exempt  securities portfolio earned $30,000
during 1999, up from $14,000 the prior year. The portfolio  averaged $783,000 in
1999,  up from  $341,000 in 1998,  an increase of $442,000 or 130%.  The average
yield was 5.81%, compared to 6.22% the prior year, on a fully taxable equivalent
basis.



                                       70


         Federal  funds sold  contributed  $555,000 to interest  income in 1999,
down  slightly  from  $568,000 in the prior year, a decrease of $13,000 or 2.3%.
Community Bankshares had an average of $10,967,000 in federal funds during 1999,
up from the prior  year's  $10,626,000,  an increase  of  $341,000 or 3.2%.  The
average yield on federal funds during 1999 was 5.06%, down from 5.35% in 1998.

         Community  Bankshares'  loan  portfolio   contributed   $12,406,000  to
interest  income in 1999,  up from  $9,697,000 in the prior year, an increase of
$2,709,000  or 28%.  The  average  loan  portfolio  for 1999  was  $139,215,000,
compared to the prior year's $103,500,000,  an increase of $35,715,000 or 34.5%.
The average yield on loans during 1999 was 8.91%, down from 9.37% in 1998.

         Community   Bankshares   had   average   earning   assets  in  1999  of
$192,758,000,  which earned a yield of 8.07%.  Community  Bankshares had average
earning assets in 1998 of $146,948,000,  which earned a yield of 8.38%.  Average
earning assets increased $45,810,000 or 31.2%.

         Community Bankshares' savings accounts averaged $28,321,000 in 1999, up
from $22,235,000 in the prior year, an increase of $6,086,000 or 27.4%. The cost
of these funds decreased to 3.33% in 1999 from 3.48% in the prior year.

         Interest bearing transaction  accounts averaged $17,417,000 in 1999, up
from  $14,028,000 in 1998, an increase of $3,389,000 or 24.2%.  The average cost
of these funds was 1.54% in 1999, compared to 1.80% in the prior year.

         Time deposits averaged  $96,761,000 in 1999, up from $73,045,000 in the
prior year,  an  increase of  $23,716,000  or 32.5%.  The cost of time  deposits
decreased to 5.07% from 5.50%.

         Short-term borrowing averaged $5,210,000 in 1999, up from $3,225,000 in
the prior  year,  an increase of  $1,985,000  or 61.5%.  The cost of these funds
decreased to 3.26% from 3.69%.

         The  subsidiary  banks had an average  $12,335,000  outstanding in FHLB
borrowings  during 1999 at an average cost of 5.47%. The subsidiary banks had an
average  $6,905,000  outstanding  during  1998  at an  average  cost  of  5.65%.
Borrowings increased by $5,430,000 or 78.6%.

         Community  Bankshares had average interest bearing  liabilities in 1999
of  $160,044,000  costing an average of 4.35%,  compared with  interest  bearing
liabilities  in 1998 of  $119,438,000  that cost an  average  of 4.65%.  Average
interest bearing liabilities increased $40,606,000 or 34%.

Volume and Rate Variance Analysis

         The table  "Volume and Rate  Variance  Analysis"  provides a summary of
changes in net interest  income  resulting from changes in volume and changes in
rate (The  changes in volume are the  difference  between  the current and prior
year's  balances  times the  prior  year's  rate.  The  changes  in rate are the
difference  between  the current  and prior  year's rate times the prior  year's
balance.)

         As reflected in the table,  the increase in 2000 net interest income of
$1,734,000 is primarily due to changes in volume. Of the $4,751,000  increase in
interest income  $3,748,000 or 79% was from volume growth in the loan portfolio.
Of the  $3,017,000  increase in interest  expense  $1,276,000  or 42% was due to
volume  increases for time deposits.  Also,  $728,000 or 24% of the increase was
due to rate changes in time deposits.  During 1999 there was a similar  pattern,
only more of the increase in net interest income came from changes in volume.




                                       71




                        Volume and Rate Variance Analysis

                                                              2000 compared to 1999                     1999 compared to 1998
                                                        Volume         Rate         Total          Volume        Rate        Total
                                                        ------         ----         -----          ------        ----        -----
Interest earning assets                                                       (Dollar amounts in thousands)

                                                                                                          
   Interest bearing deposits ...................      $   (54)      $    17       $   (37)      $   (24)      $    (1)      $   (25)
   Investment securities taxable ...............          480            87           567           602           (59)          543
   Investment securities--tax exempt ...........            1             1             2            17            (1)           16
   Federal funds sold ..........................         (252)          127          (125)           18           (31)          (13)
   Loans receivable ............................        3,748           596         4,344         3,203          (494)        2,709
                                                      -------       -------       -------       -------       -------       -------
   Total interest income .......................        3,923           828         4,751         3,816          (586)        3,230
                                                      -------       -------       -------       -------       -------       -------

Interest bearing liabilities
   Savings .....................................          188           227           415           204           (35)          169
   Interest bearing transaction ................           57             3            60            55           (39)           16
   accounts
   Time deposits ...............................        1,276           728         2,004         1,221          (338)          883
                                                      -------       -------       -------       -------       -------       -------
   Total interest bearing deposits .............        1,521           958         2,479         1,480          (412)        1,068
   Short term borrowing ........................          (25)           73            48            66           (15)           51
   FHLB advances ...............................          416            74           490           297           (12)          285
                                                      -------       -------       -------       -------       -------       -------
   Total interest expense ......................        1,912         1,105         3,017         1,843          (439)        1,404
                                                      -------       -------       -------       -------       -------       -------

Net interest income ............................      $ 2,013       $  (277)      $ 1,734       $ 1,973       $  (147)      $ 1,826
                                                      =======       =======       =======       =======       =======       =======


Premises And Equipment

         Premises and equipment were $4,411,000 at December 31, 2000 compared to
$4,619,000  the prior  year,  a  decrease  of  $208,000  or 4.5%.  There were no
significant changes in Community Bankshares' fixed asset accounts.  Premises and
equipment are discussed further in Note 6 to the attached consolidated financial
statements of Community Bankshares.


Investment Portfolio

         Community  Bankshares'   investment  portfolio  consists  primarily  of
short-term  U. S.  government  and agency  debt  issues.  Investment  securities
averaged $48.2 million in 2000, $40.6 million in 1999 and $30.4 million in 1998.
Note 4 to the consolidated  financial statements provides further information on
the investment portfolio.

         The table below gives the  amortized  cost and fair value of  Community
Bankshares' investment portfolio for the past three years.



                                       72




                                                          2000                           1999                       1998
                                                 Amortized    Fair value     Amortized        Fair value   Amortized      Fair value
                                                   cost       ----------        cost          ----------     cost         ----------
                                                   ----                         ----                         ----
Securities held-to-maturity                                                (Dollar amounts in thousands)

                                                                                                           
U.S. government and agencies .............        $12,371        $12,217        $13,369        $12,919        $15,035        $15,076
State and local government ...............              -              -              -              -            251            253
                                                  -------        -------        -------        -------        -------        -------
 Total held-to-maturity ..................        $12,371        $12,217        $13,369        $12,919        $15,286        $15,329
                                                  =======        =======        =======        =======        =======        =======

Securities available-for sale
U.S. government and agencies .............        $38,599        $38,403        $28,931        $28,151        $16,921        $16,975
State and local government ...............            814            810            825            814            225            227
Other securities .........................          1,982          1,982          1,601          1,601          1,660          1,660
                                                  -------        -------        -------        -------        -------        -------
 Total available for sale ................        $41,395        $41,195        $31,357        $30,566        $18,806        $18,862
                                                  =======        =======        =======        =======        =======        =======



Information  on  the  maturity  distribution  of  the  investment  portfolio  is
presented in Note 4 to the financial statements.

         At December 31, 2000 Community Bankshares' available for sale portfolio
showed  a net of tax  other  comprehensive  loss in the  equity  section  of the
balance sheet of $131,000 compared to $511,000 the prior year. The change in the
valuation of the  investment  portfolio  was directly  related to the changes in
market interest rates during the year.  Management  considers it unlikely that a
significant  amount of  investments  will be sold prior to maturity and does not
regard the valuation as anything  other than a temporary  fluctuation  in market
value.

Loan Portfolio

         The  average  size of the loan  portfolio  in 2000 was $179.7  million,
compared to $139.2 million in 1999 and $103.5 million in 1998.

         At  December  31,  2000  the net loan  portfolio  was  $192.7  million,
compared  to $155.2  million the prior  year,  an  increase of $37.5  million or
24.2%.

         Management believes the loan portfolio is adequately diversified. There
are no foreign loans and few agricultural loans.

         The table,  "Loan  Portfolio  Composition,"  in the following  section,
indicates the amounts of loans outstanding  according to the type of loan at the
dates indicated.

Loan Portfolio Composition

         The following table shows the composition of the loan portfolio for the
years ended December 31, 1996 through 2000.



Loan category                                             2000         1999          1998         1997         1996
                                                          ----         ----          ----         ----         ----
                                                                        (Dollar amounts in thousands)
                                                                                               
Commercial, financial and agricultural                   $51,966      $39,752       $29,403      $21,690      $16,520
Real estate - construction                                15,389        9,156         5,738        6,563        5,611
Real estate - mortgage                                    98,154       84,680        62,789       46,734       35,553
Installment loans to individuals                          29,270       23,033        19,325       16,348       11,021
Obligations of political subdivisions                        298          468           540          616          124
                                                        --------     --------      --------      -------      -------
     Total loans - gross                                $195,077     $157,089      $117,795      $91,951      $68,829
                                                        ========     ========      ========      =======      =======




                                       73


         Commercial,  financial,  and agricultural loans, primarily representing
loans made to small businesses, increased by $12.2 million or 30.7% during 2000.
These loans may be made on either a secured or an unsecured  basis.  When taken,
security usually consists of liens on inventories,  receivables,  equipment, and
furniture and fixtures.  Unsecured business loans are generally  short-term with
emphasis on repayment strengths and low debt to worth ratios.

         Real estate loans  consist of  construction  loans and loans secured by
mortgages. Construction loans are also generally secured with mortgages. Because
Community  Bankshares'  subsidiaries  are  community  banks,  real estate  loans
comprise  the bulk of the loan  portfolio.  Construction  loans  increased  $6.2
million or 68.1% in 2000.  Mortgage  loans  increased  $13.5 million or 15.9% in
2000.

         During 1998 through 2000 Community Bankshares generally did not compete
with 15 and 30 year  fixed  secondary  market  mortgage  interest  rates,  so it
elected to pursue the  origination  of mortgage  loans that could be easily sold
into the secondary  mortgage  market.  These loans were generally  pre-qualified
with the  underwriters to avoid problems in the sale of the loans. In 2000, 1999
and 1998 Community Bankshares sold $5.9 million, $9.9 million and $12.1 million,
respectively,  in such  loans.  These  loans were sold at par so no gain or loss
would be recognized at the time of sale.  However,  the  origination and sale of
these loans generates fee income. Community Bankshares also makes mortgage loans
for its own  account.  Such  loans are  usually  for a shorter  term than  loans
originated  to sell and usually  have a variable  rather  than a fixed  interest
rate.

         Installment  loans to  individuals  increased  $6.2 million or 27.1% in
2000.

         Interest  income  from the loan  portfolio  was $16.7  million  in 2000
compared  to $12.4  million in 1998,  an increase  of $4.3  million or 35%.  The
average yield on the portfolio was 9.32% in 2000, compared to 8.91% in 1999.

Maturity Distribution of Loans

         The following  table sets forth the maturity  distribution of Community
Bankshares'  loans,  by type,  as of  December  31,  2000 as well as the type of
interest on loans due after one year.



                                                                  After one         Over
                                                  Within one      year but          five
                           Category                  year     within five years     years            Total
                           --------                  ----     -----------------     -----            -----
                                                              (Dollar amounts in thousands)
                                                                                      
                Commercial                          $24,903        $23,269        $ 4,092        $ 52,264
                Real estate                          33,724         52,277         27,542         113,543
                Installment                          10,113         18,175            982          29,270
                                                    -------        -------        -------        --------
                Total                               $68,740        $93,721        $32,616        $195,077
                                                    =======        =======        =======        ========

                Loans due after one year
                Predetermined interest rate                                                      $122,810
                Floating interest rate                                                              3,527
                                                                                                 --------
                                  Total                                                          $126,337
                                                                                                 ========


Lending Risks

         Because extending credit involves a certain degree of risk,  management
has established loan and credit policies  designed to control both the types and
amounts  of  risks  assumed  and  to  minimize  losses.  Such  policies  include
limitations  on  loan-to-collateral  values  for  various  types of  collateral,
requirements for appraisals of real estate  collateral,  problem loan management
practices and collection  procedures,  and nonaccrual and charge-off guidelines.

                                       74


Community  Bankshares  also  conducts  internal  loan  reviews  to monitor on an
ongoing basis the quality of its portfolio.

         Community Bankshares has a geographic concentration of loans within its
home communities of Orangeburg,  Sumter, and Florence,  South Carolina,  because
its primary business is community banking.

         Concentrations  of credit  also occur where a number of  customers  are
engaged  in  similar  business  activities.  A  concentration  is  defined  as a
concentration  of loans  exceeding  10% of total  loans.  The  subsidiary  banks
regularly  review  their  business  lending in an effort to detect,  monitor and
control such loan concentrations. At December 31, 2000, Community Bankshares had
no such loan concentrations.

Nonaccrual and Past Due Loans

         The  nonaccrual,  past due,  and  impaired  loans and other real estate
owned  are  summarized  in  Note 5 to  the  consolidated  financial  statements.
Community Bankshares had no restructured loans in 2000 or 1999.



                                                                         2000         1999         1998          1997          1996
                                                                         ----         ----         ----          ----          ----
                                                                                      (Dollar amounts in thousands)
                                                                                                                
Nonaccrual loans .............................................         $  238         $ 90         $ 31          $ 81          $431
Accruing loans 90 days or more past due ......................             93            6          187             -            93
                                                                       ------         ----         ----          ----          ----
     Total ...................................................         $  331         $ 96         $218          $ 81          $524
                                                                       ======         ====         ====          ====          ====
     Total as a % of outstanding loans .......................           0.17%        0.06%        0.19%         0.09%         0.76%
                                                                       ======         ====         ====          ====          ====
Other Real Estate Owned ......................................         $    -         $  -         $266          $132          $  -
                                                                       ======         ====         ====          ====          ====
Impaired Loans (included in non accrual) .....................         $  238         $ 90         $ 31          $ 81          $120
                                                                       ======         ====         ====          ====          ====



         Gross income that would have been recorded for the year ended  December
31, 2000 and 1999, if nonaccrual  loans had been  performing in accordance  with
their  original  terms was  approximately  $32,641 and $2,100  respectively.  No
interest income was recognized in the 2000 period for the non-accrual loans.

         Community Bankshares'  nonaccrual loan policy is discussed in Note 2 to
the consolidated  financial  statements in the section labeled Loans Receivable.
Community  Bankshares'  policy on impaired  loans is  discussed in Note 2 to the
consolidated  financial  statements  in the section  labeled  Allowance for Loan
Losses.

         Nonaccrual  loans and  impaired  loans were not material in relation to
the portfolio as a whole in 2000.  Management  is aware of no trends,  events or
uncertainties that would cause nonaccrual loans to change materially in 2001.

Potential Problem Loans

         At  December  31,  2000,  Community  Bankshares'  internal  loan review
program had identified  $992,000 (0.51% of the portfolio) in various loans where
information  about credit  problems of borrowers  had caused  management to have
concerns  about the ability of the borrowers to comply with  original  repayment
terms.

         The amounts reflected above do not represent  management's  estimate of
the potential losses since a large proportion of these loans are secured by real
estate and other marketable collateral.

Secured versus Unsecured Loans

         Community  Bankshares  does  not  aggressively  seek to make  unsecured
loans, since these loans may be somewhat more risky than  collateralized  loans.
There are, however,  occasions when it is in the business interests of Community
Bankshares to provide  short-term,  unsecured  loans to selected  customers.  In


                                       75


2000,  Community  Bankshares had $12.4 million in unsecured loans or 6.4% of its
loan  portfolio.  In 1999,  Community  Bankshares  had $9.6 million in unsecured
loans or 6.1% of its loan portfolio.

Loan Participations

         Periodically,  Community  Bankshares'  banking  subsidiaries enter into
sales or purchases of loan  participations  with one another and other financial
institutions.  The subsidiary banks generally only sell  participations in loans
that would cause the bank to exceed its lending limitation to a single customer.
As the subsidiary  banks'  lending  limits  increase they may buy back such loan
participations.  Such loans are  usually  commercial  in nature,  subject to the
purchasing bank's standard underwriting  requirements,  and all risks associated
with the portion of the loan sold flow to the purchaser.

         At the end of 2000 the three  subsidiary  banks had $14,748,000 in loan
participations  purchased.  Of these  loans  $6,017,000  was with  nonaffiliated
banks.

         At the end of 2000 the three  subsidiary  banks had $10,895,000 in loan
participations sold. Of these loans $2,164,000 was with nonaffiliated banks.

         At the end of 1999 the three  subsidiary  banks had  $7,292,000 in loan
participations  purchased. Of these loans, all but $564,000 were among the three
banks.

         At the end of 1999 the three  subsidiary  banks had  $6,701,000 in loan
participations sold. Of these loans, all were sold among the three banks.

Other Real Estate

         Other real estate, consisting of foreclosed properties,  was $0 in 2000
and 1999 and $266,000 in 1998.  Other real estate is  initially  recorded at the
lower of net loan balance or its estimated fair value, net of estimated disposal
costs.  The estimate of fair value for  foreclosed  properties  is determined by
appraisal at the time of acquisition.

Summary Of Loan Loss Experience

Allowance for Loan Losses

         The  allowance  for loan losses is increased by the  provision for loan
losses,  which is a direct  charge  to  expense.  Losses on  specific  loans are
charged against the allowance in the period in which management  determines that
such loans become uncollectible.  Recoveries of previously charged-off loans are
credited to the allowance.  At December 31, 2000 and 1999 the allowance for loan
losses was 1.24% and 1.23%,  respectively,  of total loans.  The following table
provides details on the changes in the allowance for loan losses during the past
five fiscal years.



                                       76






                                                                          2000        1999        1998           1997        1996
                                                                          ----        ----        ----           ----        ----
                                                                                      (Dollar amounts in thousands)
                                                                                                            
Average amount of loans outstanding ...............................    $179,654     $139,215     $103,500     $ 81,167     $ 57,806
                                                                       ========     ========     ========     ========     ========

Allowance for loan losses - January 1 .............................    $  1,936     $  1,459     $  1,140     $    876     $    707
                                                                       --------     --------     --------     --------     --------

Loan charge-offs:
Real estate .......................................................          78            0            7            0            0
Installment .......................................................         116           95          111          121           70
Credit cards and related plans ....................................           9            5            6            9            5
Commercial and other ..............................................          33           80           56            2           11
                                                                       --------     --------     --------     --------     --------
Total charge-offs .................................................         236          180          180          132           86
                                                                       --------     --------     --------     --------     --------

Recoveries:
Real Estate .......................................................           3            0            0            0            4
Installment .......................................................          25           17           12           34           23
Credit cards and related plans ....................................           2            3            3            4            1
Commercial ........................................................           6           25            0            0            0
                                                                       --------     --------     --------     --------     --------
Total recoveries ..................................................          36           45           15           38           28
                                                                       --------     --------     --------     --------     --------

Net charge-offs ...................................................         200          135          165           94           58
Provision for loan losses .........................................         688          612          484          358          227
                                                                       --------     --------     --------     --------     --------

Allowance for loan losses - Dec. 31 ...............................    $  2,424     $  1,936     $  1,459     $  1,140     $    876
                                                                       ========     ========     ========     ========     ========

Ratios
Net charge-offs to average loans outstanding ......................        0.11%        0.10%        0.16%        0.12%        0.10%
Net charge-offs to loans outstanding at end of year ...............        0.10%        0.09%        0.14%        0.10%        0.08%
 llowance for loan losses to average loans ........................        1.35%        1.39%        1.41%        1.40%        1.52%
Allowance for loan losses to total loans at end of year ...........        1.24%        1.23%        1.24%        1.24%        1.27%
Net charge-offs to allowance for losses ...........................        8.25%        6.97%       11.31%        8.25%        6.62%
Net charge-offs to provision for loans losses .....................       29.07%       22.06%       34.09%       26.25%       25.55%


         Management  reviews  its  allowance  for loan  losses  in  three  broad
categories:  commercial, real estate and installment loans. The combination of a
relatively short operating  history and relatively high asset quality  precludes
management from establishing a specific loan loss percentage for the computation
of the  allowance for each  category.  Instead  management  assigns an estimated
percentage  factor  to each in the  computation  of the  overall  allowance.  In
general terms, the real estate portfolio is subject to the least risk,  followed
by the commercial  loan portfolio,  followed by the installment  loan portfolio.
The subsidiary  banks' internal and external loan review programs will from time
to time identify  loans that are subject to specific  weaknesses  and such loans
will be reviewed for a specific loan loss allowance.

         Community  Bankshares  operates three  independent  community  banks in
central South Carolina. Under the provisions of the National Bank Act each board
of directors is responsible for determining the adequacy of its bank's loan loss
allowance.  In addition,  each bank is supervised and regularly  examined by the


                                       77


Office of the Comptroller of the Currency of the U. S. Treasury Department. As a
normal part of a safety and soundness examination, the OCC examiners will assess
and comment on the adequacy of a national bank's allowance for loan losses.  The
allowance  presented in this  discussion is on an  aggregated  basis and as such
will generally show a substantial  unallocated reserve that might not be present
if the Corporation were comprised of one operating bank subsidiary.

         The nature of community  banking is such that the loan  portfolios will
be predominantly comprised of small and medium size business and consumer loans.
With community banks there is by definition a geographic  concentration of loans
within the banks' respective city or county.  Management at each subsidiary bank
monitors the loan  concentrations and loan portfolio quality on an ongoing basis
including,  but not  limited  to:  quarterly  analysis  of loan  concentrations,
monthly  reporting of past dues,  non-accruals,  and watch loans,  and quarterly
reporting of loan charge-offs and recoveries.  These efforts focus on historical
experience  and are bolstered by quarterly  analysis of local and state economic
conditions, which is part of the subsidiary banks' assessment of the adequacy of
their allowances for loan losses.

         Management  believes that the allowance for loan losses, as of December
31, 2000 is sufficient to absorb the expected charge-offs and provide adequately
for the  inherent  losses that  remain in the loan  portfolio.  Management  will
continue to closely monitor the levels of  non-performing  and potential problem
loans and  address  the  weaknesses  in these  credits to enhance  the amount of
ultimate collection or recovery of these assets. Management considers the levels
and trends in  non-performing  and past due loans in determining  how historical
loan loss rates are adjusted.

         The following  table  presents the allocation of the allowance for loan
losses, as of December 31, 1996 through 2000, compared with the percent of loans
in the applicable categories to total loans.



                                           % of                 % of                 % of                 % of               % of
                                          loans in             loans in             loans in             loans in           loans in
                                           each                 each                 each                 each               each
                                 2000     category   1999      category   1998      category    1997     category   1996    category
                                 ----     --------   ----      --------   ----      --------    ----     --------   ----    --------
                                                               (Dollar amounts in thousands)
                                                                                                   
Commercial ................    $  801        27%    $  660        28%    $  364        25%    $  336        24%    $  314        24%
Real estate ...............       752        58%       565        58%       385        58%       301        58%       313        60%
Installment ...............       487        15%       360        15%       388        16%       288        18%       188        16%
Unallocated ...............       384         0%       351         0%       322         0%       215         0%        61         0%
                               ------    ------     ------    ------     ------    ------     ------    ------     ------    ------
     Total ................    $2,424       100%    $1,936       100%    $1,459       100%    $1,140       100%    $  876       100%
                               ======    ======     ======    ======     ======    ======     ======    ======     ======    ======



         Community Bankshares maintains an allowance for loan losses it believes
sufficient to cover  estimated  losses.  The allowance is allocated to different
segments of the portfolio,  based on  management's  expectations of risk in that
segment  of the  portfolio.  This  allocation  is an  estimate  only  and is not
intended  to  restrict  Community  Bankshares'  ability  to  respond  to losses.
Community  Bankshares  charges  losses from any segment of the  portfolio to the
allowance, regardless of the allocation.

         In reviewing  the adequacy of the  allowance for loan losses at the end
of each period,  Community Bankshares considers historical loan loss experience,
current economic  conditions,  loans  outstanding,  trends in non-performing and
delinquent  loans,  and the quality of collateral  securing  problem loans.  The
allowance for loan losses is management's  best estimate of probable loan losses
that have been incurred as of December 31, 2000.

Provision for Loan Losses

         The  provision  for  loan  losses  is  charged  to  earnings  based  on
management's  continuing review and evaluation of the loan portfolio and general
economic conditions.  In reviewing the adequacy of the provision for loan losses
during  each  period,   Community  Bankshares  considers  historical  loan  loss
experience,   current  economic   conditions,   loans  outstanding,   trends  in
non-performing and delinquent loans, the quality of collateral  securing problem


                                       78


loans, and the results of its ongoing internal and external loan review process.
Provisions  for loan  losses  totaled  $688,000  and  $612,000 in 2000 and 1999,
respectively. Based on the available information, Community Bankshares considers
its 2000 provision for loan losses adequate.

         Net  charge-offs  in 2000 were  $200,000 or 29.1% of the  provision for
loan losses  compared to $135,000 or 22.1% of the  provision  for loan losses in
the prior year.  See "Allowance for Loan Losses" for a discussion of the factors
management  considers  in its  review  of the  adequacy  of  the  allowance  and
provision for loan losses.

Average Deposits

         Community  Bankshares'  average  deposits  in 2000 were  $203  million,
compared to $168.6 million in 1999, an increase of $34.3 million or 20.4%.

         The total average deposits for Community Bankshares for the years ended
December 31, 2000, 1999 and 1998 are summarized below:



                                                     2000                      1999                   1998
                                             Average      Average     Average      Average     Average   Average
                                             balance       cost       balance       cost       balance     cost
                                             -------       ----       -------       ----       -------     ----
                                                               (Dollar amounts in thousands)
                                                                                          
Noninterest bearing demand                   $ 28,531                $ 26,124                  $ 19,536
Interest bearing transaction accounts          21,039       1.56%      17,417        1.54%       14,028     1.80%
Savings-regular                                 8,414       2.12%       8,595        2.08%       10,774     2.38%
Savings- money market                          25,031       4.73%      19,726        3.97%       11,461     4.96%
Time deposits less than $100,000               81,797       5.66%      39,406        5.09%       52,314     5.39%
Time deposits greater than $100,000            38,152       6.10%      57,355        5.14%       20,731     5.92%
                                             --------                --------                  --------

Total average deposits                       $202,964                $168,623                  $128,844
                                             ========                ========                  ========



         At  December  31,  2000  Community   Bankshares   had   $38,702,000  in
certificates   of  deposit  of  $100,000  or  more.   The  maturities  of  these
certificates are disclosed are as follows:

                        Maturity
                                                     (dollar amounts in
                                                         thousands)
                        Of 3 months or less                 12,721
                        From 3 to 6 months                   9,050
                        From 6 to 12 months                 13,575
                        Over 12 months                       3,356
                                                           -------
                                                           $38,702
                                                           =======

Return On Equity And Assets

         The following  table shows the return on assets (net income  divided by
average total assets),  return on equity (net income divided by average equity),
dividend  payout ratio  (dividends  declared per share divided by net income per
share),  and equity to assets ratio  (average  equity  divided by average  total
assets) for the years ended December 31, 2000, 1999 and 1998.



                                       79




                                                      2000      1999        1998
                                                      ----      ----        ----
Return on assets (ROA) ...........................    1.26%     1.06%     0.99%
Return on equity (ROE) ...........................   14.67%    11.12%     8.91%
Dividend payout ratio (dividends/net income) .....   20.50%    27.82%    28.91%
Equity as a percent of assets ....................    8.59%     9.49%    11.17%

Short-Term Borrowings

         Community  Bankshares'  short-term  borrowings consist of federal funds
purchased and securities  sold under  agreements to repurchase,  which generally
mature each business  day.  There was  $9,352,000,  $2,782,000,  and  $4,464,000
outstanding at year-end 2000, 1999 and 1998,  respectively.  Further information
is provided in the following table.

                                                       2000     1999        1998
                                                       ----     ----        ----
                                                   (Dollar amounts in thousands)
Outstanding at year-end ..........................   $9,352    $2,782    $4,464
Interest rate at year-end ........................     5.01%     3.50%     3.00%
Maximum month-end balance during the year ........   $9,532    $6,473    $7,315
Average amount outstanding during the year .......   $4,501    $5,210    $3,225
Weighted average interest rate during the year ...     4.84%     3.26%     3.69%


Federal Home Loan Bank Advances

         Community  Bankshares' banking  subsidiaries are members of the Federal
Home Loan Bank of Atlanta.  As such they have access to long-term borrowing from
the FHLB. There were $20,350,000, $19,420,000 and $9,490,000 outstanding in such
advances at year-end 2000, 1999 and 1998,  respectively.  Further information on
these borrowings from the FHLB is provided in the following table.

                                                    2000       1999         1998
                                                    ----       ----         ----
                                                  (Dollar amounts in thousands)
Outstanding at year-end .......................   $20,350    $19,420    $ 9,490
Interest rate at year-end .....................      6.04%      5.55%      5.41%
Maximum month-end balance during the year .....   $20,350    $19,420    $ 9,560
Average amount outstanding during the year ....   $19,385    $12,335    $ 6,905
Weighted average interest rate during the year       6.01%      5.47%      5.65%

Capital

Dividends

         During 2000 Community Bankshares paid cash dividends to shareholders of
22 cents per share,  which totaled $645,000.  This represented a dividend payout
ratio (dividends  divided by net income) of 20.5%. In 1999 Community  Bankshares
paid cash  dividends  to  shareholders  of 19 cents  per  share,  which  totaled
$608,000. This represented a dividend payout ratio of 27.8%.

Common Stock

         Common  stock at December  31,  2000  totaled  $15,928,000  compared to
$14,207,000  the prior year,  an  increase  of  $1,721,000.  This  increase  was


                                       80


comprised of a transfer from retained  earnings of $1,709,000,  the market value
of a five-percent stock dividend on January 31, 2000, as well as smaller changes
associated  with the exercise of stock options and shares issued by the dividend
reinvestment program.

Capital Adequacy

         The Federal Reserve and federal bank regulatory agencies have adopted a
risk-based capital standard for assessing the capital adequacy of a bank holding
company or financial  institution.  The minimum required ratio is 8%. Orangeburg
National  Bank,  Sumter  National  Bank,  and  Florence  National  Bank are each
considered `well capitalized' for regulatory purposes.  This category requires a
minimum  risk based  capital  ratio of 10%.  Detailed  information  on Community
Bankshares'  capital  position,  as well as that  of its  subsidiary  banks,  is
provided  in  Note  20  to  the  consolidated  financial  statements.  Community
Bankshares considers its current and projected capital position to be adequate.

Noninterest Income And Expense

Noninterest income, 2000 compared to 1999

         Noninterest  income  increased to $1,868,000 in 2000 from $1,317,000 in
1999, a $551,000 or 41.8%  increase.  The major  component of this change was in
service  charge income,  which in 2000 was $1,475,000  compared to $1,031,000 in
the prior year, a $444,000 or 43.1% increase.  Most of this increase was related
to growth in the  Florence  and Sumter  banks'  returned  check fees and deposit
account service charge income.

Noninterest expense, 2000 compared to 1999

         Overall,  non-interest  expenses  increased to  $6,552,000 in 2000 from
$6,066,000 in 1999, an increase of $486,000 or 8%.

         Personnel  costs in 2000 were  $3,779,000  compared to  $3,493,000  the
prior year, an increase of $286,000 or 8.2%.

         Premises  and  equipment  expenses  in 2000 were  $942,000  compared to
$886,000 the prior year, a $56,000 or 6.3% increase.

         Marketing expenses in 2000 were $207,000 compared to $180,000 the prior
year, a $27,000 or 15% increase.

         Regulatory  fees in 2000 were  $140,000  compared to $155,000 the prior
year, a $15,000 or 9.7% decrease.

         Supplies expense was $160,000 in 2000 compared to $155,000 in the prior
year, an increase of $5,000 or 3.1%.

         Director  fees were  $137,000 in 2000 compared to $121,000 in the prior
year,  an increase of $16,000 or 13.2%.  Orangeburg  National  Bank pays outside
directors $600 per month.  Sumter National Bank and Florence National Banks pays
outside  directors $300 per month.  The Florence bank began paying director fees
during 2000. Community Bankshares pays outside directors $200 per month.

         FDIC  insurance  costs were $33,000 in 2000  compared to $23,000 in the
prior year, an increase of $10,000 or 43.4%.

All other  expenses were  $1,154,000 in 2000 compared to $1,053,000 in the prior
year, an increase of $101,000 or 9.6%.




                                       81



Income Taxes, 2000 compared to 1999

         Community  Bankshares  pays U. S.  corporate  income  taxes  and  South
Carolina bank income taxes.  The 2000  provision for income taxes was $1,807,000
compared  to  $1,049,000  the prior  year,  an  increase  of  $758,000 or 72.3%.
Community  Bankshares'  effective  average tax rate is 36.5% in 2000 compared to
32.4% the prior year.  Community  Bankshares was the beneficiary of the exercise
of non-qualified  stock options on 27,500 shares during 1999. The tax benefit to
Community  Bankshares  approximated  $89,000  and  accounts  for  the  temporary
reduction in the effective tax rate during 1999.

Noninterest income, 1999 compared to 1998

         Noninterest  income  increased to $1,317,000 in 1999 from $1,055,000 in
1998, a $262,000 or 24.8%  increase.  The major  component of this change was in
service charge income,  which in 1999 was $1,031,000 compared to $798,000 in the
prior year, a $233,000 or 29.2% increase.

Noninterest expense, 1999 compared to 1998

         Overall,  non-interest  expenses  increased to  $6,066,000 in 1999 from
$5,074,000  in 1998,  an increase  of $992,000 or 19.6%.  The first full year of
operation  of the new  subsidiary  bank in Florence  accounted  for much of this
increase.  Accordingly,  many of the dollar  and  percentage  changes  discussed
herein will be larger than normal.

         Personnel  costs in 1999 were  $3,493,000  compared to  $2,911,000  the
prior year, an increase of $582,000 or 20%.

         Premises  and  equipment  expenses  in 1999 were  $886,000  compared to
$701,000 the prior year, a $185,000 or 26.4% increase.

         Marketing expenses in 1999 were $180,000 compared to $166,000 the prior
year, a $14,000 or 8.4% decrease.

         Regulatory expenses in 1999 were $155,000 compared to $92,000 the prior
year, a $63,000 or 68.5% increase.

         Supplies expense was $155,000 in 1999 compared to $174,000 in the prior
year, a decrease of $19,000 or 10.9%.

         Director  fees were  $121,000 in 1999 compared to $125,000 in the prior
year,  a decrease  of $4,000 or 3%.  Orangeburg  National  Bank paid its outside
directors  $600 per month.  Sumter  National  Bank paid its  directors  $300 per
month.  Community Bankshares paid its outside directors $200 per month. Florence
National Bank did not pay outside director fees in 1999.

         FDIC  insurance  costs were $23,000 in 1999  compared to $16,000 in the
prior year, an increase of $7,000 or 44%.

         All other expenses were  $1,053,000 in 1999 compared to $889,000 in the
prior year, an increase of $164,000 or 18.5%.

Income Taxes, 1999 compared to 1998

         The 1999 provision for income taxes was $1,049,000 compared to $663,000
the  prior  year,  an  increase  of  $386,000  or 58.2%.  Community  Bankshares'
effective average tax rate was 32.4%.  Community  Bankshares was the beneficiary
of the exercise of non-qualified stock options on 27,500 shares during 1999. The
tax benefit to Community  Bankshares  approximated  $89,000 and accounts for the
temporary reduction in the effective tax rate.




                                       82



Inflation

         The assets and liabilities of Community  Bankshares are mostly monetary
in nature.  Accordingly,  the  financial  results and  operations  of  Community
Bankshares  are much more affected by changes in interest  rates than changes in
inflation.  There is, however, a strong correlation between increasing inflation
and increasing  interest rates.  The impact of inflation has been very moderate,
less than 3%, during 2000.  Prospects  appear good for continued low  inflation,
despite some  increases in energy costs.  Although  inflation  does not normally
affect a financial  institution as  dramatically  as it affects  businesses with
large  investments  in plants and  inventories,  it does have an effect.  During
periods of high inflation there are usually corresponding increases in the money
supply,  and banks  experience  above  average  growth  in  assets,  loans,  and
deposits.  General  increases in the prices of goods and services also result in
increased operating expenses.

Liquidity

         Liquidity is the ability to meet current and future obligations through
liquidation  or maturity of existing  assets or the  acquisition  of  additional
liabilities.  Adequate  liquidity  is  necessary  to meet  the  requirements  of
customers for loans and deposit  withdrawals in a timely and economical  manner.
The most manageable  sources of liquidity are composed of liabilities,  with the
primary  focus of  liquidity  management  being the ability to attract  deposits
within the subsidiary  banks' service areas.  Core deposits (total deposits less
certificates of deposit of $100,000 or more) provide a relatively stable funding
base.  Certificates  of deposit of $100,000 or more are generally more sensitive
to changes in rates,  so they must be monitored  carefully.  Asset  liquidity is
provided by several  sources,  including  amounts due from banks,  federal funds
sold, and investments available-for-sale.

         Community   Bankshares  maintains  an   available-for-sale   investment
portfolio.   While  investment  securities  purchased  for  this  portfolio  are
generally purchased with the intent to be held to maturity,  such securities are
marketable  and  occasional  sales may occur  prior to  maturity  as part of the
process of asset/liability and liquidity  management.  Community Bankshares also
maintains a held-to-maturity investment portfolio.  Securities in this portfolio
are  generally  not  considered  a  primary  source  of  liquidity.   Management
deliberately  maintains a short-term  maturity  schedule for its  investments so
that there is a continuing stream of maturing investments.  Community Bankshares
intends to maintain a short-term investment portfolio in order to continue to be
able to supply liquidity to its loan portfolio and for customer withdrawals.

         Community  Bankshares has substantially more liabilities that mature in
the next 12 months  than it has assets  maturing  in the same  period.  However,
based on its historical experience,  and that of similar financial institutions,
Community Bankshares believes that it is unlikely that so many deposits would be
withdrawn,  without being replaced by other deposits,  that Community Bankshares
would be  unable to meet its  liquidity  needs  with the  proceeds  of  maturing
assets.

         Community  Bankshares  also  maintains  various  federal funds lines of
credit with correspondent banks and is able to borrow from the Federal Home Loan
Bank and the Federal Reserve's discount window.

         Community Bankshares,  through its subsidiary banks, has a demonstrated
ability to attract  deposits from its market area.  Deposits have grown from $72
million  in 1995 to over $218  million  in 2000.  This  stable  growing  base of
deposits is the major source of operating liquidity.

         Community  Bankshares'  long-term  liquidity  needs are  expected to be
primarily  affected by the maturing of  long-term  certificates  of deposit.  At
December  31, 2000  Community  Bankshares  had  approximately  $15.3  million in
certificates  of deposit  and other  obligations  maturing in one to five years.
Community Bankshares had $17.9 million in obligations maturing after five years.
Community  Bankshares'  assets  maturing in the same periods were $119.4 million
and $35.5 million, respectively.  Even with a substantially larger dollar amount
of assets  maturing  in both  periods  than  liabilities,  Community  Bankshares
believes that it will not have any significant long-term liquidity problems.

         In the  opinion of  management,  the current  and  projected  liquidity
position is adequate.



                                       83



FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2001 AND SEPTEMBER 30, 2000:

Results Of Operations

Net Income

         For the nine  months  ended  September  30, 2001  Community  Bankshares
earned a  consolidated  profit of  $2,793,000  compared  to  $2,342,000  for the
comparable  period in 2000, an increase of 19.3% or $451,000.  Basic and diluted
earnings  per share were $.87 in the 2001  period  compared to $.73 for the 2000
period.

         For the 2001  period  Orangeburg  National  Bank  reported  a profit of
$1,869,000  compared to $1,687,000 for the 2000 period,  an increase of 10.8% or
$182,000.

         For the 2001 period Sumter  National Bank reported a profit of $849,000
compared to $634,000 for the 2000 period, an increase of 33.9% or $215,000.  The
Sumter bank began operation in September 1996.

         For the 2001  period  Florence  National  Bank  reported  a  profit  of
$125,000  compared  to  $39,000  for the 2000  period,  an  increase  of 220% or
$86,000. The Florence bank began operation in July 1998.

         As noted  above,  consolidated  net  income for the nine  months  ended
September  30, 2001,  increased  from the prior year by 19.3% or  $451,000.  The
major  components  of this  increase are discussed  below.  Net interest  income
before  provision  for loan losses for the nine months ended  September 30, 2001
increased to $8,126,000  compared to $7,625,000  for the same period in 2000, an
increase of 6.6% or $501,000.  For the 2001 period the provision for loan losses
was $457,000  compared to $490,000  for the 2000  period,  a decrease of 6.7% or
$33,000.  Non-interest  income for the 2001  period was  $1,987,000  compared to
$1,349,000  for the 2000  period,  a 47.3% or  $638,000  increase.  For the same
periods,  non-interest expense was $5,322,000 compared to $4,852,000,  a 9.7% or
$470,000 increase.

Profitability

         Profitability  may be  measured  through  the ROA  (return  on  average
assets) and the ROE (return on average  equity).  Return on assets is the income
for the period divided by the average assets for the period, annualized.  Return
on equity is the  income for the period  divided by the  average  equity for the
period,  annualized.  Operating  results for the nine months ended September 30,
2001 and 2000 yield the results in the table shown below.

                                       Nine months ended Sept. 30,
                                        2001             2000
                                        ----             ----
                                        (dollars in thousands)
         Average assets               $281,704         $243,697
         ROA                             1.32%            1.28%
         Average equity                $24,488          $21,047
         ROE                            15.21%           14.84%
         Net income                     $2,793           $2,342


Net interest income

         Net interest  income,  the major  component  of  Community  Bankshares'
income,  is the amount by which  interest  and fees on interest  earning  assets
exceeds  the  interest  paid on interest  bearing  deposits  and other  interest
bearing  funds.  During the first nine months of 2001 net interest  income after
provision for loan losses  increased to $7,669,000  from  $7,135,000,  a 7.5% or
$534,000  increase over the first nine months of 2000. This  improvement was the
result of a $38 million  increase in the average volume of earning  assets.  The
average  yield on earning  assets  decreased  to 8.07% for the 2001  period from
8.56% for the 2000 period.  This decline was the result of market  interest rate


                                       84


declines.  During the first nine months of 2001 the prime  lending rate declined
from 9.0% to 5.50%.  During the first nine months of 2000 the prime lending rate
increased from 8.75% to 9.50%.

         For the first  nine  months of 2001 the cost of funds  averaged  4.79%,
decreased  from  4.90% for the first  nine  months of 2000.  The effect of these
changes was a net interest spread (yield on earning assets less cost of interest
bearing liabilities) of 3.28% for the 2001 period,  decreased from 3.66% for the
2000 period.  Community  Bankshares'  net interest  margin (net interest  income
divided by total earning assets) was 4.05% for the 2001 period compared to 4.43%
for the 2000 period.

Interest Income

         Elsewhere  in this report is a table  comparing  the average  balances,
yields,  and  rates  for the  interest  rate  sensitive  segments  of  Community
Bankshares'  balance  sheets for the nine months  ended  September  30, 2001 and
2000. A discussion of that table follows.

         Total interest income for the first nine months of 2001 was $16,200,000
compared  with  $14,744,000  for the same period in 2000,  a 9.9% or  $1,456,000
increase.  The yield on average  earning  assets for the 2001  period was 8.07%,
decreased  from 8.56% for the 2000  period.  The decline in yields was  directly
related to the overall decline in market interest rates.  Total average interest
earning assets for the 2001 period were  $267,610,000  compared to  $229,709,000
for the 2000 period, an increase of 16.5% or $37,901,000.

         The loan portfolio earned $13,694,000 for the first nine months of 2001
compared  to  $12,184,000  for the same  period of 2000,  a 12.4% or  $1,510,000
increase.  The yield  decreased  to 8.85% for the 2001 period from 9.24% for the
2000 period.  The average size of the loan  portfolio was  $206,419,000  for the
2001 period compared to $175,774,000  for the 2000 period,  an increase of 17.4%
or $30,645,000.

         The taxable  investment  portfolio earned $1,699,000 for the first nine
months in 2001  compared to  $2,230,000  for the same period in 2000, a 23.8% or
$531,000 decrease. The yield decreased to 6.21% in the 2001 period from 6.37% in
the 2000 period.  The average size of the portfolio was  $36,490,000 in the 2001
period  compared  to  $46,646,000  in the 2000  period,  a decrease  of 21.8% or
$10,156,000.  As bond market  interest  rates  declined  during 2001,  Community
Bankshares had numerous securities called prior to maturity.

         The tax-exempt  investment  portfolio earned $21,000 for the first nine
months in 2001  compared to $25,000 for the same period in 2000, a 16% or $4,000
decrease.  The yield (on a taxable  equivalent basis) on the portfolio was 5.69%
for the 2001 period,  decreased from 6.27% for the 2000 period. The average size
of the  portfolio  was $746,000 for the 2001 period  compared to $806,000 in the
2000 period, a decrease of 7.4% or $60,000.

         Interest bearing deposits in other banks  contributed  $144,000 for the
first nine months of 2001  compared  to $53,000 for the same period in 2000,  an
increase of 172% or $91,000.  The yield on these deposits decreased to 4.32% for
the 2001 period from 6.10% in the 2000  period.  Community  Bankshares  averaged
$4,441,000  in the 2001 period  compared to  $1,159,000  in the 2000 period,  an
increase of 283% or $3,282,000. The increase in these deposits was the result of
declining  market  interest  rates,  which caused  numerous  calls of investment
securities  prior to  maturity.  The  funds  resulting  from  these  calls  were
temporarily invested in interest bearing deposits and federal funds.

         Federal  funds  sold  earned  $642,000  the first  nine  months of 2001
compared  to  $252,000  for the same  period  in 2000,  an  increase  of 155% or
$390,000.  Yields decreased to 4.39% for the 2001 period from 6.31% for the 2000
period. For the 2001 period Community Bankshares increased its average volume in
federal funds sold to $19,514,000  compared to $5,324,000 for the 2000 period, a
267% or $14,190,000 increase.

Interest Expense

         Interest  expense  for the first  nine  months  of 2001 was  $8,074,000
compared  to the prior  year's  $7,119,000,  a 13.4% or $955,000  increase.  The


                                       85


average volume of interest  bearing  liabilities was  $224,702,000  for the 2001
period  compared to  $193,799,000  for the 2000 period,  a 15.9% or  $30,903,000
increase. The average rate paid for interest-bearing liabilities during the 2001
period was 4.79%, decreased from 4.90% for the 2000 period.

         The cost of savings  accounts  was $927,000 in the first nine months in
2001  compared to  $955,000 in the first nine months of 2000,  a 2.9% or $28,000
decrease.  Average savings deposit balances were $37,290,000 for the 2001 period
compared to $32,650,000 for the 2000 period, an increase of 14.2% or $4,640,000.
The average rate paid on these funds decreased to 3.31% from 3.90%.

         Interest bearing transaction  accounts cost $165,000 for the first nine
months in 2001  compared to the prior  year's  $241,000,  a decrease of 31.5% or
$76,000.  The  volume of these  deposits  was  $23,389,000  for the 2001  period
compared to $20,519,000 for the 2000 period, a 14% or $2,870,000  increase.  The
average rate paid on these funds in the 2001 period decreased to .94% from 1.57%
in the 2000 period.

         Time  deposits  cost  $5,909,000  for the  first  nine  months  of 2001
compared to $4,943,000  for the first nine months of the prior year, an increase
of 19.5% or $966,000.  The volume was  $136,836,000 for the 2001 period compared
to  $117,735,000  for the 2000  period,  a 16.2% or  $19,101,000  increase.  The
average  rate paid on these  funds  increased  to 5.76% for the 2001 period from
5.60% for the 2000 period.  This increase runs contrary to market interest rates
but reflects  increased  competition for time deposits in Community  Bankshares'
markets.

         Short-term borrowings consist of federal funds purchased and securities
sold under  agreements to  repurchase.  This is a relatively  small and volatile
part of the balance  sheet.  It cost  $212,000 for the first nine months in 2001
compared to $117,000 for the first nine months of 2000,  an increase of 81.2% or
$95,000. The volume of these funds was $7,414,000 in the 2001 period compared to
$3,553,000 in the 2000 period,  an increase of 109% or  $3,861,000.  The average
rate paid on these funds decreased to 3.81% from 4.39%.

         Borrowings  from the Federal Home Loan Bank cost $861,000 for the first
nine  months in 2001  compared  to  $863,000  for the first nine months in 2000,
virtually  unchanged.  The advances averaged  $19,773,000 during the 2001 period
compared to $19,342,000 for the 2000 period,  a 2.2% or $431,000  increase.  The
average rate paid on these funds decreased to 5.81% from 5.95%.

Non-Interest Income

         Non-interest  income  for  the  first  nine  months  of  2001  grew  to
$1,987,000  compared to  $1,349,000 in the first nine months of 2000, a 47.3% or
$638,000 increase. Much of this increase resulted from the introduction of a new
service,  an  automated  overdraft  courtesy  line for  customers.  This service
provides  for a flat  fee  for  paying  customer  checks  in  overdraft  that is
equivalent  to the fee  charged  for  returned  checks.  Customers  who use this
service are subject to other terms and conditions.

Non-Interest Expense

         For the first nine months of 2001 non-interest expenses were $5,322,000
compared to  $4,852,000  for the first nine  months of 2000,  a 9.7% or $470,000
increase.  This  increase is related to higher  levels of business  activity and
included the following components:

         For the  2001  period  personnel  costs  were  $3,172,000  compared  to
$2,831,000 for the 2000 period, an increase of 12% or $341,000;

         For the 2001 period  premises  and  equipment  expenses  were  $703,000
compared to $690,000 for the 2000 period, an increase of 1.9% or $13,000; and

         For the 2001 period other costs were $1,447,000  compared to $1,331,000
for the 2000 period, an increase of 8.7% or $116,000.


                                       86



Income Taxes

         Community  Bankshares  provided $1,541,000 for federal and state income
taxes during the first nine months of 2001 compared to  $1,290,000  for the same
period in 2000, a 19.5% or $251,000 increase.  The average tax rate for the 2001
period was 35.6% and for the 2000 period it was 35.5%.

FOR THE QUARTERS ENDED SEPTEMBER 30, 2001 AND 2000:

Results of Operations

Net Income

         For the quarter ended September 30, 2001, Community Bankshares earned a
consolidated profit of $962,000,  compared to $865,000 for the comparable period
of 2000,  an increase of 11.2% or $97,000.  Basic or diluted  earnings per share
were $.30 in the 2001 period,  compared to $.27 for the 2000 period. The changes
in the items comprising net interest income, which are discussed below, resulted
from  essentially  the same factors  discussed  above  regarding  the results of
operation for the nine months ended September 30, 2001.

Net interest income

         Net interest  income  before  provision for loan losses for the quarter
ended September 30, 2001 increased to $2,770,000  compared to $2,648,000 for the
same period in 2000,  an increase of 4.6% or  $122,000.  For the same period the
provision for loan losses was $180,000 compared to $152,000 for the 2000 period,
an increase of 18.4% or $28,000.

Interest Income

         Total  interest  income  for the  third  quarter  2001  was  $5,261,000
compared to $5,273,000 for the same period in 2000, virtually unchanged.

         The  loan  portfolio  earned  $4,578,000  for the  third  quarter  2001
compared to $4,421,000 for the same period of 2000, a 3.6% or $157,000 increase.

         The  investment  portfolio  earned  $457,000 for the third quarter 2001
compared to $763,000  for the same  period of 2000  period,  a 40.1% or $306,000
decrease.

         Interest  bearing deposits in other banks  contributed  $38,000 for the
third  quarter 2001 compared to $25,000 for the same period of 2000, an increase
of 52% or $13,000.

         Federal  funds  sold  earned  $188,000  for the third  quarter  of 2001
compared  to  $64,000  for the same  period  of  2002,  an  increase  of 194% or
$124,000.

Interest expense

         Interest expense for the third quarter of 2001 was $2,491,000  compared
to $2,625,000 for the same period of 2000, a 5.1% or $134,000 decrease.

Non-interest income and expense

         Non-interest  income  for the 2001  period  was  $744,000  compared  to
$464,000 for the 2000 period,  a 60.3% or $280,000  increase.  This increase was
mostly the result of the  introduction of the new automated  overdraft  service.
Non-interest expense was $1,833,000 compared to $1,625,000,  a 12.8% or $208,000
increase.



                                       87


Changes In Financial Position

Investment portfolio

         The  investment  portfolio is comprised of held to maturity  securities
and available for sale securities. Community Bankshares and its three subsidiary
banks usually  purchase  short-term  issues (ten years or less) of U. S Treasury
and U. S. Government agency securities for investment purposes. At September 30,
2001 the held to maturity portfolio totaled  $2,149,000  compared to $12,371,000
at December 31, 2000, a decrease of 82.6% or $10,222,000. At September 30, 2001,
the available for sale portfolio totaled $33,002,000  compared to $41,195,000 at
December 31, 2000, a decrease of 19.9% or $8,193,000. Most of the decline in the
subsidiary banks'  investment  portfolios was due to the call of many securities
during 2001,  which resulted from the decline in bond market interest rates. The
following chart summarizes the investment  portfolios at September 30, 2001, and
December 31, 2000.



                                                                     September 30, 2001
                                                    Held to maturity                   Available for sale
                                            Amortized cost      Fair value      Amortized cost      Fair value
                                            --------------      ----------      --------------      ----------
                                                                   (dollars in thousands)
                                                                                          
U. S. Government and federal agencies            $2,149            $2,157           $30,036           $30,201
Tax exempt securities                                 -                 -               803               820
Other equity securities                               -                 -             1,981             1,981
                                                      -                 -           -------           -------
Total                                            $2,149            $2,157           $32,820           $33,002
                                                 ======            ======           =======           =======

Unrealized gain                                  $    8                             $   182
                                                 ======                             =======




                                                                     December 31, 2000
                                                    Held to maturity                   Available for sale
                                            Amortized cost      Fair value      Amortized cost      Fair value
                                            --------------      ----------      --------------      ----------
                                                                   (dollars in thousands)
                                                                                          
U. S. Government and federal agencies           $12,371           $12,217           $38,599           $38,404
Tax exempt securities                                 -                 -               814               810
Other equity securities                               -                 -             1,981             1,981
                                                      -                 -           -------           -------
Total                                           $12,371           $12,217           $41,394           $41,195
                                                =======           =======           =======           =======

Unrealized (loss)                               $  (154)                            $  (199)
                                                =======                             =======



Loan portfolio

         The loan portfolio is primarily  consumer and small business  oriented.
At  September  30,  2001  the  loan  portfolio  was  $219,125,000   compared  to
$195,077,000  at  December  31,  2000,  a 12.3%  or  $24,048,000  increase.  The
following chart summarizes the loan portfolio at September 30, 2001 and December
31, 2000.

                                           Sept. 30, 2001      Dec. 31, 2000
                                           --------------      -------------
                                                  (dollars in thousands)
Real estate                                   $138,258            $113,543
Commercial                                      55,260              52,264
Loans to individuals                            25,607              29,270
                                              --------            --------
Total                                         $219,125            $195,077
                                              ========            ========





                                       88



Past Due and Non-Performing Assets and the Allowance for Loan Losses

         Community Bankshares closely monitors past due loans and loans that are
in  non-accrual  status and other real estate owned.  Below is a summary of past
due and non-performing assets at September 30, 2001 and December 31, 2000.

                                             Sept. 30, 2001       Dec. 31, 2000
                                             --------------       -------------
                                                     (dollars in thousands)
Past due 90 days + accruing loans                  $101                 $ 93
Non-accrual loans                                  $413                 $238
Impaired loans (included in nonaccrual)            $413                 $238
Other real estate owned                            $267                 $  -

         Management  considers the past due and non-accrual amounts at September
30,  2001  to be  reasonable  in  relation  to the  size  of the  portfolio  and
manageable in the normal course of business.  The increase in non-accrual assets
is associated with a small number of loans and is not indicative, in the opinion
of management, of any trend.

         Community  Bankshares had no restructured loans during any of the above
listed periods.

Allowance for Loan Losses

         Management believes that the allowance for loan losses, as of September
30,  2001,  is  sufficient  to  absorb  the  expected  charge-offs  and  provide
adequately for the inherent losses that remain in the loan portfolio. Management
will  continue to closely  monitor the levels of  non-performing  and  potential
problem loans and address the  weaknesses in these credits to enhance the amount
of ultimate  collection  or recovery of these assets.  Management  considers the
levels  and  trends  in  non-performing  and past due loans in  determining  how
historical loan loss rates are adjusted.

         The aggregate allowance for loan losses of the subsidiary banks and the
aggregate  activity  with  respect to those  allowances  are  summarized  in the
following table.



                                                   Nine months ended         Year ended         Nine months ended
                                                    Sept. 30, 2001          Dec. 31, 2000        Sept. 30, 2000
                                                    --------------          -------------        --------------
                                                                                             
Allowance at beginning of period                         $2,424                $1,936                 $1,936
Provision expense                                           457                   688                    490
Net charge offs                                            (120)                 (200)                  (156)
                                                         ------                ------                 ------
Allowance at end of period                               $2,761                $2,424                 $2,270
                                                         ======                ======                 ======
Allowance / outstanding loans                             1.26%                 1.24%                  1.22%


         In reviewing  the adequacy of the  allowance for loan losses at the end
of  each  period,  management  of  each  bank  considers  historical  loan  loss
experience,   current  economic   conditions,   loans  outstanding,   trends  in
non-performing  and  delinquent  loans,  and the quality of collateral  securing
problem  loans.  After  charging  off  all  known  losses,  management  of  each
subsidiary bank considers the allowance adequate to provide for estimated losses
inherent in the loan portfolio at September 30, 2001.

Deposits

         Deposits   were   $233,791,000   at  September  30,  2001  compared  to
$218,811,000 at December 31, 2000, an increase of 6.8% or $14,980,000.

         Time deposits  greater than $100,000 were  $48,708,000 at September 30,
2001  compared to  $38,702,000  at December  31,  2000,  an increase of 25.9% or
$10,006,000.



                                       89


Liquidity

         Community   Bankshares  has  substantially  more  liabilities   (mostly
deposits, which may be withdrawn) which mature in the next 12 months than it has
assets maturing in the same period. However, based on its historical experience,
and that of similar financial  institutions,  Community Bankshares believes that
it is unlikely that so many deposits would be withdrawn,  without being replaced
by  other  deposits,  that  Community  Bankshares  would be  unable  to meet its
liquidity needs with the proceeds of maturing assets.

         Community  Bankshares  through its banking  subsidiaries also maintains
federal funds lines of credit with  correspondent  banks,  and is able to borrow
from the Federal Home Loan Bank and from the Federal Reserve's discount window.

         Community   Bankshares   through   its  banking   subsidiaries   has  a
demonstrated  ability to attract deposits from its markets.  Deposits have grown
from $30 million in 1989 to over $233 million in 2001.  This base of deposits is
the major source of operating liquidity.

         Community  Bankshares'  long term  liquidity  needs are  expected to be
primarily  affected by the maturing of  long-term  certificates  of deposit.  At
September 30, 2001  Community  Bankshares  had  approximately  $24.7 million and
$11.5 million in certificates of deposit and other interest bearing  liabilities
maturing  in one to five  years and over  five  years,  respectively.  Community
Bankshares' assets maturing or repricing in the same periods were $124.8 million
and $26.1  million,  respectively.  Community  Bankshares  expects to be able to
manage its current balance sheet  structure  without  experiencing  any material
liquidity problems.

         In  the  opinion  of  management,  Community  Bankshares'  current  and
projected liquidity position is adequate.

Capital resources

         As  summarized  in the table below,  Community  Bankshares  maintains a
strong capital position.



                                                                                               Minimum required
                                                                                                     for
                                                   Sept. 30, 2001          Dec. 31, 2000       capital adequacy
                                                   --------------          -------------       ----------------

                                                                                         
Tier 1 capital to average total assets                  8.89%                   8.20%                4.00%
Tier 1 capital to risk weighted assets                 11.77%                  11.10%                4.00%
Total capital to risk weighted assets                  12.95%                  12.30%                6.00%


         In  the  opinion  of  management,  Community  Bankshares'  current  and
projected capital positions are adequate.

Dividends

         Community  Bankshares  declared and paid a quarterly  cash  dividend of
seven cents per share during the first three quarters of 2001, for a total of 21
cents per share. The total cost of these dividends was $672,000.

Commitments

         Sumter  National  Bank has entered  into a contract to  construct a new
branch bank.  This building is currently under  construction  near the corner of
Liberty Street and  Wedgefield  Highway in Sumter.  The  contracted  cost of the
building is $567,681.




                                       90



Quantitative and Qualitative Disclosures about Market Risk

         Market risk is the risk of loss from adverse  changes in market  prices
and rates.  Community  Bankshares'  market risk arises principally from interest
rate risk inherent in its lending, deposit and borrowing activities.  Management
actively  monitors  and  manages  its  interest  rate  risk  exposure.  Although
Community  Bankshares  manages other risks, such as credit quality and liquidity
risk in the normal course of business,  management  considers interest rate risk
to be its most significant  market risk and this risk could potentially have the
largest material effect on Community Bankshares' financial condition and results
of  operations.  Other types of market risks such as foreign  currency  exchange
risk and  commodity  price risk,  do not arise in the normal course of community
banking activities.

         Achieving  consistent growth in net interest income is the primary goal
of Community Bankshares' asset/liability function. Community Bankshares attempts
to  control  the mix  and  maturities  of  assets  and  liabilities  to  achieve
consistent  growth in net interest  income  despite  changes in market  interest
rates.  Community  Bankshares  seeks to accomplish  this goal while  maintaining
adequate liquidity and capital.  Community  Bankshares'  asset/liability  mix is
sufficiently  balanced  so that the effect of  interest  rates  moving in either
direction is not expected to be significant over time.

         Community Bankshares' Asset/Liability Committee uses a simulation model
to assist in achieving  consistent  growth in net interest income while managing
interest rate risk.  The model takes into account  interest rate changes as well
as changes in the mix and volume of assets and liabilities.  The model simulates
Community Bankshares' balance sheet and income statement under several different
rate  scenarios.  The model's inputs (such as interest rates and levels of loans
and  deposits)  are  updated  on a  quarterly  basis in order to obtain the most
accurate  forecast   possible.   The  forecast   presents   information  over  a
twelve-month  period. It reports a base case in which interest rates remain flat
and reports  variations  that occur when rates increase and decrease 100 and 200
basis  points.  According  to  the  model  as of  December  31,  2000  Community
Bankshares is positioned so that net interest income will increase  $240,000 and
net income will increase $147,000 if interest rates rise 300 basis points in the
next twelve months.  Conversely,  net interest income will decline  $251,000 and
net income will decline  $154,000 if interest  rates  decline 200 basis  points.
According  to the  model as of  September  30,  2001  Community  Bankshares  was
positioned  so that net interest  income would be expected to increase  $242,000
and net income would be expected to increase  $149,000 in the next twelve months
if interest rates rise 100 basis points.  Conversely,  net interest income would
be  expected  to decline  $242,000  and net income  would be expected to decline
$149,000 in the next twelve  months if interest  rates decline 100 basis points.
Computation of  prospective  effects of  hypothetical  interest rate changes are
based on numerous  assumptions,  including  relative  levels of market  interest
rates and loan prepayment, and should not be relied upon as indicative of actual
results.  Further,  the  computations do not  contemplate any actions  Community
Bankshares could undertake in response to changes in interest rates.

         The Market Risk table,  which follows this discussion,  shows Community
Bankshares'  financial  instruments  that are  sensitive  to changes in interest
rates. Community Bankshares uses certain assumptions to estimate fair values and
expected maturities.  For assets, expected maturities are based upon contractual
maturity, projected repayments, and prepayment of principal and potential calls.
For core deposits without contractual maturity (i.e., interest checking, savings
and money market  accounts),  the table  presents  principal cash flows based on
management's judgment concerning their most likely runoff. The actual maturities
and runoff  could vary  substantially  if future  prepayments,  runoff and calls
differ from Community Bankshares' historical experience.


                                       91




                                        Average    2001       2002       2003      2004      2005    After 2006  Balance  Fair value
                                        -------    ----       ----       ----      ----      ----    ----------  -------  ----------
                                         rate
                                                                      (Dollar amounts in thousands)
Earning assets
                                                                                                 
Interest bearing deposits ....            6.25% $   594    $    $-    $     -    $     -    $     -    $     -   $    594   $    594
Investment securities ........            6.38%   1,740      7,487      8,300      9,028     13,217     12,984     52,756
Investment securities - tax ..            6.01%     201                   412        197                              810
                                                                                                                 --------
     exempt
Total securities investments .                                                                                     53,566     53,412
                                                                                                                 --------   --------
Federal funds sold ...........            6.45%   8,130          -          -          -          -          -      8,130      8,130
Loans ........................            9.32%  92,325     12,904     22,864     25,499    $19,176     22,309    195,077    197,811
Interest bearing liabilities
Savings ......................            4.06%   1,919      1,823      1,732      1,646      1,563     29,702     38,385
Interest bearing transaction .            1.56%   1,135      1,079      1,025        973        925     17,571     22,708
     accounts
Time deposits < $100,000 .....            5.66%  75,329      9,815      1,166        456        936         95     87,797
Time deposits > $100,000 .....            6.10%  35,719      2,637        144        100        102          -     38,702
                                                                                                       -------   --------
Total deposits ...............                                                                                    187,592    187,365
                                                                                                       -------   --------   --------
Short term borrowing .........            4.84%   9,352          -          -          -          -          -      9,352      9,352
FHLB advances ................            6.01% $ 2,500    $     -    $     -    $     -    $ 1,650    $16,200   $ 20,350   $ 20,209


         The static interest rate sensitivity gap position, while not a complete
measure  of  interest  sensitivity,  is also  reviewed  periodically  to provide
insights  related to the static  repricing  structure of the  subsidiary  banks'
assets and  liabilities.  At December  31, 2000 on a  cumulative  basis  through
twelve months,  rate sensitive  liabilities  exceeded rate sensitive  assets, by
$81.5 million. The liability sensitive position is largely due to the assumption
that the banks' $61 million in interest bearing  transaction  accounts,  savings
accounts and money market  accounts will reprice within a year.  This assumption
may or may not be valid,  since these accounts vary greatly in their sensitivity
to interest rate changes in the market.


                                       92


         The  following  table   summarizes   Community   Bankshares'   interest
sensitivity position as of December 31, 2000.

                          Interest Sensitivity Analysis



                                                         Within 3      4-12 months        1-5 years           Over 5          Total
                                                          months       -----------        ---------           years           -----
                                                          ------                                              -----
                                                                        (Dollar amounts in thousands)
Interest earning assets
                                                                                                            
Interest bearing deposits ......................       $     594         $       -        $        -     $         -       $     594
Taxable investment securities ..................             700             1,241            37,835          12,980          52,756
Tax exempt investment securities ...............               -                 -               810               -             810
Federal funds sold .............................           8,130                 -                 -               -           8,130
Loans, net of unearned income ..................          78,229            13,577            80,716          22,555         195,077
                                                       ---------         ---------         ---------       ---------       ---------

Total interest earning assets ..................          87,653            14,818           119,361          35,535         257,367
                                                       ---------         ---------         ---------       ---------       ---------

Interest bearing liabilities
Savings ........................................          38,385                 -                 -               -          38,385
Interest bearing transaction accounts ..........          22,708                 -                 -               -          22,708
Time deposits < $100M ..........................          23,728            51,970            12,004              95          87,797
Time deposits > $100M ..........................          12,721            22,625             3,356               -          38,702
Short term borrowing ...........................           9,352                 -                 -               -           9,352
FHLB advances ..................................               -             2,570               140          17,640          20,350
                                                       ---------         ---------         ---------       ---------       ---------

Total interest bearing liabilities .............       $ 106,894         $  77,165         $  15,500       $  17,735       $ 217,294
                                                       ---------         ---------         ---------       ---------       ---------

Interest sensitivity gap .......................       $ (19,241)        $ (62,347)        $ 103,861       $  17,800       $  40,073
Cumulative gap .................................         (19,241)          (81,588)           22,273          40,073
RSA/RSL ........................................              82%               19%
Cumulative RSA/RSL .............................              82%               56%


RSA- rate sensitive assets; RSL- rate sensitive liabilities

         The above table  reflects the balances of interest  earning  assets and
interest  bearing  liabilities  at the  earlier of their  repricing  or maturity
dates. Amortizing fixed rate loans are reflected at the scheduled maturity date.
Variable rate amortizing  loans are reflected at the earliest date at which they
may be repriced  contractually.  Deposits in other banks and debt securities are
reflected at each instrument's  ultimate maturity date.  Overnight federal funds
sold are reflected as instantly  repriceable.  Interest bearing liabilities with
no  contractual  maturity,   such  as  savings  deposits  and  interest  bearing
transaction  accounts,  are reflected in the earliest repricing period possible.
Fixed rate time deposits are reflected at the earlier of their next repricing or
maturity dates.


                                       93

Selected Quareterly Financial Data

         The  following  table  contains  selected  financial  data of Community
Bankshares on a quarterly basis from the first quarter of 1999 through the third
quarter of 2001.

                        Selected Quarterly Financial Data
                  (Dollars in thousands, except per share data)



                                      Quarters of 2001              Quarters of 2000                      Quarters of 1999
                                -----------------------   -----------------------------------   ------------------------------------
                                Third   Second    First   Fourth     Third    Second    First   Fourth    Third    Second      First
                                -----   ------    -----   ------     -----    ------    -----   ------    -----    ------      -----

                                                                                           
Interest and dividend income  $ 5,550  $ 5,389   $ 5,261  $ 5,557  $ 5,273  $ 4,888   $ 4,583  $ 4,313  $ 4,092   $ 3,730   $ 3,415
Interest expense ............  (2,846)  (2,737)   (2,491)  (2,856)  (2,625)  (2,329)   (2,165)  (1,942)  (1,827)   (1,670)   (1,519)
                              -------  -------   -------  -------  -------  -------   -------  -------  -------   -------   -------

Net interest income .........   2,704    2,652     2,770    2,701    2,648    2,559     2,418    2,371    2,265     2,060     1,896
Provision for loan losses ...    (142)    (135)     (180)    (198)    (152)    (158)     (180)    (173)    (166)     (139)     (134)
                              -------  -------   -------  -------  -------  -------   -------  -------  -------   -------   -------

Net interest income after
    provision for loan losses   2,562    2,517     2,590    2,503    2,496    2,401     2,238    2,198    2,099     1,921     1,762
Noninterest income ..........     551      692       744      519      464      448       437      323      344       345       305
Noninterest expenses ........  (1,712)  (1,777)   (1,833)  (1,700)  (1,625)  (1,627)   (1,600)  (1,639)  (1,530)   (1,460)   (1,437)
                              -------  -------   -------  -------  -------  -------   -------  -------  -------   -------   -------

Income before income taxes ..   1,401    1,432     1,501    1,322    1,335    1,222     1,075      882      913       806       630
Provision for income taxes ..    (500)    (502)     (539)    (517)    (470)    (439)     (381)    (286)    (299)     (263)     (201)
                              -------  -------   -------  -------  -------  -------   -------  -------  -------   -------   -------

Net income ..................     901      930       962      805      865      783       694      596      614       543       429
                              =======  =======   =======  =======  =======  =======   =======  =======  =======   =======   =======

Earnings per share
    Basic ................... $  0.28  $  0.29   $  0.30  $  0.25  $  0.27  $  0.25   $  0.22  $  0.19  $  0.19   $  0.17   $  0.13
                              =======  =======   =======  =======  =======  =======   =======  =======  =======   =======   =======

    Diluted ................. $  0.28  $  0.29   $  0.30  $  0.24  $  0.27  $  0.25   $  0.22  $  0.19  $  0.19   $  0.17   $  0.13
                              =======  =======   =======  =======  =======  =======   =======  =======  =======   =======   =======


                                       94

                               RECENT DEVELOPMENTS

         On October 31, 2001,  Community  Bankshares  completed  its  previously
announced   acquisition  of  Resource   Mortgage,   Inc.,  a  mortgage   company
headquartered in Columbia, South Carolina. Consideration for the acquisition was
95,454 shares of Community  Bankshares  common stock,  of which 63,636 are being
held  in  escrow  pending  the  attainment  of  certain  earnings  goals  by the
subsidiary. The subsidiary, which was renamed Community Resource Mortgage, Inc.,
has 29  employees  and has  offices  in  Columbia,  Sumter and  Anderson,  South
Carolina. The subsidiary originates and sells residential mortgage loans.

         In connection with the acquisition, Community Bankshares has guaranteed
a $9 million  line of credit with an  unaffiliated  lender for the  subsidiary's
general working capital purposes.

Condensed Financial Information

         The following tables set forth condensed balance sheets at December 31,
2001 and  statements of income for the year ended December 31, 2001, for each of
Community  Bankshares and Ridgeway  Bancshares.  This information is not audited
and does not contain the detail and notes which would  accompany  full financial
statements prepared in accordance with generally accepted accounting principles.

                           Community Bankshares, Inc.
                        Unaudited Condensed Balance Sheet
                                December 31, 2001
                             (Dollars in Thousands)

ASSETS
     Cash and Federal funds .....................................       $ 28,025
     Investments ................................................         43,707
     Loans, net of allowance ....................................        237,340
     Premises and equipment .....................................          5,202
     Other assets ...............................................          4,343
                                                                        --------
         Total Assets ...........................................       $318,617
                                                                        ========
LIABILITIES AND EQUITY
     Deposits ...................................................       $255,433
     Borrowings .................................................         33,479
     Other liabilities ..........................................          2,158
     Shareholders' equity .......................................         27,547
                                                                        --------
         Total liabilities and shareholders' equity .............       $318,617
                                                                        ========


                           Community Bankshares, Inc.
                     Unaudited Condensed Statement of Income
                                December 31, 2001
                             (Dollars in Thousands)

Interest income ..........................................             $ 21,234
Interest expense .........................................              (10,294)
                                                                       --------
     Net interest income .................................               10,940
Provision for loan losses ................................                 (650)
Other Income .............................................                3,584
Other expense ............................................               (7,810)
                                                                       --------
     Income before taxes .................................                6,064
                                                                       --------
Income taxes .............................................               (2,135)
                                                                       --------
     Net income ..........................................             $  3,929
                                                                       ========


                                       95

                            Ridgeway Bancshares, Inc.
                        Unaudited Condensed Balance Sheet
                                December 31, 2001
                             (Dollars in Thousands)

ASSETS
     Cash and Federal funds ......................................       $ 8,962
     Investments .................................................        28,124
     Loans, net of allowance .....................................        40,401
     Premises and equipment ......................................           737
     Other assets ................................................         1,096
                                                                         -------
         Total Assets ............................................       $79,320
                                                                         =======
LIABILITIES AND EQUITY
     Deposits ....................................................       $67,353
     Borrowings ..................................................         3,134
     Other liabilities ...........................................           138
     Shareholders' equity ........................................         8,695
                                                                         -------
         Total liabilities and shareholders' equity ..............       $79,320
                                                                         =======

                            Ridgeway Bancshares, Inc.
                     Unaudited Condensed Statement of Income
                                December 31, 2001
                             (Dollars in Thousands)

Interest income ..........................................              $ 5,236
Interest expense .........................................               (2,113)
                                                                        -------
     Net interest income .................................                3,123
Provision for loan losses ................................                  (80)
Other Income .............................................                  738
Other expense ............................................               (2,280)
                                                                        -------
     Income before taxes .................................                1,501
Income taxes .............................................                 (413)
                                                                        -------
     Net income ..........................................              $ 1,088
                                                                        =======

                           SUPERVISION AND REGULATION

         Bank  holding  companies  and banks  are  extensively  regulated  under
federal and state law. To the extent that the  following  information  describes
statutory  and  regulatory  provisions,  it is  qualified  in  its  entirety  by
reference to such  statutes and  regulations.  Any change in  applicable  law or
regulation may have a material  effect on the business of Community  Bankshares,
Ridgeway Bancshares and their respective banking subsidiaries.

         As discussed below under the caption "Recent Legislation", Congress has
recently adopted extensive changes in the laws governing the financial  services
industry.  Among the changes  adopted  are  creation  of the  financial  holding
company,  a new type of bank holding  company  with powers that  greatly  exceed
those of standard holding companies, and creation of the financial subsidiary, a
subsidiary that can be used by national banks to engage in many, though not all,
of the same  activities  in which a financial  holding  company may engage.  The
legislation  also establishes the concept of functional  regulation  whereby the
various financial activities in which financial institutions engage are overseen
by the regulator  with the relevant  regulatory  experience.  Neither  Community
Bankshares,  Ridgeway Bancshares,  nor their respective banking subsidiaries has
yet  made  a  decision  as to how to  adapt  the  new  legislation  to its  use.

                                       96

Accordingly,  the following discussion relates to the supervisory and regulatory
provisions  that apply to Community  Bankshares and Ridgeway  Bancshares as they
currently operate.

Regulation Of Bank Holding Companies

General

         As bank  holding  companies  registered  under the federal Bank Holding
Company Act,  Community  Bankshares  and Ridgeway  Bancshares are subject to the
regulations  of the  Federal  Reserve.  Under  the  Bank  Holding  Company  Act,
Community  Bankshares'  and Ridgeway  Bancshares'  activities and those of their
subsidiaries are limited to banking,  managing or controlling banks,  furnishing
services to or performing services for its subsidiaries or engaging in any other
activity  which the  Federal  Reserve  determines  to be so  closely  related to
banking or managing or controlling banks as to be a proper incident thereto. The
Bank Holding Company Act prohibits  Community  Bankshares or Ridgeway Bancshares
from  acquiring  direct or indirect  control of more than 5% of the  outstanding
voting stock or  substantially  all of the assets of any bank or from merging or
consolidating  with another bank holding  company  without prior approval of the
Federal  Reserve.  The BHCA also  prohibits  Community  Bankshares  or  Ridgeway
Bancshares  from acquiring  control of any bank  operating  outside the State of
South Carolina unless such action is specifically  authorized by the statutes of
the state where the bank to be acquired is located.

         Additionally,   the  Bank  Holding  Company  Act  prohibits   Community
Bankshares or Ridgeway  Bancshares from engaging in or from acquiring  ownership
or  control  of more  than 5% of the  outstanding  voting  stock of any  company
engaged in a  non-banking  business  unless such  business is  determined by the
Federal Reserve to be so closely  related to banking as to be properly  incident
thereto.  The Bank  Holding  Company Act  generally  does not place  territorial
restrictions on the activities of such non-banking-related activities.

         As discussed below under "Recent  Legislation",  a bank holding company
that meets certain  requirements may now qualify as a financial  holding company
and thereby  significantly  increase  the variety of services it may provide and
the investments it may make.

         Community  Bankshares  and  Ridgeway  Bancshares  are also  subject  to
limited  regulation  and  supervision  by the  South  Carolina  State  Board  of
Financial Institutions. A South Carolina bank holding company may be required to
provide  the  State  Board  with  information  with  respect  to  the  financial
condition, operations, management and inter-company relationships of the holding
company  and its  subsidiaries.  The State  Board  also may  require  such other
information as is necessary to keep itself informed about whether the provisions
of South Carolina law and the  regulations  and orders issued  thereunder by the
State Board have been  complied  with,  and the State Board may examine any bank
holding company and its  subsidiaries.  Furthermore,  pursuant to applicable law
and  regulations,  Community  Bankshares  and Ridgeway  Bancshares  must receive
approval of, or give notice to (as applicable) the State Board prior to engaging
in the acquisition of banking or non-banking institutions or assets.

Obligations of Holding Companies to their Subsidiary Banks

         A number of obligations  and  restrictions  are imposed on bank holding
companies  and their  depository  institution  subsidiaries  by Federal  law and
regulatory  policies that are designed to reduce  potential loss exposure to the
depositors of such  depository  institutions  and to the FDIC insurance funds in
the event the depository  institution  is in danger of becoming  insolvent or is
insolvent.  For example, under the policy of the Federal Reserve, a bank holding
company is required to serve as a source of financial strength to its subsidiary
depository  institutions and to commit resources to support such institutions in
circumstances  where it might not do so absent such  policy.  In  addition,  the
"cross-guarantee"  provisions of the Federal Deposit  Insurance Act, as amended,
require insured  depository  institutions  under common control to reimburse the
FDIC for any loss  suffered  or  reasonably  anticipated  by either the  Savings
Association Insurance Fund or the Bank Insurance Fund of the FDIC as a result of
the default of a commonly  controlled insured depository  institution or for any
assistance  provided  by the FDIC to a commonly  controlled  insured  depository
institution  in  danger  of  default.  The  FDIC  may  decline  to  enforce  the
cross-guarantee  provisions  if it  determines  that a  waiver  is in  the  best
interest of the Savings Association Insurance fund or the Bank Insurance fund or
both. The FDIC's claim for damages is superior to claims of  stockholders of the
insured  depository  institution  or its holding  company but is  subordinate to

                                       97


claims of depositors,  secured creditors and holders of subordinated debt (other
than affiliates) of the commonly controlled insured depository institutions.

         The Federal Deposit  Insurance Act also provides that amounts  received
from the liquidation or other resolution of any insured  depository  institution
by any receiver must be distributed (after payment of secured claims) to pay the
deposit  liabilities of the institution prior to payment of any other general or
unsecured  senior  liability,   subordinated  liability,   general  creditor  or
stockholder.  This provision would give depositors a preference over general and
subordinated  creditors and stockholders in the event a receiver is appointed to
distribute  the assets of any banking  subsidiary  of  Community  Bankshares  or
Ridgeway Bancshares.

         Any capital  loans by a bank holding  company to any of its  subsidiary
banks are  subordinate  in right of payment  to  deposits  and to certain  other
indebtedness of such subsidiary  bank. In the event of a bank holding  company's
bankruptcy,  any  commitment  by the bank  holding  company  to a  federal  bank
regulatory  agency to maintain the capital of a subsidiary  bank will be assumed
by the bankruptcy trustee and entitled to a priority of payment.

         The banking  subsidiaries  of  Community  Bankshares  are all  national
banking  associations  subject to the provisions of the National Bank Act. Under
the National  Bank Act, if the capital  stock of a national  bank is impaired by
losses or otherwise, the Office of the Comptroller of the Currency is authorized
to  require   payment  of  the   deficiency  by   assessment   upon  the  bank's
shareholders',  pro rata, and to the extent necessary, if any such assessment is
not paid by any shareholder after three months notice, to sell the stock of such
shareholder to make good the deficiency.

Capital Adequacy Guidelines For Bank Holding Companies And Banks

         The various federal bank regulators,  including the Federal Reserve and
the FDIC, have adopted  risk-based and leverage capital adequacy  guidelines for
assessing bank holding company and bank capital adequacy. These standards define
what qualifies as capital and establish minimum capital standards in relation to
assets and off-balance sheet exposures, as adjusted for credit risks.

         Failure  to  meet  capital   guidelines   could   subject  the  banking
subsidiaries  of Community  Bankshares  and Ridgeway  Bancshares to a variety of
enforcement remedies, including the termination of deposit insurance by the FDIC
and a prohibition on the taking of brokered deposits.

         The risk-based  capital standards of both the Federal Reserve Board and
the FDIC explicitly identify  concentrations of credit risk and the risk arising
from non-traditional  activities,  as well as an institution's ability to manage
these risks,  as  important  factors to be taken into account by the agencies in
assessing an institution's overall capital adequacy. The capital guidelines also
provide that an institution's exposure to a decline in the economic value of its
capital  due to changes in interest  rates be  considered  by the  agencies as a
factor in evaluating a bank's capital  adequacy.  The Federal Reserve Board also
has recently issued  additional  capital  guidelines for bank holding  companies
that engage in certain trading activities.

         The applicable capital adequacy  guidelines and the capital position of
Community  Bankshares and its subsidiary  banks are summarized in Note 20 to the
financial  statements of Community  Bankshares contained elsewhere in this Proxy
Statement/Prospectus  and the  applicable  capital  adequacy  guidelines and the
capital position of Ridgeway  Bankshares and its subsidiary banks are summarized
in  Note  16 to  the  financial  statements  of  Ridgeway  Bancshares  contained
elsewhere  in this Proxy  Statement/Prospectus.  Each of  Community  Bankshares,
Ridgeway  Bancshares  and their  respective  banking  subsidiaries  exceeded all
applicable capital adequacy guidelines at September 30, 2001.

Payment Of Dividends

         Community   Bankshares  and  Ridgeway  Bancshares  are  legal  entities
separate and distinct from their banking  subsidiaries.  Most of the revenues of
Community  Bankshares and Ridgeway Bancshares result from dividends paid to them
by their  respective  banking  subsidiaries.  There are statutory and regulatory
requirements  applicable to the payment of dividends by subsidiary banks as well
as by bank holding companies.



                                       98



         Each national banking  association is required by federal law to obtain
the prior  approval of the Office of the  Comptroller  of the  Currency  for the
payment of  dividends  if the total of all  dividends  declared  by the board of
directors  of such bank in any year will exceed the total of (i) such bank's net
profits (as defined and  interpreted by regulation)  for that year plus (ii) the
retained  net  profits  (as  defined  and  interpreted  by  regulation)  for the
preceding  two years,  less any  required  transfers  to surplus.  In  addition,
national  banks can only pay  dividends to the extent that  retained net profits
(including the portion  transferred to surplus)  exceed bad debts (as defined by
regulation).

         All shares of Ridgeway  Bancshares  common  stock are entitled to share
equally in such  dividends as Ridgeway  Bancshares  may pay on its common stock.
The  payment by Ridgeway  Bancshares  of  dividends,  if any,  rests  within the
discretion  of its  board  of  directors  and  depends  upon its  earnings,  its
compliance with capital requirements, its financial condition and other relevant
factors.  Bank of Ridgeway is authorized to pay cash dividends up to 100% of net
income in any calendar year without  obtaining  the prior  approval of the State
Board of  Financial  Institutions  provided  that Bank of  Ridgeway  received  a
composite  rating of one or two at the last  examination  conducted by the State
Board.  South  Carolina law requires each state  nonmember  bank to maintain the
same reserves  against deposits as are required for state member banks under the
Federal  Reserve Act. This  requirement  is not expected to limit the ability of
Bank of Ridgeway to pay dividends on its common stock.

         The payment of dividends by Community  Bankshares,  Ridgeway Bancshares
or their  respective  banking  subsidiaries  may also be  affected or limited by
other  factors,  such as the  requirements  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  on the  financial
condition of the banks, could include the payment of dividends),  such authority
may require, after notice and hearing, that such bank cease and desist from such
practice.  The Office of the  Comptroller  of the  Currency has  indicated  that
paying  dividends  that deplete a national  bank's capital base to an inadequate
level would be an unsafe and unsound banking practice.  The Federal Reserve, the
Office  of the  Comptroller  of the  Currency  and the FDIC have  issued  policy
statements,  which provide that bank holding  companies and insured banks should
generally only pay dividends out of current operating earnings.

Transactions By Bank Holding Companies With Their Affiliates

         Federal law  regulates  transactions  among  Community  Bankshares  and
Ridgeway  Bancshares  and their  affiliates,  including the amount of the banks'
loans to or  investments  in nonbank  affiliates  and the amount of  advances to
third parties  collateralized  by securities  of an affiliate.  Further,  a bank
holding  company and its  affiliates  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.

FDIC Insurance Assessments

         Because the  deposits of all of the banking  subsidiaries  of Community
Bankshares and Ridgeway  Bancshares are insured by the Bank Insurance  Fund, the
banks are subject to semiannual insurance assessments imposed by the FDIC. Since
January 1,  1997,  the  assessments  imposed on all FDIC  deposits  for  deposit
insurance  have an effective  rate ranging from 0 to 27 basis points per $100 of
insured  deposits,  depending on the  institution's  capital  position and other
supervisory factors.  However, because legislation enacted in 1996 requires that
both Savings Association Insurance  Fund-insured and Bank Insurance Fund-insured
deposits pay a pro rata portion of the interest due on the obligations issued by
the  Financing  Corporation,  the FDIC is  currently  assessing  Bank  Insurance
Fund-insured deposits an additional 1.26 basis points per $100 of deposits,  and
Savings  Association  Insurance  Fund-insured  deposits an additional 6.30 basis
points  per  $100  of  deposits,  to  cover  those  obligations.  The  Financing
Corporation assessment will continue to be adjusted quarterly to reflect changes
in the assessment  bases of the respective  funds based on quarterly Call Report
and Thrift Financial Report submissions.

Regulation Of The Banks

         Orangeburg  National Bank,  Sumter National Bank, and Florence National
Bank are also subject to  examination  by the Office of the  Comptroller  of the



                                       99


Currency bank  examiners and the Bank of Ridgeway is also subject to examination
by the South Carolina State Board of Financial  Institutions.  In addition,  the
banks are  subject to various  other  state and  federal  laws and  regulations,
including state usury laws,  laws relating to  fiduciaries,  consumer credit and
branch  banking.  The banks'  loan  operations  are  subject to certain  federal
consumer credit laws and regulations promulgated thereunder,  including, but not
limited to: the federal  Truth-In-Lending  Act, governing  disclosures of credit
terms  to  consumer  borrowers;  the Home  Mortgage  Disclosure  Act,  requiring
financial  institutions to provide certain information concerning their mortgage
lending;  the Equal Credit Opportunity Act and the Fair Housing Act, prohibiting
discrimination on the basis of certain  prohibited  factors in extending credit;
the Fair Credit Reporting Act, governing the use and provision of information to
credit  reporting  agencies;  the Bank Secrecy Act,  dealing  with,  among other
things,  the  reporting  of  certain  currency  transactions;  and the Fair Debt
Collection Act, governing the manner in which consumer debts may be collected by
collection  agencies.  The  deposit  operations  of the banks are subject to the
Truth in Savings Act, requiring certain  disclosures about rates paid on savings
accounts;  the Expedited Funds  Availability Act, which deals with disclosure of
the availability of funds deposited in accounts and the collection and return of
checks by banks;  the Right to Financial  Privacy Act,  which  imposes a duty to
maintain  certain   confidentiality   of  consumer  financial  records  and  the
Electronic  Funds Transfer Act and  regulations  promulgated  thereunder,  which
govern  automatic   deposits  to  and  withdrawals  from  deposit  accounts  and
customers'  rights and  liabilities  arising  from the use of  automated  teller
machines and other electronic banking services.

         The banks are subject to the requirements of the Community Reinvestment
Act.  The  Community  Reinvestment  Act  imposes on  financial  institutions  an
affirmative  and  ongoing  obligation  to meet the credit  needs of their  local
communities,  including low- and moderate-income neighborhoods,  consistent with
the safe and sound operation of those institutions. Each financial institution's
actual performance in meeting community credit needs is evaluated as part of the
examination process, and also are considered in evaluating mergers, acquisitions
and applications to open a branch or facility.

Other Safety And Soundness Regulations

         Prompt  Corrective  Action.  The federal  banking  agencies  have broad
powers under  current  federal law to take prompt  corrective  action to resolve
problems of insured depository institutions.  The extent of these powers depends
upon whether the  institutions in question are "well  capitalized,"  "adequately
capitalized,"    "undercapitalized,"    "significantly    undercapitalized"   or
"critically undercapitalized."

         A bank that is "undercapitalized"  becomes subject to provisions of the
Federal Deposit Insurance Act restricting  payment of capital  distributions and
management  fees;  requiring  the Office of the  Comptroller  of the Currency to
monitor the condition of the bank; requiring submission by the bank of a capital
restoration  plan;  restricting  the growth of the bank's  assets and  requiring
prior approval of certain  expansion  proposals.  A bank that is  "significantly
undercapitalized" is also subject to restrictions on compensation paid to senior
management  of the bank,  and a bank that is  "critically  undercapitalized"  is
further subject to  restrictions on the activities of the bank and  restrictions
on payments of subordinated debt of the bank. The purpose of these provisions is
to require banks with less than adequate capital to act quickly to restore their
capital and to have the Office of the  Comptroller of the Currency move promptly
to take over banks that are unwilling or unable to take such steps.

         Brokered Deposits.  Under current FDIC regulations,  "well capitalized"
banks may accept brokered deposits without restriction, "adequately capitalized"
banks may accept  brokered  deposits  with a waiver  from the FDIC  (subject  to
certain restrictions on payments of rates), while  "undercapitalized"  banks may
not accept brokered  deposits.  The regulations  provide that the definitions of
"well capitalized", "adequately capitalized" and "undercapitalized" are the same
as the  definitions  adopted by the agencies to implement the prompt  corrective
action provisions described in the previous paragraph.

Interstate Banking

         Under the Riegle-Neal  Interstate Banking and Branching  Efficiency Act
of 1994 ("Riegel-Neal"), Community Bankshares, Ridgeway Bancshares and any other
adequately  capitalized  bank  holding  company  located in South  Carolina  can
acquire a bank located in any other state,  and a bank holding  company  located
outside South Carolina can acquire any South Carolina-based bank, in either case

                                      100


subject to certain deposit percentage and other  restrictions.  Riegle-Neal also
provides  that,  in any  state  that  has not  previously  elected  to  prohibit
out-of-state  banks from  operating  interstate  branches  within its territory,
adequately  capitalized and managed bank holding companies can consolidate their
multistate bank  operations into a single bank subsidiary and branch  interstate
through  acquisitions.  De novo branching by an  out-of-state  bank is permitted
only if it is expressly  permitted by the laws of the host state.  The authority
of a bank to establish and operate  branches  within a state will continue to be
subject to applicable  state  branching  laws.  South  Carolina law was amended,
effective  July 1, 1996,  to permit such  interstate  branching  but not de novo
branching by an out-of-state bank.

         The  Riegel-Neal  Act,  together  with  legislation  adopted  in  South
Carolina,  resulted in a number of South  Carolina banks being acquired by large
out-of-state  bank  holding  companies.  Size  gives the  larger  banks  certain
advantages  in competing for business from larger  customers.  These  advantages
include  higher  lending limits and the ability to offer services in other areas
of South Carolina and the region.

Legislative Proposals

         Other  proposed   legislation  which  could  significantly  affect  the
business of banking has been  introduced  or may be  introduced in Congress from
time to time. Neither Community  Bankshares nor Ridgeway  Bancshares can predict
the future  course of such  legislative  proposals  or their impact on Community
Bankshares or Ridgeway Bancshares should they be adopted.

Recent Legislation

         On November 12, 1999, the President signed the Gramm-Leach-Bliley  Act,
which  makes it easier for  affiliations  between  banks,  securities  firms and
insurance companies to take place. The Act removes Depression-era  barriers that
had separated  banks and securities  firms,  and seeks to protect the privacy of
consumers' financial information.  Most of the provisions of the Act require the
applicable   regulators  to  adopt  regulations  in  order  to  implement  these
provisions, and a significant number of regulations have already been adopted.

         Under provisions of the new legislation, which were effective March 11,
2000, banks,  securities firms and insurance companies are able to structure new
affiliations  through  a  holding  company  structure  or  through  a  financial
subsidiary.  The legislation creates a new type of bank holding company called a
"financial  holding  company" which has powers much more extensive than those of
standard holding companies. These expanded powers include authority to engage in
"financial  activities,"  which are activities that are (1) financial in nature;
(2) incidental to activities that are financial in nature;  or (3) complimentary
to a  financial  activity  and that do not impose a safety and  soundness  risk.
Significantly,   the  permitted  financial   activities  for  financial  holding
companies  include  authority  to  engage  in  merchant  banking  and  insurance
activities,  including insurance portfolio investing. A bank holding company can
qualify as a financial holding company and expand the services it offers only if
all of its subsidiary depository institutions are well-managed, well-capitalized
and  have  received  a  rating  of   "satisfactory"   on  their  last  Community
Reinvestment Act examination.

         The  legislation  also  creates  another  new type of  entity  called a
"financial subsidiary." A financial subsidiary may be used by a national bank or
a group of national banks to engage in many of the same activities permitted for
a financial holding company, though several of these activities,  including real
estate development or investment,  insurance or annuity underwriting,  insurance
portfolio  investing and merchant  banking,  are reserved for financial  holding
companies.  A bank's  investment  in a financial  subsidiary  affects the way in
which the bank calculates its regulatory capital, and the assets and liabilities
of financial  subsidiaries  may not be consolidated  with those of the bank. The
bank must also be certain that its risk  management  procedures  are adequate to
protect it from  financial and  operational  risks created both by itself and by
any financial subsidiary.  Further, the bank must establish policies to maintain
the separate corporate  identities of the bank and its financial  subsidiary and
to prevent each from becoming liable for the obligations of the other.

         The Act also  establishes  the  concept  of  "functional  supervision,"
meaning that  similar  activities  should be  regulated  by the same  regulator.
Accordingly,  the Act spells out the regulatory authority of the bank regulatory
agencies,  the Securities and Exchange Commission and state insurance regulators
so that each type of activity is  supervised by a regulator  with  corresponding

                                       101


expertise.  The Federal  Reserve Board is intended to be an umbrella  supervisor
with the  authority  to  require a bank  holding  company or  financial  holding
company  or any  subsidiary  of  either  to  file  reports  as to its  financial
condition,  risk management  systems,  transactions with depository  institution
subsidiaries  and  affiliates,  and compliance  with any federal law that it has
authority to enforce.

         Although the Act reaffirms that states are the regulators for insurance
activities  of  all  persons,  including   federally-chartered  banks,  the  Act
prohibits  states from preventing  depository  institutions and their affiliates
from conducting insurance activities.

         The Act also  establishes  a minimum  federal  standard  of  privacy to
protect the confidentiality of a consumer's  personal financial  information and
gives the consumer the power to choose how personal financial information may be
used by financial institutions.

         Community  Bankshares  anticipates  that  the Act  and the  regulations
adopted pursuant to the Act will be likely to create new opportunities for it to
offer expanded services to customers in the future,  though Community Bankshares
has not yet determined what the nature of the expanded services might be or when
Community  Bankshares might find it feasible to offer them. Community Bankshares
further  expects that the Act will increase  competition  from larger  financial
institutions that are currently more capable than Community Bankshares of taking
advantage of the  opportunity  to provide a broader range of services.  However,
Community  Bankshares continues to believe that its commitment to providing high
quality,  personalized service to customers will permit it to remain competitive
in its market area.

Fiscal And Monetary Policy

         Banking is a business  which depends to a large extent on interest rate
differentials. In general, the difference between the interest paid by a bank on
its deposits and its other  borrowings,  and the interest  received by a bank on
its loans and  securities  holdings,  constitutes  the major portion of a bank's
earnings.  Thus, the earnings and growth of Community  Bankshares are subject to
the influence of economic conditions  generally,  both domestic and foreign, and
also to the monetary and fiscal  policies of the United States and its agencies,
particularly  the Federal Reserve.  The Federal Reserve  regulates the supply of
money through  various means,  including  open-market  dealings in United States
government  securities,  the  discount  rate at which  banks may borrow from the
Federal Reserve, and the reserve requirements on deposits. The nature and timing
of any changes in such policies and their impact on Community  Bankshares cannot
be predicted.

                DESCRIPTION OF COMMUNITY BANKSHARES COMMON STOCK

         Community  Bankshares  is  authorized  to issue  12,000,000  shares  of
Community  Bankshares  common stock. At September 30, 2001, there were 3,204,220
shares of Community  Bankshares  common stock issued and  outstanding.  No other
class of stock is authorized.

         Community  Bankshares'  common stock has unlimited voting rights and is
entitled to receive the net assets of Community Bankshares upon dissolution. All
shares of common stock, upon issuance and receipt of the consideration for their
issuance,  will be fully paid and  nonassessable.  None of the shares  issued or
proposed  to be  issued  pursuant  to  this  offering  is  convertible,  has any
redemption rights or is entitled to any sinking fund.

         Holders of  Community  Bankshares  common stock are entitled to receive
such dividends as may be declared by the board of directors out of funds legally
available  therefor.  The ability of Community  Bankshares  to pay  dividends is
affected by the ability of its subsidiary  institutions to pay dividends,  which
is limited by applicable  regulatory  requirements  and capital  guidelines.  At
September  30,  2001,  under  such   requirements   and  guidelines,   Community
Bankshares'  subsidiary  institutions  had $4.8  million  of  undivided  profits
legally   available  for  the  payment  of  dividends.   See   "Supervision  and
Regulation-Payment of Dividends."

         For a further  description of Community  Bankshares  common stock,  see
"EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS."


                                       102

                              SHAREHOLDER PROPOSALS

         Community  Bankshares  expects  to hold  its  next  annual  meeting  of
shareholders  after the merger  during May 2002.  Under SEC rules,  proposals of
Community Bankshares  shareholders intended to be presented at that meeting must
have been received by Community  Bankshares at its principal  executive offices,
791 Broughton Street,  Orangeburg,  South Carolina 29115, Attention:  William W.
Traynham,  President,  by  December  3, 2001,  for  consideration  by  Community
Bankshares for possible  inclusion in such proxy  statement.  If any shareholder
proposal is not received by Community  Bankshares by February 16, 2002,  proxies
solicited by management of Community Bankshares will be voted on the proposal in
the discretion of the designated proxy agents.

                           FORWARD LOOKING STATEMENTS

         This Proxy  Statement/Prospectus  and documents  incorporated in it may
include  forward  looking  statements  which reflect  Community  Bankshares'  or
Ridgeway  Bancshares'  current views with respect to future events and financial
performance.  Such forward looking  statements are based on general  assumptions
and are subject to various risks, uncertainties and other factors that may cause
actual  results to differ  materially  from the views,  beliefs and  projections
expressed in such statements.  Some factors are specific to Community Bankshares
and Ridgeway Bancshares, including:

     o    The  cost and  other  effects  of  material  contingencies,  including
          litigation  contingencies and other contingencies  related to acquired
          operations.

     o    Community  Bankshares'  ability  to  expand  into new  markets  and to
          maintain profit margins in the face of pricing pressures.

     o    The  ability  of   Community   Bankshares   to  achieve  the  earnings
          expectations related to the acquired operations of  recently-completed
          and  pending  acquisitions,  which in turn  depends  on a  variety  of
          factors, including

     o    The ability of Community  Bankshares to achieve the  anticipated  cost
          savings  and  revenue   enhancements  with  respect  to  the  acquired
          operations.

     o    The assimilation of the acquired operations with Community Bankshares'
          corporate   culture,   including  the  ability  to  instill  Community
          Bankshares'  credit  practices and efficient  approach to the acquired
          operations.

     o    The continued growth of the acquired entities' markets consistent with
          recent historical experience.

Other factors which may affect Community Bankshares or Ridgeway Bancshares apply
to the financial services industry more generally, including:

     o    Possible  changes in economic and business  conditions that may affect
          the prevailing  interest rates, the prevailing rates of inflation,  or
          the amount of growth,  stagnation,  or recession in the global,  U.S.,
          and   southeastern   U.S.   economies,   the  value  of   investments,
          collectibility of loans, and the profitability of business entities.

     o    Possible   changes  in  monetary  and  fiscal   policies,   laws,  and
          regulations,  and  other  activities  of  governments,  agencies,  and
          similar organizations.

     o    The effects of easing of restrictions on participants in the financial
          services  industry,  such as banks,  securities  brokers and  dealers,
          investment companies,  and finance companies, and attendant changes in
          patterns  and  effects  of  competition  in  the  financial   services
          industry.


                                       103

         The words "believe",  "expect",  "anticipate",  "project",  and similar
expressions  signify  forward looking  statements.  Readers are cautioned not to
place undue reliance on any forward  looking  statements made by or on behalf of
Community  Bankshares.  Any  such  statement  speaks  only  as of the  date  the
statement was made. Community  Bankshares  undertakes no obligation to update or
revise any forward looking statements.

                                     EXPERTS

         The consolidated  financial statements of Community Bankshares December
31, 2000 and 1999,  and for each of the three years in the period ended December
31, 2000, included in this Proxy  Statement/Prospectus,  have been audited by J.
W. Hunt & Company,  L.L.P.,  independent  auditors, as set forth in their report
thereon which is included herein. The financial statements audited by J. W. Hunt
& Company, L.L.P., have been included in reliance on their report given on their
authority as experts in accounting and auditing.

         The consolidated financial statements of Ridgeway Bancshares,  included
with this Proxy Statement/Prospectus,  have been audited by Tourville, Simpson &
Caskey, LLP.,  independent  auditors,  for the periods indicated in their report
thereon which is included herein. The financial statements audited by Tourville,
Simpson & Caskey,  LLP have been  included in reliance on their  report given on
their authority as experts in accounting and auditing.

                                    OPINIONS

         The legality of the shares of Community  Bankshares  common stock to be
issued in the merger  will be passed  upon by  Haynsworth  Sinkler  Boyd,  P.A.,
Columbia South Carolina.  Certain tax  consequences of the transaction have also
been passed upon by Haynsworth Sinkler Boyd, P.A.

                       WHERE YOU CAN FIND MORE INFORMATION

         Community Bankshares files annual, quarterly and special reports, proxy
statements  and  other  information  with  the  SEC.  You may  read and copy any
reports,  statements or other  information that Community  Bankshares files with
the  SEC  at  the  SEC's  public  reference  room  at 450  Fifth  Street,  N.W.,
Washington,  D.C.,  20549.  Please  call the SEC at  1-800-SEC-0330  for further
information on operation of the public reference  rooms.  These filings are also
available  at the  Internet  world  wide  web  site  maintained  by  the  SEC at
"http://www.sec.gov."

         Community  Bankshares  filed a Registration  Statement on Form S-4 (the
"Registration  Statement")  to register  with the SEC the  Community  Bankshares
common  stock to be issued to Ridgeway  Bancshares  shareholders  in the merger.
This Proxy  Statement/Prospectus  is a part of that  Registration  Statement and
constitutes a prospectus of Community Bankshares.  As allowed by SEC rules, this
Proxy  Statement/Prospectus does not contain all the information you can find in
Community   Bankshares'   registration   statement   or  the  exhibits  to  that
registration statement.

         Community   Bankshares  has  supplied  all  information   contained  or
incorporated  by  reference  in  this  Proxy  Statement/Prospectus  relating  to
Community Bankshares,  and Ridgeway Bancshares has supplied all such information
relating to Ridgeway Bancshares.

         You  should  rely  only on the  information  contained  in  this  Proxy
Statement/Prospectus.  We  have  not  authorized  anyone  to  provide  you  with
information   that  is   different   from  what  is   contained  in  this  Proxy
Statement/Prospectus.  This Proxy  Statement/Prospectus  is dated March 4, 2002.
You  should  not  assume   that  the   information   contained   in  this  Proxy
Statement/Prospectus  is accurate  as of any date other than that date.  Neither
the mailing of this Proxy  Statement/Prospectus to shareholders nor the issuance
of Community  Bankshares  common stock in the merger creates any  implication to
the  contrary.  There may be changes in the affairs of Community  Bankshares  or
Ridgeway Bancshares since the date of this Proxy  Statement/Prospectus which are
not reflected in this document.

         We have  not  authorized  anyone  to give any  information  or make any
representation  about the merger or Community  Bankshares or Ridgeway Bancshares
that   differs   from,   or   adds   to,   the   information   in   this   Proxy
Statement/Prospectus  or in Community  Bankshares'  documents  that are publicly
filed with the Securities  and Exchange  Commission.  Therefore,  if anyone does
give you different or additional information, you should not rely on it.


                                       104

         If you are in a jurisdiction  where it is unlawful to offer to exchange
or sell, or to ask for offers to exchange or buy, the securities offered by this
Proxy Statement/Prospectus or to ask for proxies, or if you are a person to whom
it is unlawful to direct such activities, then the offer presented by this Proxy
Statement/Prospectus does not extend to you.
















                                      105


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                       AND PRO FORMA FINANCIAL INFORMATION



CONSOLIDATED FINANCIAL STATEMENTS                                                                                              Page
                                                                                                                               ----
      Ridgeway Bancshares, Inc.:
                                                                                                                          
      Report of Independent Accountants.........................................................................................F-2
      Consolidated Balance Sheets as of December 31, 2000 and 1999 (audited)....................................................F-3
      Consolidated Statements of Operations for the Years ended December 31, 2000, 1999 and 1998 (audited)......................F-4
      Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income for the Years
        ended December 31, 2000, 1999 and 1998 (audited)........................................................................F-5
      Consolidated Statements of Cash Flows for the Years ended December 31, 2000, 1999 and 1998 (audited)......................F-6
      Notes to Consolidated Financial Statements..............................................................................F-7-21

      Condensed Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000 (unaudited)..........................F-22
      Condensed Consolidated Statements of Operations for the Three Months and Nine Months
        ended September 30, 2001 and 2000 (unaudited) ..........................................................................F-23
      Condensed Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income
        for the Nine Months ended September 30, 2001 and 2000 (unaudited) ......................................................F-24
      Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2001 and 2000 (unaudited).........F-25
      Notes to Condensed Consolidated Financial Statements (unaudited).......................................................F-26-27

      Community Bankshares, Inc.:

      Independent Auditors' Report..............................................................................................F-28
      Consolidated Balance Sheets as of December 31, 2000 and 1999 (audited)....................................................F-29
      Consolidated Statements of Income for the Years ended December 31, 2000, 1999 and 1998  (audited)......................F-30-31
      Consolidated Statements of Changes in Shareholders' Equity for the Years
        ended December 31, 2000, 1999 and 1998 (audited) ....................................................................F-32-33
      Consolidated Statements of Cash Flows for the Years ended December 31, 2000, 1999 and 1998 (audited)...................F-34-35
      Notes to Consolidated Financial Statements.............................................................................F-36-65

      Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000 (unaudited)....................................F-66
      Consolidated Statements of Income for the Three Months and Nine Months
        ended September 30, 2001 and 2000 (unaudited) ..........................................................................F-67
      Consolidated Statements of Changes in Shareholders' Equity for the Nine Months
        ended September 30, 2001 and 2000 (unaudited) ..........................................................................F-68
      Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2001 and 2000 (unaudited)...................F-69
      Notes to Unaudited Consolidated Financial Statements......................................................................F-70

      PRO FORMA FINANCIAL INFORMATION
      Community Bankshares, Inc:

      Pro Forma Combined Condensed Financial Statements.........................................................................F-71
      Pro Forma Combined Condensed Balance Sheet as of September 30, 2001.......................................................F-72
      Pro Forma Combined Condensed Statement of Income for the Nine Months ended September 30, 2001.............................F-73
      Pro Forma Combined Condensed Statement of Income for the Year ended December 31, 2000.....................................F-73




                                      F-1





                       TOURVILLE, SIMPSON & CASKEY, L.L.P.
                          CERTIFIED PUBLIC ACCOUNTANTS
                              POST OFFICE BOX 1769
                         COLUMBIA, SOUTH CAROLINA 29202

                            TELEPHONE (803) 252-3000
                               FAX (803) 252-2226
WILLIAM E. TOURVILLE, CPA                                   MEMBER AICPA SEC AND
HARRIET S. SIMPSON, CPA, CISA, CDP                             PRIVATE COMPANIES
R. JASON CASKEY, CPA                                           PRACTICE SECTIONS

JOHN T. DRAWDY, JR., CPA
TIMOTHY R. ALFORD, CPA
DAVID J. WATKINS II, CPA




                        REPORT OF INDEPENDENT ACCOUNTANTS



The Board of Directors
Ridgeway Bancshares, Inc.
Ridgeway, South Carolina


We have  audited  the  accompanying  consolidated  balance  sheets  of  Ridgeway
Bancshares,  Inc.  and its  subsidiary  as of December 31, 2000 and 1999 and the
related   statements  of  operations,   changes  in  shareholders'   equity  and
comprehensive  income,  and cash flows for the years ended  December  31,  2000,
1999, and 1998. These consolidated  financial  statements are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these consolidated financial statements based on our audits.

We conducted our audit 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 consolidated  financial statements.  An audit
also  includes  assessing the  accounting  principles  used and the  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 financial  statements  referred to above present fairly, in
all material respects,  the financial position of Ridgeway Bancshares,  Inc. and
its  subsidiary  as of  December  31,  2000 and 1999,  and the  results of their
operations and their cash flows for the years ended December 31, 2000, 1999, and
1998 in conformity with generally accepted accounting principles.




Tourville, Simpson & Caskey, L.L.P.
Columbia, South Carolina
January 11, 2001


                                             Tourville, Simpson & Caskey, L.L.P.




                                       F-2



                           RIDGEWAY BANCSHARES, INC.

                           Consolidated Balance Sheets
                           December 31, 2000 and 1999



                                                                                                    2000                    1999
                                                                                                    ----                    ----
Assets
Cash and cash equivalents:
                                                                                                                 
Cash and due from banks ............................................................           $  2,938,982            $  2,786,891
Federal funds sold and securities purchased under agreements
 to resell .........................................................................              5,960,000                 300,000
                                                                                               ------------            ------------
Total cash and cash equivalents ....................................................              8,898,982               3,086,891

Time deposits with other banks .....................................................                137,000                 130,000

Investment securities:
Securities available-for-sale ......................................................              7,559,684               9,663,001
Securities held-to-maturity (market value of $16,220,805 in 2000 ...................             16,116,759              16,095,443
 and $15,976,538 in 1999)
Nonmarketable equity securities ....................................................                 63,648                  63,648
                                                                                               ------------            ------------
Total investment securities ........................................................             23,740,091              25,822,092

Loans receivable: ..................................................................             39,804,725              33,723,521
Less allowance for loan losses .....................................................                387,529                 334,209
                                                                                               ------------            ------------
Loans, net .........................................................................             39,417,196              33,389,312
Premises and equipment, net ........................................................                773,165                 834,424
Accrued interest receivable ........................................................                601,553                 571,218
Other assets .......................................................................                573,394                 621,067
                                                                                               ------------            ------------

Total assets .......................................................................           $ 74,141,381            $ 64,455,004
                                                                                               ============            ============

Liabilities
 Deposits:
Non-interest bearing demand deposits ...............................................           $  9,839,029            $  9,552,518
Interest bearing demand deposits ...................................................              9,211,538               8,414,369
Money market accounts ..............................................................             10,161,177               7,171,753
Savings ............................................................................              7,621,758               6,772,620
Certificates of deposit of $100,000 and over .......................................              6,864,350               4,194,809
Certificates of deposit of under $100,000 ..........................................             19,992,563              18,865,577
                                                                                               ------------            ------------
Total deposits .....................................................................             63,690,415              54,971,646
Accrued interest payable ...........................................................                171,663                 163,368
Federal funds purchased ............................................................                      -                 390,000
Securities sold under agreements to repurchase .....................................              2,418,501               1,812,270
Other liabilities ..................................................................                 20,320                  90,183
                                                                                               ------------            ------------
Total liabilities ..................................................................             66,300,899              57,427,467
                                                                                               ------------            ------------

Shareholders' Equity
Common stock, no par value; 100,000 shares authorized; .............................              2,200,000               2,200,000
 40,000 shares issued and outstanding
Accumulated other comprehensive income (loss) ......................................                (18,413)                (82,640)
Retained earnings ..................................................................              5,658,895               4,910,177
                                                                                               ------------            ------------
Total shareholders' equity .........................................................              7,840,482               7,027,537
                                                                                               ------------            ------------

Total liabilities and shareholders' equity .........................................           $ 74,141,381            $ 64,455,004
                                                                                               ============            ============


The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                             Tourville, Simpson & Caskey, L.L.P.




                                       F-3


                           RIDGEWAY BANCSHARES, INC.

                      Consolidated Statements of Operations
              For the Years Ended December 31, 2000, 1999, and 1998



                                                                                      2000               1999                1998
                                                                                      ----               ----                ----
Interest income:
                                                                                                                 
Loans, including fees ..................................................          $3,410,292          $2,941,423          $2,895,415
Investment securities:
Taxable ................................................................             912,003             919,085             776,608
Tax-exempt .............................................................             437,632             444,786             411,670
Nonmarketable equity securities ........................................               3,609               4,631               2,800
Federal funds sold and securities purchased ............................             218,083             210,617             270,948
 under agreements to resell
Time deposits with other banks .........................................               8,241               6,713               7,562
                                                                                  ----------          ----------          ----------
 Total .................................................................           4,989,860           4,527,255           4,365,003
                                                                                  ----------          ----------          ----------

Interest expense:
Deposits ...............................................................           1,882,089           1,658,883           1,683,687
Federal funds purchased and securities sold
 under agreement to repurchase ............ ............................             161,356              85,262              64,245
                                                                                  ----------          ----------          ----------
 Total .................................................................           2,043,445           1,744,145           1,747,932
                                                                                  ----------          ----------          ----------

Net interest income ....................................................           2,946,415           2,783,110           2,617,071

Provision for loan losses ..............................................              75,000              60,000              54,000
                                                                                  ----------          ----------          ----------

Net interest income after provision for loan losses ....................           2,871,415           2,723,110           2,563,071
                                                                                  ----------          ----------          ----------

Other operating income
Service charges on deposit accounts ....................................             480,961             406,495             408,138
Other service charges and fees .........................................             161,589             125,461              91,615
Other income ...........................................................              28,824              31,048              50,308
                                                                                  ----------          ----------          ----------
 Total .................................................................             671,374             563,004             550,061
                                                                                  ----------          ----------          ----------

Other operating expenses
Salaries and benefits ..................................................           1,172,132           1,082,389           1,084,260
Net occupancy and equipment expense ....................................             220,604             196,691             161,828
Other operating expense ................................................             745,510             637,540             571,050
                                                                                  ----------          ----------          ----------
 Total .................................................................           2,138,246           1,916,620           1,817,138
                                                                                  ----------          ----------          ----------

Income before income taxes .............................................           1,404,543           1,369,494           1,295,994

Income tax expense .....................................................             375,825             359,800             251,698
                                                                                  ----------          ----------          ----------

Net income .............................................................          $1,028,718          $1,009,694          $1,044,296
                                                                                  ==========          ==========          ==========

Earnings per share
 Weighted average common shares outstanding ............................              40,000              40,000              40,000
 Net income ............................................................          $    25.72          $    25.24          $    26.10



The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                             Tourville, Simpson & Caskey, L.L.P.




                                       F-4


                           RIDGEWAY BANCSHARES, INC.

           Consolidated Statements of Changes in Shareholders' Equity
 and Comprehensive Income For the Years Ended December 31, 2000, 1999, and 1998



                                                                                  Accumulated
                                                     Common Stock                   Other
                                                     ------------                Comprehensive        Retained
                                               Shares           Amount            Income(Loss)        Earnings              Total
                                               ------           ------            ------------        --------              -----

                                                                                                           
Balance, December 31, 1997 ............        40,000          2,200,000             31,126           3,336,187           5,567,313

Net income ............................                                                               1,044,296           1,044,296

Other comprehensive income ............                                              25,748                                  25,748
                                                                                                                        -----------
  Comprehensive income ................                                                                                   1,070,044
                                                                                                                        -----------
Cash dividends declared
 -$5.70 per share .....................                                                                (228,000)           (228,000)
                                               ------        -----------        -----------           ---------         -----------

Balance, December 31, 1998 ............        40,000          2,200,000             56,874           4,152,483           6,409,357

Net income ............................                                                               1,009,694           1,009,694

Other comprehensive income ............                                            (139,514)                               (139,514)
                                                                                                                        -----------
  Comprehensive income ................                                                                                     870,180
                                                                                                                        -----------
Cash dividends declared ...............                                                                (252,000)           (252,000)
 -$6.30 per share
                                               ------        -----------        -----------           ---------         -----------

Balance, December 31, 1999 ............        40,000          2,200,000            (82,640)          4,910,177           7,027,537

Net income ............................                                                               1,028,718           1,028,718

Other comprehensive income ............                                              64,227                                  64,227
                                                                                                                        -----------
  Comprehensive income ................                                                                                   1,092,945
                                                                                                                        -----------

Cash dividends declared
 -$7.00 per share .....................                                                                (280,000)           (280,000)
                                               ------        -----------        -----------           ---------         -----------

Balance, December 31, 2000 ............        40,000        $ 2,200,000        $   (18,413)          $ 5,658,8         $ 7,840,482
                                               ======        ===========        ===========           =========         ===========


The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                             Tourville, Simpson & Caskey, L.L.P.



                                       F-5


                           RIDGEWAY BANCSHARES, INC.


                      Consolidated Statements of Cash Flows
              For the Years Ended December 31, 2000, 1999, and 1998



                                                                                    2000                1999                1998
                                                                                    ----                ----                ----
Cash flows from operating activities:
                                                                                                               
  Net income ...........................................................        $ 1,028,718         $ 1,009,694         $ 1,044,296
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Depreciation .......................................................             87,785              73,366              64,078
    Provision for possible loan losses .................................             75,000              60,000              54,000
    Premium amortization less accretion ................................              1,135                (512)            (23,867)
    Deferred income tax provision (benefit) ............................            (25,969)            (36,680)            (92,501)
    Amortization of intangible assets ..................................             42,000              50,524              62,457
    (Increase) decrease in accrued interest receivable .................            (30,335)           (115,688)              6,188
    (Increase) decrease in other assets ................................             (6,079)             33,154              42,558
    Increase (decrease) in accrued interest payable ....................              8,295               1,800             (17,195)
    Increase (decrease) in other liabilities ...........................            (69,863)             46,695             (51,606)
                                                                                -----------         -----------         -----------
      Net cash provided by operating activities ........................          1,110,687           1,122,353           1,088,408
                                                                                -----------         -----------         -----------

Cash flows from investing activities:
  Proceeds from maturities of securities available-for-sale ............          2,700,000           3,100,000           4,300,000
  Purchases of securities available-for-sale ...........................           (490,313)         (2,999,817)         (7,499,688)
  Proceeds from maturities of securities held-to-maturity ..............          2,195,137           2,083,015           3,553,998
  Purchases of securities held-to-maturity .............................         (2,222,010)         (6,207,114)         (1,508,741)
  Net increase in loans to customers ...................................         (6,102,884)         (3,237,668)         (1,232,643)
  Purchase of premises and equipment ...................................            (26,526)           (229,777)            (61,771)
  Net increase in time deposits with other banks .......................             (7,000)                  -             (10,000)
                                                                                -----------         -----------         -----------
      Net cash used by investing activities ............................         (3,953,596)         (7,491,361)         (2,458,845)
                                                                                -----------         -----------         -----------

Cash flows from financing activities:
  Net increase in demand and savings deposits ..........................          4,922,242             711,851           3,179,417
  Net increase (decrease) in certificates of deposit ...................          3,796,527            (196,707)          2,574,712
  Net increase (decrease) in federal funds purchased and ...............            216,231             837,669            (129,800)
   securities sold under repurchase agreements
  Cash dividends paid ..................................................           (280,000)           (252,000)           (228,000)
                                                                                -----------         -----------         -----------
      Net cash provided by financing activities ........................          8,655,000           1,100,813           5,396,329
                                                                                -----------         -----------         -----------

Net increase (decrease) in cash and cash equivalents ...................          5,812,091          (5,268,195)          4,025,892

Cash and cash equivalents, beginning of period .........................          3,086,891           8,355,086           4,329,194
                                                                                -----------         -----------         -----------

Cash and cash equivalents, end of period ...............................        $ 8,898,982         $ 3,086,891         $ 8,355,086
                                                                                ===========         ===========         ===========



The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                             Tourville, Simpson & Caskey, L.L.P.



                                       F-6


                            RIDGEWAY BANCSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis  of  Presentation  and  Consolidation  -  The  accompanying   consolidated
financial  statements  include the accounts of Ridgeway  Bancshares,  Inc.  (the
Company),  its  wholly-owned  subsidiary,  Bank of Ridgeway (the Bank),  and the
Bank's wholly-owned subsidiary, Ridgeway Insurance Agency (the Agency). The Bank
provides commercial banking services to domestic markets principally in northern
Richland County and in Fairfield County, South Carolina.  The Agency has been in
a  dormant  status  for the  past  several  years.  The  consolidated  financial
statements  include  the  accounts of the parent  company  and its  wholly-owned
subsidiary  after  elimination  of all  significant  intercompany  balances  and
transactions.

The accounting and reporting policies of the Bank reflect industry practices and
conform to generally  accepted  accounting  principles in all material respects.
All significant intercompany accounts and transactions have been eliminated.

Management's Estimates - The preparation of consolidated 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 disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period. Actual results could differ from those estimates.

Material  estimates that are  particularly  susceptible  to  significant  change
relate to the  determination  of the  allowance  for losses on loans,  including
valuation  allowances  for  impaired  loans  and the  valuation  of real  estate
acquired  in  connection  with  foreclosures  or in  satisfaction  of loans.  In
connection  with the  determination  of the  allowances  for losses on loans and
foreclosed  real  estate,   management   obtains   independent   appraisals  for
significant  properties.  Management must also make estimates in determining the
estimated useful lives and methods for depreciating premises and equipment.

While  management  uses available  information to recognize  losses on loans and
foreclosed  real estate,  future  additions to the  allowances  may be necessary
based on changes in local economic conditions. In addition, regulatory agencies,
as an integral part of their examination process, periodically review the Bank's
allowances  for losses on loans and  foreclosed  real estate.  Such agencies may
require  the  Bank to  recognize  additions  to the  allowances  based  on their
judgments about information  available to them at the time of their examination.
Because of these factors, it is possible that the allowances for losses on loans
and foreclosed real estate may change in the near term.

Significant  Group  Concentrations  of  Credit  Risk  - Most  of  the  Company's
activities are with customers  located within Fairfield and Richland Counties in
South  Carolina.  Note 4  discusses  the types of  securities  that the  Company
invests in. Note 5 discusses  the types of lending that the Company  engages in.
The Company does not have any significant  concentrations to any one industry or
customer.

Investment  Securities Held to Maturity - Investment securities held to maturity
are stated at cost,  adjusted  for  amortization  of premium  and  accretion  of
discount  computed  by the  straight-line  method.  The Bank has the ability and
management has the intent to hold designated  investment securities to maturity.
Reductions in market value  considered by management to be other than  temporary
are  reported  as a  realized  loss and a  reduction  in the  cost  basis of the
security.

Investment    Securities     Available-for-Sale    -    Investment    securities
available-for-sale  are carried at  amortized  cost and  adjusted  to  estimated
market  value by  recognizing  the  aggregate  unrealized  gains or  losses in a
valuation  account.  Aggregate  market  valuation  adjustments  are  recorded in
shareholders'  equity net of deferred  income taxes.  Reductions in market value
considered by  management to be other than  temporary are reported as a realized
loss and a reduction in the cost basis of the security.  The adjusted cost basis
of securities available-for-sale is determined by specific identification and is
used in computing the gain or loss upon sale.

Nonmarketable  Equity Securities - Nonmarketable  equity securities  include the
Bank's investments in the stock of Community  Financial  Services.  The stock is
carried  at cost  because  it has no quoted  market  value  and no ready  market
exists.  Dividends  received  from the  investment  is  included  as a  separate
component in interest income.


                                             Tourville, Simpson & Caskey, L.L.P.



                                       F-7


                            RIDGEWAY BANCSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Loans - Interest  income on loans is  computed  based upon the unpaid  principal
balance. Interest income is recorded in the period earned.

The accrual of interest income is discontinued  when a loan becomes 90 days past
due as to principal or interest. Management may elect to continue the accrual of
interest  when the  estimated net  realizable  value of  collateral  exceeds the
principal balance and accrued interest. Impaired loans are measured based on the
present value of discounted  expected cash flows.  When it is determined  that a
loan is impaired, a direct charge to bad debt expense is made for the difference
between  the net  present  value of  expected  future  cash  flows  based on the
contractual  rate and the Bank's  recorded  investment in the related loan.  The
corresponding entry is to a related valuation account.  Interest is discontinued
on impaired loans when  management  determines  that a borrower may be unable to
meet payments as they become due.

The Company  identifies  impaired loans through its normal  internal loan review
process.  Loans  on  the  Company's  problem  loan  watch  list  are  considered
potentially impaired loans. These loans are evaluated in determining whether all
outstanding  principal and interest are expected to be collected.  Loans are not
considered  impaired if a minimal  delay  occurs and all  amounts due  including
accrued  interest at the  contractual  interest rate for the period of delay are
expected to be collected.  At December 31, 2000,  management has determined that
no  impairment  of loans  existed  that  would  have a  material  effect  on the
Company's financial statements.

Allowance  for Loan Losses - An allowance for possible loan losses is maintained
at a level deemed  appropriate by management to provide adequately for known and
inherent risks in the loan  portfolio.  The allowance is based upon a continuing
review of past loan  loss  experience,  current  economic  conditions  which may
affect the borrowers' ability to pay and the underlying  collateral value of the
loans. Loans, which are deemed to be uncollectible, are charged off and deducted
from the  allowance.  The provision  for possible loan losses and  recoveries on
loans previously charged off are added to the allowance.

Premises  and  Equipment  - Premises  and  equipment  are  stated at cost,  less
accumulated  depreciation.  The provision for depreciation is computed primarily
by the  declining-balance  method.  Rates of depreciation are generally based on
the  following  estimated  useful  lives:  buildings - 30 years;  furniture  and
equipment - 5 to 15 years. The cost of assets sold or otherwise disposed of, and
the related  accumulated  depreciation  are eliminated from the accounts and the
resulting gains or losses are reflected in the income statement. Maintenance and
repairs  are  charged to current  expense  as  incurred,  and the costs of major
renewals and improvements are capitalized.

Other Real Estate Owned - Other real estate owned includes real estate  acquired
through  foreclosure  and  loans  accounted  for as in  substance  foreclosures.
Collateral is considered foreclosed in substance when the borrower has little or
no equity in the fair value of the  collateral,  proceeds  for  repayment of the
debt can be  expected  to come  only from the sale of the  collateral  and it is
doubtful that the borrower can rebuild equity or otherwise repay the loan in the
foreseeable  future.  Other real estate owned is initially recorded at the lower
of cost  (principal  balance of the former loan plus costs of  improvements)  or
estimated fair value.

Any  write-downs  at the dates of  acquisition  are charged to the allowance for
possible loan losses.  Expenses to maintain such assets,  subsequent write-downs
and gains and losses on disposal are included in other expenses.

Intangible Assets - Intangible assets consist of core deposit premiums resulting
from the  acquisition of the Blythewood  branch.  The core deposit  premiums are
being amortized over fifteen years using the straight-line method.

Income and Expense  Recognition  - The accrual  method of accounting is used for
all  significant  categories  of  income  and  expense.  Immaterial  amounts  of
insurance commissions and other miscellaneous fees are reported when received.


                                             Tourville, Simpson & Caskey, L.L.P.


                                       F-8


                            RIDGEWAY BANCSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Retirement  Benefits - The Bank  sponsors a  trusteed  non-contributory  defined
benefit pension plan covering  employees who have completed at least 1,000 hours
of service within one year and have attained age twenty-one.  The funding policy
for this plan is to contribute  annually an amount  between the minimum  funding
amount   required  by  ERISA  and  the  maximum   tax-deductible   contribution.
Contributions  are  intended  to provide  not only for  benefits  attributed  to
service to date but also for those expected to be earned in the future. See Note
13.

A trusteed  retirement  savings plan is sponsored  by the Bank,  which  provides
retirement benefits to substantially all officers and employees who meet certain
age and service  requirements.  The plan includes a "salary  reduction"  feature
pursuant to Section  401(k) of the  Internal  Revenue  Code.  Under the plan and
present policies,  participants are permitted to make contributions up to 15% of
their  annual  compensation.  At its  discretion,  the Bank  can  make  matching
contributions up to 100% of the participants' contributions. Expenses charged to
earnings for the retirement  savings plan were approximately  $18,536,  $16,853,
and $15,967 in 2000, 1999, and 1998, respectively.

Income taxes - Income taxes are the sum of amounts  currently  payable to taxing
authorities  and the net changes in income taxes payable or refundable in future
years.  Income  taxes  deferred  to future  years  are  determined  utilizing  a
liability   approach.   This  method  gives  consideration  to  the  future  tax
consequences  associated with differences  between the financial  accounting and
tax bases of certain assets and liabilities,  principally the allowance for loan
losses.

Earnings Per Share - Earnings per share is  calculated  by dividing  earnings by
the weighted average number of common shares outstanding during the year.

Comprehensive  Income - Accounting  principles generally require that recognized
revenue, expenses, gains, and losses be included in net income. Although certain
changes  in assets  and  liabilities,  such as  unrealized  gains and  losses on
available-for-sale  securities,  are  reported  as a separate  component  of the
equity  section of the balance  sheet,  such items,  along with net income,  are
components of comprehensive income.

The  components  of other  comprehensive  income and  related tax effects are as
follows:



                                                                                                Year Ended December 31,
                                                                                                -----------------------
                                                                                       2000              1999                1998
                                                                                       ----              ----                ----

                                                                                                                 
Unrealized holding gains (losses) on available-for-sale
 securities ...............................................................         $ 101,948          $(221,451)         $  38,399
Reclassification adjustment for (gains) losses realized
 in net income ............................................................                 -                  -                  -
                                                                                    ---------          ---------          ---------

Net unrealized gains (losses) on securities ...............................           101,948           (221,451)            38,399

Tax effect ................................................................           (37,721)            81,937            (12,651)
                                                                                    ---------          ---------          ---------

Net-of-tax amount .........................................................         $  64,227          $(139,514)         $  25,748
                                                                                    =========          =========          =========





                                             Tourville, Simpson & Caskey, L.L.P.


                                       F-9


                             RIDGEWAY BANCSHARES, INC.

                   Notes to Consolidated Financial Statements


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Statement  of Cash Flows - For  purposes of  reporting  cash flows,  the Company
considers  certain highly liquid debt  instruments  purchased with a maturity of
three months or less to be cash  equivalents.  Cash equivalents  include amounts
due from banks, federal funds sold, and securities purchased under agreements to
resell.

During 2000,  1999,  and 1998,  the Company  paid  $2,035,150,  $1,742,345,  and
$1,765,127 respectively,  for interest. Cash paid for income taxes was $442,944,
$371,310, and $352,079 in 2000, 1999, and 1998, respectively.

Changes in the valuation account of securities available-for-sale, including the
deferred tax effects,  are considered non-cash  transactions for purposes of the
statement  of cash  flows  and are  presented  in  detail  in the  notes  to the
financial statements.

Off-Balance-Sheet  Financial  Instruments - In the ordinary  course of business,
the Company enters into  off-balance-sheet  financial instruments  consisting of
commitments to extend credit and letters of credit. These financial  instruments
are  recorded  in the  financial  statements  when they  become  payable  by the
customer.

Recent  Accounting  Pronouncements  - In June 1998,  the FASB  issued  Statement
(SFAS) No. 133,  Accounting for Derivative  Instruments and Hedging  Activities,
effective  for fiscal  years  beginning  after  June 15,  2000.  This  Statement
establishes  accounting and reporting  standards for derivative  instruments and
hedging activities,  including certain derivative  instruments embedded in other
contracts,  and requires that an entity  recognize all  derivatives as assets or
liabilities in the balance sheet and measure them at fair value.  The accounting
for changes in the fair value of a derivative  depends on how the  derivative is
used and how the derivative is designated.  The Company  adopted SFAS on July 1,
2000.  The  adoption  of SFAS No.  133 did not  have a  material  impact  on the
consolidated financial statements.

Reclassifications  - Certain captions and amounts in the consolidated  financial
statements  of 1999  and  1998  were  reclassified  to  conform  with  the  2000
presentation.


NOTE 2 - MERGER WITH RHBT FINANCIAL CORPORATION

On June 28,  2000,  the Company  announced  that it signed a letter of intent to
merge with RHBT Financial  Corporation,  a bank holding company headquartered in
Rock Hill, South Carolina. As of the date of this report no definitive agreement
has been reached.


NOTE 3 - CASH AND DUE FROM BANKS

The Bank is required by regulation  to maintain an average cash reserve  balance
based on a  percentage  of  deposits.  The  average  amount of the cash  reserve
balances at December 31, 2000 were approximately $546,000.



                                             Tourville, Simpson & Caskey, L.L.P.



                                      F-10


                            RIDGEWAY BANCSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 4 - INVESTMENT SECURITIES

The amortized cost and estimated market values of securities  available-for sale
at December 31, 2000 and 1999 were:



                                                                                             Gross Unrealized             Estimated
                                                                         Amortized           ----------------               Market
                                                                           Cost            Gains          Losses            Value
                                                                           ----            -----          ------            -----
December 31, 2000:
                                                                                                              
 U.S. Treasuries ...............................................       $1,498,005       $    1,483       $    2,613       $1,496,875
 U.S. Government agencies and corporations .....................        5,990,905            5,256           36,048        5,960,113
 Obligations of state and political subdivisions ...............          100,000            2,696                -          102,696
                                                                       ----------       ----------       ----------       ----------

     Total securities ..........................................       $7,588,910       $    9,435       $   38,661       $7,559,684
                                                                       ==========       ==========       ==========       ==========

December 31, 1999:
 U.S. Treasuries ...............................................       $2,695,467       $    2,790       $    9,288       $2,688,969
 U.S. Government agencies and corporations .....................        6,998,708            1,084          127,079        6,872,713
 Obligations of state and political subdivisions ...............          100,000            1,319                -          101,319
                                                                       ----------       ----------       ----------       ----------

     Total securities ..........................................       $9,794,175       $    5,193       $  136,367       $9,663,001
                                                                       ==========       ==========       ==========       ==========



The amortized cost and estimated  market value of securities held to maturity at
December 31, 2000 and 1999 were:



                                                                                             Gross Unrealized             Estimated
                                                                         Amortized           ----------------               Market
                                                                           Cost            Gains          Losses            Value
                                                                           ----            -----          ------            -----
December 31, 2000
                                                                                                             
 U.S. Government agencies & corporations ...................       $ 7,098,958       $     7,573       $    26,734       $ 7,079,797
 Obligations of state and political subdivisions ...........         9,017,801           140,116            16,909         9,141,008
                                                                   -----------       -----------       -----------       -----------

     Total securities ......................................       $16,116,759       $   147,689       $    43,643       $16,220,805
                                                                   ===========       ===========       ===========       ===========

December 31, 1999:
 U.S. Government agencies & corporations ...................       $ 6,701,888       $    21,198       $    99,537       $ 6,623,549
 Obligations of state and political subdivisions ...........         9,393,555            71,067           111,633         9,352,989
                                                                   -----------       -----------       -----------       -----------

     Total securities ......................................       $16,095,443       $    92,265       $   211,170       $15,976,538
                                                                   ===========       ===========       ===========       ===========



There were no sales of investment securities during 2000 or 1999.


                                             Tourville, Simpson & Caskey, L.L.P.



                                      F-11


                            RIDGEWAY BANCSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 4 - INVESTMENT SECURITIES - continued

The  amortized  cost and  estimated  market value of  investment  securities  at
December 31, 2000 based on their  contractual  maturities are summarized  below.
Actual maturities may differ from contractual  maturities  because borrowers may
have the right to call or prepay obligations without penalty.

                                                                2000
                                                                ----
                                                                       Estimated
                                                       Amortized        Market
                                                         Cost           Value
                                                         ----           -----
Due within one year ............................     $ 7,283,481     $ 7,268,757
Due after one year but within five years .......      11,990,945      12,021,818
Due after five years but within ten years ......       4,344,567       4,400,111
Due after ten years ............................          86,676          89,803
                                                     -----------     -----------

Total ..........................................     $23,705,669     $23,780,489
                                                     ===========     ===========

At  December  31,  2000  and 1999  investment  securities  with a book  value of
$8,543,148  and  $6,398,452  and a market value of  $8,523,642  and  $6,349,184,
respectively, were pledged as collateral to secure public deposits and for other
purposes.


NOTE 5 - LOANS

Loans consisted of the following:

                                                              December 31,
                                                              ------------
                                                        2000              1999
                                                        ----              ----
Real estate ................................       $23,602,492       $18,237,180
Home equity ................................         2,420,481         2,305,281
Commercial and industrial loans ............         5,045,202         4,715,796
Consumer ...................................         8,019,601         7,914,307
All other loans ............................           716,949           550,957
                                                   -----------       -----------

                                                   $39,804,725       $33,723,521

As of December 31, 2000 and 1999,  management had placed loans totaling $225,340
and  $18,586 in  nonaccrual  status  because  the loans were not  performing  as
originally  contracted.  Loans  ninety days or more past due and still  accruing
interest were $355,233 and $102,886 at December 31, 2000 and 1999  respectively.
No impairment has been  recognized  because  management has determined  that the
discounted  value of expected  proceeds from the sale of  collateral,  typically
real estate, exceeds the carrying amount of these loans.


                                             Tourville, Simpson & Caskey, L.L.P.


                                      F-12


                            RIDGEWAY BANCSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 5 - LOANS - continued

Transactions in the allowance for loan losses are summarized below:

                                           2000            1999           1998
                                           ----            ----           ----

Balance, January 1 ................     $ 334,209      $ 304,837      $ 286,689
Provision charged to expense ......        75,000         60,000         54,000
Charge-offs .......................       (44,871)       (47,445)       (45,882)
Recoveries ........................        23,191         16,817         10,030
                                        ---------      ---------      ---------

Balance, December 31 ..............     $ 387,529      $ 334,209      $ 304,837
                                        =========      =========      =========

The Bank is a party to financial instruments with  off-balance-sheet risk in the
normal course of business to meet the financing  needs of its  customers.  These
financial  instruments  include commitments to extend credit and standby letters
of credit. Those instruments involve, to varying degrees, elements of credit and
interest  rate risk in excess of the  amount  recognized  in the  statements  of
financial  position.  The contractual or notional  amounts of those  instruments
reflect  the  extent  of  involvement  the Bank  has in  particular  classes  of
financial instruments.

The Bank'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 written is represented by the  contractual or notional  amount
of  those  instruments.  The  Bank  uses  the same  credit  policies  in  making
commitments  and  conditional   obligations  as  it  does  for  on-balance-sheet
instruments.

Standby letters of credit written are conditional commitments issued by the Bank
to guarantee  the  performance  of a customer to a third party.  The credit risk
involved in issuing  letters of credit is essentially  the same as that involved
in extending loans to customers.

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no violation of any condition established in the contract.  Commitments
generally  have fixed  expiration  dates or other  termination  clauses  and may
require  payment of a fee. Since some of the  commitments are expected to expire
without  being  drawn  upon,  the total  commitment  amounts do not  necessarily
represent  future  cash   requirements.   The  Bank  evaluates  each  customer's
creditworthiness  on a case-by-case  basis. The amount of collateral obtained if
deemed  necessary by the Bank upon extension of credit is based on  management's
credit evaluation of the counter-party.

Collateral  held for  commitments to extend credit and standby letters of credit
varies  but  may  include  accounts  receivable,   inventory,  property,  plant,
equipment, and income-producing commercial properties.

The  following  table  summarizes  the  Company's   off-balance-sheet  financial
instruments whose contractual amounts represent credit risk at December 31, 2000
and 1999:

                                                        2000             1999
                                                        ----             ----

Commitments to extend credit ...............        $5,417,598        $3,992,000
Standby letters of credit ..................           273,000           358,000

Management is not aware of any significant concentrations of loans to classes of
borrowers or industries that would be affected similarly by economic conditions.
At December 31, 2000,  the Bank was not  committed to lend  additional  funds to
borrowers having loans in nonaccrual status.


                                             Tourville, Simpson & Caskey, L.L.P.




                                      F-13


                            RIDGEWAY BANCSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 6 - PREMISES AND EQUIPMENT

Premises and equipment consisted of the following:

                                                              December 31,
                                                              ------------
                                                         2000             1999
                                                         ----             ----

Land .......................................        $  145,185        $  145,185
Buildings and improvements .................           943,823           943,823
Furniture and equipment ....................           632,497           605,971
                                                    ----------        ----------
                                                     1,721,505         1,694,979
Less, accumulated depreciation .............           948,340           860,555
                                                    ----------        ----------

                                                    $  773,165        $  834,424
                                                    ==========        ==========


NOTE 7 - DEPOSITS

At December 31, 2000, the scheduled maturities of time deposits are as follows:

                     2001                         $24,444,493
                     2002                           2,040,614
                     2003                             114,857
                     2004                             240,112
                     2005 and thereafter               16,837
                                                  -----------

                                                  $26,856,913
                                                  ===========

Overdrawn  deposit  accounts in the amount of $35,638 are classified as loans as
of December 31, 2000.


NOTE 8 - SHORT-TERM BORROWINGS

Short-term  borrowings  payable at December 31, 2000 and 1999 consist of federal
funds  purchased  and  securities  sold under  agreements  to  repurchase  which
generally mature on a one to thirty day basis. Information concerning securities
sold under agreements to repurchase is summarized as follows:

                                                         2000           1999
                                                         ----           ----

Average balance during the year ................     $2,894,137      $1,943,398
Average interest rate during the year ..........           5.48%           4.38%
Maximum month-end balance during the year ......     $4,663,044      $2,373,711

Under the terms of the  repurchase  agreement,  the Bank  sells an  interest  in
securities issued by United States Government  Agencies,  and the Bank agrees to
repurchase the same  securities the following  business day. The securities sold
under these agreements are the identical  securities on the Bank's balance sheet
captioned as securities purchased under agreements to resell. As of December 31,
2000, the par value and market value of the securities  held by the  third-party
for the underlying agreements were $2,435,000 and $2,435,688, respectively.


                                             Tourville, Simpson & Caskey, L.L.P.




                                      F-14


                            RIDGEWAY BANCSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 9 - RELATED PARTY TRANSACTIONS

Certain parties  (principally  certain  directors and  stockholders of the Bank,
their immediate families and business interests) were loan customers of, and had
other transactions in the normal course of business with the Bank. Related party
loans are made on  substantially  the same terms,  including  interest rates and
collateral,  as those  prevailing at the time for comparable  transactions  with
unrelated  persons and do not involve  more than normal risk of  collectibility.
The  aggregate  dollar  amount of loans to  related  parties  was  $844,208  and
$500,413 at December 31, 2000 and 1999, respectively.


NOTE 10 - UNUSED LINES OF CREDIT

As of December  31,  2000,  the  Company had unused  lines of credit to purchase
federal funds from other financial institutions totaling $5,000,000. These lines
of credit  are  available  on a one to seven day  basis  for  general  corporate
purposes.  The lenders  have  reserved  the right not to renew their  respective
lines.


NOTE 11 - COMMITMENTS AND CONTINGENCIES

The Company was not  involved as  defendant  in any  litigation  at December 31,
2000.  Management  and legal  counsel are not aware of any pending or threatened
litigation,  or unasserted claims or assessments that could result in losses, if
any, that would be material to the financial statements.


NOTE 12 - RESTRICTIONS ON SUBSIDIARY DIVIDENDS, LOANS, OR ADVANCES

South Carolina banking regulations  restrict the amount of dividends that can be
paid to shareholders.  All of the Bank's dividends to Ridgeway Bancshares,  Inc.
are payable only from the  undivided  profits of the Bank. At December 31, 2000,
the Bank's undivided profits were $5,645,441. The Bank is authorized to pay cash
dividends up to 100% of net income in any calendar  year without  obtaining  the
prior approval of the  Commissioner of Banking provided that the Bank received a
composite  rating  of  one  or  two at the  last  Federal  or  State  regulatory
examination.  Under Federal Reserve Board  regulations,  the amounts of loans or
advances from the Bank to the parent company are also restricted.


NOTE 13 - EMPLOYEE BENEFITS

The  Bank  has  a  contributory  defined  benefit  pension  plan,  which  covers
substantially  all employees.  Employees  covered under the plan are eligible to
participate after attainment of age 21 and completion of at least 1,000 hours of
service,  and pension  benefits  are based on salary and years of  service.  All
employees are fully vested in the plan after 7 years of service. The actuarially
determined  pension  benefits  are based on the  aggregate  method.  The  Bank's
funding  policy  provides  that  payments to the plan shall be  consistent  with
minimum government  funding  regulations plus additional  amounts,  which may be
approved by the Bank from time to time.


                                             Tourville, Simpson & Caskey, L.L.P.



                                      F-15


                            RIDGEWAY BANCSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 13 - EMPLOYEE BENEFITS - continued

Plan assets are stated at fair value and consist  primarily of  interest-bearing
certificates  of deposit and U.S.  Governments  bonds.  The table of actuarially
computed benefit obligations and net assets of the plan at December 31, 2000 and
1999 is presented below:

                                                            2000         1999
                                                            ----         ----

Benefit obligation ...................................   $ 687,651    $ 659,915
Fair Value of plan assets ............................     641,693      646,383
                                                         ---------    ---------

Funded status ........................................   $ (45,958)   $ (13,532)
                                                         =========    =========

Prepaid (unfunded) benefit cost recognized in the
 statement of financial position .....................   $    (486)   $     537
                                                         =========    =========

The weighted-average assumptions for 2000 and 1999 are as follows:

                                                            2000           1999
                                                            ----           ----
Discount rate .................................             7.25%          6.75%
Expected return on plan assets ................             7.25%          6.75%
Rate of compensation increase .................             5.00%          5.00%

Benefit cost ..................................       $   59,023        $64,121
Employer contribution .........................           58,000         63,982
Plan participants' contributions ..............                -          2,368
Benefits paid .................................              476          5,484


NOTE 14 - OTHER EXPENSES

Other  expenses  for the years  ended  December  31,  2000,  1999,  and 1998 are
summarized as follows:

                                              2000           1999         1998
                                              ----           ----         ----
Stationery and printing ..............      $ 59,406      $ 58,258      $ 64,740
Postage and freight ..................        55,881        58,638        54,103
Data processing services .............       194,377       148,930       109,062
Intangible costs .....................        42,000        50,524        62,457
Merger expenses ......................        74,600             -             -
Other ................................       319,246       321,190       280,688
                                            --------      --------      --------

    Total ............................      $745,510      $637,540      $571,050
                                            ========      ========      ========


                                             Tourville, Simpson & Caskey, L.L.P.


                                      F-16


                            RIDGEWAY BANCSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 15 - INCOME TAXES

Income tax expense  included in the statement of operations  for the years ended
December 31, 2000, 1999, and 1998 are summarized as follows:



                                                                                 2000                   1999                 1998
                                                                                 ----                   ----                 ----

Currently payable:
                                                                                                                 
  Federal ........................................................            $ 353,346             $ 348,060             $ 300,958
  State ..........................................................               48,448                48,420                43,241
                                                                              ---------             ---------             ---------
                                                                                401,794               396,480               344,199
                                                                              ---------             ---------             ---------
Deferred:
  Federal ........................................................               10,804              (107,687)              (69,091)
  State ..........................................................                  948               (10,930)              (10,759)
                                                                              ---------             ---------             ---------
                                                                                 11,752              (118,617)              (79,850)
                                                                              ---------             ---------             ---------

                                                                              $ 413,546             $ 277,863             $ 264,349
                                                                              =========             =========             =========
Income tax expense is allocated as follows:
  To continuing operations .......................................            $ 375,825             $ 359,800             $ 251,698
  To shareholders' equity ........................................               37,721               (81,937)               12,651
                                                                              ---------             ---------             ---------

                                                                              $ 413,546             $ 277,863             $ 264,349
                                                                              =========             =========             =========


Net deferred income taxes of $164,863 and $176,615 were included in other assets
at December 31, 2000 and 1999,  respectively.  Deferred income taxes result from
temporary  differences in the recognition of certain items of income and expense
for tax and financial reporting purposes.

The gross  amounts of deferred  tax assets and deferred  tax  liabilities  as of
December 31, 2000, 1999 and 1998 are as follows:



                                                                                    2000                  1999                1998
                                                                                    ----                  ----                ----
Deferred tax assets:
                                                                                                                   
  Allowance for loan losses .........................................             $149,199             $128,670             $117,362
  Available-for-sale securities .....................................               10,814               48,535                    -
  Organizational expense ............................................                8,281               10,219                    -
  Other .............................................................                  187                    -                    -
                                                                                  --------             --------             --------
    Total deferred tax assets .......................................              168,481              187,424              117,362
                                                                                  --------             --------             --------

Deferred tax liabilities:
  Accumulated accretion and amortization ............................                3,618               10,603               25,701
   on investment securities
  Available-for-sale securities .....................................                    -                    -               33,402
  Other .............................................................                    -                  206                  261
                                                                                  --------             --------             --------
    Total deferred tax liabilities ..................................                3,618               10,809               59,364
                                                                                  --------             --------             --------

    Net deferred tax asset ..........................................             $164,863             $176,615             $ 57,998
                                                                                  ========             ========             ========



                                             Tourville, Simpson & Caskey, L.L.P.


                                      F-17


                            RIDGEWAY BANCSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 15 - INCOME TAXES - continued

Deferred tax assets  represent the future tax benefit of deductible  differences
and,  if it is more  likely  than not that a tax asset will not be  realized,  a
valuation  allowance is required to reduce the  recorded  deferred tax assets to
net realizable value.  Management has determined that it is more likely than not
that the entire  deferred tax asset at December  31, 2000 will be realized,  and
accordingly, has not established a valuation allowance.

A reconciliation between the income tax expense for the years ended December 31,
2000,  1999, and 1998 and the amount computed by applying the Federal  statutory
rate of 34% to income before income taxes follows:



                                                                                     2000                1999                1998
                                                                                     ----                ----                ----

                                                                                                                 
Tax expense at statutory rate ..........................................          $ 477,545           $ 465,628           $ 440,638
State income tax, net of Federal income tax effect .....................             32,601              27,671              14,270
Tax exempt interest income .............................................           (155,113)           (154,188)           (139,968)
Disallowed interest expense ............................................             21,659              18,075              17,195
Other, net .............................................................               (867)              2,614             (80,437)
                                                                                  ---------           ---------           ---------

     Total .............................................................          $ 375,825           $ 359,800           $ 251,698
                                                                                  =========           =========           =========



NOTE 16 - REGULATORY MATTERS

The Company and the Bank 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 material
effect on the Company's financial statements.  Under capital adequacy guidelines
and the regulatory  framework for prompt corrective  action, the Company and the
Bank must meet specific capital guidelines that involve quantitative measures of
the Company's and the Bank's assets, liabilities,  and certain off-balance-sheet
items as calculated under regulatory accounting practices. The Company's and the
Bank's  capital  amounts and  classifications  are also  subject to  qualitative
judgments  by the  regulators  about  components,  risk  weightings,  and  other
factors.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Company  and the Bank to maintain  minimum  ratios (set forth in the
table  below)  of  Tier 1 and  total  capital  as a  percentage  of  assets  and
off-balance-sheet exposures,  adjusted for risk weights ranging from 0% to 100%.
Tier 1 capital of the  Company  and the Bank  consists  of common  shareholders'
equity, excluding the unrealized gain or loss on securities  available-for-sale,
minus certain  intangible  assets.  Tier 2 capital consists of the allowance for
loan  losses  subject to certain  limitations.  Total  capital  for  purposes of
computing the capital ratios consists of the sum of Tier 1 and Tier 2 capital.

The  Company and the Bank are also  required  to  maintain  capital at a minimum
level  based on average  assets  (as  defined),  which is known as the  leverage
ratio.  Only the strongest  institutions  are allowed to maintain capital at the
minimum requirement. All others are subject to maintaining ratios 1% to 2% above
the minimum.

As  of  the  most   recent   regulatory   examination,   the  Bank  was   deemed
well-capitalized under the regulatory framework for prompt corrective action. To
be categorized well capitalized, the Bank must maintain total risk-based, Tier 1
risk-based,  and Tier 1 leverage  ratios as set forth in the table below.  There
are no  conditions  or events that  management  believes have changed the Bank's
categories.


                                             Tourville, Simpson & Caskey, L.L.P.



                                      F-18


                            RIDGEWAY BANCSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 16 - REGULATORY MATTERS - continued

The following  table  summarizes the capital  amounts and ratios of the Bank and
the regulatory minimum requirements at December 31, 2000 and 1999.



                                                                                                                    To Be Well-
                                                                                                                 Capitalized Under
                                                                                          For Capital            Prompt Corrective
                                                                       Actual           Adequacy Purposes        Action Provisions
                                                                       ------           -----------------        -----------------
                                                               Amount        Ratio     Amount         Ratio     Amount         Ratio
                                                               ------        -----     ------         -----     ------         -----
December 31, 2000
                                                                                                            
Total capital (to risk-weighted assets) ...............       $7,879         21.18%    $2,976         8.00%    $3,720         10.00%
Tier 1 capital (to risk-weighted assets) ..............        7,492         20.14%     1,488         4.00%     2,232          6.00%
Tier 1 capital (to average assets) ....................        7,492         10.40%     2,881         4.00%     3,602          5.00%

December 31, 1999
Total capital (to risk-weighted assets) ...............       $7,065         19.80%    $2,855         8.00%    $3,569         10.00%
Tier 1 capital (to risk-weighted assets) ..............        6,731         18.86%     1,428         4.00%     2,141          6.00%
Tier 1 capital (to average assets) ....................        6,731         10.31%     2,612         4.00%     3,265          5.00%


The Federal Reserve Board has similar  requirements for bank holding  companies.
The Company is currently not subject to these  requirements  because the Federal
Reserve  guidelines  contain an exemption for bank holding  companies  with less
than $150,000,000 in consolidated assets.


                                             Tourville, Simpson & Caskey, L.L.P.



                                      F-19


                            RIDGEWAY BANCSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 17 - RIDGEWAY BANCSHARES, INC. (PARENT COMPANY ONLY)

Presented below are the condensed financial  statements for Ridgeway Bancshares,
Inc. (Parent Company Only).



                                   Balance Sheets
                            December 31, 2000 and 1999

                                                                                                    2000                     1999
                                                                                                    ----                     ----
Assets
                                                                                                                   
  Cash ...........................................................................               $    3,458              $         -
  Investment in banking subsidiary ...............................................                7,827,028                7,044,258
  Other assets ...................................................................                    9,996                    9,821
                                                                                                 ----------               ----------

        Total assets .............................................................               $7,840,482               $7,054,079
                                                                                                 ==========               ==========

Liabilities and Shareholders' equity
  Due to banking subsidiary ......................................................               $        -               $   26,542
                                                                                                 ----------               ----------

  Shareholders' equity ...........................................................                7,840,482                7,027,537
                                                                                                 ----------               ----------

        Total liabilities and shareholders' equity ...............................               $7,840,482               $7,027,537
                                                                                                 ==========               ==========



                              Statements of Operations
                  For the years ended December 31, 2000 and 1999



                                                                                                    2000                    1999
                                                                                                    ----                    ----

Income
                                                                                                                     
  Dividends from banking subsidiary .................................................            $   310,000               $      -

Expenses
  Other expenses ....................................................................                      -                 26,542
                                                                                                 -----------            -----------

Income (loss) before income taxes and equity in undistributed .......................                310,000                (26,542)
  earnings of banking subsidiary

  Income tax benefit ................................................................                    175                  9,821

  Equity in undistributed earnings of banking subsidiary ............................                718,543              1,026,415
                                                                                                 -----------            -----------

Net income ..........................................................................            $ 1,028,718            $ 1,009,694
                                                                                                 ===========            ===========




                                             Tourville, Simpson & Caskey, L.L.P.


                                      F-20


                            RIDGEWAY BANCSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 17 - RIDGEWAY BANCSHARES, INC. (PARENT COMPANY ONLY) - continued



                                                                                                    2000                    1999
                                                                                                    ----                    ----

Cash flows from operating activities:
                                                                                                                  
Net income .........................................................................            $ 1,028,718             $ 1,009,694
Adjustments to reconcile net income to net cash provided by
 operating activities:
Equity in undistributed earnings of banking subsidiary .............................               (718,543)             (1,026,415)
Decrease (increase) in other assets ................................................                  1,804                  (9,821)
(Decrease) increase in other liabilities ...........................................                (26,542)                 26,542
                                                                                                -----------             -----------
Net cash provided by operating activities ..........................................                285,437                       -
                                                                                                -----------             -----------

Cash flows from financing activities:
Cash dividends paid ................................................................               (280,000)                      -
                                                                                                -----------             -----------
Net cash used by financing activities ..............................................               (280,000)                      -
                                                                                                -----------             -----------

Increase in cash ...................................................................                  5,437                       -

Cash, beginning ....................................................................                      -                       -
                                                                                                -----------             -----------

Cash, ending .......................................................................            $     5,437                     $ -
                                                                                                ===========             ===========



                                             Tourville, Simpson & Caskey, L.L.P.


                                      F-21



                            RIDGEWAY BANCSHARES, INC.


                      Condensed Consolidated Balance Sheets
                                   (Unaudited)



                                                                                                   September 30,       December 31,
                                                                                                       2001                2000
                                                                                                       -----               ----
Assets Cash and cash equivalents:
                                                                                                                 
  Cash and due from banks ...............................................................         $  2,475,152         $  2,938,982
  Federal funds sold and securites purchased under agreements to resell .................            4,604,000            5,960,000
                                                                                                  ------------         ------------
    Total ...............................................................................            7,079,152            8,898,982

  Time deposits with other banks ........................................................              148,000              137,000

Investment securities:
  Securities available-for-sale .........................................................            9,260,563            7,559,684
  Securities held-to-maturity ...........................................................           17,898,247           16,116,759
  Nonmarketable equity securities .......................................................               63,648               63,648
                                                                                                  ------------         ------------
    Total ...............................................................................           27,222,458           23,740,091

Loans receivable: .......................................................................           40,710,307           39,804,725
  Less allowance for loan losses ........................................................              419,062              387,529
                                                                                                  ------------         ------------
    Loans, net ..........................................................................           40,291,245           39,417,196

Premises and equipment, net .............................................................              755,583              773,165
Accrued interest receivable .............................................................              609,894              601,553
Other assets ............................................................................              557,378              573,394
                                                                                                  ------------         ------------

    Total assets ........................................................................         $ 76,663,710         $ 74,141,381
                                                                                                  ============         ============

Liabilities
 Deposits:
    Noninterest-bearing demand deposits .................................................         $  9,714,465         $  9,839,029
    Interest-bearing demand deposits ....................................................            9,016,304            9,211,538
    Money market accounts ...............................................................            8,457,583           10,161,177
    Savings .............................................................................            7,534,858            7,621,758
    Certificates of deposit of $100,000 and over ........................................            8,095,969            6,864,350
    Certificates of deposit of under $100,000 ...........................................           22,079,722           19,992,563
                                                                                                  ------------         ------------
      Total deposits ....................................................................           64,898,901           63,690,415

Accrued interest payable ................................................................              148,438              171,663
Securities sold under agreement to repurchase ...........................................            2,832,974            2,418,501
Other liabilities .......................................................................              186,111               20,320
                                                                                                  ------------         ------------
    Total liabilities ...................................................................           68,066,424           66,300,899

Shareholders' Equity
Common stock, no par value in 2001 and 2000; 100,000 shares .............................            2,200,000            2,200,000
  authorized in 2001 and 2000; 40,000 shares issued and outstanding
Accumulated other comprehensive income (loss) ...........................................              106,148              (18,413)
Retained earnings .......................................................................            6,291,138            5,658,895
                                                                                                  ------------         ------------
    Total shareholders' equity ..........................................................            8,597,286            7,840,482
                                                                                                  ------------         ------------

    Total liabilities and shareholders' equity ..........................................         $ 76,663,710         $ 74,141,381
                                                                                                  ============         ============



            See notes to condensed consolidated financial statements.




                                      F-22



                 Condensed Consolidated Statements of Operations
                                   (Unaudited)



                                                                           Nine Months Ended                 Three Months Ended
                                                                             September 30,                       September 30,
                                                                        2001             2000               2001              2000
                                                                        ----             ----               ----              ----

Interest income:
                                                                                                              
  Loans, including fees ....................................        $2,783,847        $2,482,337        $  911,447        $  862,731
  Investment securities:
    Taxable ................................................           669,524           700,992           225,885           225,674
    Tax-exempt .............................................           325,996           326,942           111,688           110,255
  Federal funds sold and securites .........................           201,696           130,016            53,486            58,155
   purchased under agreements to resell
  Time deposits with other banks ...........................             6,296             5,775             2,002             2,083
                                                                    ----------        ----------        ----------        ----------
       Total ...............................................         3,987,359         3,646,062         1,304,508         1,258,898
                                                                    ----------        ----------        ----------        ----------

Interest expense:
  Deposit accounts .........................................         1,611,382         1,354,375           498,145           484,835
  Federal funds purchased and securities sold ..............            77,378           102,163            22,078            43,520
                                                                    ----------        ----------        ----------        ----------
   under agreement to repurchase
       Total ...............................................         1,688,760         1,456,538           520,223           528,355
                                                                    ----------        ----------        ----------        ----------

Net interest income ........................................         2,298,599         2,189,524           784,285           730,543

Provision for loan losses ..................................            54,000            45,000            18,000            15,000
                                                                    ----------        ----------        ----------        ----------

Net interest income after provision for loan ...............         2,244,599         2,144,524           766,285           715,543
                                                                    ----------        ----------        ----------        ----------
 losses

Other operating income:
  Service charges on deposit accounts ......................           435,984           377,537           141,598           132,997
  Other service charges and fees ...........................            85,199           107,008            25,142            35,053
  Other  income ............................................            16,936            13,777             5,431             4,035
                                                                    ----------        ----------        ----------        ----------
       Total ...............................................           538,119           498,322           172,171           172,085
                                                                    ----------        ----------        ----------        ----------

Other operating expenses:
  Salaries and wages .......................................           665,568           646,841           223,911           217,124
  Employee benefits ........................................           231,213           219,486            73,489            72,514
  Net occupancy and equipment expense ......................           161,951           169,950            54,252            56,122
  Other operating expenses .................................           626,743           470,128           216,260           169,863
                                                                    ----------        ----------        ----------        ----------
       Total ...............................................         1,685,475         1,506,405           567,912           515,623
                                                                    ----------        ----------        ----------        ----------

Income before income taxes .................................         1,097,243         1,136,441           370,544           372,005

Income tax expense .........................................           305,000           310,700           102,000            99,900
                                                                    ----------        ----------        ----------        ----------

Net income .................................................        $  792,243        $  825,741        $  268,544        $  272,105
                                                                    ==========        ==========        ==========        ==========

Earnings per share
   Weighted average common shares outstanding ..............            40,000            40,000            40,000            40,000
   Net income ..............................................        $    19.81        $    20.64        $     6.71        $     6.80


           See notes to condensed consolidated financial statements.


                                      F-23



                  Condensed Consolidated Statements of Changes
                in Shareholders' Equity and Comprehensive Income
                  For the Nine Months Ended September 30, 2001



                                                                                                       Accumulated
                                                         Common Stock                                     Other
                                                        -------------                Retained          Comprehensive
                                                   Shares          Amount            Earnings             Income             Total

                                                                                                         
Balance, December 31, 199 .................        40,000        $2,200,000        $ 4,910,177         $ (82,640)       $ 7,027,537

Net income for the period .................                                          1,028,718                            1,028,718

Other comprehensive income ................                                                               64,227             64,227
                                                                                                                        -----------

Comprehensive income ......................                                                                               1,092,945
                                                                                                                        -----------

Cash dividends declared
 $7.00 per share ..........................                                           (280,000)                            (280,000)
                                                   ------        ----------        -----------         ---------        -----------

Balance, December 31, 2000 ................        40,000        $2,200,000        $ 5,658,895         $ (18,413)       $ 7,840,482

Net income for the period .................                                            792,243                              792,243

Other comprehensive income ................                                                              124,561            124,561
                                                                                                                        -----------

Comprehensive income ......................                                                                                 916,804
                                                                                                                        -----------

Cash dividends declared
  $4.00 per share .........................                                           (160,000)                            (160,000)
                                                   ------        ----------        -----------         ---------        -----------

Balance, September 30, 2001 ...............        40,000        $2,200,000        $ 6,291,138         $ 106,148        $ 8,597,286
                                                   ======        ==========        ===========         =========        ===========






                                      F-24



                 Condensed Consolidated Statements of Cash Flows
                                   (Unaudited)



                                                                                                     Nine Months Ended September 30,
                                                                                                     -------------------------------
                                                                                                        2001                2000
                                                                                                        ----                ----
Cash flows from operating activities:
                                                                                                                  
  Net income .............................................................................         $   792,243          $   825,741
  Adjustments to reconcile net income to net cash (used) provided by
   operating activities:
   Depreciation ..........................................................................              65,475               67,185
   Provision for possible loan losses ....................................................              54,000               45,000
   Premium amortization less accretion ...................................................              (6,728)               1,725
   Amortization of intangible assets .....................................................              31,500               31,500
   (Increase) in accrued interest receivable .............................................              (8,341)                (952)
   (Increase) in other assets ............................................................             (17,332)             (25,159)
   (Decrease) in accrued interest payable ................................................             (23,225)             (12,841)
   Increase in other liabilities .........................................................             165,791               80,790
                                                                                                   -----------          -----------
      Net cash provided by operating activities ..........................................           1,053,383            1,012,989
                                                                                                   -----------          -----------

Cash flows from investing activities:
  Proceeds from maturities of securities available-for-sale ..............................           6,000,000            1,200,000
  Purchases of securities available-for-sale .............................................          (7,500,000)                   -
  Proceeds from sales of securities held-to-maturity .....................................             350,000                    -
  Proceeds from maturities of securities held-to-maturity ................................           6,815,416            2,146,759
  Purchases of securities held-to-maturity ...............................................          (9,014,646)          (1,220,447)
  Net increase in loans to customers .....................................................            (928,049)          (4,616,136)
  Net increase in time deposits with other banks .........................................             (11,000)              (7,000)
  Purchases of premises and equipment ....................................................             (47,893)             (16,337)
                                                                                                   -----------          -----------
    Net cash used by investing activities ................................................          (4,336,172)          (2,513,161)
                                                                                                   -----------          -----------

Cash flows from financing activities:
  Net increase (decrease) in demand and savings deposits .................................          (2,110,292)           1,314,631
  Net increase in certificates of deposit ................................................           3,318,778            1,844,589
  Net increase in federal funds purchased and securities sold ............................             414,473            2,460,774
   under repurchase agreements
  Cash dividends paid ....................................................................            (160,000)            (140,000)
                                                                                                   -----------          -----------
   Net cash provided by financing activities .............................................           1,462,959            5,479,994
                                                                                                   -----------          -----------

Net increase (decrease) in cash and cash equivalents .....................................          (1,819,830)           3,979,822

Cash and cash equivalents, beginning of period ...........................................           8,898,982            3,086,891
                                                                                                   -----------          -----------

Cash and cash equivalents, end of period .................................................         $ 7,079,152          $ 7,066,713
                                                                                                   ===========          ===========

 Cash paid during the period for:
  Income taxes ...........................................................................         $   343,987          $   360,994
  Interest ...............................................................................         $ 1,711,985          $ 1,469,379






                                      F-25



                            RIDGEWAY BANCSHARES, INC.

NOTE 1 - BASIS OF PRESENTATION

The  accompanying  consolidated  financial  statements  have  been  prepared  in
accordance  with  the  requirements  for  interim   financial   statements  and,
accordingly, they are condensed and omit disclosures,  which would substantially
duplicate those contained in the most recent annual report to shareholders.  The
financial  statements as of September 30, 2001 and for the interim periods ended
September  30, 2001 and 2000 are  unaudited  and, in the opinion of  management,
include all adjustments  (consisting of normal  recurring  accruals)  considered
necessary for a fair presentation.  The financial information as of December 31,
2000 has been derived from the audited financial statements as of that date. For
further information, refer to the financial statements and the notes included in
Ridgeway Bancshares, Inc.'s 2000 Annual Report.


NOTE 2 - MERGER WITH COMMUNITY BANKSHARES, INC.

         On November 22, 2001, the Company announced that it had signed a letter
of intent to merge with  Community  Bankshares,  Inc.,  a bank  holding  company
headquartered in Orangeburg,  South Carolina. Under the agreement, the Company's
shareholders  will  receive 25 shares of Community  Bankshares  common stock for
each share of the Company's common stock and $100 in cash. Following the merger,
the Bank of Ridgeway  will continue to operate as a  wholly-owned  subsidiary of
Community  Bankshares,  Inc.  The merger is expected to be  completed by July 1,
2002.


NOTE 3 - COMPREHENSIVE INCOME

Comprehensive  income includes net income and other comprehensive  income, which
is defined as nonowner related  transactions in equity. The following table sets
forth the amounts of other  comprehensive  income  included in equity along with
the related tax effect for the three and nine month periods ended  September 30,
2001 and 2000.



                                                                                          Pre-tax                        Net-of-tax
                                                                                           Amount        (Expense)         Amount
                                                                                           ------         -------          ------
For the Nine Months Ended September 30, 2001:
Unrealized gains on securities:
                                                                                                                  
 Unrealized holding gains arising during the period .............................         $190,057        ($ 65,496)        $124,561
 Plus: reclassification adjustment for gains realized in net income..............                -                -                -
                                                                                          --------         --------         --------
 Net unrealized gains on securities .............................................          190,057        (  65,496)         124,561
                                                                                          --------         --------         --------

Other comprehensive income ......................................................         $190,057        ($ 65,496)        $124,561
                                                                                          ========         ========         ========



                                      F-26






                                                                                            Pre-tax                       Net-of-tax
                                                                                            Amount        (Expense)         Amount
                                                                                            ------         -------          ------
For the Nine Months Ended September 30, 2000:
Unrealized gains on securities:
                                                                                                                    
 Unrealized holding gains arising during the period ................................         $32,867        ($15,110)        $17,757
 Plus: reclassification adjustment for gains realized in net income.................               -               -               -
                                                                                             -------         -------         -------
 Net unrealized gains on securities ................................................          32,867        ( 15,110)         17,757
                                                                                             -------         -------         -------

Other comprehensive income .........................................................         $32,867        ($15,110)        $17,757
                                                                                             =======         =======         =======





                                                                                            Pre-tax                       Net-of-tax
                                                                                            Amount        (Expense)         Amount
                                                                                            ------         -------          ------
For the Three Months Ended September 30, 2001:
Unrealized gains on securities:
                                                                                                                    
 Unrealized holding gains arising during the period ................................         $62,520        ($21,257)        $41,263
 Plus: reclassification adjustment for gains realized in net income.................               -               -               -
                                                                                             -------         -------         -------
 Net unrealized gains on securities ................................................          62,520        ( 21,257)         41,263
                                                                                             -------         -------         -------

Other comprehensive income .........................................................         $62,520        ($21,257)        $41,263
                                                                                             =======         =======         =======




                                                                                            Pre-tax                       Net-of-tax
                                                                                            Amount        (Expense)         Amount
                                                                                            ------         -------          ------
For the Three Months Ended September 30, 2000:
Unrealized gains on securities:
                                                                                                                    
Unrealized holding gains arising during the period ..............................          $52,056         ($19,202)         $32,854
Plus: reclassification adjustment for gains realized in net income...............                -                -                -
                                                                                           -------          -------          -------
Net unrealized gains on securities ..............................................           52,056         ( 19,202)          32,854
                                                                                           -------          -------          -------

Other comprehensive income ......................................................          $52,056         ($19,202)         $32,854
                                                                                           =======          =======          =======


Accumulated other comprehensive income consists solely of the unrealized gain on
securities available for sale, net of the deferred tax effects.






                                      F-27










                          INDEPENDENT AUDITORS' REPORT


To the Shareholders and
Board of Directors of
Community Bankshares, Inc.


We have  audited  the  accompanying  consolidated  balance  sheets of  Community
Bankshares,  Inc.,  and  subsidiaries  as of December 31, 2000 and 1999, and the
related consolidated  statements of income, changes in shareholders' equity, and
cash flows for each of the years in the  three-year  period  ended  December 31,
2000. These  consolidated  financial  statements are the  responsibility  of the
Corporation's  management.  Our responsibility is to express an opinion on these
consolidated 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  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  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  at December  31,  2000 and 1999,  and the
results  of their  operations  and their cash flows for each of the years in the
three-year period ended December 31, 2000, in conformity with generally accepted
accounting principles.

                                        s/J. W. Hunt & Company, L.L.P.

Columbia, South Carolina
February 2, 2001





                                      F-28


                  COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES

             CONSOLIDATED BALANCE SHEETS, DECEMBER 31, 2000 AND 1999

                                     ASSETS


($ in thousands)                                                                                        2000                 1999
                                                                                                        ----                 ----

                                                                                                                    
Cash and due from banks ................................................................            $  10,209             $  12,275
Federal funds sold .....................................................................                8,130                 8,040
                                                                                                    ---------             ---------
                 Total cash and cash equivalents .......................................               18,339                20,315
Interest-bearing deposits with banks ...................................................                  594                   788
Securities available for sale, at fair value ...........................................               41,195                30,566
Securities held to maturity (fair value approximates $12,217
   and $12,919 as of December 31, 2000 and 1999, respectively) .........................               12,371                13,369
Loans held for sale ....................................................................                  343                   269
Loans receivable, net of allowance for loan
   losses of $2,424 in 2000 and $1,936 in 1999 .........................................              192,653               155,153
Accrued interest receivable ............................................................                2,330                 1,700
Premises and equipment - net ...........................................................                4,411                 4,619
Net deferred tax asset .................................................................                  795                   858
Other assets ...........................................................................                  292                   393
                                                                                                    ---------             ---------

                  Total assets .........................................................              273,323               228,030
                                                                                                    =========             =========

                      LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
   Deposits:
      Demand, non interest-bearing .....................................................            $  31,219             $  26,878
      Interest-bearing transaction accounts ............................................               22,708                18,372
      Savings ..........................................................................               38,385                30,506
      Certificates of deposit of $100 and over .........................................               38,702                36,163
      Other time deposits ..............................................................               87,797                72,445
                                                                                                    ---------             ---------
                  Total deposits .......................................................              218,811               184,364
      Federal funds purchased and securities sold under
         agreements to repurchase ......................................................                9,352                 2,782
      Federal Home Loan Bank advances ..................................................               20,350                19,420
      Accrued interest payable .........................................................                1,224                   770
      Accrued expenses and other liabilities ...........................................                  447                   449
                                                                                                    ---------             ---------
                  Total liabilities ....................................................              250,184               207,785
                                                                                                    ---------             ---------

Shareholders' equity:
   Common stock - no par  value,  authorized  shares
      - 12,000,000; issued and outstanding - 3,199,180 shares
      in 2000 and 3,191,462 shares in 1999 .............................................               15,928                14,207
   Retained earnings ...................................................................                7,342                 6,549
   Accumulated other comprehensive loss ................................................                 (131)                 (511)
                                                                                                    ---------             ---------
                  Total shareholders' equity ...........................................               23,139                20,245
                                                                                                    ---------             ---------

                  Total liabilities and shareholders' equity ...........................              273,323               228,030
                                                                                                    =========             =========


THE  ACCOMPANYING  NOTES  ARE AN  INTEGRAL  PART OF THE  CONSOLIDATED  FINANCIAL
STATEMENTS




                                      F-29


                   COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF INCOME, YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


($ in thousands, except per share data)                                                  2000               1999              1998
                                                                                         ----               ----              ----

Interest and dividend income:
                                                                                                                    
   Loans, including fees ..................................................            $16,750            $12,406            $ 9,697
   Deposits with other financial institutions .............................                 64                101                126
   Investment securities interest and dividends:
      Interest - U. S. Treasury and
         U.S. Government Agencies .........................................              2,891              2,352              1,831
      Interest - tax-exempt securities ....................................                 32                 30                 14
      Dividends ...........................................................                134                106                 84
   Federal funds sold and securities
      purchased under agreements to resell ................................                430                555                568
                                                                                       -------            -------            -------
                  Total interest and dividend income ......................             20,301             15,550             12,320
                                                                                       -------            -------            -------
Interest expense:
   Deposits:
      Interest-bearing transaction accounts ...............................                329                269                253
      Savings .............................................................              1,358                942                774
      Certificates of deposit of $100 and over ............................              2,279              1,523              1,174
      Certificates of deposit of less than $100 ...........................              4,626              3,379              2,844
                                                                                       -------            -------            -------
                  Total interest on deposits ..............................              8,592              6,113              5,045
   Federal funds purchased and securities sold
      under agreements to repurchase ......................................                218                170                119
   Federal Home Loan Bank advances ........................................              1,165                675                390
                                                                                       -------            -------            -------
                  Total interest expense ..................................              9,975              6,958              5,554
                                                                                       -------            -------            -------
Net interest income .......................................................             10,326              8,592              6,766
Provision for loan losses .................................................                688                612                484
                                                                                       -------            -------            -------
                  Net interest income after provision
                     for loan losses ......................................              9,638              7,980              6,282
                                                                                       -------            -------            -------
Noninterest income:
   Service charges on deposit accounts ....................................              1,475              1,031                798
   Deposit box rent .......................................................                 25                 24                 19
   Bank card fees .........................................................                 29                 14                 12
   Credit life insurance commissions ......................................                 77                 48                 74
   Other ..................................................................                262                200                152
                                                                                       -------            -------            -------
                  Total noninterest income ................................              1,868              1,317              1,055
                                                                                       -------            -------            -------
Noninterest expenses:
   Salaries and employee benefits .........................................              3,779              3,493              2,911
   Premises and equipment .................................................                942                886                701
   Marketing ..............................................................                207                180                166
   Regulatory fees ........................................................                140                155                 92
   Supplies ...............................................................                160                155                174
   Director fees ..........................................................                137                121                125
   FDIC insurance .........................................................                 33                 23                 16
   Other ..................................................................              1,154              1,053                889
                                                                                       -------            -------            -------
                  Total noninterest expenses ..............................              6,552              6,066              5,074
                                                                                       -------            -------            -------


                                                                (Continued) - 1.




                                      F-30



                  COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME, YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998



                                                                                          2000              1999             1998
                                                                                          ----              ----             ----

                                                                                                                   
Income before provision for income taxes and
   cumulative effect of a change in accounting principle ....................           $ 4,954           $ 3,231           $ 2,263

Provision for income taxes ..................................................             1,807             1,049               663
                                                                                        -------           -------           -------

Income before cumulative effect of a change in
   accounting principle .....................................................             3,147             2,182             1,600

Cumulative effect of a change in accounting principle,
   net of tax ...............................................................                 -                 -                33
                                                                                        -------           -------           -------

            Net income ......................................................             3,147             2,182             1,567
                                                                                        =======           =======           =======

Average number of common shares outstanding .................................             3,194             3,189             3,041
                                                                                        =======           =======           =======

Average number of common shares outstanding,
   assuming dilution ........................................................             3,215             3,215             3,097
                                                                                        =======           =======           =======

Basic earnings per common share:

   Income before cumulative effect of a change in
      accounting principle ..................................................           $  0.99           $  0.68           $  0.53

   Cumulative effect of a change in accounting principle,
      net of tax ............................................................                 -                 -             (0.01)
                                                                                        -------           -------           -------

   Net income ...............................................................              0.99              0.68              0.52
                                                                                        =======           =======           =======

Diluted earnings per common share:

   Income before cumulative effect of a change in
      accounting principle ..................................................           $  0.98           $  0.68           $  0.52

   Cumulative effect of a change in accounting principle,
      net of tax ............................................................                 -                 -             (0.01)
                                                                                        -------           -------           -------

   Net income ...............................................................              0.98              0.68              0.51
                                                                                        =======           =======           =======





                                                                 (Concluded) -2.

THE  ACCOMPANYING  NOTES  ARE AN  INTEGRAL  PART OF THE  CONSOLIDATED  FINANCIAL
STATEMENTS




                                      F-31


                   COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY,
                  YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998

($ in thousands, except per share data)



                                                                                                         ACCUMULATED
                                                                                                           OTHER
                                                               COMMON STOCK              RETAINED       COMPREHENSIVE
                                                        SHARES            AMOUNT         EARNINGS        INCOME (LOSS)        TOTAL
                                                        ------            ------         --------        -------------        -----

Balance,
                                                                                                          
   January 1, 1998 ............................       2,766,410       $    9,156       $    3,861       $       20       $   13,037

   Common stock issued ........................         433,660            5,579                -                -            5,579

   Stock issuance cost ........................               -              (87)               -                -              (87)
                                                                                                                         ----------

   Comprehensive income:
     Net income ...............................               -                -            1,567                -            1,567

     Change in unrealized gains
        (losses), net of applicable
        deferred income taxes
        on securities
        available for sale ....................               -                -                -               16               16
                                                                                                                         ----------
            Total comprehensive income ........                                                                               1,583
                                                                                                                         ----------

   Dividends paid at $.15
      per share ...............................               -                -             (453)               -             (453)
                                                     ----------       ----------       ----------       ----------       ----------

Balance,
   December 31, 1998 ..........................       3,200,070           14,648            4,975               36           19,659

   Repurchase of common stock .................         (49,455)            (630)               -                -             (630)

   Common stock issued ........................          40,847              189                -                -              189
                                                                                                                         ----------

   Comprehensive income:
     Net income ...............................               -                -            2,182                -            2,182

     Change in unrealized gains
        (losses), net of applicable
        deferred income taxes
        on securities
        available for sale ....................               -                -                -             (547)            (547)
                                                                                                                         ----------
            Total comprehensive income ........               -                -                -                -            1,635
                                                                                                                         ----------

   Dividends paid at $.19
      per share ...............................               -                -             (608)               -             (608)
                                                     ----------       ----------       ----------       ----------       ----------




                                                                (Continued) - 1.




                                      F-32


                  COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY,
                 YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998

                    ($ in thousands, except per share data)



                                                                                                       ACCUMULATED
                                                                                                          OTHER
                                                              COMMON STOCK              RETAINED       COMPREHENSIVE
                                                         SHARES          AMOUNT         EARNINGS       INCOME (LOSS)        TOTAL
                                                         ------          ------         --------       -------------        -----

Balance,
                                                                                                          
   December 31, 1999 ..........................       3,191,462       $   14,207       $    6,549       $     (511)      $   20,245

   Shares issued by DRIP ......................           5,335                3                -                -                3

   Common stock issued ........................           2,520               19                -                -               19

   Costs of stock dividend ....................               -              (10)               -                -              (10)

   Cash-in-lieu of 5% stock dividend ..........            (137)               -                -                -                -

   Market value of 5% stock dividend ..........               -            1,709           (1,709)               -                -
                                                                                                                         ----------

   Comprehensive income:
     Net income ...............................               -                -            3,147                -            3,147

     Change in unrealized gains
        (losses), net of applicable
        deferred income taxes
        on securities
        available for sale ....................               -                -                -              380              380
                                                                                                                         ----------
            Total comprehensive income ........                                                                               3,527
                                                                                                                         ----------

   Dividends paid at $.22
      per share ...............................               -                -             (645)               -             (645)
                                                     ----------       ----------       ----------       ----------       ----------

Balance,
   December 31, 2000 ..........................       3,199,180           15,928            7,342             (131)          23,139
                                                     ==========       ==========       ==========       ==========       ==========













                                                                (Concluded) - 2.


THE  ACCOMPANYING  NOTES  ARE AN  INTEGRAL  PART OF THE  CONSOLIDATED  FINANCIAL
STATEMENTS




                                      F-33



                   COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES


                     CONSOLIDATED STATEMENTS OF CASH FLOWS,
                  YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998

($ in thousands)


                                                                                        2000              1999             1998
                                                                                        ----              ----             ----

Cash flows from operating activities:
                                                                                                                  
   Net income ................................................................         $  3,147          $  2,182          $  1,567
   Adjustments to reconcile net income to net cash
      provided by operating activities:
      Depreciation and amortization ..........................................              478               462               437
      Accretion of discounts and amortization of premiums -
         securities - net ....................................................               15               (14)               (8)
      Provision for loan losses ..............................................              688               612               484
      Deferred income taxes ..................................................             (148)             (405)             (102)
      Proceeds from sales of real estate loans held for sale .................            5,868             9,963            12,089
      Originations of real estate loans held for sale ........................           (5,868)           (9,963)          (12,089)
      Increase in real estate loans held for sale ............................              (74)             (453)             (363)
      Net changes in operating assets and liabilities:
         Accrued interest receivable .........................................             (630)             (458)              (75)
         Other assets ........................................................              101               289              (339)
         Accrued interest payable ............................................              454               167                93
         Other liabilities ...................................................               (2)               14               187
                                                                                       --------          --------          --------
                  Net cash provided by operating activities ..................            4,029             2,396             1,881
                                                                                       --------          --------          --------

Cash flows from investing activities:
   Net (increase) decrease in interest-bearing deposits
      with banks .............................................................              194               789              (339)
   Purchases of securities held to maturity ..................................                -            (2,424)          (19,253)
   Purchases of securities available for sale ................................          (16,797)          (23,050)          (23,181)
   Proceeds from maturities of securities
      held to maturity .......................................................            1,000             4,340            21,284
   Proceeds from maturities of securities
      available for sale .....................................................            6,742            10,485            19,479
   Loan originations and principal collections, net ..........................          (38,188)          (38,261)          (26,012)
   Purchases of premises and equipment .......................................             (270)           (1,189)           (1,530)
                                                                                       --------          --------          --------
                  Net cash used by investing activities ......................          (47,319)          (49,310)          (29,552)
                                                                                       --------          --------          --------











                                                                (Continued) - 1.




                                      F-34



                  COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS,
                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998



                                                                                           2000             1999             1998
                                                                                           ----             ----             ----

Cash flows from financing activities:
                                                                                                                  
   Net increase in demand, transaction
      and savings deposit accounts ...........................................         $ 16,556          $ 10,048          $ 16,544
   Net increase in time deposits .............................................           17,891            26,686            13,919
   Net increase (decrease) in federal funds purchased
      and securities sold under agreements to repurchase .....................            6,570            (1,682)            1,913
   Federal Home Loan Bank advances ...........................................              930             9,930             8,430
   Repurchase of stock .......................................................                -              (630)                -
   Proceeds from issuance of common stock ....................................                3                 -             5,372
   Stock issuance cost .......................................................              (10)                -               (87)
   Proceeds from exercise of stock options ...................................               19               189               207
   Dividends paid ............................................................             (645)             (608)             (453)
                                                                                       --------          --------          --------
                  Net cash provided by financing activities ..................           41,314            43,933            45,845
                                                                                       --------          --------          --------

Net change in cash and cash equivalents ......................................           (1,976)           (2,981)           18,174

Cash and cash equivalents at beginning of year ...............................           20,315            23,296             5,122
                                                                                       --------          --------          --------

Cash and cash equivalents at end of year .....................................           18,339            20,315            23,296
                                                                                       ========          ========          ========

SUPPLEMENTAL DISCLOSURES OF
   CASH FLOW INFORMATION:
      Cash payments for interest .............................................         $  9,590          $  6,751          $  5,461
                                                                                       ========          ========          ========

      Cash payments for income taxes .........................................         $  1,927          $  1,287          $    718
                                                                                       ========          ========          ========

SUPPLEMENTAL SCHEDULE OF NON-CASH
   INVESTING ACTIVITIES:
      Transfers of loans receivable to other
         real estate owned ...................................................         $    145          $     99          $      -
                                                                                       ========          ========          ========

      Transfer from retained earnings to
         common stock outstanding for the market
         value of the 5% stock dividend ......................................         $  1,709          $      -          $      -
                                                                                       ========          ========          ========







                                                                (Concluded) - 2.



THE  ACCOMPANYING  NOTES  ARE AN  INTEGRAL  PART OF THE  CONSOLIDATED  FINANCIAL
STATEMENTS




                                      F-35


                   COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

NOTE 1 - ORGANIZATION:

Community Bankshares, Inc. (the "Corporation"),  was organized under the laws of
the State of South  Carolina  and was  chartered  as a business  corporation  on
November  30,  1992.  Pursuant to the  provisions  of the Federal  Bank  Holding
Company  Act,  an  application  was  filed  with and  approved  by the  Board of
Governors of the Federal  Reserve  System for the  Corporation  to become a bank
holding company by the acquisition of Orangeburg National Bank (ONB).

In June 1996,  Sumter  National Bank (SNB) and in July 1998,  Florence  National
Bank  (FNB)  commenced  operations  in  Sumter  and  Florence,  South  Carolina,
respectively,  following  approval by the  Comptroller of the Currency and other
regulators.  Upon completion of their organization,  the common stock of SNB and
FNB was acquired by the Corporation.

The Banks operate as wholly-owned  subsidiaries of the Corporation with separate
Boards of Directors  and  operating  policies and provide a variety of financial
services to  individuals  and small  businesses  through  their offices in South
Carolina.   The  primary  deposit  products  are  checking,   savings  and  term
certificate  accounts and the primary lending products are consumer,  commercial
and mortgage loans.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     PRINCIPLES OF CONSOLIDATION:

The consolidated  financial  statements  include the accounts of the Corporation
(the Parent Holding  Company) and its  subsidiaries,  the Banks. All significant
intercompany balances and transactions have been eliminated in consolidation.

     USE OF ESTIMATES:

The  preparation  of  consolidated   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 at
the date of the balance sheet and the reported  amounts of revenues and expenses
during the reporting  period.  Actual results could differ from those estimates.
Material  estimates that are particularly  susceptible to significant  change in
the near term relate to the  determination  of the allowance for loan losses and
the valuation of deferred tax assets.

     SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK:

Most of the  Corporation's  activities are with  customers  located within South
Carolina.  Note 4 discusses the types of securities the  Corporation  purchases.
Note 5 discusses the types of lending that the Corporation engages in. The Banks
grant  agribusiness,  commercial,  consumer and  residential  loans to customers
throughout the State of South Carolina. Although the Banks have diversified loan
portfolios,  a  substantial  portion of their  debtors'  ability to honor  their
contracts is dependent  upon the  economies of Florence,  Orangeburg  and Sumter
Counties, South Carolina and the surrounding areas.

     ORGANIZATION, STOCK OFFERING AND PREOPENING COSTS:

Preopening  costs associated with the organization of the Banks were expensed as
incurred while stock issuance costs were charged to common stock as incurred.

Organization  costs were,  until 1998,  deferred and  amortized  over five years
using the straight-line  method.  In 1998, the Corporation  adopted Statement of




                                      F-36


Position ("SOP") 98-5, "Reporting on the Costs of Start-Up Activities". This SOP
requires costs of start-up  activities and organization  costs to be expensed as
incurred.  The initial  application  of this SOP is  reported as the  cumulative
effect of a change in accounting principle.

The effect of adopting this SOP in 1998 was to decrease income before  provision
for  income  taxes  and  net  income  by  approximately   $46,000  and  $33,000,
respectively,  and basic  earnings  per share and diluted  earnings per share by
$0.01 and $0.01, respectively.

     CASH AND CASH EQUIVALENTS:

For purposes of the  consolidated  statements of cash flows, the Corporation has
defined  cash and cash  equivalents  as those  amounts  included  in the balance
sheets  under the caption,  "Cash and due from banks" and "Federal  funds sold",
all of which mature within ninety days.

     INTEREST-BEARING DEPOSITS WITH BANKS:

Interest-bearing  deposits  with banks mature within one year and are carried at
cost.

     SECURITIES:

Securities  that  management has both the ability and positive intent to hold to
maturity are  classified  as held to maturity and carried at cost,  adjusted for
amortization of premium and accretion of discounts  using methods  approximating
the  interest  method.  Securities  that  may be  sold  prior  to  maturity  for
asset/liability  management purposes, or that may be sold in response to changes
in interest rates,  changes in prepayment risk,  increase in regulatory capital,
or other similar  factors,  are classified as available for sale and are carried
at fair value.  Unrealized gains and losses on securities available for sale are
excluded from  earnings and reported in other  comprehensive  income.  Gains and
losses on the sale of  securities  available  for sale are recorded on the trade
date and are determined using the specific  identification  method.  Declines in
the fair value of held to maturity and available for sale securities below their
cost that are deemed to be other than  temporary  are  reflected  in earnings as
realized losses.

Interest and dividends on securities, including the amortization of premiums and
the  accretion  of  discounts,   are  reported  in  interest  and  dividends  on
securities.

No securities are being held for short-term resale;  therefore,  the Corporation
does not currently use a trading account classification.

     LOAN SALES:

The Corporation  originates  loans for sale generally  without recourse to other
financial institutions under commitments or other arrangements in place prior to
loan origination. Sales are completed at or near the loan origination date.

Mortgage  loans  originated  and intended for sale in the  secondary  market are
carried at the lower of cost or estimated fair value in the aggregate. Gains and
losses,  if any,  on the sale of such loans are  determined  using the  specific
identification  method.  All fees and other  income  from these  activities  are
recognized in income when loan sales are completed.

     LOANS RECEIVABLE:

The Corporation grants mortgage, commercial and consumer loans to customers. The
ability of the Corporation's  debtors to honor their contracts is dependent upon
the real estate and general  economic  conditions  in its service  areas.  Loans
receivable  that  management  has  the  intent  and  ability  to  hold  for  the
foreseeable  future or until maturity or pay-off generally are reported at their
outstanding unpaid principal balance adjusted for charge-offs, the allowance for
loan losses,  and any deferred fees or costs on originated loans, or unamortized
premiums or  discounts  on purchased  loans.  Interest  income is accrued on the
unpaid principal balance.




                                      F-37


The accrual of interest on mortgage and commercial  loans is discontinued at the
time the loan is 90 days delinquent unless the credit is well collateralized and
in process of collection.  Residential real estate loans are typically placed on
nonaccrual  at the  time the loan is 120  days  delinquent.  Unsecured  personal
credit lines and certain  consumer  finance loans are  typically  charged off no
later than the time the loan is 180 days delinquent.

Other  consumer  loans  are  charged  off at  the  time  the  loan  is 120  days
delinquent.  In all cases,  loans are placed on  nonaccrual or charged off at an
earlier date if collection of principal or interest is considered doubtful.

All interest  accrued but not  collected for loans that are placed on nonaccrual
or charged off is reversed against interest income.  The interest on these loans
is accounted for on the cash basis or cost recovery method, until qualifying for
return to accrual.  Loans are returned to accrual  status when all the principal
and interest amounts  contractually  due are brought current and future payments
are reasonably assured.

     ALLOWANCE FOR LOAN LOSSES:

The allowance for loan losses is established through a provision for loan losses
charged against  earnings as losses are estimated to have occurred.  Loan losses
are charged against the allowance when management believes the  uncollectibility
of a loan balance is confirmed.  Subsequent recoveries,  if any, are credited to
the allowance.

The allowance for loan losses is evaluated on a regular basis by management  and
is based upon management's periodic review of the collectibility of the loans in
light of  historical  experience,  the nature and volume of the loan  portfolio,
adverse  situations that may affect the borrower's  ability to repay,  estimated
value of any underlying  collateral,  and prevailing economic  conditions.  This
evaluation  is  inherently   subjective  as  it  requires   estimates  that  are
susceptible  to  significant  revision as more  information  becomes  available.
Management  of each Bank  reviews its  allowance  for loan losses in three broad
categories:  commercial,  real estate,  and  installment  loans,  and assigns an
estimated  percentage factor to each in the determination of the estimate of the
allowance for loan losses. The Banks' internal and external loan review programs
identify loans that are subject to specific  weaknesses,  and such loans will be
reviewed for a specific loan loss allowance.

A loan is considered  impaired when, based on current information and events, it
is  probable  that the  Corporation  will be unable  to  collect  the  scheduled
payments of principal or interest when due according to the contractual terms of
the loan agreement.  Factors considered by management in determining  impairment
include  payment  status,  collateral  value,  and the probability of collecting
scheduled  principal  and  interest  payments  when due.  Loans that  experience
insignificant payment delays and payment shortfalls generally are not classified
as  impaired.  Management  determines  the  significance  of payment  delays and
payment shortfalls on a case-by-case basis, taking into consideration all of the
circumstances surrounding the loan and the borrower, including the length of the
delay, the reasons for the delay,  the borrower's prior payment record,  and the
amount  of the  shortfall  in  relation  to the  principal  and  interest  owed.
Impairment is measured on a loan by loan basis for commercial  and  construction
loans by either the present  value of expected  future cash flows  discounted at
the loan's effective  interest rate, the loan's  obtainable market price, or the
fair value of the collateral if the loan is collateral dependent.





                                      F-38



     ALLOWANCE FOR LOAN LOSSES  (CONTINUED):

Large groups of smaller balance homogeneous loans are collectively evaluated for
impairment. Accordingly, the Corporation does not separately identify individual
consumer and residential loans for impairment disclosures.

     STOCK-BASED COMPENSATION:

Statement of Financial  Accounting  Standards ("SFAS") No. 123,  "Accounting for
Stock-Based  Compensation",  encourages all entities to adopt a fair value based
method of accounting for employee stock compensation plans, whereby compensation
cost is  measured  at the  grant  date  based on the  value of the  award and is
recognized  over the  service  period,  which is  usually  the  vesting  period.
However,  it also allows an entity to continue to measure  compensation cost for
those plans using the intrinsic  value based method of accounting  prescribed by
Accounting  Principles  Board  Opinion No 25,  "Accounting  for Stock  Issued to
Employees",  whereby  compensation  cost is the  excess,  if any,  of the quoted
market price of the stock at the grant date (or other measurement date) over the
amount an employee must pay to acquire the stock. Stock options issued under the
Corporation's  stock option plans have no intrinsic value at the grant date, and
under  Opinion  No.  25  no  compensation  cost  is  recognized  for  them.  The
Corporation  has elected to continue with the accounting  methodology in Opinion
No. 25 and, as a result,  has provided pro forma  disclosures  of net income and
earnings per share and other  disclosures,  as if the fair value based method of
accounting had been applied.

     FORECLOSED ASSETS:

Foreclosed  assets,  which are  recorded  in other  assets,  include  properties
acquired through  foreclosure or in full or partial  satisfaction of the related
loan and are held for sale.

Foreclosed  assets  are  initially  recorded  at  fair  value  at  the  date  of
foreclosure,   establishing  a  new  cost  basis.   Subsequent  to  foreclosure,
valuations are  periodically  performed by management and the assets are carried
at the lower of carrying amount or fair value,  less costs to sell.  Revenue and
expenses from operations and changes in the valuation  allowance are included in
other expenses.

     PREMISES AND EQUIPMENT:

Premises  and  equipment  are  stated  at cost,  less  accumulated  depreciation
computed principally on the straight-line method over the estimated useful lives
of the assets.  Useful lives generally used in providing for depreciation are as
follows:

Building                                                              40 years
Building components                                                 5-30 years
Vault doors, safe deposit boxes, night depository, etc.               40 years
Furniture, fixtures and equipment                                   5-25 years

     INCOME TAXES:

Deferred income tax assets and  liabilities  are reflected at currently  enacted
income tax rates  applicable  to the period in which the  deferred tax assets or
liabilities  are  expected to be realized or settled.  As changes in tax laws or
rates are enacted,  deferred tax assets and liabilities are adjusted through the
provision  for income taxes.  The  provision  (benefit) for income taxes of each
subsidiary is recorded as if each subsidiary filed a separate return.





                                      F-39


     ADVERTISING COSTS:

The cost of advertising is expensed as incurred.

     FINANCIAL INSTRUMENTS:

In the ordinary  course of business the Banks enter into  commitments  to extend
credit and grant standby  letters of credit.  Such  off-balance-sheet  financial
instruments are recorded in the consolidated  financial statements when they are
funded.

     SEGMENTS:

Community Bankshares, Inc. through its banking subsidiaries,  ONB, SNB, and FNB,
provides a broad range of financial  services to  individuals  and  companies in
central  South  Carolina.  These  services  include  demand,  time,  and savings
deposits;  lending services;  ATM processing;  and similar  financial  services.
While the  Corporation's  decision  makers  monitor the  revenue  streams of the
various  financial  products and services,  operations are managed and financial
performance is evaluated on a  corporate-wide  basis.  Accordingly,  the banking
operations are not considered by management to comprise more than one reportable
operating segment.

     COMPREHENSIVE INCOME:

The Corporation  adopted SFAS No. 130,  Reporting  Comprehensive  Income,  as of
January  1,  1998.  Accounting  principles  generally  require  that  recognized
revenue,  expenses, gains and losses be included in net income. Although certain
changes  in assets  and  liabilities,  such as  unrealized  gains and  losses on
securities  available  for sale,  are  reported as a separate  component  of the
equity  section of the balance  sheet,  such items,  along with net income,  are
components of comprehensive  income.  The adoption of SFAS No. 130 had no effect
on  the  Corporation's  net  income  or  shareholders'  equity.  Currently,  the
Corporation's  only component of  Comprehensive  Income (Loss) is its unrealized
gains (losses) on securities available for sale.

     RECENT ACCOUNTING PRONOUNCEMENTS:

In  June  1998,  the  FASB  issued  SFAS  No.  133,  Accounting  for  Derivative
Instruments and Hedging Activities,  which establishes  accounting and reporting
standards for derivative  instruments,  including certain derivative instruments
embedded  in  other  contracts.  The  statement  requires  that  all  derivative
instruments  be recorded in the  balance  sheet as either an asset or  liability
measured at fair value,  and that  changes in the fair value of  derivatives  be
recognized  currently in earnings unless specific hedge accounting  criteria are
met. Special  accounting for qualifying  hedges allows a derivative's  gains and
losses to offset related results on the hedged item in the income statement, and
requires   that  a  company   formally   document,   designate  and  assess  the
effectiveness of transactions that receive hedge  accounting.  In June 1999, the
FASB issued SFAS No. 137,  Accounting  for  Derivative  Instruments  and Hedging
Activities - Deferral of the Effective  Date of FASB  Statement  No. 133,  which
delays the original  effective date of SFAS No. 133 until fiscal years beginning
after June 15,  2000.  The  adoption  of SFAS No. 133 is not  expected to have a
material effect on the Corporation's consolidated financial statements.

In September  2000,  the FASB issued SFAS No. 140,  Accounting for Transfers and
Servicing of Financial Assets and  Extinguishments of Liabilities.  SFAS No. 140
replaces and carries over most of the provisions of SFAS No. 125, Accounting for
Transfers and Servicing of Financial Assets and  Extinguishments of Liabilities,
and it revises those  standards for  accounting  for  securitizations  and other
transfers of assets and collateral  and requires  additional  disclosures.  This
Statement  provides  consistent   standards  for  distinguishing   transfers  of
financial assets that are sales from transfers that are secured borrowings. SFAS
No. 140 is effective for transfers  occurring after March 31, 2001,  however, is
effective for recognition and reclassification of collateral and for disclosures
relating to  securitization  transactions and collateral for fiscal years ending
after  December  15,  2000.  The  effect of  implementation  of the  Statement's
provisions at December 31, 2000 was immaterial to the Corporation's consolidated
financial statements.  The Corporation does not anticipate the implementation of
the remaining provisions of the Statement effective subsequent to March 31, 2001
will have a material effect on its earnings or financial condition.





                                      F-40


     OTHER:

Certain  amounts  previously  reported in the  statements  have been restated to
conform to the current year's presentation and disclosure requirements.

NOTE 3 - RESTRICTIONS ON CASH AND DUE FROM BANK ACCOUNTS:

The Banks are required to maintain  average  reserve  balances  with the Federal
Reserve, or in available cash. The average daily reserve balance requirements at
December 31, 2000 was approximately $540,000.

At December 31, 2000, the Corporation had cash balances with correspondent banks
totaling approximately $274,000, all fully insured by the FDIC.

NOTE 4 - SECURITIES:

Securities held to maturity consist of the following (in thousands of dollars):



                                                                                       DECEMBER 31, 2000
                                                                                       -----------------
                                                                                  GROSS                 GROSS
                                                             AMORTIZED          UNREALIZED            UNREALIZED             FAIR
                                                               COST               GAINS                 LOSSES               VALUE
                                                               ----               -----                 ------               -----
                                                                                                                 
U.S. Government and
   federal agencies ...........................              $12,371              $     1              $  (155)              $12,217
                                                             =======              =======              =======               =======


                                                                                       DECEMBER 31, 1999
                                                                                       -----------------
                                                                                  GROSS                 GROSS
                                                             AMORTIZED          UNREALIZED            UNREALIZED             FAIR
                                                               COST               GAINS                 LOSSES               VALUE
                                                               ----               -----                 ------               -----
U.S. Government and
                                                                                                                 
   federal agencies ...........................              $13,369              $     2              $  (452)              $12,919
                                                             =======              =======              =======               =======


Securities  available  for  sale  consist  of the  following  (in  thousands  of
dollars):


                                                                                       DECEMBER 31, 2000
                                                                                       -----------------
                                                                                   GROSS               GROSS
                                                             AMORTIZED          UNREALIZED            UNREALIZED             FAIR
                                                               COST                GAINS               LOSSES                VALUE
                                                               ----                -----               ------                -----
                                                                                                                 
U.S. Government and
   federal agencies ...........................              $38,599              $    21              $  (216)              $38,404
State and local
   governments ................................                  814                    1                   (5)                  810
Federal Home Loan
   Bank stock .................................                1,396                    -                    -                 1,396
Federal Reserve
   Bank stock .................................                  408                    -                    -                   408
Equity securities .............................                  177                    -                    -                   177
                                                             -------              -------              -------               -------
            Total .............................               41,394                   22                 (221)               41,195
                                                             =======              =======              =======               =======





                                      F-41


NOTE 4 - SECURITIES (CONTINUED):



                                                                                       DECEMBER 31, 1999
                                                                                       -----------------
                                                                                   GROSS                GROSS
                                                             AMORTIZED           UNREALIZED            UNREALIZED             FAIR
                                                               COST                GAINS                LOSSES                VALUE
                                                               ----                -----                ------                -----

                                                                                                                 
U.S. Government and
   federal agencies ...........................              $28,931              $     2              $  (782)              $28,151

State and local
   governments ................................                  825                    1                  (12)                  814

Federal Home Loan
   Bank stock .................................                1,016                    -                    -                 1,016

Federal Reserve
   Bank stock .................................                  408                    -                    -                   408

Equity securities .............................                  177                    -                    -                   177
                                                             -------              -------              -------               -------

            Total .............................               31,357                    3                 (794)               30,566
                                                             =======              =======              =======               =======



The  amortized  cost and fair value of debt  securities at December 31, 2000, by
contractual  maturity are detailed below.  Expected  maturities will differ from
contractual  maturities  because  borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.



                                                                             SECURITIES                           SECURITIES
                                                                        HELD-TO-MATURITY                      AVAILABLE-FOR-SALE
                                                                   AMORTIZED            FAIR               AMORTIZED          FAIR
(In thousands of dollars)                                            COST               VALUE                COST             VALUE
                                                                     ----               -----                ----             -----

                                                                                                                 
Due in one year or less ................................            $     -            $     -            $ 2,163            $ 2,153
Due after one year through
   five years ..........................................             12,371             12,217             27,642             27,486
Due after five years through
   ten years ...........................................                  -                  -              9,608              9,575
                                                                    -------            -------            -------            -------
            Subtotal ...................................             12,371             12,217             39,413             39,214
Equity securities ......................................                  -                  -              1,981              1,981
                                                                    -------            -------            -------            -------

            Total ......................................             12,371             12,217             41,394             41,195
                                                                    =======            =======            =======            =======







                                      F-42



The  following  is a summary  of  maturities  and yields of  securities  held to
maturity and securities available for sale as of December 31, 2000 (in thousands
of dollars):



                                                                              After five years
                                                         After one year but    but within ten
                                        Within one year  within five years          years         Over ten years          Total
                                        ---------------  -----------------          -----         --------------          -----

Securities held to maturity:
                                                                                                 
Federal agency obligations ........... $     -   0.00%    $12,371    6.05%    $     -    0.00%    $     -    0.00%  $12,371    6.05%
                                       -------   ----     -------    ----     -------    ----     -------    ----   -------    ----
          Total held to maturity .....       -   0.00%     12,371    6.05%          -    0.00%          -    0.00%   12,371    6.05%
                                       -------   ----     -------    ----     -------    ----     -------    ----   -------    ----

Securities available for sale:
Federal agency obligations ...........   1,941   5.14%     26,888    6.07%      9,575    6.98%          -    0.00%   38,404    6.25%
State and local governments ..........     212   4.14%        598    3.80%          -    0.00%          -    0.00%      810    3.89%
Equities .............................       -   0.00%          -    0.00%          -    0.00%      1,981    7.05%    1,981    7.05%
                                       -------   ----     -------    ----     -------    ----     -------    ----   -------    ----
         Total available for sale ....   2,153   5.04%     27,486    5.99%      9,575    6.98%      1,981    7.05%   41,195    6.24%
                                       -------   ----     -------    ----     -------    ----     -------    ----   -------    ----

Total for portfolio ..................   2,153   5.04%     39,857    6.03%      9,575    6.98%      1,981    7.05%   53,566    6.20%
                                       =======   ====     =======    ====     =======    ====     =======    ====   =======    ====


Yields on tax exempt  obligations  have been computed on a tax equivalent  basis
using the maximum federal tax rate of 34%.

The Banks,  as members of the Federal  Home Loan Bank  ("FHLB") of Atlanta,  are
required to own capital stock in the FHLB of Atlanta based  generally upon their
balances of residential  mortgage  loans and FHLB  advances.  FHLB capital stock
owned by ONB and SNB is pledged as collateral on FHLB advances.  No ready market
exists for this stock, and it has no quoted market value. However, redemption of
this stock has historically been at par value.

All  equity  securities  including  investments  in the FHLB  stock and  Federal
Reserve Bank stock (as  required of the  respective  banks) have no  contractual
maturity and are classified in the maturity category of over ten years.

At December 31, 2000 and 1999,  investment  securities  with a carrying value of
$19,282,000  and  $15,155,000,  respectively,  were  pledged  to  secure  public
deposits,  FHLB advances,  and for other purposes required and permitted by law.
At December 31, 2000 and 1999,  the  carrying  amount of  securities  pledged to
secure  repurchase  agreements was  approximately  $10,051,000  and  $3,134,000,
respectively.

NOTE 5 - LOANS RECEIVABLE:

The  following  is a summary of loans by category at December  31, 2000 and 1999
(in thousands of dollars):

                                                               2000        1999
                                                               ----        ----
Commercial, financial and agricultural .................    $ 51,966    $ 39,752
Real estate - construction .............................      15,389       9,156
Real estate - mortgage .................................      98,154      84,680
Installment loans to individuals .......................      29,270      23,033
Obligations of states and political subdivisions .......         298         468
                                                            --------    --------

          Total loans - gross ..........................     195,077     157,089
                                                            ========    ========




                                      F-43


The loan  portfolio  included  fixed rate and  adjustable  rate  loans  totaling
$121,122,000 and $73,955,000, respectively, at December 31, 2000.

Overdrawn demand deposits  totaling $864,000 and $492,000 have been reclassified
as loan balances at December 31, 2000 and 1999, respectively.

Gross  proceeds  on mortgage  loans  originated  for resale  were  approximately
$5,900,000,  $9,900,000,  and $12,100,000 for the years ended December 31, 2000,
1999 and 1998, respectively. The Bank sold all of these loans at par; therefore,
no gain or loss was recognized on the sales.

Loans outstanding to directors,  executive officers, principal holders of equity
securities,  or to any of their  associates  totaled  $7,299,000 at December 31,
2000,  and  $7,545,000 at December 31, 1999. A total of $5,278,000 in loans were
made or added,  while a total of $5,524,000 were repaid or deducted during 2000.
Related party loans are made on substantially the same terms, including interest
rates  and  collateral,   as  those   prevailing  at  the  time  for  comparable
transactions  with unrelated persons and do not involve more than normal risk of
collectibility.  Changes in the  composition  of the board of  directors  or the
group  comprising  executive  officers result in additions to or deductions from
loans  outstanding  to  directors,  executive  officers or principal  holders of
equity securities.

Changes in the allowance for loan losses and related  ratios for the years ended
December 31, 2000, 1999 and 1998, were as follows (in thousands of dollars):



                                                                                    2000                1999                 1998
                                                                                    ----                ----                 ----
                                                                                                                  
Average amount of loans outstanding .................................            $179,654             $139,215             $103,349
                                                                                 ========             ========             ========
Allowance for loan losses at beginning
   of year ..........................................................            $  1,936             $  1,459             $  1,140
                                                                                 --------             --------             --------
Loan charge-offs:
   Real estate ......................................................                  78                    -                    7
   Installment ......................................................                 116                   95                  111
   Credit cards and related plans ...................................                   9                    5                    6
   Commercial and other .............................................                  33                   80                   56
                                                                                 --------             --------             --------
         Total charge-offs ..........................................                 236                  180                  180
                                                                                 --------             --------             --------
Recoveries:
   Real estate ......................................................                   3                    -                    -
   Installment ......................................................                  25                   17                   12
   Credit cards and related plans ...................................                   2                    3                    3
   Commercial and other .............................................                   6                   25                    -
                                                                                 --------             --------             --------
         Total recoveries ...........................................                  36                   45                   15
                                                                                 --------             --------             --------
Net charge-offs .....................................................                 200                  135                  165
                                                                                 --------             --------             --------
Provision for loan losses ...........................................                 688                  612                  484
                                                                                 --------             --------             --------
Allowance for loan losses at end of year ............................               2,424                1,936                1,459
                                                                                 ========             ========             ========
Ratios
Net charge-offs to average loans
   outstanding ......................................................                0.11%                0.10%                0.16%
Net charge-offs to loans outstanding
   at end of year ...................................................                0.10%                0.09%                0.14%
Allowance for loan losses to average
   loans ............................................................                1.35%                1.39%                1.41%
Allowance for loan losses to total loans
   at end of year ...................................................                1.24%                1.23%                1.24%
Net charge-offs to allowance for loan losses
                                                                                     8.25%                6.97%               11.31%
Net charge-offs to provision for
   loan losses ......................................................               29.07%               22.06%               34.09%





                                      F-44




The following is a summary of information pertaining to impaired loans:

                                                         Year Ended December 31,
                                                         -----------------------
                                                              2000         1999
                                                              ----         ----
                                                                (In thousands)

Impaired loans without a valuation allowance .............   $  -            $ -
Impaired loans with a valuation allowance ................    238             90
                                                             ----           ----

Total impaired loans .....................................    238             90
                                                             ====           ====

Valuation allowance related to impaired loans ............   $ 36           $ 14
                                                             ====           ====

                                                        Years Ended December 31,
                                                        ------------------------
                                                        2000       1999     1998
                                                        ----       ----     ----
                                                             (In thousands)

Average investment in impaired loans ..............     $  331     $  53     $74
                                                        ======     =====     ===

Interest income recognized on impaired loans ......     $    -     $   -     $ -
                                                        ======     =====     ===

Interest  income recognized on a
cash basis on impaired loans ......................     $    -     $   -     $ -
                                                        ======     =====     ===

No additional  funds are  committed to be advanced in  connection  with impaired
loans.

Nonaccrual, past due loans, and other real estate owned at December 31, 2000 and
1999, were as follows (in thousands of dollars):

                                                                 2000     1999
                                                                 ----     ----

Nonaccrual loans ...........................................     $238      $ 90
Accruing loans 90 days or more past due ....................       93         6
                                                                 ----      ----

          Total ............................................      331        96
                                                                 ====      ====

          Total as a percentage of outstanding loans .......     0.17%     0.06%
                                                                 ====      ====

Foreclosed assets ..........................................     $  -      $  -
                                                                 ====      ====

Gross interest income that would have been recorded for the years ended December
31, 2000,  1999 and 1998 if nonaccrual  loans had been  performing in accordance
with  their  original  terms  was  approximately  $32,600,  $2,100  and  $2,100,
respectively.




                                      F-45


NOTE 6 - PREMISES AND EQUIPMENT:

Premises and  equipment at December 31, 2000 and 1999,  consist of the following
(in thousands of dollars):

                                                             2000          1999
                                                             ----          ----

Land ...............................................        $  761        $  761
Building and components ............................         2,821         2,749
Furniture, fixtures and equipment ..................         3,055         2,921
                                                            ------        ------
          Total ....................................         6,637         6,431
Less, accumulated depreciation .....................         2,226         1,812
                                                            ------        ------

          Premises and equipment - net .............         4,411         4,619
                                                            ======        ======

Depreciation expense was approximately $478,000, $462,000, and $371,000, for the
years ended December 31, 2000, 1999 and 1998, respectively.

The FNB office building was constructed on leased land. The land is being leased
under a  noncancellable  operating  lease for an initial term of ten years.  The
lease terms provide for two ten year renewal  options and a third renewal of two
years. FNB is responsible for property taxes and improvements.  The annual basic
rent in lease  years one  through  five is $48,000  and in years six through ten
$53,000.

Rent expense totaled approximately $48,000,  $49,500, and $25,000 in 2000, 1999,
and 1998, respectively.

NOTE 7 - DEPOSITS:

At December 31, 2000,  the scheduled  maturities  of time deposits  greater than
$100,000 are as follows (in thousands of dollars):

         Maturing in
         -----------
         2001 ................................      $35,719
         2002 ................................        2,637
         2003 ................................          144
         2004 ................................          100
         2005 ................................          102
                                                    -------

         Total                                       38,702
                                                     ======

Deposits  of  directors  and  officers  totaled  approximately   $3,825,000  and
$4,484,000 at December 31, 2000 and 1999, respectively.

NOTE 8 - OTHER BORROWED FUNDS:

Federal funds purchased and securities  sold under  agreements with customers to
repurchase  generally mature within one to four days from the transaction  date.
Securities  sold under  agreements to repurchase  are reflected at the amount of
cash received in connection with the transaction.  The Corporation  monitors the
fair  value  of the  underlying  securities  on a daily  basis.  All  securities
underlying these agreements are institution-owned securities.





                                      F-46


Information  concerning  securities  sold  under  agreements  to  repurchase  is
summarized as follows (in thousands of dollars):

                                                            2000          1999
                                                            ----          ----

Outstanding at year-end ............................     $  9,352      $  2,782
Interest rate at year-end ..........................         5.01%         3.50%
Interest expense ...................................     $146,778      $149,274
Maximum month-end balance during the year ..........     $  9,532      $  6,473
Average amount outstanding during the year .........     $  4,501      $  5,210
Weighted average interest rate during the year .....         4.84%         3.26%

At December 31, 2000 and 1999 there were no federal funds purchased.

NOTE 9 - FEDERAL HOME LOAN BANK ADVANCES:

The Banks are members of the Federal Home Loan Bank of Atlanta and as such, have
access to  long-term  borrowing.  The  collateral  for any such  borrowings  are
blanket liens on ONB's and SNB's  one-to-four  family  residential loans and all
the banks' stock in the Federal Home Loan Bank.  Borrowings during 2000 and 1999
are summarized as follows (in thousands of dollars):

                                                             2000         1999
                                                             ----         ----

Outstanding at year-end ..............................     $20,350      $19,420
Interest rate at year-end ............................        6.04%        5.55%
Maximum amount outstanding at any month-end ..........     $20,350      $19,420
Average amount outstanding during the year ...........     $19,385      $12,335
Weighted average interest rate during the year .......        6.01%        5.47%

Required principal reductions are as follows (in thousands of dollars):

            YEAR ENDING:
                2001 .....................  $ 2,500
                2002 .....................        -
                2003 .....................        -
                2004 .....................        -
                2005 .....................    1,650
                 Thereafter ..............   16,200
                                            -------
                        Total ............   20,350
                                            =======

NOTE 10 - COMMON STOCK:

The Company  declared a five percent stock dividend in January 2000. The average
number of common  shares  outstanding  and all earnings per common share amounts
included in the  accompanying  consolidated  financial  statements and notes are
based on the increased number of shares giving  retroactive effect for the stock
dividend.

The  Corporation  repurchased  49,455  shares  of  its  common  stock  from  the
Corporation's  former chief  executive  officer in January 1999.  The repurchase
price per share was at the then market price of $12.74 and totaled approximately
$630,000.




                                      F-47


Under the Corporation's  Dividend  Reinvestment Plan,  shareholders may reinvest
all or part of their cash  dividends in shares of common stock and also purchase
additional shares of common stock.

NOTE 11 - STOCK OPTIONS AND DIVIDEND REINVESTMENT SHARES:

At December  31,  2000,  285,600  common  shares were  reserved for issuance for
employee stock option plans and 630,000 common shares were reserved for issuance
pursuant to the dividend reinvestment and additional stock purchase plan.

During 1999,  the  Corporation  amended its 1997 Stock  Option  Plan.  Under the
amended Plan, up to 285,600 shares of common stock were authorized to be granted
to selected officers and other employees of the Corporation and its subsidiaries
pursuant  to exercise of  incentive  and  nonqualified  stock  options.  Of such
shares,  190,050 were  reserved  for issuance  pursuant to exercise of incentive
stock  options and 95,550 were  reserved  for  issuance  pursuant to exercise of
nonqualified stock options.

The exercise price of any qualified option granted is equal to the fair value of
the common stock on the date the option is granted.  Nonqualified options can be
issued for less than fair value;  however,  the  Corporation  has not elected to
issue these options for less than fair value at the date of the grant.

The Corporation applies APB Opinion 25 and related Interpretations in accounting
for the stock-based  compensation plans.  Accordingly,  no compensation cost has
been recognized for the stock-based  compensation  plans. Had compensation  cost
for the stock-based  compensation  plans been recognized based on the fair value
at the grant dates for the stock options  consistent with the method  prescribed
by SFAS No. 123, the  Corporation's net income and earnings per share would have
been adjusted to the pro forma amounts indicated below:


                                                              Year Ended
                                                           December 31, 1999
                                                           -----------------
                                                      (In thousands, except per
                                                             share data)

     Net income                       As reported                 $2,182
                                       Pro Forma                   1,678

     Basic earnings per share         As reported                  $0.68
                                       Pro Forma                    0.53

     Diluted earnings per share       As reported                  $0.68
                                       Pro Forma                    0.52

The fair value of each option  granted is  estimated  on the date of grant using
the  Black-Scholes  option-pricing  model  with the  following  weighted-average
assumptions:

                                                                Year Ended
                                                            December 31, 1999
                                                            -----------------

              Dividend yield ............................           1.54%
              Expected life .............................         7.9 years
              Expected volatility .......................           27.5%
              Risk-free interest rate ...................           5.30%

A summary of the status of the Corporation's 1994 stock option plan is presented
below:


                                                          2000                        1999                         1998
                                                          ----                        ----                         ----
                                                               Exercise                       Exercise                      Exercise
                                                   Shares        Price          Shares          Price        Shares           Price
                                                   ------        -----          ------          -----        ------           -----
Fixed options:
                                                                                                        
  Outstanding at beginning of year ............         -         $  -          28,875        $   3.71       84,525        $   3.71
  Granted .....................................         -            -               -               -            -               -
  Exercised ...................................         -            -         (28,875)           3.71      (55,650)           3.71
  Forfeited ...................................         -            -               -               -            -               -
                                                   ------                      -------                      -------
  Outstanding at end of year ..................         -            -               -               -       28,875            3.71
                                                   ======                      =======                      =======
Options exercisable at year-end ...............         -            -               -               -       28,875            3.71





                                      F-48


NOTE 11 - STOCK OPTIONS AND DIVIDEND REINVESTMENT SHARES (CONTINUED):

A summary of the status of the Corporation's  1997 pre-amended stock option plan
is presented below:



                                                                    2000                     1999                    1998
                                                                    ----                     ----                    ----
                                                                          Exercise                Exercise                 Exercise
                                                            Shares         Price      Shares        Price     Shares         Price
                                                            ------         -----      ------        -----     ------         -----

Fixed options:
                                                                                                         
  Outstanding at beginning of year ................        63,840        $   7.60     75,390      $   7.60     79,590      $   7.60
  Granted .........................................             -            -             -          -             -          -
  Exercised .......................................        (2,520)           7.60    (10,710)         7.60     (2,310)         7.60
  Forfeited .......................................             -            -          (840)         7.60     (1,890)         7.60
                                                           ------                    -------                  -------
  Outstanding at end of year ......................        61,320            7.60     63,840          7.60     75,390          7.60
                                                           ======                    =======                  =======

Options exercisable at year-end ...................        61,320            7.60     63,840          7.60     75,390          7.60


A summary of the status of the Corporation's  1997 stock option plan, as amended
in 1999, is presented below:



                                                                                  2000                            1999
                                                                                  ----                            ----
                                                                                          Exercise                        Exercise
                                                                        Shares              Price         Shares            Price
                                                                        ------              -----         ------            -----
Fixed options:
   Outstanding at beginning of year
                                                                                                               
                                                                       161,700          $   12.83               -          $      -
        Granted ...........................................                  -                  -         161,700             12.83
        Exercised .........................................                  -                  -               -                 -
        Forfeited .........................................             (3,780)             12.83               -                 -
                                                                       -------          ---------         -------          --------

   Outstanding at end of year .............................            157,920              12.83         161,700             12.83
                                                                       =======          =========         =======          ========

   Options exercisable at year end ........................            157,920          $   12.83               -          $      -
                                                                       =======          =========         =======          ========

   Weighted average fair value of
     options granted during the
     year .................................................                             $       -                          $    4.62
                                                                                        =========                          =========


Information  pertaining  to  options  outstanding  at  December  31,  2000 is as
follows:



                                            Options Outstanding                          Options Exercisable
                                            -------------------                          -------------------
                                                 Weighted
                                                  Average            Weighted                            Weighted
                                                 Remaining           Average                              Average
     Exercise                Number             Contractual          Exercise           Number           Exercise
      Prices               Outstanding             Life               Price           Exercisable          Price
      ------               -----------             ----               -----           -----------          -----
                                                                                        
      $12.83                 157,920             7.4 years           $12.83              157,920          $12.83
        7.60                  61,320             6.3 years             7.60               61,320            7.60
                             -------                                                    --------
Outstanding at
   end of year               219,240              7.1 years            11.37             219,240            11.37
                             =======                                                     =======





                                      F-49


NOTE 12 - INCOME TAXES:

The Corporation files consolidated federal income tax returns on a calendar-year
basis.

The 2000, 1999 and 1998 provision for income taxes consists of the following (in
thousands of dollars):

                                             2000          1999            1998
                                             ----          ----            ----
Current tax provision:
   Federal ........................       $ 1,801        $ 1,065        $   710
   South Carolina .................           154             85             80
Deferred tax benefit ..............          (148)          (101)          (127)
                                          -------        -------        -------
          Total ...................         1,807          1,049            663
                                          =======        =======        =======

The  provision  for federal  income taxes differs from that computed by applying
federal statutory rates to income before federal income tax expense as indicated
in the following summary (in thousands of dollars):



                                                                                    2000                 1999                 1998
                                                                                    ----                 ----                 ----
                                                                                                                   
Income tax at statutory rate on income
   before income taxes ..............................................             $ 1,684              $ 1,099              $   769
Increase (decrease) resulting from:
   Exercise of certain stock options ................................                   -                  (89)                (165)
   South Carolina bank tax, net of federal
      tax benefit ...................................................                 147                   96                   67
   Tax exempt interest ..............................................                 (17)                 (19)                 (14)
   Amortization of organization costs ...............................                 (24)                 (24)                   -
   Other ............................................................                  17                  (14)                   6
                                                                                  -------              -------              -------
          Provision for income taxes ................................               1,807                1,049                  663
                                                                                  =======              =======              =======


Temporary differences, which give rise to deferred tax assets and liabilities at
December 31, 2000 and 1999, are as follows (in thousands of dollars):

                                                             2000         1999
                                                             ----         ----
Deferred tax assets:
  Allowance for loan losses ..........................     $   778      $   614
  Net unrealized losses on securities
     available for sale ..............................          69          280
  Preopening costs ...................................          39           67
  State tax net operating loss carry forward .........          58           65
  Other ..............................................           -            1
                                                           -------      -------
          Total deferred tax assets ..................         944        1,027
                                                           -------      -------
Deferred tax liabilities:
  Depreciation .......................................         120          145
  Accretion ..........................................           4            6
                                                           -------      -------
          Total deferred tax liabilities .............         124          151
                                                           -------      -------
          Net deferred tax asset before valuation
               allowance .............................         820          876
          Less, valuation allowance ..................         (25)         (18)
                                                           -------      -------
          Net deferred tax asset .....................         795          858
                                                           =======      =======



                                       F-50


At December 31, 2000, the Corporation had net operating loss (NOL) carryforwards
for state income tax purposes of  approximately  $1,273,000  available to offset
future state taxable income. The NOL carryforwards expire primarily in the years
2007 through 2015. The Corporation and the Banks each file separate state income
tax returns.  The valuation allowance  represents  management's  estimate of the
state NOL carryforwards that will not be realized in the foreseeable future.

NOTE 13 - EMPLOYEE BENEFIT PLANS:

The Corporation  provides a defined  contribution  plan with an Internal Revenue
Code Section  401(k)  provision.  All employees who have  completed 500 hours of
service  during a six-month  period and have attained age 18 may  participate in
the plan.

A participant  may elect to make tax deferred  contributions  up to a maximum of
12% of eligible  compensation.  The Corporation will make matching contributions
on behalf of each  participant  in the amount of 100% of the elective  deferral,
not exceeding 3% of the  participant's  compensation.  The  Corporation may also
make  nonelective  contributions  determined  at the  discretion of the Board of
Directors.

The Corporation's contributions for the years ended December 31, 2000, 1999, and
1998 totaled approximately $242,000, $149,000, and $140,000, respectively.

NOTE 14 - OFF-BALANCE-SHEET ACTIVITIES:

The  Banks  are   parties  to  credit   related   financial   instruments   with
off-balance-sheet  risk in the normal  course of business to meet the  financing
needs of their customers.  These financial  instruments  include  commitments to
extend  credit and  standby  letters of credit.  Such  commitments  involve,  to
varying  degrees,  elements  of credit and  interest  rate risk in excess of the
amount recognized in the consolidated balance sheets.

The Banks' exposure to credit loss is represented by the  contractual  amount of
these commitments.  The Banks use the same credit policies in making commitments
as they do for on-balance-sheet instruments.

At  December  31,  2000 and  1999,  the  following  financial  instruments  were
outstanding whose contract amounts represent credit risk:

                                                             Contract Amount
                                                             ---------------
                                                           2000           1999
                                                           ----           ----
                                                              (In thousands)

Commitments to grant loans .......................        $12,822        $11,231
Unfunded commitments under lines of
    credit .......................................         12,115         11,269
Standby letters of credit ........................          3,426          3,427

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no violation of any condition established in the contract.  Commitments
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 amount of collateral obtained, if deemed
necessary by the Banks upon extension of credit, is based on management's credit
evaluation of the counter-party. Collateral held varies but may include personal
residences, accounts receivable,  inventory, property, plant, and equipment, and
income-producing commercial properties.




                                      F-51



Standby  letters of credit are  conditional  commitments  issued by the Banks to
guarantee  the  performance  of a customer to a third  party.  Those  letters of
credit are  primarily  issued to support  private  borrowing  arrangements.  All
letters of credit are short-term guarantees. The credit risk involved in issuing
letters of credit is  essentially  the same as that  involved in extending  loan
facilities to customers.  The Banks generally hold collateral  supporting  those
commitments if deemed necessary.

To reduce credit risk related to the use of both derivatives and  credit-related
financial  instruments,  the Bank might deem it necessary to obtain  collateral.
The amount and nature of the  collateral  obtained is based on the Banks' credit
evaluation  of the  customer.  Collateral  held  varies  but may  include  cash,
securities,  accounts receivable,  inventory,  property, plant and equipment and
real estate.

NOTE 15 - EARNINGS PER COMMON SHARE:

Basic  earnings  per  common  share   represents   income  available  to  common
stockholders divided by the weighted-average number of common shares outstanding
during the year.  Diluted earnings per common share reflects  additional  common
shares that would have been outstanding if dilutive  potential common shares had
been  issued.  Potential  common  shares  that may be issued by the  Corporation
relate  solely  to  outstanding  stock  options,  and are  determined  using the
treasury stock method.

Earnings per common share have been computed based on the following:



                                                                                                 Years Ended December 31,
                                                                                                 ------------------------
                                                                                     2000                1999                1998
                                                                                     ----                ----                ----
                                                                                                     (In thousands)

                                                                                                                 
Net income .............................................................          $    3,147          $    2,182          $    1,567
                                                                                  ==========          ==========          ==========

Average number of common shares outstanding ............................           3,194,129           3,189,235           3,040,512
Effect of dilutive options .............................................              21,403              25,888              56,550
                                                                                  ----------          ----------          ----------
Average number of common shares outstanding  used to
   calculate diluted earnings per common  share ........................          3,215,532           3,215,123           3,097,062
                                                                                  ==========          ==========          ==========


NOTE 16 - OTHER COMPREHENSIVE INCOME (LOSS):

The components of other comprehensive  income (loss) and related tax effects are
as follows:



                                                                                                  Years Ended December 31,
                                                                                                  ------------------------
                                                                                        2000                 1999              1998
                                                                                        ----                 ----              ----
                                                                                                       (In thousands)
                                                                                                                      
Unrealized holding gains (losses) on available for
   sale securities .........................................................             $(200)             $(791)             $  56
Less: Reclassification adjustment for gains
   (losses) realized in income .............................................                 -                  -                  -
                                                                                         -----              -----              -----
Net unrealized gains (losses) ..............................................              (200)              (791)                56
Tax effect .................................................................                69                280                 20
                                                                                         -----              -----              -----
Net-of-tax amount ..........................................................              (131)              (511)                36
                                                                                         =====              =====              =====





                                      F-52


NOTE 17 - CREDIT RISK CONCENTRATIONS

Concentrations  of credit risk arise when a number of  customers  are engaged in
similar business  activities,  or activities in the same geographic  region,  or
have  similar  economic   features  that  would  cause  their  ability  to  meet
contractual  obligations  to  be  similarly  affected  by  changes  in  economic
conditions.

The Banks regularly  monitor various  segments of their credit risk portfolio to
assess potential  concentration  risks and to obtain  collateral when considered
necessary.

NOTE 18 - FAIR VALUE OF FINANCIAL INSTRUMENTS:

The fair value of a financial  instrument  is the  current  amount that would be
exchanged  between willing  parties,  other than in a forced  liquidation.  Fair
value is best  determined  based upon quoted  market  prices.  However,  in many
instances,  there are no quoted  market  prices  for the  Corporation's  various
financial  instruments.  In cases where quoted market prices are not  available,
fair  values  are based on  estimates  using  present  value or other  valuation
techniques. These techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows. Accordingly, the
fair value  estimates  may not be realized  in an  immediate  settlement  of the
instrument.   SFAS  No.  107,   "Disclosures   about  Fair  Value  of  Financial
Instruments",  excludes  certain  financial  instruments  and  all  nonfinancial
instruments from its disclosure  requirements.  Accordingly,  the aggregate fair
value amounts presented may not necessarily  represent the underlying fair value
of the Corporation.

The following methods and assumptions were used by the Corporation in estimating
fair values of financial instruments as disclosed herein:

     Cash  and  cash  equivalents.   The  carrying  amounts  of  cash  and  cash
     equivalents approximate fair values.

     Interest-bearing   deposits   with   banks.   The   carrying   amounts   of
     interest-bearing deposits with banks approximate their fair values.

     Securities  available  for sale  and  held to  maturity.  Fair  values  for
     securities,  excluding  Federal  Home Loan Bank and  Federal  Reserve  Bank
     stock,  are based on quoted market  prices.  The carrying  value of Federal
     Home Loan Bank and Federal Reserve Bank stock approximates fair value based
     on the  redemption  provisions  of the  Federal  Home Loan Bank and Federal
     Reserve Bank.  The market values of state and local  government  securities
     are established with the assistance of an independent pricing service.  The
     values are based on data which often  reflect  transactions  of  relatively
     small  size  and  are  not  necessarily  indicative  of  the  value  of the
     securities when traded in large volumes.

     Loans held for sale. The carrying amounts approximate their fair values.

     Loans receivable.  For variable-rate loans that reprice frequently and with
     no  significant  change in credit  risk,  fair values are based on carrying
     values.  Fair values for certain  mortgage loans (for example,  one-to-four
     family  residential)  and other  consumer  loans are based on quoted market
     prices  of  similar   loans  sold,   adjusted  for   differences   in  loan
     characteristics.  Fair values for  commercial  real  estate and  commercial
     loans are estimated  using  discounted  cash flow analyses,  using interest
     rates  currently being offered for loans with similar terms to borrowers of
     similar credit quality.  Fair values for non-performing loans are estimated
     using discounted cash flow analyses or underlying  collateral values, where
     applicable.

     Deposit liabilities.  The fair values disclosed for demand deposits are, by
     definition,  equal to the amount  payable on demand at the  reporting  date
     (that is, their carrying  amounts).  The carrying amounts of variable-rate,
     fixed-term   money-market   accounts  and  certificates  of  deposit  (CDs)
     approximate  their  fair  values at the  reporting  date.  Fair  values for
     fixed-rate CDs are estimated using a discounted cash flow  calculation that
     applies  interest  rates  currently  being  offered  on  certificates  to a
     schedule of aggregated expected monthly maturities on time deposits.




                                      F-53


     Short-term borrowings.  The carrying amounts of federal funds purchased and
     borrowings under repurchase agreements, approximate their fair values.

     Federal Home Loan Bank  advances.  The fair values of the Federal Home Loan
     Bank advances are estimated  using  discounted  cash flow analyses based on
     the Corporation's  current incremental borrowing rates for similar types of
     borrowing arrangements.

     Accrued interest. The carrying amounts of accrued interest approximate fair
     value.

     Off-balance-sheet    instruments.   Fair   values   for   off-balance-sheet
     credit-related financial instruments are based on fees currently charged to
     enter into similar  agreements,  taking into account the remaining terms of
     the agreements and the counterparties' credit standings.

The  estimated  fair  values and related  carrying  or  notional  amounts of the
Corporation's  financial  instruments  at  December  31,  2000 and 1999,  are as
follows (in thousands of dollars):



                                                                                         2000                         1999
                                                                                         ----                         ----
                                                                               CARRYING        FAIR         CARRYING         FAIR
                                                                                AMOUNT         VALUE         AMOUNT          VALUE
                                                                                ------         -----         ------          -----
Financial assets:
                                                                                                                
   Cash and cash equivalents ...........................................       $ 18,339       $ 18,339       $ 20,315       $ 20,315
   Interest-bearing deposits with banks ................................            594            594            788            788
   Investment securities ...............................................         53,566         53,412         43,935         43,485
   Loans held for sale .................................................            343            343            269            269
   Loans receivable ....................................................        192,653        197,811        155,153        152,327
   Accrued interest receivable .........................................          2,330          2,330          1,700          1,700

Financial liabilities:
   Deposits ............................................................       $218,811       $218,584       $184,364       $184,228
   Federal funds purchased and
      securities sold under agreements
      to repurchase ....................................................          9,352          9,352          2,782          2,782
   Federal Home Loan Bank advances .....................................         20,350         20,309         19,420         19,324
   Accrued interest payable ............................................          1,224          1,224            770            770

Off-balance-sheet credit related financial instruments:
      Commitments to extend credit .....................................         12,822         12,822       $ 11,231       $ 11,231
      Unfunded commitments under
         lines of credit ...............................................         12,115         12,115         11,269         11,269
      Standby letters of credit ........................................          3,426          3,426          3,427          3,427


NOTE 19 - CONTINGENCIES:

     CLAIMS AND LAWSUITS:

The  Corporation  is subject at times to claims and lawsuits  arising out of the
normal  course of business  which,  in the opinion of  management,  will have no
material effect on the Corporation's consolidated financial statements.

NOTE 20 - REGULATORY MATTERS:

The Banks, as national banks, are subject to the dividend restrictions set forth
by the Comptroller of the Currency. Under such restrictions,  the Banks may not,
without the prior approval of the Comptroller of the Currency, declare dividends
in  excess of the sum of the  current  year's  earnings  (as  defined)  plus the




                                      F-54


retained  earnings  (as defined)  from the prior two years.  The  dividends,  at
December 31,  2000,  that the Banks could  declare,  without the approval of the
Comptroller of the Currency,  amounted to approximately $4,518,000. In addition,
dividends paid by the Banks to the Corporation would be prohibited if the effect
thereof would cause the Banks'  capital to be reduced below  applicable  minimum
capital requirements.

Under Federal  Reserve  regulation,  the Banks also are limited as to the amount
they may  loan to the  Corporation  unless  such  loans  are  collateralized  by
specified obligations.  The maximum amount available for transfer from the Banks
to the  Corporation  in the  form of  loans or  advances  totaled  approximately
$4,315,000 at December 31, 2000.

The Corporation  (on a consolidated  basis) and the 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 adverse effect on the  Corporation's and the Banks'
financial  statements.  Under capital  adequacy  guidelines  and the  regulatory
framework for prompt corrective  action, the Corporation and the Banks must meet
specific capital guidelines that involve quantitative  measures of their assets,
liabilities,  and certain off-balance-sheet items as calculated under regulatory
accounting practices. The capital amounts and classification are also subject to
qualitative judgments by the regulators about components,  risk weightings,  and
other factors.  Prompt  corrective  action provisions are not applicable to bank
holding companies.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the  Corporation  and the Banks to maintain  minimum  amounts and ratios
(set forth in the table  below) of total and Tier I capital  (as  defined in the
regulations)  to  risk-weighted  assets (as  defined),  and of Tier I capital to
average assets (as defined).  Management believes,  as of December 31, 2000, and
1999, that the Corporation and the Banks met all capital  adequacy  requirements
to which they are subject.

As of May 31, 2000,  for ONB,  April 30, 2000, for SNB and January 31, 2000, for
FNB, the most recent  notifications  from the Office of the  Comptroller  of the
Currency  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 table.  There are no  conditions  or events
since the  notifications  that  management  believes  have  changed  the  Banks'
categories.






                                      F-55



The  Corporation's  and the Banks'  actual  capital  amounts and ratios are also
presented in the table (in thousands of dollars).




                                                            MINIMUM REQUIRED                MINIMUM REQUIRED
                                                              FOR CAPITAL                TO BE WELL CAPITALIZED
                                     ACTUAL                ADEQUACY PURPOSES                  UNDER PROMPT
                                     ------                -----------------                   CORRECTIVE
                                                                                            ACTION PROVISIONS
                                                                                            -----------------
                               AMOUNT       RATIO        AMOUNT        RATIO              AMOUNT         RATIO
                               ------       -----        ------        -----              ------         -----
At December 31, 2000:

Tier I Capital (to
   Average Assets):
                                                                                         
      Consolidated ........  $ 21,709         8.2%     $ 10,672           4.0%           $ 13,340           5.0%
      ONB .................    11,883         7.7%        6,173           4.0%              7,716           5.0%
      SNB .................     5,893         8.1%        2,910           4.0%              3,638           5.0%
      FNB .................     3,933         9.9%        1,589           4.0%              1,986           5.0%

Tier I Capital (to
   Risk Weighted
   Assets):
      Consolidated ........    21,709        11.1%        7,776           4.0%             11,663           6.0%
      ONB .................    11,833        11.9%        3,978           4.0%              5,966           6.0%
      SNB .................     5,893         9.7%        2,430           4.0%              3,645           6.0%
      FNB .................     3,933        11.5%        1,368           4.0%              2,052           6.0%

Total Capital (to
   Risk Weighted
   Assets):
      Consolidated ........    24,000        12.3%       15,560           8.0%             19,449          10.0%
      ONB .................    13,132        13.2%        7,959           8.0%              9,949          10.0%
      SNB .................     6,628        10.9%        4,865           8.0%              6,081          10.0%
      FNB .................     4,240        12.4%        2,736           8.0%              3,419          10.0%

At December 31, 1999:

Tier I Capital (to
   Average Assets):
      Consolidated ........  $ 20,757         9.4%      $ 8,861           4.0%           $ 11,077           5.0%
      ONB .................    10,667         7.8%        5,485           4.0%              6,857           5.0%
      SNB .................     4,735         7.8%        2,443           4.0%              3,054           5.0%
      FNB .................     3,855        16.5%          933           4.0%              1,166           5.0%

Tier I Capital (to
   Risk Weighted
   Assets):
      Consolidated ........    20,757        13.0%        6,377           4.0%              9,566           6.0%
      ONB .................    10,667        11.7%        3,647           4.0%              5,470           6.0%
      SNB .................     4,735         9.3%        2,027           4.0%              2,841           6.0%
      FNB .................     3,855        23.2%          665           4.0%                998           6.0%

Total Capital (to
   Risk Weighted
   Assets):
      Consolidated ........    22,694        14.2%       12,754           8.0%             15,944          10.0%
      ONB .................    11,808        13.0%        7,293           8.0%              9,117          10.0%
      SNB .................     5,266        10.4%        4,054           8.0%              5,067          10.0%
      FNB .................     4,028        24.2%        1,331           8.0%              1,664          10.0%






                                      F-56


NOTE 21 - CONDENSED FINANCIAL STATEMENTS:

Presented below are the condensed financial statements for Community Bankshares,
Inc. (Parent Company only) (in thousands of dollars):

COMMUNITY BANKSHARES, INC. (PARENT COMPANY ONLY)



                                                                                                                DECEMBER 31,
                                                                                                                ------------
                                                                                                          2000               1999
                                                                                                          ----               ----
Balance Sheets:
   Assets:
                                                                                                                       
      Cash ...............................................................................              $ 1,194              $ 1,041
      Investment in banking subsidiaries .................................................               21,578               18,746
      Securities available for sale, at fair value .......................................                   50                   50
      Premises and equipment (net of accumulated depreciation
         of $520 in 2000 and $411 in 1999) ...............................................                  235                  292
      Other assets .......................................................................                  138                  166
                                                                                                        -------              -------

                  Total assets ...........................................................               23,195              20,295
                                                                                                        =======              =======

   Liabilities and shareholders' equity:
      Other liabilities ..................................................................              $    56              $    50
      Shareholders' equity ...............................................................               23,139               20,245
                                                                                                        -------              -------

                  Total liabilities and shareholders' equity .............................               23,195               20,295
                                                                                                        =======              =======



                                                                                                      YEAR ENDED DECEMBER 31,
                                                                                                      -----------------------
                                                                                            2000               1999            1998
                                                                                            ----               ----            ----
Statements of Income:
   Income:
                                                                                                                    
      Management fees assessed banking subsidiaries ............................          $ 1,352           $ 1,176          $ 1,141
      Dividends from subsidiaries ..............................................            1,027               872              700
      Interest .................................................................               67                61              138
                                                                                          -------           -------          -------
                  Total ........................................................            2,446             2,109            1,979
                                                                                          -------           -------          -------
   Expenses:
      Salaries and employee benefits ...........................................              842               796              648
      Premises and equipment ...................................................              272               260              230
      Supplies .................................................................               61                59               70
      Director fees ............................................................               22                22               24
      Preopening - FNB .........................................................                -                 -               75
      Other general expenses ...................................................              276               281              258
                                                                                          -------           -------          -------
                  Total ........................................................            1,473             1,418            1,305
                                                                                          -------           -------          -------

Income before income tax (provision) benefit and equity in
   undistributed earnings of banking subsidiaries ..............................              973               691              674
Applicable income tax (provision) benefit ......................................              (28)               60                8
Equity in undistributed earnings of banking subsidiaries .......................            2,202             1,431              885
                                                                                          -------           -------          -------

Net income .....................................................................            3,147             2,182            1,567
                                                                                          =======           =======          =======





                                      F-57



COMMUNITY BANKSHARES, INC. (PARENT COMPANY ONLY) (CONTINUED):



                                                                                                   YEAR ENDED DECEMBER 31,
                                                                                                   -----------------------
                                                                                         2000               1999               1998
                                                                                         ----               ----               ----
Statements of Cash Flows:
   Cash flows from operating activities:
                                                                                                                   
      Net income ..........................................................           $ 3,147            $ 2,182            $ 1,567
      Adjustments to reconcile net income to net
         cash provided by operating activities:
            Depreciation and amortization .................................               107                107                106
            Decrease (increase) in other assets ...........................                28                (38)                46
            Increase (decrease) in other liabilities ......................                 6                (90)                85
            Equity in undistributed earnings of banking
                  subsidiaries ............................................            (2,202)            (1,431)              (885)
                                                                                      -------            -------            -------
                  Net cash provided by operating
                     activities ...........................................             1,086                730                919
                                                                                      -------            -------            -------

Cash flows from investing activities:
   Investment in SNB ......................................................              (250)              (500)              (500)
   Investment in FNB ......................................................                 -                  -             (4,500)
   Purchase of premises and equipment .....................................               (50)               (70)              (169)
   Proceeds from maturities of securities
      held to maturity ....................................................                 -                  -                647
                                                                                      -------            -------            -------
                  Net cash used by investing
                      activities ..........................................              (300)              (570)            (4,522)
                                                                                      -------            -------            -------

Cash flows from financing activities:
   Repurchase of stock ....................................................                 -               (630)                 -
   Common stock issued ....................................................                22                189              5,579
   Stock issuance cost ....................................................               (10)                 -                (87)
   Cash dividends paid ....................................................              (645)              (608)              (453)
                                                                                      -------            -------            -------
                  Net cash provided (used) by financing
                     activities ...........................................              (633)            (1,049)             5,039
                                                                                      -------            -------            -------

Net increase (decrease) in cash ...........................................               153               (889)             1,436

Cash at beginning of year .................................................             1,041              1,930                494
                                                                                      -------            -------            -------

Cash at end of year .......................................................             1,194              1,041              1,930
                                                                                      =======            =======            =======

Supplemental disclosures of cash flow information:
   Cash payments for income taxes .........................................           $ 1,780            $ 1,214            $   656
                                                                                      =======            =======            =======

Supplemental schedule of non-cash investing activities:
   Transfer from retained earnings to common stock
      outstanding for the market value of the 5% stock
      dividend ............................................................           $ 1,709            $     -            $     -
                                                                                      =======            =======            =======






                                      F-58


NOTE 22 - QUARTERLY DATA (UNAUDITED):



                                                                           YEARS ENDED DECEMBER 31,
                                                                           ------------------------
                                                                  2000                                      1999
                                                                  ----                                      ----
                                                 Fourth     Third     Second      First      Fourth    Third     Second      First
                                                quarter    quarter    quarter    quarter    quarter   quarter    quarter    quarter
                                                -------    -------    -------    -------    -------   -------    -------    -------
                                                                    (In thousands, except per share data)

                                                                                                    
Interest and dividend income ...............   $ 5,557    $ 5,273    $ 4,888    $ 4,583    $ 4,313    $ 4,092    $ 3,730    $ 3,415
Interest expense ...........................    (2,856)    (2,625)    (2,329)    (2,165)    (1,942)    (1,827)    (1,670)    (1,519)
                                               -------    -------    -------    -------    -------    -------    -------    -------

Net interest income ........................     2,701      2,648      2,559      2,418      2,371      2,265      2,060      1,896
Provision for loan losses ..................      (198)      (152)      (158)      (180)      (173)      (166)      (139)      (134)
                                               -------    -------    -------    -------    -------    -------    -------    -------

Net interest income after
   provision for loan losses ...............     2,503      2,496      2,401      2,238      2,198      2,099      1,921      1,762
Noninterest income .........................       519        464        448        437        323        344        345        305
Noninterest expenses .......................    (1,700)    (1,625)    (1,627)    (1,600)    (1,639)    (1,530)    (1,460)    (1,437)
                                               -------    -------    -------    -------    -------    -------    -------    -------

Income before income taxes .................     1,322      1,335      1,222      1,075        882        913        806        630
Provision for income taxes .................      (517)      (470)      (439)      (381)      (286)      (299)      (263)      (201)
                                               -------    -------    -------    -------    -------    -------    -------    -------

Net income .................................       805        865        783        694        596        614        543        429
                                               =======    =======    =======    =======    =======    =======    =======    =======

Earnings per share
   Basic ...................................   $  0.25    $  0.27    $  0.25    $  0.22    $  0.19    $  0.19    $  0.17    $  0.13
                                               =======    =======    =======    =======    =======    =======    =======    =======

   Diluted .................................   $  0.24    $  0.27    $  0.25    $  0.22    $  0.19    $  0.19    $  0.17    $  0.13
                                               =======    =======    =======    =======    =======    =======    =======    =======






THESE NOTES ARE AN INTEGRAL PART OF THE ACCOMPANYING FINANCIAL STATEMENTS



                                      F-59


            COMMUNITY BANKSHARES, INC. - CONSOLIDATED BALANCE SHEETS



         ($ amounts in thousands)                                                                     UNAUDITED
                                                                                                       Sept. 30,        December 31,
                                                                                                         2001               2000
                                                                                                         ----               ----
         ASSETS
Cash and due from other financial institutions:
                                                                                                                    
     Non-interest bearing ..................................................................          $  10,738           $  10,209
     Federal funds sold ....................................................................             18,267               8,130
                                                                                                      ---------           ---------
         Total cash and cash equivalents ...................................................             29,005              18,339
Interest bearing deposits in other banks ...................................................              4,129                 594
Investment securities:
     Securities held to maturity ...........................................................              2,149              12,371
     Securities available for sale .........................................................             33,002              41,195
Loans held for resale ......................................................................                154                 343
Loans ......................................................................................            219,125             195,077
     Less, allowance for loan losses .......................................................             (2,761)             (2,424)
                                                                                                      ---------           ---------
         Net loans .........................................................................            216,364             192,653
Premises and equipment .....................................................................              4,423               4,411
Accrued interest  receivable ...............................................................              1,780               2,330
Deferred income taxes ......................................................................                648                 795
Other real estate owned ....................................................................                267                   -
Other assets ...............................................................................                360                 292
                                                                                                      ---------           ---------
         Total assets ......................................................................          $ 292,281           $ 273,323
                                                                                                      =========           =========

         LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
     Non-interest bearing ..................................................................          $  32,548           $  31,219
     Interest bearing ......................................................................            201,243             187,592
                                                                                                      ---------           ---------
         Total deposits ....................................................................            233,791             218,811
Federal funds purchased and securities
     sold under agreements to repurchase ...................................................             10,976               9,352
Federal Home Loan Bank advances ............................................................             20,280              20,350
Other liabilities ..........................................................................              1,688               1,671
                                                                                                      ---------           ---------
         Total liabilities .................................................................            266,735             250,184
                                                                                                      ---------           ---------
Shareholders' equity:
     Common stock
         No par, authorized shares 12,000,000, issued and
         outstanding 3,204,220 in 2001 and 3,199,180 in 2000 ...............................             15,967              15,928
     Retained earnings .....................................................................              9,463               7,342
     Accumulated other comprehensive income (loss) .........................................                116                (131)
                                                                                                      ---------           ---------
         Total shareholders' equity ........................................................             25,546              23,139
                                                                                                      ---------           ---------

         Total liabilities and shareholders' equity ........................................          $ 292,281           $ 273,323
                                                                                                      =========           =========


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS



                                      F-60



   COMMUNITY BANKSHARES, INC. - CONSOLIDATED STATEMENTS OF INCOME (Unaudited)



                                                                         Nine months ended Sept. 30,    Three months ended Sept. 30,
                                                                         ---------------------------    ----------------------------
                                                                           2001             2000           2001             2000
                                                                           ----             ----           ----             ----
         ($ amounts in thousands)
Interest and dividend income:
                                                                                                              
    Interest and fees on loans .................................       $   13,694       $   12,184       $    4,578       $    4,421
    Deposits with other financial institutions .................              144               53               38               25
    Investment securities:
      Interest - U. S. Treasury and
        U. S. Government Agencies ..............................            1,602            2,159              408              727
      Dividends ................................................              118               96               49               36
                                                                       ----------       ----------       ----------       ----------
         Total investment securities ...........................            1,720            2,255              457              763
    Federal funds sold and securities
      purchased under agreements to resell .....................              642              252              188               64
                                                                       ----------       ----------       ----------       ----------
         Total interest and dividend income ....................           16,200           14,744            5,261            5,273
                                                                       ----------       ----------       ----------       ----------

Interest expense:
    Deposits:
      Certificates of deposit of $100,000 or more ..............            1,912            1,666              602              593
      Other ....................................................            5,089            4,473            1,561            1,642
                                                                       ----------       ----------       ----------       ----------
         Total deposits ........................................            7,001            6,139            2,163            2,235
    Federal funds purchased and securities
      sold under agreements to repurchase ......................              212              117               63               53
    Federal Home Loan Bank advances ............................              861              863              265              337
                                                                       ----------       ----------       ----------       ----------
         Total interest expense ................................            8,074            7,119            2,491            2,625
                                                                       ----------       ----------       ----------       ----------
Net interest income ............................................            8,126            7,625            2,770            2,648
Provision for loan losses ......................................              457              490              180              152
                                                                       ----------       ----------       ----------       ----------
Net interest income after provision for loan losses ............            7,669            7,135            2,590            2,496
                                                                       ----------       ----------       ----------       ----------

Non-interest income:
    Service charges on deposit accounts ........................            1,490            1,059              562              363
    Gain on sale of securities .................................               14                -               14                -
    Other ......................................................              483              290              168              101
                                                                       ----------       ----------       ----------       ----------
         Total non-interest income .............................            1,987            1,349              744              464
                                                                       ----------       ----------       ----------       ----------

Non-interest expense:
    Salaries and employee benefits .............................            3,172            2,831            1,070              939
    Premises and equipment .....................................              703              690              232              234
    Other ......................................................            1,447            1,331              531              452
                                                                       ----------       ----------       ----------       ----------
         Total non-interest expense ............................            5,322            4,852            1,833            1,625
                                                                       ----------       ----------       ----------       ----------
Net income before taxes ........................................            4,334            3,632            1,501            1,335
Provision for income taxes .....................................            1,541            1,290              539              470
                                                                       ----------       ----------       ----------       ----------

Net income .....................................................       $    2,793       $    2,342       $      962       $      865
                                                                       ==========       ==========       ==========       ==========

Basic earnings per common share:
    Weighted average shares outstanding ........................        3,201,560        3,194,685        3,200,867        3,194,685
    Net income per common share ................................       $     0.87       $     0.73       $     0.30       $     0.27
Diluted earnings per common share:
    Weighted average shares outstanding ........................        3,222,456        3,216,207        3,220,138        3,216,207
    Net income per common share ................................       $     0.87       $     0.73       $     0.30       $     0.27




                                      F-61



             COMMUNITY BANKSHARES, INC. - CONSOLIDATED STATEMENTS OF
                        CHANGES IN SHAREHOLDERS' EQUITY
        for the nine months ended September 30, 2001 and 2000 (Unaudited)
                            ($ amounts in thousands)




                                                                                                       Accumulated
                                                                     Common Stock                          Other            Total
                                                                     ------------           Retained  Comprehensive    Shareholders'
                                                                 Shares        Amount       Earnings   Income (Loss)       Equity
                                                                 ------        ------       --------   -------------       ------
                                                                                   (dollar amounts in thousands)

                                                                                                          
Balances at Dec. 31, 1999 ................................      3,191,462    $   14,207    $    6,549        $(511)      $   20,245
Comprehensive income:
     Net income ..........................................                                      2,342                         2,342
     Other comprehensive income (loss) net of tax:
     Unrealized gain (loss) on securities ................                                                      88               88
Cash-in-lieu of shares in connection with Jan. 31,
     2000 stock dividend..................................           (137)
Market value of shares issued in
     five percent stock dividend..........................              -         1,709        (1,709)                            -
Shares issued under option agreement .....................          2,520            19                                          19
Costs of stock dividend ..................................                          (10)                                        (10)
Dividends paid ...........................................              -             -          (452)           -             (452)
                                                               ----------    ----------    ----------        -----       ----------
Balances at Sept. 30, 2000 ...............................      3,193,845    $   15,925    $    6,730        $(423)      $   22,232
                                                               ==========    ==========    ==========        =====       ==========

Balances at Dec. 31, 2000 ................................      3,199,180    $   15,928    $    7,342        $(131)      $   23,139
Comprehensive income:
     Net income ..........................................                                      2,793                         2,793
     Other comprehensive income (loss) net of tax:
     Unrealized gain (loss) on securities ................                                                     247              247
Shares issued under option agreement .....................          5,040            39                                          39
Dividends paid ...........................................              -             -          (672)           -             (672)
                                                               ----------    ----------    ----------        -----       ----------
Balances at September 30, 2001 ...........................      3,204,220    $   15,967    $    9,463        $ 116       $   25,546
                                                               ==========    ==========    ==========        =====       ==========


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS







                                      F-62


 COMMUNITY BANKSHARES, INC. - CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)



                                                                                                        Nine months ended Sept. 30,
                                                                                                         2001                2000
                                                                                                         ----                ----
                                                                                                       (Dollar amounts in thousands)
Cash flows from operating activities:
                                                                                                                     
Net income .................................................................................           $  2,793            $  2,342
Adjustments to reconcile net income to net cash
     provided (used) by operating activities
      Depreciation .........................................................................                329                 360
      Provision for loan losses ............................................................                457                 490
      Accretion of discounts and amortization of ...........................................                (18)                 (7)
           premiums - investment securities - net
Changes in assets and liabilities:
      Proceeds of sale of loans held for resale ............................................              9,807               4,861
      Origination of loans held for resale .................................................             (9,807)             (4,861)
      (Increase) decrease in interest receivable ...........................................                550                (543)
      Decrease in other assets .............................................................                 79                  62
      Increase in other liabilities ........................................................                 17                 295
                                                                                                       --------            --------
Net cash provided by operating activities ..................................................              4,207               2,999
                                                                                                       --------            --------

Cash flows from investing activities:
      Net (increase) in interest bearing deposits ..........................................             (3,535)               (781)
      Proceeds from maturities of investment ...............................................             11,375               1,500
           securities - held to maturity
      Purchases of investment securities - held to .........................................             (1,153)               (501)
           maturity
      Proceeds from maturities of investment ...............................................             69,658               3,551
           securities - available for sale
      Purchases of investment securities - available .......................................            (61,200)             (8,468)
           for sale
      Net (increase) in loans to customers .................................................            (23,979)            (29,205)
      Purchase of premises and equipment ...................................................               (341)               (212)
      Net (increase) in other real estate ..................................................               (267)                  -
                                                                                                       --------            --------
        Net cash (used) in investing activities ............................................             (9,442)            (34,116)
                                                                                                       --------            --------

Cash flows from financing activities:
      Net increase in demand, savings, and time ............................................             14,980              26,927
           deposits
      Net increase in federal funds purchased and ..........................................              1,624               2,975
           securities sold under agreements to
           repurchase
      (Decrease) in Federal Home Loan Bank advances ........................................                (70)               (370)
      Common stock issued under option plan ................................................                 39                  10
      Dividends paid in cash ...............................................................               (672)               (453)
                                                                                                       --------            --------
        Net cash provided by financing activities ..........................................             15,901              29,089
                                                                                                       --------            --------

Net increase  (decrease) in cash and cash equivalents ......................................             10,666              (2,028)
Cash and cash equivalents-beginning of period ..............................................             18,339              20,315
                                                                                                       --------            --------

Cash and cash equivalents-end of period ....................................................           $ 29,005            $ 18,287
                                                                                                       ========            ========



THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS



                                      F-63


Notes to Unaudited Consolidated Financial Statements

Summary of Significant Accounting Principles

         A summary of significant  accounting policies and the audited financial
statements for 2000 are included in Corporation's Annual Report on Form 10-K for
the year ended December 31, 2000.

Principles of Consolidation

         The consolidated financial statements include the accounts of Community
Bankshares, Inc. (CBI), the parent company, and Orangeburg National Bank, Sumter
National Bank and Florence  National  Bank, its wholly owned  subsidiaries.  All
significant   intercompany  items  have  been  eliminated  in  the  consolidated
statements.

Management Opinion

         The interim financial  statements in this report are unaudited.  In the
opinion of management, all the adjustments necessary to present a fair statement
of the results for the interim period have been made. Such  adjustments are of a
normal and recurring nature.
         The results of operations  for any interim  period are not  necessarily
indicative  of the  results to be expected  for an entire  year.  These  interim
financial  statements  should be read in conjunction  with the annual  financial
statements and notes thereto contained in the 2000 Annual Report on Form 10-K.

Changes in Comprehensive Income Components

         The  Financial  Accounting  Standards  Board's  Statement  of Financial
Accounting  Standards No. 130, "Reporting  Comprehensive  Income," effective for
fiscal  years  beginning  after  December 15, 1997,  establishes  standards  for
reporting and display of  comprehensive  income and its components in a full set
of general-purpose financial statements. Disclosure as required by the Statement
is as follows:



                                                                                          Before-Tax    Tax (Expense)     Net-of-Tax
                                                                                            Amount        or Benefit        Amount
                                                                                            ------        ----------        ------

Unrealized gains (losses) on securities:
                                                                                                                 
Unrealized holding gains (losses) arising during  period .............................     $(640,000)        $217,000     $(423,000)
                                                                                           ---------         --------     ---------
Other comprehensive income, Sept. 30, 2000 ...........................................     $(640,000)        $217,000     $(423,000)
                                                                                           =========         ========     =========
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during period ..............................      $176,000         $(60,000)     $116,000
                                                                                            --------         ---------     --------
Other comprehensive income, Sept. 30, 2001 ...........................................      $176,000         $(60,000)     $116,000
                                                                                            ========         =========     ========





                                      F-64


                PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)

            The following  unaudited pro forma combined  condensed balance sheet
as of September 30, 2001 and unaudited pro forma  combined  statements of income
for the nine months  ended  September  30, 2001 and the year ended  December 31,
2000 combine the  historical  financial  statements of Community  Bankshares and
Ridgeway Bancshares.  The pro forma combined condensed statements give effect to
the proposed merger of Ridgeway  Bancshares into Community  Bankshares as if the
merger  occurred on September  30, 2001 with respect to the balance sheet and on
January 1, 2001 or January 1, 2000, respectively, with respect to the statements
of income  for the nine  months  ended  September  30,  2001 and the year  ended
December 31, 2000,  respectively.  The pro forma combined  condensed  statements
give effect to the proposed merger under the purchase method of accounting.

            The  purchase  method of  accounting  requires  that all of Ridgeway
Bancshares  assets and  liabilities  be adjusted to their  estimated fair market
values as of the date of  acquisition.  For  purposes of the pro forma  combined
condensed  statements,  fair  market  value of  September  30,  2001  assets and
liabilities  has been  estimated by  management  of Community  Bankshares  using
market information on January 30, 2002. Accordingly,  these adjustments are only
approximations.  Upon consummation of the merger, Community Bankshares will make
adjustments as of the date of consummation  based on more precise appraisals and
estimates.

            The pro forma combined condensed statements also contain adjustments
based on assumed interest rates and estimates by Community Bankshares management
regarding  changes in revenues and expenses  that  management  believes  will be
achieved after consummation of the merger. Of course,  there can be no assurance
that such changes will be of the magnitude  estimated or that they will occur at
all.

            The pro forma  financial  statements are provided for  informational
purposes.  The  pro  forma  combined  condensed  statements  of  income  are not
necessarily  indicative of actual  results that would have been achieved had the
merger been  consummated at the beginning of the periods  presented,  and is not
indicative of future results.



                                      F-65



              UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
                               September 30, 2001
                             (Dollars in thousands)



                                                                                                                          Community
                                                                                                                          Bankshares
                                                                                                                          Pro Forma
                                                          Community Bankshares  Ridgeway Bancshares     Adjustments       Combined
                                                          --------------------  -------------------     -----------       --------
ASSETS
                                                                                                                
      Cash and federal funds ............................         $ 33,134            $  7,227         $ (4,150)(1)         $ 36,211
      Investments .......................................           35,151              27,222              180(2)            62,553
      Loans, net of allowance ...........................          216,518              40,291              806(2)           257,615
      Premises and equipment ............................            4,423                 756              249(2)             5,428
      Goodwill ..........................................                                                 4,907(3)            4,907
      Core deposit intangible ...........................                                                 1,785(4)            1,785
      Other assets ......................................            3,055               1,167                                 4,222
                                                                                      --------         --------             --------

            Total assets ................................         $292,281            $ 76,663         $  3,777             $372,721
                                                                  ========            ========         ========             ========

LIABILITIES AND EQUITY
      Deposits ..........................................         $233,791            $ 64,899         $    324(2)          $299,014
      Short-term borrowings .............................           10,976               2,833                                13,809
      Long-term borrowings ..............................           20,280                   -                                20,280
      Other liabilities .................................            1,688                 334                                 2,022
      Shareholder equity ................................           25,546               8,597            3,453(5)            37,596
                                                                  --------            --------         --------             --------

            Total liabilities and equity ................         $292,281            $ 76,663         $  3,777             $372,721
                                                                  ========            ========         ========             ========


__________________
(1)  To record  payment of $4 million to Ridgeway  shareholders  and $150,000 in
     estimated direct costs associated with purchase.
(2)  To record estimated market value adjustment.
(3)  To record  goodwill  resulting  from  purchase  plus  $150,000 in estimated
     direct costs associated with purchase.
(4)  To record estimated core deposit intangible.
(5)  To record issuance of $12.05 million in Community  Bankshares  common stock
     and elimination of $8.597 million in Ridgeway Bancshares equity.



                                      F-66



           UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
                      Nine Months Ended September 30, 2001
                             (Dollars in thousands)



                                                                                                                         Community
                                                                                                                         Bankshares
                                                                                                                         Pro Forma
                                                         Community Bankshares  Ridgeway Bancshares     Adjustments       Combined
                                                         --------------------  -------------------     -----------       --------

                                                                                                               
Interest income .................................           $ 16,200            $  3,987               $    (78)(1)        $ 20,109
Interest expense ................................             (8,074)             (1,689)                                    (9,763)
                                                                                --------               --------            --------
      Net interest income .......................              8,126               2,298                    (78)             10,346
Provision for loan losses .......................               (457)                (54)                  (511)
Other income ....................................              1,987                 538                    300 (2)           2,825
Other expenses ..................................             (5,322)             (1,685)                   (17)(3)          (7,024)
                                                            --------            --------               --------            --------
      Income before taxes .......................              4,334               1,097                    205               5,636
Income taxes ....................................             (1,541)               (305)                   (74)(4)          (1,920)
                                                            --------            --------               --------            --------

      Net income ................................           $  2,793            $    792               $    131            $  3,716
                                                            ========            ========               ========            ========


________________
(1)  To record  opportunity  cost of $4,150,000 in cash  disbursed at an assumed
     federal funds rate of 2.5%.
(2)  To record estimated income from introduction of new products.
(3)  To  record  estimated   reduction  in  operating  expenses   subsequent  to
     consolidation and amortization of core deposit intangible.
(4)  To record estimated tax effect of projected income increase.


           UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
                          Year Ended December 31, 2000
                             (Dollars in thousands)



                                                                                                                         Community
                                                                                                                         Bankshares
                                                                                                                         Pro Forma
                                                         Community Bankshares  Ridgeway Bancshares     Adjustments       Combined
                                                         --------------------  -------------------     -----------       --------

                                                                                                               
Interest income .................................           $ 20,301            $  4,990               $   (104)(1)        $ 25,187
Interest expense ................................             (9,975)             (2,043)                                   (12,018)
                                                                                --------               --------            --------
      Net interest income .......................             10,326               2,947                   (104)             13,169
Provision for loan losses .......................               (688)                (75)                  ____                (763)
Other income ....................................              1,868                 671                    400 (2)           2,939
Other expenses ..................................             (6,552)             (2,138)                   (23)(3)          (8,713)
                                                            --------            --------               --------            --------
      Income before taxes .......................              4,954               1,405                    273               6,632
Income taxes ....................................             (1,807)               (376)                   (98)(4)          (2,281)
                                                            --------            --------               --------            --------

      Net income ................................           $  3,147            $  1,029               $    175            $  4,351
                                                            ========            ========               ========            ========

_____________
(1)  To record  opportunity  cost of $4,150,000 in cash  disbursed at an assumed
     federal funds rate of 2.5%.
(2)  To record estimated income from introduction of new products.
(3)  To  record  estimated   reduction  in  operating  expenses   subsequent  to
     consolidation and amortization of core deposit intangible.
(4)  To record estimated tax effect of projected income increase.



                                      F-67


                                                                      APPENDIX A

                          AGREEMENT AND PLAN OF MERGER

                                 BY AND BETWEEN

                            RIDGEWAY BANCSHARES, INC.

                                       AND

                           COMMUNITY BANKSHARES, INC.

                          DATED AS OF NOVEMBER 20, 2001





















                                      A-1



                          AGREEMENT AND PLAN OF MERGER

         THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into  as of  November  20,  2001,  by  and  between  RIDGEWAY  BANCSHARES,  INC.
("Ridgeway"),  a corporation  organized and existing under the Laws of the State
of  South  Carolina,  with its  principal  office  located  in  Ridgeway,  South
Carolina;  and COMMUNITY  BANKSHARES,  INC. ("CBI"), a corporation organized and
existing  under  the Laws of the  State of South  Carolina,  with its  principal
office located in Orangeburg, South Carolina.

                                    PREAMBLE

         The  Boards  of   Directors  of  Ridgeway  and  CBI  believe  that  the
transactions  described  herein are in the best interests of the parties to this
Agreement and their  respective  shareholders.  This Agreement  provides for the
acquisition  of Ridgeway by CBI pursuant to the merger of Ridgeway with and into
CBI. At the effective time of the merger,  the outstanding shares of the capital
stock of Ridgeway  shall be converted into shares of the common stock of CBI and
cash (except as provided  herein).  As a result,  shareholders of Ridgeway shall
become  shareholders  of CBI,  and each of the  subsidiaries  of Ridgeway  shall
continue to conduct its business  and  operations  as a  subsidiary  of CBI. The
transactions  described in this  Agreement  are subject to the  approvals of the
shareholders of CBI and Ridgeway,  the Board of Governors of the Federal Reserve
System and state regulatory  authorities,  and the satisfaction of certain other
conditions  described in this  Agreement.  It is the intention of the parties to
this  Agreement that the Merger for federal income tax purposes shall qualify as
a "reorganization"  within the meaning of Section 368(a) of the Internal Revenue
Code and that this Agreement  shall  constitute a "plan of  reorganization"  for
purposes of Sections 354 and 361 of the Internal Revenue Code.

         As a condition and  inducement to CBI's  willingness to enter into this
Agreement, Ridgeway's directors are executing and delivering to CBI an agreement
(a "Support Agreement"),  in substantially the form of Exhibit 1. As a condition
and inducement to Ridgeway 's willingness to enter into this  Agreement,  CBI 's
directors  are  executing  and  delivering  to Ridgeway an agreement (a "Support
Agreement"), in substantially the form of Exhibit 2.

         Certain  terms used in this  Agreement  are defined in Section  11.1 of
this Agreement.

         NOW,   THEREFORE,   in  consideration  of  the  above  and  the  mutual
warranties,  representations,  covenants,  and agreements set forth herein,  and
intending to be legally bound hereby, the Parties agree as follows:

                                    ARTICLE 1

                        TRANSACTIONS AND TERMS OF MERGER

         1.1 Merger.  Subject to the terms and conditions of this Agreement,  at
the  Effective  Time,  Ridgeway  shall be merged with and into CBI in accordance
with the  provisions  of  Section  33-11-101  of the SCBCA  and with the  effect
provided  in Section  33-11-106  of the SCBCA (the  "Merger").  CBI shall be the
Surviving Corporation resulting from the Merger. The Merger shall be consummated
pursuant to the terms of this Agreement,  which has been approved and adopted by
the respective Boards of Directors of Ridgeway and CBI.

         1.2 Time and Place of  Closing.  The  consummation  of the Merger  (the
"Closing")  shall take place at 9:00 A.M.  on the date that the  Effective  Time
occurs (or the  immediately  preceding day if the Effective Time is earlier than


                                     A-2



9:00 A.M.),  or at such other time as the  Parties,  acting  through  their duly
authorized  officers,  may mutually agree. The place of Closing shall be at such
location as may be mutually agreed upon by the Parties.

         1.3 Effective Time. The Merger and the other transactions  contemplated
by this  Agreement  shall  become  effective  on the  date  and at the  time the
Articles of Merger  containing the Plan of Merger  attached  hereto as Exhibit 3
shall  become  effective  with the  Secretary  of  State  of the  State of South
Carolina (the  "Effective  Time").  Subject to the terms and conditions  hereof,
unless  otherwise  mutually agreed upon by the duly authorized  officers of each
Party,  the Parties  shall use their  reasonable  efforts to cause the Effective
Time to occur on the last  business  day of the  month in which  the last of the
following occurs: (i) the effective date (including expiration of any applicable
waiting period) of the last required Consent of any Regulatory  Authority having
authority over and approving or exempting the Merger, (ii) the date on which the
shareholders of Ridgeway approve the matters relating to this Agreement required
to be approved by such  shareholders  by  applicable  Law or,  (iii) the date on
which the  shareholders  of CBI approve the matters  relating to this  Agreement
required to be approved by such  shareholders  by applicable  Law, or such later
day within 30 days thereof as may be specified by CBI.

         1.4 Execution of Support Agreements.  Simultaneously with the execution
of this Agreement and as a condition hereto,  the directors of Ridgeway are each
executing and delivering to CBI, and the directors of CBI are each executing and
delivering to Ridgeway, a Support Agreement.

                                    ARTICLE 2

                                 TERMS OF MERGER

         2.1 Articles of Incorporation.  The Articles of Incorporation of CBI in
effect  immediately  prior  to the  Effective  Time  shall  be the  Articles  of
Incorporation  of the  Surviving  Corporation  after the  Effective  Time  until
otherwise amended or repealed.

         2.2  Bylaws.  The  Bylaws  of CBI in  effect  immediately  prior to the
Effective  Time  shall be the  Bylaws  of the  Surviving  Corporation  after the
Effective Time until otherwise amended or repealed.

         2.3 Directors and Officers.  The directors of CBI in office immediately
prior to the  Effective  Time,  together  with such  additional  persons  as may
thereafter be elected, shall serve as the directors of the Surviving Corporation
from and after the Effective Time in accordance with the Bylaws of the Surviving
Corporation.  The officers of CBI in office  immediately  prior to the Effective
Time, together with such additional persons as may thereafter be elected,  shall
serve as the officers of the Surviving  Corporation from and after the Effective
Time in accordance with the Bylaws of the Surviving Corporation.

                                    ARTICLE 3

                           MANNER OF CONVERTING SHARES

         3.1 Conversion of Shares.  Subject to the provisions of this Article 3,
at the  Effective  Time,  by virtue of the Merger and  without any action on the
part of CBI or Ridgeway,  or the  shareholders  of either of the foregoing,  the
shares of the constituent corporations shall be converted as follows:

         (a) Each share of CBI Common Stock issued and  outstanding  immediately
prior to the Effective Time shall remain issued and  outstanding  from and after
the Effective Time.



                                     A-3


         (b) Each share of Ridgeway Common Stock,  excluding  shares held by any
Ridgeway  Company or any CBI  Company,  in each case  other than in a  fiduciary
capacity or as a result of debts previously  contracted,  issued and outstanding
at the Effective Time shall be converted into 25 shares of CBI Common Stock plus
the right to receive  $100.00  cash  (subject  to the  election  as set forth in
Section 3.1(c) of the Agreement, the "Exchange Ratio").

         (c)  Holders  of  Ridgeway  Common  Stock  shall  be  provided  with an
opportunity  to elect to receive either (i) cash in lieu of receiving CBI Common
Stock with  respect to a  specified  number of shares of Ridgeway  Common  Stock
("Cash Election Shares") or (ii) CBI Common Stock in lieu of receiving cash with
respect  to a  specified  number of  shares of  Ridgeway  Common  Stock  ("Stock
Election Shares") in accordance with the procedures set forth below. An election
form and other  appropriate  and customary  transmittal  materials  (which shall
specify  that  delivery  shall be  effected,  and risk of loss and  title to the
certificates   theretofore   representing   Ridgeway   Common  Stock  (the  "Old
Certificates") shall pass, only upon proper delivery of such Old Certificates to
an exchange agent designated by CBI (the "Exchange  Agent")) in such form as CBI
and Ridgeway shall mutually agree (the "Election  Form") shall be mailed as soon
as  reasonably  practicable  after the  Effective  Time or on such other date as
Ridgeway and CBI shall  mutually  agree (the  "Mailing  Date") to each holder of
record of Ridgeway  Common Stock as of five  business  days prior to the Mailing
Date (the "Election  Form Record Date").  Ridgeway shall provide to the Exchange
Agent all  information  reasonably  necessary  for it to  perform  as  specified
herein.  Each  Election  Form  shall  permit a holder (or the  beneficial  owner
through  appropriate and customary  documentation  and instructions) of Ridgeway
Common Stock to elect to designate  all or a portion of such  holder's  Ridgeway
Common Stock as either Cash Election Shares or Stock Election Shares. Any shares
of Ridgeway  Common  Stock with  respect to which the holder (or the  beneficial
owner,  as the case may be) shall not have  submitted to the  Exchange  Agent an
effective,  properly  completed Election Form on or before 5:00 p.m. on the 20th
day  following the Mailing Date (or such other time and date as CBI and Ridgeway
may  mutually  agree) (the  "Election  Deadline")  shall be  converted  into the
Exchange  Ratio as set forth in Section  3.1(b) of this  Agreement  (such shares
being  referred to as "No Election  Shares").  Any such election shall have been
properly made only if the Exchange Agent shall have actually received a properly
completed  Election  Form by the Election  Deadline.  An Election  Form shall be
deemed properly  completed only if accompanied by one or more  certificates  (or
customary  affidavits  and  bond  regarding  the  loss  or  destruction  of such
certificates or the guaranteed  delivery of such certificates)  representing all
shares of Ridgeway  Common Stock  covered by such Election  Form,  together with
duly executed transmittal  materials included in the Election Form. Any Election
Form may be revoked or changed by the person submitting such Election Form at or
prior to the Election  Deadline.  In the event an Election Form is revoked prior
to the Election  Deadline,  the shares of Ridgeway  Common Stock  represented by
such Election Form shall become No Election Shares. Subject to the terms of this
Agreement and of the Election  Form,  the Exchange  Agent shall have  reasonable
discretion  to:  determine  whether any election,  revocation or change has been
properly or timely made; disregard immaterial defects in the Election Forms; and
determine the amount of any proration of stock or cash. Any good faith decisions
of the Exchange Agent  regarding  such matters shall be binding and  conclusive.
Neither CBI nor the Exchange  Agent shall be under any  obligation to notify any
person of any defect in an Election  Form.  Within five  business days after the
Election Deadline, unless the Effective Time has not yet occurred, in which case
as soon after the Effective  Time as  practicable,  CBI shall cause the Exchange
Agent to effect the  allocation  among the holders of Ridgeway  Common  Stock in
accordance with the Election Forms as follows:

         (i) The  Exchange  Agent will (x)  multiply the product of 25 times the
         number of Cash Election Shares (the  "Available  Stock") by the Average
         Closing  Price to  determine  the  value of the  Available  Stock  (the
         "Available  Stock Value") and (y) multiply the number of Stock Election
         Shares by  $100.00  to  determine  the  amount of  available  cash (the
         "Available Cash").




                                     A-4


         (ii) If the amount of Available Cash exceeds the Available Stock Value,
         then the  Available  Stock shall be  distributed  pro rata to the Stock
         Election Shares pursuant to a formula or process agreed upon by CBI and
         the Bank of Ridgeway.  To the extent that the value of CBI Common Stock
         (computed  using the Average  Closing Price) so distributed to a holder
         of Stock Election  Shares is less than $100.00 per Stock Election Share
         held, such holder shall receive the difference in cash.

         (iii) If the  Available  Stock Value  exceeds  the amount of  Available
         Cash, then the Available Cash shall be distributed pro rata to the Cash
         Election Shares pursuant to a formula or process agreed upon by CBI and
         the Bank of  Ridgeway.  To the extent  that the number of shares of CBI
         Common Stock  distributed  to a holder of Cash Election  Shares is less
         than 25 shares per Cash Election Share held,  such holder shall receive
         the value of the difference  (computed using the Average Closing Price)
         in cash in addition to $100.00 per share of the Cash Election Shares.

         3.2 Anti-Dilution  Provisions. In the event Ridgeway changes the number
of shares of Ridgeway Common Stock issued and outstanding prior to the Effective
Time as a result of a stock split,  reverse  stock  split,  stock  dividend,  or
similar recapitalization with respect to such stock, the Exchange Ratio shall be
proportionately  adjusted.  In the event CBI changes the number of shares of CBI
Common Stock issued and outstanding prior to the Effective Time as a result of a
stock split,  reverse stock split, stock dividend,  or similar  recapitalization
with respect to such stock and the record date  therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or similar
recapitalization  for which a record date is not established)  shall be prior to
the Effective Time, the Exchange Ratio shall be proportionately adjusted.

         3.3 Shares  Held by  Ridgeway  or CBI.  Each of the shares of  Ridgeway
Common  Stock held by any Ridgeway  Company or by any CBI Company,  in each case
other  than  in  a  fiduciary  capacity  or  as a  result  of  debts  previously
contracted,  shall  be  canceled  and  retired  at  the  Effective  Time  and no
consideration shall be issued in exchange therefor.

         3.4 Dissenting  Shareholders.  Any holder of shares of Ridgeway  Common
Stock who perfects such holder's  dissenters'  rights of appraisal in accordance
with and as contemplated by Chapter 13 of the SCBCA shall be entitled to receive
the value of such shares in cash as  determined  pursuant to such  provision  of
Law;  provided,  however,  that no such payment shall be made to any  dissenting
shareholder  unless and until such dissenting  shareholder has complied with the
applicable  provisions of the SCBCA and surrendered to the Surviving Corporation
the  certificate or  certificates  representing  the shares for which payment is
being made. In the event that after the Effective Time a dissenting  shareholder
of Ridgeway fails to perfect,  or effectively  withdraws or loses, such holder's
right to appraisal and of payment for such holder's shares,  CBI shall issue and
deliver the  consideration  to which such  holder of shares of  Ridgeway  Common
Stock is entitled under this Article 3 (without interest) upon surrender by such
holder of the certificate or certificates representing shares of Ridgeway Common
Stock held by such holder.  Ridgeway  will  establish an escrow  account with an
amount  sufficient to satisfy the maximum aggregate payment that may be required
to be paid to  dissenting  shareholders.  Upon  satisfaction  of all  claims  of
dissenting  shareholders,  the remaining escrowed amount,  reduced by payment of
the fees and expenses of the escrow  agent,  will be returned to Ridgeway or the
Surviving Corporation.

         3.5  Fractional  Shares.  Notwithstanding  any other  provision of this
Agreement,  each holder of shares of Ridgeway Common Stock exchanged pursuant to
the Merger who would  otherwise  have been  entitled  to receive a fraction of a
share  of CBI  Common  Stock  shall  receive,  in lieu  thereof,  cash  (without
interest) in an amount equal to a fractional part of a share of CBI Common Stock



                                     A-5


multiplied by the market value of one share of CBI Common Stock at the Effective
Time.  The market value of one share of CBI Common Stock at the  Effective  Time
shall be the last sale price of CBI Common Stock at the close of regular trading
on the AMEX (as reported by The Wall Street Journal or, if not reported thereby,
any  other  authoritative  source  agreed  to by  Ridgeway  and CBI) on the last
trading day  preceding  the  Effective  Time on which shares of CBI Common Stock
were traded. No such holder will be entitled to dividends, voting rights, or any
other rights as a shareholder in respect of any fractional shares.

                                    ARTICLE 4

                               EXCHANGE OF SHARES

         4.1  Exchange Procedures.

         (a) As soon as reasonably  practicable after the Effective Time or such
other date as Ridgeway and CBI shall  mutually  agree,  CBI and  Ridgeway  shall
cause  the  Exchange  Agent  to  mail to the  former  shareholders  of  Ridgeway
appropriate  transmittal  materials  described  in  Section  3.1(c).  After  the
Effective  Time,  each holder of shares of  Ridgeway  Common  Stock  (other than
shares to be canceled  pursuant to Section 3.3 of this  Agreement or as to which
dissenters' rights of appraisal as contemplated by Section 3.4 of this Agreement
have been  perfected and not withdrawn or forfeited  under Section  33-13-210 of
the SCBCA) issued and  outstanding at the Effective Time promptly upon surrender
of the  certificate  or  certificates  representing  such shares to the Exchange
Agent, shall receive in exchange therefor the consideration provided in Sections
3.1 and 3.5 of this Agreement, together with all undelivered dividends and other
distributions in respect of such shares (without  interest  thereon) pursuant to
Section  4.2 of this  Agreement.  To the extent  required by Section 3.5 of this
Agreement, each holder of shares of Ridgeway Common Stock issued and outstanding
at the Effective Time also shall receive,  upon surrender of the  certificate or
certificates  representing such shares,  cash in lieu of any fractional share of
CBI  Common  Stock to which  such  holder  may be  otherwise  entitled  (without
interest). Until so surrendered, each outstanding certificate of Ridgeway Common
Stock  shall be deemed  for all  purposes,  other  than as  provided  below with
respect  to the  payment  of  dividends  or other  distributions  payable to the
holders of shares of CBI Common Stock, to represent the consideration into which
the number of shares of Ridgeway Common Stock  represented  thereby prior to the
Effective Time shall have been converted.  CBI shall not be obligated to deliver
the  consideration  to which any  former  holder  of  Ridgeway  Common  Stock is
entitled as a result of the Merger until such holder  surrenders  such  holder's
certificate or certificates representing the shares of Ridgeway Common Stock for
exchange as provided in this Section 4.1. The  certificate  or  certificates  of
Ridgeway  Common  Stock so  surrendered  shall be duly  endorsed as the Exchange
Agent  may  require.  Any other  provision  of this  Agreement  notwithstanding,
neither the Surviving  Corporation,  Ridgeway,  nor the Exchange  Agent shall be
liable to a holder of Ridgeway  Common  Stock for any  amounts  paid or properly
delivered  in  good  faith  to a  public  official  pursuant  to any  applicable
abandoned property Law.

         4.2 Rights of Former Ridgeway Shareholders.  At the Effective Time, the
stock  transfer  books of  Ridgeway  shall be closed as to holders  of  Ridgeway
Common Stock immediately prior to the Effective Time and no transfer of Ridgeway
Common Stock by any such holder shall  thereafter be made or  recognized.  Until
surrendered  for exchange in  accordance  with the  provisions of Section 4.1 of
this Agreement,  each certificate  theretofore  representing  shares of Ridgeway
Common Stock  (other than shares to be canceled  pursuant to Section 3.3 of this
Agreement or as to which  dissenters'  rights of appraisal  as  contemplated  by
Section 3.4 of this Agreement have been perfected and not withdrawn or forfeited
under Section  33-13-210 of the SCBCA) shall from and after the  Effective  Time
represent for all purposes only the right to receive the consideration  provided
in  Sections  3.1 and 3.5 of  this  Agreement  in  exchange  therefor,  subject,



                                     A-6


however, to the Surviving Corporation's  obligation to pay any dividends or make
any other  distributions  with a record date prior to the  Effective  Time which
have been  declared  or made by  Ridgeway  in respect of such shares of Ridgeway
Common Stock in  accordance  with the terms of this  Agreement  and which remain
unpaid  at  the  Effective  Time.  To  the  extent   permitted  by  Law,  former
shareholders  of record of Ridgeway  Common Stock at the  Effective  Time (other
than  holders  of  shares  as  to  which  dissenters'  rights  of  appraisal  as
contemplated  by  Section  3.4 of this  Agreement  have been  perfected  and not
withdrawn or forfeited  under Section  33-13-210 of the SCBCA) shall be entitled
to vote after the Effective Time at any meeting of CBI  shareholders  the number
of whole  shares of CBI  Common  Stock  into which  their  respective  shares of
Ridgeway  Common Stock are  converted,  regardless  of whether such holders have
exchanged their certificates representing Ridgeway Common Stock for certificates
representing  CBI  Common  Stock  in  accordance  with  the  provisions  of this
Agreement.  Whenever a dividend or other  distribution is declared by CBI on the
CBI Common Stock,  the record date for which is at or after the Effective  Time,
the declaration shall include dividends or other  distributions on all shares of
CBI Common Stock issuable  pursuant to this Agreement,  but no dividend or other
distribution payable to the holders of record of CBI Common Stock as of any time
subsequent  to the  Effective  Time  shall be  delivered  to the  holder  of any
certificate  representing shares of Ridgeway Common Stock issued and outstanding
at the Effective Time until such holder surrenders such certificate for exchange
as provided in Section 4.1 of this  Agreement.  However,  upon surrender of such
Ridgeway  Common  Stock  certificate,  both  the CBI  Common  Stock  certificate
(together with all such  undelivered  dividends or other  distributions  without
interest)  and any  undelivered  dividends  and  cash  payments  to be paid  for
fractional share interests  (without  interest) shall be delivered and paid with
respect to each share represented by such certificate.

                                    ARTICLE 5

                   REPRESENTATIONS AND WARRANTIES OF RIDGEWAY

         Ridgeway  hereby  represents  and  warrants,   except  as  specifically
disclosed in a section of the Ridgeway  Disclosure  Memorandum  corresponding to
the relevant section of this Article 5, to CBI as follows:

              5.1 Organization,  Standing,  and Power. Ridgeway is a corporation
duly  organized,  validly  existing,  and in good standing under the Laws of the
State of South  Carolina,  and has the corporate power and authority to carry on
its  business as now  conducted  and to own,  lease,  and  operate its  Material
Assets. Ridgeway is duly qualified or licensed to transact business as a foreign
corporation  in good  standing  in the States of the United  States and  foreign
jurisdictions  where the character of its Assets or the nature or conduct of its
business  requires  it  to  be  so  qualified  or  licensed,   except  for  such
jurisdictions  in which  the  failure  to be so  qualified  or  licensed  is not
reasonably likely to have,  individually or in the aggregate, a Material Adverse
Effect on Ridgeway.

         5.2  Authority; No Breach of Agreement.

         (a)  Ridgeway  has the  corporate  power  and  authority  necessary  to
execute,  deliver,  and  perform its  obligations  under this  Agreement  and to
consummate the transactions  contemplated hereby. The execution,  delivery,  and
performance  of  this  Agreement,  and  the  consummation  of  the  transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action (including valid authorization and adoption of
this  Agreement by Ridgeway's  duly  constituted  Board of Directors) in respect
thereof on the part of Ridgeway,  subject to the  approval of this  Agreement by
the holders of two-thirds  of the  outstanding  shares of Ridgeway  Common Stock
entitled  to vote  thereon,  which is the only  shareholder  vote  required  for
approval of this Agreement and  consummation of the Merger by Ridgeway.  Subject
to such  requisite  shareholder  approval,  this  Agreement  represents a legal,
valid,  and binding  obligation  of Ridgeway,  enforceable  against  Ridgeway in
accordance  with its terms  (except in all cases as such  enforceability  may be
limited by  applicable  bankruptcy,  insolvency,  reorganization,  receivership,
conservatorship,  moratorium,  or similar  Laws  affecting  the  enforcement  of



                                     A-7


creditors'  rights  generally and except that the  availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).

         (b) Neither the execution  and delivery of this  Agreement by Ridgeway,
nor the consummation by Ridgeway of the transactions  contemplated  hereby,  nor
compliance by Ridgeway with any of the provisions hereof, will (i) conflict with
or result in a breach of any provision of Ridgeway's  Articles of  Incorporation
or Bylaws,  or (ii)  constitute  or result in a Default  under,  or require  any
Consent  pursuant  to, or result in the creation of any Lien on any Asset of any
Ridgeway  Company under, any Contract or Permit of any Ridgeway  Company,  where
such  Default or Lien,  or any failure to obtain  such  Consent,  is  reasonably
likely to have,  individually or in the aggregate,  a Material Adverse Effect on
Ridgeway,  or (iii) subject to receipt of the requisite  Consents referred to in
Section  9.1(b) of this  Agreement,  violate any Law or Order  applicable to any
Ridgeway Company or any of their respective Material Assets,  which violation is
reasonably likely to have,  individually or in the aggregate, a Material Adverse
Effect on Ridgeway.

         (c) Other than in connection or compliance  with the  provisions of the
Securities Laws,  applicable state corporate and securities Laws, and other than
Consents  required  from  Regulatory  Authorities,  and other than notices to or
filings  with the  Internal  Revenue  Service or the  Pension  Benefit  Guaranty
Corporation or both with respect to any employee benefit plans, or under the HSR
Act, and other than Consents,  filings, or notifications  which, if not obtained
or made, are not reasonably likely to have,  individually or in the aggregate, a
Material  Adverse Effect on Ridgeway,  no notice to, filing with, or Consent of,
any public body or authority is necessary  for the  consummation  by Ridgeway of
the Merger and the other transactions contemplated in this Agreement.

         5.3  Capital Stock.

         (a) The authorized capital stock of Ridgeway  consists,  as of the date
of this  Agreement,  of 40,000 shares of Ridgeway  Common Stock, of which, as of
the date of this Agreement,  (i) 40,000 shares were issued and  outstanding,  no
shares  held in  treasury  and (ii) no  shares of  Ridgeway  Common  Stock  were
issuable  pursuant to  outstanding  awards under stock plans,  and not more than
40,000  shares  of  Ridgeway  Common  Stock  will  be  issuable  or  issued  and
outstanding at the Effective Time. All of the issued and  outstanding  shares of
Ridgeway  Common Stock are duly and validly issued and outstanding and are fully
paid  and,  except  as  expressly   provided  otherwise  under  applicable  Law,
nonassessable under the SCBCA. None of the outstanding shares of Ridgeway Common
Stock has been issued in  violation of any  preemptive  rights of the current or
past shareholders of Ridgeway.

         (b) There is no Ridgeway  Stock Plan and there are no shares of capital
stock or other equity  securities  of Ridgeway  outstanding  and no  outstanding
Rights relating to the capital stock of Ridgeway.

         5.4 Ridgeway Subsidiaries. Ridgeway has disclosed in Section 5.4 of the
Ridgeway Disclosure  Memorandum all of the Ridgeway  Subsidiaries as of the date
of this Agreement.  Ridgeway or one of its  Subsidiaries  owns all of the issued
and outstanding shares of capital stock of each Ridgeway  Subsidiary.  No equity
securities of any Ridgeway  Subsidiary  are or may become  required to be issued
(other than to another Ridgeway Company) by reason of any Rights,  and there are
no Contracts by which any Ridgeway  Subsidiary  is bound to issue (other than to
another Ridgeway Company) additional shares of its capital stock or Rights or by
which any  Ridgeway  Company  is or may be bound to  transfer  any shares of the
capital  stock  of any  Ridgeway  Subsidiary  (other  than to  another  Ridgeway
Company).  There are no Contracts relating to the rights of any Ridgeway Company
to vote or to  dispose  of any  shares  of the  capital  stock  of any  Ridgeway
Subsidiary.  All of the shares of capital stock of each Ridgeway Subsidiary held
by a Ridgeway Company are fully paid and, except as expressly provided otherwise
under applicable Law,  nonassessable  under the applicable  corporate or banking



                                     A-8


Law of the  jurisdiction  in which such  Subsidiary is incorporated or organized
and are owned by the Ridgeway Company, except as set forth in Section 5.4 of the
Ridgeway  Disclosure  Memorandum,  free and  clear of any  Lien.  Each  Ridgeway
Subsidiary is a bank or a corporation,  and is duly organized, validly existing,
and (if applicable) in good standing under the Laws of the jurisdiction in which
it is  incorporated  or  organized,  and has the  corporate  power and authority
necessary  for it to own,  lease,  and  operate  its  Assets and to carry on its
business  as now  conducted.  Each  Ridgeway  Subsidiary  is duly  qualified  or
licensed to transact  business as a foreign  corporation in good standing in the
States of the United States and foreign jurisdictions where the character of its
Assets or the nature or conduct of its  business  requires it to be so qualified
or  licensed,  except  for such  jurisdictions  in which  the  failure  to be so
qualified or licensed is not reasonably  likely to have,  individually or in the
aggregate, a Material Adverse Effect on Ridgeway.  Each Ridgeway Subsidiary that
is a depository institution is an "insured depository institution" as defined in
the Federal Deposit Insurance Act and applicable regulations thereunder, and the
deposits in which are insured by the Bank  Insurance  Fund to the fullest extent
permitted by Law.

         5.5 Financial Statements.  Ridgeway has disclosed in Section 5.5 of the
Ridgeway Disclosure Memorandum, and has delivered to CBI copies of, all Ridgeway
Financial  Statements  prepared  for  periods  ended  prior  to the date of this
Agreement  and will deliver to CBI copies of all Ridgeway  Financial  Statements
prepared  subsequent  to the  date of this  Agreement.  The  Ridgeway  Financial
Statements (as of the dates thereof and for the periods covered thereby) (i) are
or, if dated after the date of this  Agreement,  will be in accordance  with the
books and records of the Ridgeway  Companies,  which are or will be, as the case
may be,  complete and correct and which have been or will have been, as the case
may be, maintained in accordance with past business practices,  and (ii) present
or will present, as the case may be, fairly the consolidated  financial position
of the Ridgeway Companies as of the dates indicated and the consolidated results
of operations,  changes in shareholders'  equity, and cash flows of the Ridgeway
Companies for the periods  indicated,  in  accordance  with GAAP (subject to any
exceptions  as to  consistency  specified  therein or as may be indicated in the
notes  thereto  or,  in the case of  interim  financial  statements,  to  normal
recurring year-end or audit adjustments which were not or are not expected to be
Material in amount or effect).

         5.6 Absence of  Undisclosed  Liabilities.  No Ridgeway  Company has any
Liabilities  that  are  reasonably  likely  to  have,  individually  or  in  the
aggregate,  a Material  Adverse  Effect on Ridgeway,  except  Liabilities to the
extent  accrued  or  reserved  against  in the  consolidated  balance  sheets of
Ridgeway as of September 30, 2001, included in the Ridgeway Financial Statements
or reflected in the notes thereto,  Liabilities  incurred in the ordinary course
of business  subsequent to September 30, 2001, and Liabilities to be incurred in
connection with the  transactions  contemplated  by this Agreement.  No Ridgeway
Company has incurred or paid any Liability since September 30, 2001,  except for
such Liabilities  incurred or paid in the ordinary course of business consistent
with  past  business  practices  and which  are not  reasonably  likely to have,
individually or in the aggregate, a Material Adverse Effect on Ridgeway.

         5.7 Absence of Certain  Changes or Events.  Since  September  30, 2001,
except as disclosed in the Ridgeway Financial  Statements delivered prior to the
date of this  Agreement  or as otherwise  disclosed  in the Ridgeway  Disclosure
Memorandum,  there have been no events,  changes, or occurrences which have had,
or are reasonably likely to have,  individually or in the aggregate,  a Material
Adverse Effect on Ridgeway.

         5.8  Tax Matters.

         (a) Since December 31, 1994, all Tax Returns required to be filed by or
on behalf of any of the Ridgeway  Companies have been timely filed,  or requests
for extensions have been timely filed, granted, and have not expired for periods



                                     A-9


ended on or before December 31, 2000, and all Tax Returns filed are complete and
accurate in all  Material  respects.  All Tax  Returns for periods  ending on or
before the date of the most recent  fiscal year end  immediately  preceding  the
Effective  Time will be timely filed or requests for  extensions  will be timely
filed.  All Taxes shown on filed Tax Returns  have been paid.  There is no audit
examination,  deficiency, or refund Litigation with respect to any Taxes that is
reasonably likely to result in a determination that would have,  individually or
in the aggregate,  a Material  Adverse Effect on Ridgeway,  except to the extent
reserved against in the Ridgeway Financial Statements dated prior to the date of
this Agreement. All Taxes due with respect to completed and settled examinations
or concluded Litigation with respect to Taxes have been paid.

         (b) None of the Ridgeway  Companies has executed an extension or waiver
of any statute of  limitations  on the  assessment  or collection of any Tax due
(excluding such statutes that relate to years currently under examination by the
Internal  Revenue  Service  or  other  applicable  taxing  authorities)  that is
currently in effect.

         (c) Adequate  provision for any Material Taxes due or to become due for
any of the Ridgeway  Companies  for the period or periods  through and including
the date of the  respective  Ridgeway  Financial  Statements  has  been  made in
accordance with GAAP and is reflected on such Ridgeway Financial Statements.

         (d) Each of the Ridgeway Companies is in Material  compliance with, and
its records contain the information and documents  (including properly completed
IRS Forms W-9)  necessary to comply with, in all Material  respects,  applicable
information reporting and Tax withholding requirements under federal, state, and
local Tax Laws, and such records  identify with specificity all accounts subject
to backup withholding under Section 3406 of the Internal Revenue Code.

         (e) None of the Ridgeway Companies has made any payments,  is obligated
to make  any  payments,  or is a party  to any  contract,  agreement,  or  other
arrangement that could obligate it to make any payments that would be disallowed
as a deduction under Section 280G or 162(m) of the Internal Revenue Code.

         (f) There are no Material  Liens with  respect to Taxes upon any of the
Assets of the Ridgeway Companies.

         (g) There has not been an  ownership  change,  as defined  in  Internal
Revenue Code Section 382(g),  of the Ridgeway  Companies that occurred during or
after  any  Taxable  Period  in which  the  Ridgeway  Companies  incurred  a net
operating loss that carries over to any Taxable Period ending after December 31,
2000.

         (h) After the date of this Agreement, no Material election with respect
to Taxes will be made without the prior  consent of CBI,  which consent will not
be unreasonably withheld.

         (i) No Ridgeway Company has or has had a permanent establishment in any
foreign country,  as defined in any applicable tax treaty or convention  between
the United States and such foreign country.

         (j) No Ridgeway  Company has filed any consent under Section  341(f) of
the Internal Revenue Code concerning collapsible corporations.

         5.9 Assets. The Ridgeway Companies have good and marketable title, free
and  clear of all  Liens,  to all of their  respective  Assets  other  than such
defects and Liens  which are not  reasonably  likely to have a Material  Adverse



                                     A-10


Effect on  Ridgeway.  All  tangible  properties  used in the  businesses  of the
Ridgeway Companies are in good condition, reasonable wear and tear excepted, and
are usable in the ordinary  course of business  consistent  with Ridgeway's past
practices,  except as would not be reasonably  likely to have a Material Adverse
Effect on Ridgeway.  All Assets which are Material to  Ridgeway's  business on a
consolidated  basis,  held  under  leases or  subleases  by any of the  Ridgeway
Companies,  are held under valid Contracts  enforceable in accordance with their
respective  terms  (except  as  enforceability  may  be  limited  by  applicable
bankruptcy, insolvency, reorganization,  moratorium, or other Laws affecting the
enforcement of creditors'  rights  generally and except that the availability of
the equitable remedy of specific  performance or injunctive relief is subject to
the discretion of the court before which any  proceedings  may be brought),  and
each such Contract is in full force and effect. The Ridgeway Companies currently
maintain insurance in amounts, scope and coverage reasonably necessary for their
operations.  None  of the  Ridgeway  Companies  has  received  notice  from  any
insurance  carrier  that (i) such  insurance  will be canceled or that  coverage
thereunder will be Materially reduced or eliminated,  or (ii) premium costs with
respect to such  policies of  insurance  will be  substantially  increased.  The
Assets of the Ridgeway Companies include all Material Assets required to operate
the business of the Ridgeway Companies as presently conducted.

         5.10  Environmental Matters.

          (a) Each Ridgeway Company, its Participation Facilities,  and its Loan
Properties are, and have been, in compliance with all Environmental Laws, except
those  instances  of  non-compliance  which are not  reasonably  likely to have,
individually or in the aggregate, a Material Adverse Effect on Ridgeway.

         (b) There is no  Litigation  pending or, to the  Knowledge of Ridgeway,
threatened before any court,  governmental agency, or authority,  or other forum
in which any Ridgeway  Company or any of its  Participation  Facilities has been
or, with respect to  threatened  Litigation,  may  reasonably  be expected to be
named  as  a  defendant  (i)  for  alleged   noncompliance   (including  by  any
predecessor) with any Environmental Law or (ii) relating to the release into the
environment of any Hazardous  Material,  whether or not occurring at, on, under,
or involving a site owned, leased, or operated by any Ridgeway Company or any of
its Participation  Facilities,  except for such Litigation pending or threatened
that is not  reasonably  likely to have,  individually  or in the  aggregate,  a
Material Adverse Effect on Ridgeway.

         (c) There is no  Litigation  pending,  or to the Knowledge of Ridgeway,
threatened  before any court,  governmental  agency, or board, or other forum in
which any of its Loan  Properties (or Ridgeway in respect of such Loan Property)
has been or, with respect to threatened  Litigation,  may reasonably be expected
to be named as a  defendant  or  potentially  responsible  party (i) for alleged
noncompliance  (including by any predecessor) with any Environmental Law or (ii)
relating to the release into the environment of any Hazardous Material,  whether
or not occurring at, on, under,  or involving a Loan  Property,  except for such
Litigation  pending  or  threatened  that  is not  reasonably  likely  to  have,
individually or in the aggregate, a Material Adverse Effect on Ridgeway.

         (d) To the Knowledge of Ridgeway,  there is no reasonable basis for any
Litigation of a type described in subsections  (b) or (c), except such as is not
reasonably likely to have,  individually or in the aggregate, a Material Adverse
Effect on Ridgeway.

         (e) To the Knowledge of Ridgeway, during the period of (i) any Ridgeway
Company's  ownership or operation of any of their respective current properties,
(ii) any Ridgeway Company's participation in the management of any Participation
Facility,  or (iii) any Ridgeway  Company's  holding of a security interest in a
Loan Property,  there have been no releases of Hazardous Material in, on, under,
or affecting (or potentially affecting) such properties,  except such as are not
reasonably likely to have,  individually or in the aggregate, a Material Adverse
Effect on Ridgeway.  Prior to the period of (i) any Ridgeway Company's ownership
or operation of any of their respective  current  properties,  (ii) any Ridgeway



                                      A-11


Company's  participation  in the management of any  Participation  Facility,  or
(iii) any Ridgeway  Company's holding of a security interest in a Loan Property,
to the Knowledge of Ridgeway,  there were no releases of Hazardous  Material in,
on,  under,  or affecting any such  property,  Participation  Facility,  or Loan
Property,  except such as are not reasonably likely to have,  individually or in
the aggregate, a Material Adverse Effect on Ridgeway.

         5.11  Compliance  with  Laws.  Ridgeway  is duly  registered  as a bank
holding  company  under the BHC Act.  Each  Ridgeway  Company  has in effect all
Permits  necessary for it to own,  lease,  or operate its Material Assets and to
carry on its business as now conducted,  except for those Permits the absence of
which are not reasonably  likely to have,  individually  or in the aggregate,  a
Material Adverse Effect on Ridgeway, and there has occurred no Default under any
such  Permit,  other  than  Defaults  which are not  reasonably  likely to have,
individually or in the aggregate, a Material Adverse Effect on Ridgeway. None of
the Ridgeway Companies:

         (a) is in violation of any Material Laws, Orders, or Permits applicable
to its business or employees  conducting  its  business,  except for  violations
which are not reasonably  likely to have,  individually  or in the aggregate,  a
Material Adverse Effect on Ridgeway; and

         (b) has received any written  notification  or  communication  from any
agency or department of federal,  state,  or local  government or any Regulatory
Authority or the staff thereof (i) asserting that any Ridgeway Company is not in
compliance with any of the Laws or Orders which such  governmental  authority or
Regulatory Authority enforces,  where such noncompliance is reasonably likely to
have,  individually or in the aggregate,  a Material Adverse Effect on Ridgeway,
(ii)  threatening  to revoke any Permits,  the revocation of which is reasonably
likely to have,  individually or in the aggregate,  a Material Adverse Effect on
Ridgeway,  or (iii) requiring any Ridgeway  Company (x) to enter into or consent
to the  issuance  of a cease and  desist  order,  formal  agreement,  directive,
commitment, or memorandum of understanding, or (y) to adopt any Board resolution
or similar undertaking,  which restricts Materially the conduct of its business,
or in any Material manner relates to its capital adequacy, its credit or reserve
policies, its management, or the payment of dividends.

         5.12  Labor  Relations.  No  Ridgeway  Company  is the  subject  of any
Litigation  asserting  that it or any other  Ridgeway  Company has  committed an
unfair labor practice (within the meaning of the National Labor Relations Act or
comparable  state Law) or seeking to compel it or any other Ridgeway  Company to
bargain with any labor organization as to wages or conditions of employment, nor
is any  Ridgeway  Company  a party  to or  bound  by any  collective  bargaining
agreement,  Contract,  or other agreement or understanding with a labor union or
labor organization, nor is there any strike or other labor dispute involving any
Ridgeway Company,  pending or, to the Knowledge of Ridgeway,  threatened,  or to
the  Knowledge  of  Ridgeway,  is there  any  activity  involving  any  Ridgeway
Company's employees seeking to certify a collective  bargaining unit or engaging
in any other organization activity.

         5.13  Employee Benefit Plans.

         (a) Ridgeway has  disclosed in Section 5.13 of the Ridgeway  Disclosure
Memorandum, and has delivered or made available to CBI prior to the execution of
this Agreement  correct and complete copies in each case of all Ridgeway Benefit
Plans.  For  purposes of this  Agreement,  "Ridgeway  Benefit  Plans"  means all
Material written pension,  retirement,  profit-sharing,  deferred  compensation,
stock option, employee stock ownership, severance pay, vacation, bonus, or other
incentive plan, all other Material written employee programs or agreements,  all
medical,  vision,  dental,  or other written  health plans,  all life  insurance
plans,  and all other Material  written employee benefit plans or fringe benefit
plans,  including  written  "employee  benefit plans" as that term is defined in



                                      A-12


Section  3(3) of  ERISA,  maintained  by,  sponsored  in whole or in part by, or
contributed to by, any Ridgeway Company for the benefit of employees,  retirees,
dependents, spouses, directors,  independent contractors, or other beneficiaries
and under which employees, retirees, dependents, spouses, directors, independent
contractors,  or other  beneficiaries  are eligible to  participate.  Any of the
Ridgeway Benefit Plans which is an "employee welfare benefit plan," as that term
is defined in Section 3(l) of ERISA,  or an "employee  pension benefit plan," as
that term is  defined  in  Section  3(2) of ERISA,  is  referred  to herein as a
"Ridgeway  ERISA Plan." Any Ridgeway ERISA Plan which is also subject to Section
412 of the Internal  Revenue Code or Section 302 of ERISA, is referred to herein
as a "Ridgeway  Pension Plan." Neither  Ridgeway nor any Ridgeway Company has an
"obligation   to   contribute"   (as  defined  in  ERISA   Section  4212)  to  a
"multiemployer  plan" (as defined in ERISA  Sections  4001(a)(3)  and 3(37)(A)).
Each "employee  pension benefit plan," as defined in Section 3(2) of ERISA, ever
maintained by any Ridgeway  Company,  that was intended to qualify under Section
401(a) of the Internal  Revenue Code is disclosed as such in Section 5.13 of the
Ridgeway Disclosure Memorandum.

         (b)  Ridgeway  has  delivered  or made  available  to CBI  prior to the
execution  of this  Agreement  correct  and  complete  copies  of the  following
documents:  (i) all trust  agreements  or other  funding  arrangements  for such
Ridgeway  Benefit Plans  (including  insurance  contracts),  and all  amendments
thereto, (ii) with respect to any such Ridgeway Benefit Plans or amendments, the
most recent determination  letters,  and all Material rulings,  Material opinion
letters,  Material  information letters, or Material advisory opinions issued by
the Internal  Revenue  Service,  the United States  Department of Labor,  or the
Pension  Benefit  Guaranty  Corporation  after  December 31, 1994,  (iii) annual
reports  or  returns,  audited  or  unaudited  financial  statements,  actuarial
valuations and reports,  and summary  annual  reports  prepared for any Ridgeway
Benefit  Plan with respect to the most recent plan year and (iv) the most recent
summary plan descriptions and any Material modifications thereto.

         (c) All Ridgeway  Benefit Plans are in compliance  with the  applicable
terms of ERISA,  the Internal Revenue Code, and any other applicable Laws, other
than  instances  of  noncompliance  which  are not  reasonably  likely  to have,
individually or in the aggregate,  a Material  Adverse Effect on Ridgeway.  Each
Ridgeway  ERISA Plan which is intended to be qualified  under Section  401(a) of
the Internal Revenue Code has received a favorable determination letter from the
Internal  Revenue  Service,  and to the  Knowledge  of  Ridgeway,  there  are no
circumstances likely to result in revocation of any such favorable determination
letter.  Each trust created under any Ridgeway ERISA Plan has been determined to
be  exempt  from Tax  under  Section  501(a) of the  Internal  Revenue  Code and
Ridgeway is not aware of any circumstance  which will or could reasonably result
in revocation of such exemption.  With respect to each Ridgeway  Benefit Plan to
the Knowledge of Ridgeway,  no event has occurred which will or could reasonably
give rise to a loss of any intended Tax consequences  under the Internal Revenue
Code or to any Tax  under  Section  511 of the  Internal  Revenue  Code  that is
reasonably likely,  individually or in the aggregate, to have a Material Adverse
Effect  on  Ridgeway.  There is no  Material  pending  or, to the  Knowledge  of
Ridgeway, threatened Litigation relating to any Ridgeway ERISA Plan.

         (d) No Ridgeway  Company has engaged in a  transaction  with respect to
any Ridgeway Benefit Plan that,  assuming the Taxable Period of such transaction
expired as of the date of this Agreement,  would subject any Ridgeway Company to
a Material tax or penalty imposed by either Section 4975 of the Internal Revenue
Code or Section 502(i) of ERISA in amounts which are reasonably  likely to have,
individually or in the aggregate, a Material Adverse Effect on Ridgeway. Neither
Ridgeway nor, to the knowledge of Ridgeway,  any  administrator  or fiduciary of
any Ridgeway  Benefit Plan (or any agent of any of the foregoing) has engaged in
any  transaction,  or acted or failed to act in any manner  with  respect to any
Ridgeway  Benefit  Plan which could  subject  Ridgeway to any direct or indirect
Liability (by indemnity or otherwise) for breach of any fiduciary, co-fiduciary,
or  other  duty  under  ERISA,  where  such  Liability,  individually  or in the
aggregate,  is reasonably  likely to have a Material Adverse Effect on Ridgeway.



                                      A-13


No oral or written representation or communication with respect to any aspect of
the Ridgeway  Benefit  Plans has been made to employees of any Ridgeway  Company
which is not in conformity with the written or otherwise  preexisting  terms and
provisions of such plans, where any Liability resulting from such non-conformity
is reasonably likely to have a Material Adverse Effect on Ridgeway.

         (e) No Ridgeway Pension Plan has any "unfunded  current  liability," as
that term is defined in Section 302(d)(8)(A) of ERISA, and the fair market value
of the  Assets of any such plan is equal to or  exceeds  the  actuarial  present
value of all accrued  benefits under such plans (whether  vested or not),  based
upon the actuarial assumptions used to prepare the most recent actuarial reports
for such plans;  and to the  Knowledge of  Ridgeway,  since the date of the most
recent  actuarial  valuation,  no event has occurred  which would be  reasonably
expected to change any such funded status in a way that is reasonably  likely to
have,  individually or in the aggregate,  a Material Adverse Effect on Ridgeway.
Neither any Ridgeway  Pension Plan nor any  "single-employer  plan,"  within the
meaning of Section  4001(a)(15) of ERISA,  currently  maintained by any Ridgeway
Company,  or the  single-employer  plan of any entity  which is  considered  one
employer  with  Ridgeway  under  Section  4001 of  ERISA or  Section  414 of the
Internal  Revenue  Code or  Section  302 of ERISA  (whether  or not  waived)  (a
"Ridgeway ERISA Affiliate") has an "accumulated  funding  deficiency" within the
meaning of Section  412 of the  Internal  Revenue  Code or Section 302 of ERISA,
based upon the actuarial  assumptions  used to prepare the most recent actuarial
reports for such plans. All required  contributions with respect to any Ridgeway
Pension Plan or any  single-employer  plan of an Ridgeway  ERISA  Affiliate have
been timely  made and there is no lien or  expected to be a lien under  Internal
Revenue  Code  Section  412(n) or ERISA  Section  302(f)  or Tax under  Internal
Revenue Code Section 4971. No Ridgeway  Company has provided,  or is required to
provide,  security to an Ridgeway Pension Plan or to any single-employer plan of
an Ridgeway  ERISA  Affiliate  pursuant to Section  401(a)(29)  of the  Internal
Revenue  Code.  All premiums  required to be paid under ERISA  Section 4006 have
been  timely  paid by  Ridgeway,  except to the extent any failure to timely pay
would not have a Material Adverse Effect on Ridgeway.

         (f) No Liability  under Title IV of ERISA has been or is expected to be
incurred  by any  Ridgeway  Company  with  respect to any defined  benefit  plan
currently  or  formerly  maintained  by any of  them  or by any  Ridgeway  ERISA
Affiliate  that has not been satisfied in full (other than Liability for Pension
Benefit Guaranty  Corporation premiums which have been paid when due, except for
Liabilities  that,  individually or in the aggregate,  would not have a Material
Adverse Effect on Ridgeway).

         (g) No Ridgeway  Company  has any  obligations  for retiree  health and
retiree life  benefits  under any of the Ridgeway  Benefit Plans other than with
respect to benefit coverage mandated by applicable Law.

         (h) Neither  the  execution  and  delivery  of this  Agreement  nor the
consummation of the transactions  contemplated  hereby will, by themselves,  (i)
result  in  any  payment  (including,  without  limitation,   severance,  golden
parachute,  or  otherwise)  becoming  due to any director or any employee of any
Ridgeway  Company from any Ridgeway  Company under any Ridgeway  Benefit Plan or
otherwise,  other than by operation of Law, (ii) increase any benefits otherwise
payable under any Ridgeway  Benefit Plan, or (iii) result in any acceleration of
the time of payment or vesting of any such benefit.

         5.14  Material  Contracts.  Except as set forth in Section  5.14 of the
Ridgeway Disclosure Memorandum, none of the Ridgeway Companies, nor any of their
respective  Assets,  businesses,  or  operations,  is a party to, or is bound or
affected  by,  or  receives  benefits  under,  (i)  any  employment,  severance,
termination, consulting, or retirement Contract providing for aggregate payments
to any  Person in any  calendar  year in excess of  $50,000,  (ii) any  Contract
relating to the  borrowing of money by any Ridgeway  Company or the guarantee by
any Ridgeway  Company of any such  obligation  (other than Contracts  evidencing
deposit  liabilities,  purchases  of  federal  funds,  fully-secured  repurchase
agreements,  and  Federal  Home Loan Bank  advances  of  depository  institution
Subsidiaries, trade payables, and Contracts relating to borrowings or guarantees
made in the  ordinary  course of  business),  and (iii)  any other  Contract  or
amendment  thereto  that would be  required  to be filed as an exhibit to a Form
10-K filed by Ridgeway with the SEC as of the date of this Agreement if Ridgeway
were  required  to file a Form 10-K with the SEC  (together  with all  Contracts
referred  to in  Sections  5.9 and  5.13(a)  of this  Agreement,  the  "Ridgeway



                                      A-14


Contracts"). With respect to each Ridgeway Contract: (i) the Contract is in full
force and effect; (ii) no Ridgeway Company is in Default thereunder,  other than
Defaults  which  are not  reasonably  likely  to  have,  individually  or in the
aggregate, a Material Adverse Effect on Ridgeway;  (iii) no Ridgeway Company has
repudiated or waived any Material  provision of any such  Contract;  and (iv) no
other party to any such Contract is, to the Knowledge of Ridgeway, in Default in
any  respect,  other  than  Defaults  which are not  reasonably  likely to have,
individually or in the aggregate,  a Material Adverse Effect on Ridgeway, or has
repudiated or waived any Material provision thereunder.  Except for Federal Home
Loan Bank advances,  all of the  indebtedness of any Ridgeway  Company for money
borrowed is prepayable at any time by such Ridgeway  Company  without penalty or
premium.

         5.15  Legal Proceedings.

         (a) There is no Litigation  instituted or pending, or, to the Knowledge
of  Ridgeway,  threatened  against any Ridgeway  Company,  or against any Asset,
interest,  or  right  of any  of  them,  that  is  reasonably  likely  to  have,
individually or in the aggregate, a Material Adverse Effect on Ridgeway, nor are
there any Orders of any Regulatory Authorities,  other governmental authorities,
or arbitrators  outstanding  against any Ridgeway  Company,  that are reasonably
likely to have,  individually or in the aggregate,  a Material Adverse Effect on
Ridgeway.

         (b) Section 5.15(b) of the Ridgeway  Disclosure  Memorandum  includes a
summary  report of all  Litigation as of the date of this Agreement to which any
Ridgeway Company is a party and which names a Ridgeway Company as a defendant or
cross-defendant.

         5.16 Reports.  Since December 31, 1996, or the date of  organization if
later,  each  Ridgeway  Company has timely  filed all  reports  and  statements,
together with any amendments  required to be made with respect thereto,  that it
was required to file with any Regulatory  Authorities,  except  failures to file
which are not reasonably  likely to have,  individually  or in the aggregate,  a
Material Adverse Effect on Ridgeway.

         5.17 Statements True and Correct.  None of the information  supplied or
to be  supplied  by any  Ridgeway  Company or any  Affiliate  thereof  regarding
Ridgeway or such  Affiliate  for inclusion in the  Registration  Statement to be
filed  by CBI  with  the SEC  will,  when  the  Registration  Statement  becomes
effective, contain any untrue statement of a Material fact, or omit to state any
Material  fact  required  to be  stated  thereunder  or  necessary  to make  the
statements  therein,  in light of the circumstances  under which they were made,
not  misleading.  None of the  information  supplied  or to be  supplied  by any
Ridgeway  Company or any Affiliate  thereof for inclusion in the Proxy Statement
to be mailed to Ridgeway's  shareholders  in connection  with the  Shareholders'
Meeting will,  when first mailed to the  shareholders  of Ridgeway,  contain any
misstatement of Material fact, or omit to state any Material fact required to be
stated thereunder or necessary to make the statements  therein,  in light of the
circumstances under which they were made, not misleading, or, in the case of the
Proxy Statement or any amendment thereof or supplement  thereto,  at the time of
the Shareholders' Meeting, omit to state any Material fact required to be stated
thereunder  or  necessary  to correct  any  Material  statement  in any  earlier
communication   with  respect  to  the   solicitation   of  any  proxy  for  the
Shareholders'  Meeting. All documents that any Ridgeway Company or any Affiliate
thereof is responsible  for filing with any  Regulatory  Authority in connection
with the transactions contemplated hereby will comply as to form in all Material
respects with the provisions of applicable Law.




                                      A-15


         5.18 Tax and Regulatory  Matters.  No Ridgeway Company or any Affiliate
thereof has taken or agreed to take any action, and Ridgeway has no Knowledge of
any fact or  circumstance  that is  reasonably  likely to (i) prevent the Merger
from qualifying as a reorganization  within the meaning of Section 368(a) of the
Internal  Revenue  Code,  or (ii)  Materially  impede  or delay  receipt  of any
Consents  of  Regulatory  Authorities  referred  to in  Section  9.1(b)  of this
Agreement. To the Knowledge of Ridgeway there exists no fact,  circumstance,  or
reason  why  the  requisite  Consents  referred  to in  Section  9.1(b)  of this
Agreement cannot be received in a timely manner.

         5.19 Intellectual  Property. All of the Intellectual Property rights of
Ridgeway  and the  Ridgeway  Subsidiaries  are in full force and effect  and, if
applicable,  constitute legal,  valid, and binding obligations of the respective
parties  thereto,  and there have not been,  and, to the  Knowledge of Ridgeway,
there  currently  are not,  any  Defaults  thereunder  by Ridgeway or a Ridgeway
Subsidiary.  Ridgeway or a Ridgeway  Subsidiary owns or is the valid licensee of
all such  Intellectual  Property rights free and clear of all Liens or claims of
infringement,  except for such Liens or claims of  infringement  which would not
reasonably be expected to have a Material  Adverse  Effect on Ridgeway.  Neither
Ridgeway nor any of the Ridgeway Subsidiaries nor, to the Knowledge of Ridgeway,
their respective  predecessors has infringed the Intellectual Property rights of
others and, to the  Knowledge of  Ridgeway,  none of the  Intellectual  Property
rights  as  used  in  the  business   conducted  by  Ridgeway  or  the  Ridgeway
Subsidiaries  infringes upon or otherwise violates the rights of any Person, nor
has any Person asserted a claim of such  infringement,  in each case,  except as
would not reasonably be expected to have a Material  Adverse Effect on Ridgeway.
Neither  Ridgeway nor any of the Ridgeway  Subsidiaries  is obligated to pay any
royalties to any Person with  respect to any such  Intellectual  Property  other
than in the ordinary course of business.  Ridgeway or a Ridgeway Subsidiary owns
or has the valid right to use all of the  Intellectual  Property rights which it
is presently using, or in connection with  performance of any Material  Contract
to which it is a party.  No  officer,  director,  or employee of Ridgeway or the
Ridgeway  Subsidiaries  is party to any Contract  which  requires  such officer,
director,  or employee to assign any  interest in any  Intellectual  Property or
keep confidential any trade secrets,  proprietary data, customer information, or
other  business  information  or which  restricts  or  prohibits  such  officer,
director,  or employee from engaging in activities  competitive with any Person,
in each case, other than with Ridgeway or any of the Ridgeway Subsidiaries.

         5.20 State  Takeover  Laws.  Subject to  Ridgeway's  right to alter its
recommendation  in accordance  with the proviso set forth in the fourth sentence
of Section 8.1 of this Agreement,  each Ridgeway Company has taken all necessary
action,  if any, to exempt the transactions  contemplated by this Agreement from
any  applicable   "moratorium,"   "control   share,"  "fair  price,"   "business
combination," or other  anti-takeover laws and regulations of the State of South
Carolina (collectively, "Takeover Laws").

         5.21 Charter Provisions.  Each Ridgeway Company has taken all action so
that the entering into of this Agreement and the  consummation of the Merger and
the other transactions contemplated by this Agreement do not and will not result
in the grant of any rights to any Person under the Articles of  Incorporation or
Bylaws or, subject to Ridgeway's right to alter its recommendation in accordance
with the  proviso  set  forth in the  fourth  sentence  of  Section  8.1 of this
Agreement,  restrict  or impair the  ability  of CBI to vote,  or  otherwise  to
exercise the rights of a  shareholder  with  respect to,  shares of any Ridgeway
Company that may be directly or indirectly acquired or controlled by it.

         5.22 Support Agreements. Each of the directors of Ridgeway has executed
and delivered to CBI a Support  Agreement in substantially  the form attached as
Exhibit 1 to this Agreement.

         5.23  Derivatives.  All  interest  rate  swaps,  caps,  floors,  option
agreements,  futures and forward  contracts,  and other similar risk  management



                                      A-16


arrangements,  whether  entered  into for  Ridgeway's  own  account,  or for the
account  of one or more  the  Ridgeway  Subsidiaries  or their  customers,  were
entered  into  (i)  in  accordance  with  prudent  business  practices  and  all
applicable  Laws,  and  (ii)  with  counterparties  believed  to be  financially
responsible.

                                    ARTICLE 6

                      REPRESENTATIONS AND WARRANTIES OF CBI

         CBI hereby represents and warrants to Ridgeway as follows:

         6.1  Organization,  Standing,  and  Power.  CBI is a  corporation  duly
organized, validly existing, and in good standing under the Laws of the State of
South  Carolina,  and has the  corporate  power  and  authority  to carry on its
business as now conducted and to own,  lease,  and operate its Material  Assets.
CBI is duly qualified or licensed to transact business as a foreign  corporation
in good  standing in the States of the United  States and foreign  jurisdictions
where the  character  of its Assets or the  nature or  conduct  of its  business
requires it to be so  qualified or licensed,  except for such  jurisdictions  in
which the failure to be so  qualified  or licensed is not  reasonably  likely to
have, individually or in the aggregate, a Material Adverse Effect on CBI.

         6.2  Authority; No Breach of Agreement.

         (a) CBI has the  corporate  power and  authority  necessary to execute,
deliver,  and perform its obligations under this Agreement and to consummate the
transactions  contemplated hereby. The execution,  delivery,  and performance of
this Agreement and the  consummation of the  transactions  contemplated  herein,
including  the Merger,  have been duly and validly  authorized  by all necessary
corporate  action in respect thereof on the part of CBI, subject to the approval
of this Agreement by the holders of two-thirds of the outstanding  shares of CBI
Common  Stock  entitled  to vote  thereon,  which is the only  shareholder  vote
required for approval of this Agreement and  consummation  of the Merger by CBI.
This  Agreement  represents  a legal,  valid,  and  binding  obligation  of CBI,
enforceable  against CBI in  accordance  with its terms  (except in all cases as
such  enforceability  may  be  limited  by  applicable  bankruptcy,  insolvency,
reorganization,  receivership,  conservatorship,  moratorium,  or  similar  Laws
affecting the  enforcement  of creditors'  rights  generally and except that the
availability  of the  equitable  remedy of specific  performance  or  injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought).

         (b) Neither the  execution  and delivery of this  Agreement by CBI, nor
the consummation by CBI of the transactions  contemplated hereby, nor compliance
by CBI with any of the provisions hereof,  will (i) conflict with or result in a
breach of any  provision  of CBI's  Articles of  Incorporation  or Bylaws,  (ii)
constitute or result in a Default under, or require any Consent  pursuant to, or
result in the  creation of any Lien on any Asset of any CBI Company  under,  any
Contract  or Permit of any CBI  Company,  where  such  Default  or Lien,  or any
failure to obtain such Consent, is reasonably likely to have, individually or in
the aggregate,  a Material Adverse Effect on CBI, or (iii) subject to receipt of
the requisite Consents referred to in Section 9.1(b) of this Agreement,  violate
any Law or  Order  applicable  to any CBI  Company  or any of  their  respective
Material Assets.

         (c) Other than in connection or compliance  with the  provisions of the
Securities  Laws,  applicable  state corporate and securities Laws, and rules of
the AMEX,  and other than Consents  required from  Regulatory  Authorities,  and
other than  notices  to or  filings  with the  Internal  Revenue  Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
or under the HSR Act, and other than Consents,  filings, or notifications which,
if not obtained or made, are not reasonably  likely to have,  individually or in
the aggregate,  a Material  Adverse Effect on CBI, no notice to, filing with, or



                                      A-17


Consent of, any public body or authority is necessary  for the  consummation  by
CBI of the Merger and the other transactions contemplated in this Agreement.

         6.3 Capital Stock. The authorized capital stock of CBI consists,  as of
the date of this Agreement,  of 12,000,000  shares of CBI Common Stock, of which
3,299,674  shares were issued and outstanding as of November 1, 2001. All of the
issued and outstanding  shares of CBI Common Stock are, and all of the shares of
CBI Common  Stock to be issued in exchange  for shares of Ridgeway  Common Stock
upon  consummation  of the Merger,  when issued in accordance  with the terms of
this Agreement,  will be, duly and validly issued and outstanding and fully paid
and, except as expressly provided otherwise under applicable Law,  nonassessable
under the SCBCA.  None of the  outstanding  shares of CBI Common Stock has been,
and none of the shares of CBI Common  Stock to be issued in exchange  for shares
of Ridgeway  Common  Stock upon  consummation  of the Merger will be,  issued in
violation of any preemptive rights of the current or past shareholders of CBI.

         6.4 CBI  Subsidiaries.  CBI or one of its Subsidiaries  owns all of the
issued and outstanding shares of capital stock of each CBI Subsidiary. No equity
securities of any CBI Subsidiary are or may become  required to be issued (other
than to another CBI Company) by reason of any Rights, and there are no Contracts
by  which  any CBI  Subsidiary  is bound to issue  (other  than to  another  CBI
Company)  additional  shares of its capital  stock or Rights or by which any CBI
Company is or may be bound to transfer  any shares of the  capital  stock of any
CBI  Subsidiary  (other than to another  CBI  Company).  There are no  Contracts
relating to the rights of any CBI Company to vote or to dispose of any shares of
the capital stock of any CBI  Subsidiary.  All of the shares of capital stock of
each CBI Subsidiary held by a CBI Company are fully paid and, except as provided
in statutes pursuant to which depository institution Subsidiaries are organized,
except as expressly provided otherwise under applicable Law, nonassessable under
the  applicable  corporate  or  banking  Law of the  jurisdiction  in which such
Subsidiary  is  incorporated  or organized and are owned by the CBI Company free
and clear of any Lien.  Each CBI  Subsidiary is either a bank or a  corporation,
and is  duly  organized,  validly  existing,  and (as to  corporations)  in good
standing  under  the Laws of the  jurisdiction  in which it is  incorporated  or
organized,  and has the corporate  power and authority  necessary for it to own,
lease,  and  operate its Assets and to carry on its  business as now  conducted.
Each CBI  Subsidiary  is duly  qualified  or licensed to transact  business as a
foreign  corporation  in good  standing  in the States of the United  States and
foreign jurisdictions where the character of its Assets or the nature or conduct
of its business  requires it to be so  qualified  or  licensed,  except for such
jurisdictions  in which  the  failure  to be so  qualified  or  licensed  is not
reasonably likely to have,  individually or in the aggregate, a Material Adverse
Effect  on CBI.  Each CBI  Subsidiary  that is a  depository  institution  is an
"insured depository institution" as defined in the Federal Deposit Insurance Act
and applicable regulations thereunder,  and the deposits in which are insured by
the Bank Insurance Fund to the fullest extent permitted by Law.

         6.5  SEC Filings; Financial Statements.

         (a) CBI has filed and made  available to Ridgeway  all forms,  reports,
and  documents  required to be filed by CBI with the SEC since  January 1 of the
second complete fiscal year preceding the date of this Agreement  (collectively,
the "CBI SEC Reports").  The CBI SEC Reports (i) at the time filed,  complied in
all Material  respects with the applicable  requirements of the 1933 Act and the
1934 Act,  as the case may be,  and (ii) did not at the time they were filed (or
if amended or superseded by a filing prior to the date of this  Agreement,  then
on the date of such filing)  contain any untrue  statement of a Material fact or
omit to state a Material  fact  required to be stated in such CBI SEC Reports or
necessary in order to make the  statements in such CBI SEC Reports,  in light of
the  circumstances  under which they were made, not  misleading.  Except for CBI
Subsidiaries that are registered as a broker,  dealer, or investment  adviser or



                                      A-18


filings required due to fiduciary holdings of the CBI Subsidiaries,  none of CBI
Subsidiaries is required to file any forms, reports, or other documents with the
SEC.

         (b) Each of the CBI Financial Statements (including,  in each case, any
related notes)  contained in the CBI SEC Reports,  including any CBI SEC Reports
filed after the date of this  Agreement  until the Effective  Time,  complied or
will comply as to form in all Material  respects with the  applicable  published
rules and regulations of the SEC with respect  thereto,  was or will be prepared
in accordance  with GAAP applied on a consistent  basis  throughout  the periods
involved  (except as may be indicated in the notes to such financial  statements
or, in the case of unaudited statements,  as permitted by Form 10-Q of the SEC),
and fairly presented or will fairly present the consolidated  financial position
of CBI and its  Subsidiaries  as at the  respective  dates and the  consolidated
results of its operations and cash flows for the periods indicated,  except that
the unaudited  interim  financial  statements  were or are subject to normal and
recurring  year-end and audit  adjustments which were not or are not expected to
be Material in amount or effect.

         6.6  Absence  of  Undisclosed  Liabilities.  No  CBI  Company  has  any
Liabilities  that  are  reasonably  likely  to  have,  individually  or  in  the
aggregate,  a  Material  Adverse  Effect on CBI,  except  Liabilities  which are
accrued or  reserved  against in the  consolidated  balance  sheets of CBI as of
September 30, 2001, included in the CBI Financial Statements or reflected in the
notes  thereto,   Liabilities  incurred  in  the  ordinary  course  of  business
subsequent to September 30, 2001,  and  Liabilities to be incurred in connection
with the transactions contemplated by the Agreement. No CBI Company has incurred
or paid any  Liability  since  September 30, 2001,  except for such  Liabilities
incurred  or paid in the  ordinary  course  of  business  consistent  with  past
business practice and which are not reasonably  likely to have,  individually or
in the aggregate, a Material Adverse Effect on CBI.

         6.7 Absence of Certain  Changes or Events.  Since  September  30, 2001,
except as disclosed in the CBI Financial  Statements delivered prior to the date
of this Agreement,  there have been no events, changes or occurrences which have
had, or are  reasonably  likely to have,  individually  or in the  aggregate,  a
Material Adverse Effect on CBI.

         6.8  Compliance  with Laws.  CBI is duly  registered  as a bank holding
company under the BHC Act. Each CBI Company has in effect all Permits  necessary
for it to own,  lease,  or  operate  its  Material  Assets  and to  carry on its
business as now conducted, except for those Permits the absence of which are not
reasonably likely to have,  individually or in the aggregate, a Material Adverse
Effect on CBI,  and there has occurred no Default  under any such Permit,  other
than Defaults which are not reasonably  likely to have,  individually  or in the
aggregate, a Material Adverse Effect on CBI. None of the CBI Companies:

         (a) is in violation of any Laws,  Orders, or Permits  applicable to its
business or employees  conducting its business,  except for violations which are
not reasonably  likely to have,  individually  or in the  aggregate,  a Material
Adverse Effect on CBI; and

         (b) has received any notification or  communication  from any agency or
department of federal, state, or local government or any Regulatory Authority or
the staff thereof (i) asserting  that any CBI Company is not in compliance  with
any of the Laws or  Orders  which  such  governmental  authority  or  Regulatory
Authority  enforces,  where such  noncompliance  is  reasonably  likely to have,
individually  or in the  aggregate,  a  Material  Adverse  Effect  on CBI,  (ii)
threatening to revoke any Permits,  the revocation of which is reasonably likely
to have,  individually or in the aggregate, a Material Adverse Effect on CBI, or
(iii)  requiring any CBI Company (x) to enter into or consent to the issuance of
a cease and desist order, formal agreement, directive, commitment, or memorandum
of understanding,  or (y) to adopt any Board resolution or similar  undertaking,
which restricts Materially the conduct of its business, or in any manner relates
to its capital adequacy, its credit or reserve policies, its management,  or the
payment of dividends.




                                      A-19


         6.9 Legal  Proceedings.  There is no Litigation  instituted or pending,
or, to the Knowledge of CBI,  threatened against any CBI Company, or against any
Asset,  employee  benefit  plan,  interest,  or right  of any of  them,  that is
reasonably likely to have,  individually or in the aggregate, a Material Adverse
Effect on CBI,  nor are there any Orders of any  Regulatory  Authorities,  other
governmental  authorities,  or arbitrators  outstanding against any CBI Company,
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on CBI.

         6.10 Reports.  Since December 31, 1996, or the date of  organization if
later,  each CBI Company has timely filed all reports and  statements,  together
with any  amendments  required  to be made  with  respect  thereto,  that it was
required to file with any Regulatory Authorities,  except failures to file which
are not reasonably likely to have,  individually or in the aggregate, a Material
Adverse Effect on CBI. As of their  respective  dates,  each of such reports and
documents, including the financial statements,  exhibits, and schedules thereto,
complied in all Material respects with all applicable Laws.

         6.11 Statements True and Correct.  None of the information  supplied or
to be supplied by any CBI Company or any Affiliate thereof regarding CBI or such
Affiliate  for inclusion in the  Registration  Statement to be filed by CBI with
the SEC will, when the Registration  Statement  becomes  effective,  contain any
untrue statement of a Material fact, or omit to state any Material fact required
to be  stated  thereunder  or  necessary  to make  the  statements  therein  not
misleading.  None  of the  information  supplied  or to be  supplied  by any CBI
Company or any  Affiliate  thereof for  inclusion  in the Proxy  Statement to be
mailed to Ridgeway's  shareholders in connection with the Shareholders' Meeting,
will,  when  first  mailed  to  the   shareholders  of  Ridgeway,   contain  any
misstatement of Material fact, or omit to state any Material fact required to be
stated thereunder or necessary to make the statements  therein,  in light of the
circumstances under which they were made, not misleading, or, in the case of the
Proxy Statement or any amendment thereof or supplement  thereto,  at the time of
the Shareholders' Meeting, omit to state any Material fact required to be stated
thereunder  or  necessary  to correct  any  Material  statement  in any  earlier
communication   with  respect  to  the   solicitation   of  any  proxy  for  the
Shareholders'  Meeting.  All  documents  that any CBI  Company or any  Affiliate
thereof is responsible  for filing with any  Regulatory  Authority in connection
with the transactions contemplated hereby will comply as to form in all Material
respects with the provisions of applicable Law.

         6.12  Tax and  Regulatory  Matters.  No CBI  Company  or any  Affiliate
thereof has taken or agreed to take any action,  and CBI has no Knowledge of any
fact or  circumstance  that is reasonably  likely to (i) prevent the Merger from
qualifying  as a  reorganization  within the  meaning  of Section  368(a) of the
Internal  Revenue  Code,  or (ii)  Materially  impede  or delay  receipt  of any
Consents  of  Regulatory  Authorities  referred  to in  Section  9.1(b)  of this
Agreement. To the Knowledge of CBI there exists no fact, circumstance, or reason
why the  requisite  Consents  referred  to in Section  9.1(b) of this  Agreement
cannot be received in a timely manner.

         6.13 Support Agreements.  Each of the directors of CBI has executed and
delivered to Ridgeway a Support  Agreement in substantially the form attached as
Exhibit 2 to this Agreement.

         6.14  Derivatives.  All  interest  rate  swaps,  caps,  floors,  option
agreements,  futures and forward  contracts,  and other similar risk  management
arrangements,  whether entered into for CBI's own account, or for the account of
one or more the CBI  Subsidiaries or their  customers,  were entered into (i) in
accordance  with prudent  business  practices and all applicable  Laws, and (ii)
with counterparties believed to be financially responsible.



                                      A-20



                                    ARTICLE 7

                    CONDUCT OF BUSINESS PENDING CONSUMMATION

         7.1  Affirmative  Covenants of Both  Parties.  Unless the prior written
consent of the other Party  shall have been  obtained,  and except as  otherwise
expressly  contemplated  herein,  each Party  shall and shall  cause each of its
Subsidiaries  to (i)  operate  its  business  only in the  usual,  regular,  and
ordinary course, (ii) use its reasonable efforts to preserve intact its business
organization  and Assets and maintain its rights and  franchises,  (iii) use its
reasonable efforts to maintain its current employee relationships, and (iv) take
no action which would:  (a) adversely  affect the ability of any Party to obtain
any Consents required for the transactions  contemplated  hereby;  (b) adversely
affect the ability of any Party to perform its  covenants and  agreements  under
this Agreement;  provided,  that the foregoing shall not prevent any CBI Company
from  discontinuing  or  disposing  of any of its  Assets or  business,  or from
acquiring or agreeing to acquire any other Person or any Assets thereof, if such
action  is, in the  reasonable  good faith  judgment  of CBI,  desirable  in the
conduct of the business of CBI and its Subsidiaries; or (c) require the approval
of the shareholders of CBI, other than the election of directors or the approval
of any employee  benefit plan,  unless  Ridgeway has consented to such action in
writing.

         7.2 Negative  Covenants of  Ridgeway.  From the date of this  Agreement
until the earlier of the Effective Time or the  termination  of this  Agreement,
except as specifically  contemplated by this Agreement,  Ridgeway  covenants and
agrees  that it will not do or agree  or  commit  to do,  or  permit  any of its
Subsidiaries  to do or agree or commit to do, any of the  following  without the
prior written consent of CBI, which consent shall not be unreasonably withheld:

         (a) amend the Articles of  Incorporation,  Bylaws,  or other  governing
instruments of any Ridgeway Company; or

         (b)  incur,   guarantee,  or  otherwise  become  responsible  for,  any
additional  debt  obligation or other  obligation for borrowed money (other than
indebtedness of a Ridgeway Company to another Ridgeway  Company) in excess of an
aggregate  of $50,000  (for the Ridgeway  Companies  on a  consolidated  basis),
except in the ordinary course of business  consistent with past practices (which
shall  include  entry  into   repurchase   agreements  or  other  fully  secured
securities),  or impose, or suffer the imposition,  on any Asset of any Ridgeway
Company  of any  Material  Lien,  except  in the  ordinary  course  of  business
consistent with past practices; or

         (c)  except  as   contemplated   by  Section  7.1  of  this  Agreement,
repurchase,  redeem,  or otherwise  acquire or exchange (other than exchanges in
the ordinary course under employee benefit plans),  directly or indirectly,  any
shares,  or any securities  convertible into any shares, of the capital stock of
any  Ridgeway  Company,  or  declare  or pay  any  dividend  or make  any  other
distribution in respect of Ridgeway's capital stock;  provided that Ridgeway may
(to the extent legally able to do so), but shall not be obligated to declare and
pay regular semi-annual cash dividends on the Ridgeway Common Stock in an amount
of $4.00 per share and with the usual and regular  record and  payment  dates as
disclosed in Section 7.2(c) of the Ridgeway Disclosure Memorandum, and provided,
that,  notwithstanding  the  provisions  of Section 1.3 of this  Agreement,  the
Parties  shall  cooperate  in  selecting  the  Effective  Time or in  permitting
Ridgeway  to  pay a  special  dividend  to  ensure  that,  with  respect  to the
semi-annual  period in which the Effective Time occurs,  the holders of Ridgeway
Common  Stock do not become  entitled  to receive  both a dividend in respect of
their Ridgeway  Common Stock and a dividend in respect of their CBI Common Stock
or fail to be entitled to receive  dividends  or less than a pro rata portion of
the semi-annual dividend; or




                                      A-21


         (d) except for this  Agreement  or pursuant  to the  exercise of Rights
outstanding  as of the date of this  Agreement and pursuant to the terms thereof
in existence on the date of this Agreement,  (i) issue, sell, pledge,  encumber,
authorize the issuance of, (ii) enter into any Contract to issue,  sell, pledge,
encumber,  or authorize  the issuance  of, or (iii)  otherwise  permit to become
outstanding, any additional shares of Ridgeway Common Stock or any capital stock
of any  Ridgeway  Company,  or any stock  appreciation  rights,  or any  option,
warrant,  conversion,  or other right to acquire any such stock, or any security
convertible into any such stock; or

         (e) adjust,  split,  combine,  or  reclassify  any capital stock of any
Ridgeway  Company or issue or authorize the issuance of any other  securities in
respect of or in  substitution  for shares of Ridgeway  Common  Stock,  or sell,
lease, mortgage, or otherwise dispose of or otherwise encumber (i) any shares of
capital  stock of any Ridgeway  Subsidiary  (unless any such shares of stock are
sold or otherwise  transferred to another Ridgeway  Company),  or (ii) any Asset
other than in the  ordinary  course of  business  for  reasonable  and  adequate
consideration  and other than  dispositions  in the ordinary  course of business
consistent with past practice; or

         (f) (i) except in connection with waiver  agreements with employees who
have written  employment  contracts  on the date  hereof,  grant any increase in
compensation  or  benefits  to the  employees,  officers,  or  directors  of any
Ridgeway  Company,  except as required by Law or as may be  consistent  with the
prior practices of such Ridgeway Company,  (ii) pay any severance or termination
pay or any bonus other than pursuant to written policies or written Contracts in
effect on the date of this  Agreement,  (iii) enter into or amend any  severance
agreements  with  officers of any Ridgeway  Company,  (iv) grant any increase in
fees or other  increases in  compensation  or other benefits to directors of any
Ridgeway Company; or (v) voluntarily accelerate the vesting of any stock options
or other stock-based compensation or employee benefits; or

         (g) enter into or amend any  employment  Contract  between any Ridgeway
Company  and any Person  (unless  such  amendment  is  required by Law) that the
Ridgeway  Company does not have the  unconditional  right to  terminate  without
Liability  (other than Liability for services already rendered and in accordance
with the Ridgeway Benefit Plans), at any time on or after the Effective Time; or

         (h) adopt any new employee benefit plan of any Ridgeway Company or make
any Material change in or to any existing employee benefit plans of any Ridgeway
Company  other than any such  change  that is  required  by Law or that,  in the
opinion of counsel,  is necessary  or  advisable  to maintain the tax  qualified
status of any such plan; or

         (i) make  any  significant  change  in any Tax or  accounting  methods,
Material elections, or systems of internal accounting controls, except as may be
appropriate  to  conform  to  changes  in  Tax  Laws  or  regulatory  accounting
requirements or GAAP; or

         (j) commence any Litigation other than as deemed necessary or advisable
in the good faith  judgment  of  management  for the  prudent  operation  of its
business  or settle any  Litigation  involving  any  Liability  of any  Ridgeway
Company for Material  money damages or  restrictions  upon the operations of any
Ridgeway Company; or

         (k)  except in the  ordinary  course of  business,  modify,  amend,  or
terminate any Material  Contract or waive,  release,  compromise,  or assign any
Material rights or claims.

         7.3 Adverse  Changes in  Condition.  Each Party  agrees to give written
notice  promptly to the other Party upon  becoming  aware of the  occurrence  or
impending  occurrence of any event or circumstance  relating to it or any of its
Subsidiaries  which (i) is  reasonably  likely to have,  individually  or in the
aggregate,  a Material Adverse Effect on it, or (ii) would cause or constitute a



                                      A-22


Material  breach  of  any  of  its  representations,  warranties,  or  covenants
contained  herein,  and to use its reasonable  efforts to prevent or promptly to
remedy the same.

         7.4  Reports.  Each Party and its  Subsidiaries  shall file all reports
required to be filed by it with Regulatory  Authorities between the date of this
Agreement and the Effective  Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed.

                                    ARTICLE 8

                              ADDITIONAL AGREEMENTS

         8.1 Registration Statement;  Proxy Statement;  Shareholder Approval. As
soon as reasonably practicable after execution of this Agreement, CBI shall file
the Registration Statement with the SEC, and shall use its reasonable efforts to
cause the Registration Statement to become effective under the 1933 Act and take
any  action  required  to be  taken  under  the  applicable  state  Blue  Sky or
securities  Laws in  connection  with the  issuance  of the shares of CBI Common
Stock upon  consummation  of the Merger.  Ridgeway shall furnish all information
concerning it and the holders of its capital stock as CBI may reasonably request
for inclusion in the Registration Statement.  CBI and Ridgeway shall each call a
Shareholders'  Meeting,  to be held as soon as reasonably  practicable after the
Registration  Statement  is declared  effective  by the SEC,  for the purpose of
voting upon approval of the Plan of Merger and such other related  matters as it
deems appropriate. In connection with the respective Shareholders' Meetings, (i)
CBI and Ridgeway shall prepare and file with the SEC a joint Proxy Statement and
mail such Proxy  Statement to their  respective  shareholders,  (ii) the Parties
shall  furnish  to each  other  all  information  concerning  them that they may
reasonably request in connection with such Proxy Statement,  (iii) the Boards of
Directors of CBI and Ridgeway shall recommend to their  respective  shareholders
the  approval  of the matters  submitted  for  approval,  and (iv) the Boards of
Directors and officers of CBI and Ridgeway shall use their respective reasonable
efforts  to obtain  such  shareholders'  approvals,  provided  that  either  may
withdraw,   modify,   or  change  in  an   adverse   manner  to  the  other  its
recommendations if its Board of Directors, after having consulted with and based
upon the advice of outside counsel, determines in good faith that the failure to
so withdraw,  modify, or change its recommendation could reasonably constitute a
breach of the fiduciary  duties of its Board of Directors under  applicable Law.
In addition,  nothing in this Section 8.1 or elsewhere in this  Agreement  shall
prohibit  accurate  disclosure by either of  information  that is required to be
disclosed in the  Registration  Statement or the Proxy Statement or in any other
document  required to be filed with the SEC (including,  without  limitation,  a
Solicitation/Recommendation  Statement on Schedule 14D-9) or otherwise  required
to be publicly  disclosed by applicable  Law or  regulations  or, in the case of
CBI, rules of the AMEX.

         8.2 Applications. As soon as reasonably practicable after the execution
of this  Agreement,  CBI shall prepare and file, and Ridgeway shall cooperate in
the  preparation  and,  where  appropriate,  filing  of,  applications  with all
Regulatory Authorities having jurisdiction over the transactions contemplated by
this  Agreement  seeking the  requisite  Consents  necessary to  consummate  the
transactions  contemplated  by this  Agreement.  CBI  shall  use all  reasonable
efforts to obtain the requisite  Consents of all Regulatory  Authorities as soon
as reasonably practicable after the filing of the appropriate applications.  CBI
will  promptly  furnish  to  Ridgeway  copies  of  applications  filed  with all
Regulatory Authorities and copies of written communications received by CBI from
any Regulatory Authorities with respect to the transactions contemplated hereby.




                                      A-23


         8.3 Filings with Secretary of State.  Upon the terms and subject to the
conditions of this Agreement,  CBI shall execute and file the Articles of Merger
with the Secretary of State of the State of South  Carolina in  connection  with
the Closing.

         8.4  Agreement  as to Efforts to  Consummate.  Subject to the terms and
conditions  of this  Agreement,  each  Party  agrees  to use,  and to cause  its
Subsidiaries to use, its reasonable  efforts to take, or cause to be taken,  all
actions,  and to do,  or cause to be done,  all  things  necessary,  proper,  or
advisable under  applicable  Laws to consummate and make  effective,  as soon as
reasonably  practicable  after  the  date of this  Agreement,  the  transactions
contemplated  by  this  Agreement,  including,  without  limitation,  using  its
reasonable efforts to lift or rescind any Order adversely  affecting its ability
to consummate the transactions  contemplated herein and to cause to be satisfied
the  conditions  referred  to in  Article 9 of this  Agreement;  provided,  that
nothing herein shall preclude either Party from exercising its rights under this
Agreement.  Each Party shall use,  and shall cause each of its  Subsidiaries  to
use, its reasonable  efforts to obtain as promptly as  practicable  all Consents
necessary or desirable for the consummation of the transactions  contemplated by
this Agreement.

         8.5  Investigation and Confidentiality.

         (a) Prior to the Effective  Time, each Party shall keep the other Party
advised  of  all  Material   developments   relevant  to  its  business  and  to
consummation  of the Merger and shall permit the other Party to make or cause to
be  made  such  investigation  of the  business  and  properties  of it and  its
Subsidiaries and of their respective financial and legal conditions as the other
Party reasonably requests,  provided that such investigation shall be reasonably
related  to  the  transactions  contemplated  hereby  and  shall  not  interfere
unnecessarily with normal  operations.  No investigation by a Party shall affect
the representations and warranties of the other Party.

         (b) Each  Party  shall,  and shall  cause its  advisers  and agents to,
maintain the confidentiality of all confidential  information furnished to it by
the other Party concerning its and its Subsidiaries' businesses, operations, and
financial   positions  to  the  extent  required  by,  and  in  accordance  with
confidentiality   agreements  between  the  Parties,  and  shall  not  use  such
information   for  any  purpose  except  in  furtherance  of  the   transactions
contemplated  by this  Agreement.  If this Agreement is terminated  prior to the
Effective  Time,  each Party shall promptly return or certify the destruction of
all documents and copies thereof,  and all work papers  containing  confidential
information received from the other Party.

         (c)  Each  Party  agrees  to give the  other  Party  notice  as soon as
practicable after any determination by it of any fact or occurrence  relating to
the other Party which it has discovered  through the course of its investigation
and which represents,  or is reasonably  likely to represent,  either a Material
breach of any  representation,  warranty,  covenant,  or  agreement of the other
Party or which has had or is reasonably likely to have a Material Adverse Effect
on the other Party; provided,  however, that the giving of such notice shall not
be dispositive of the occurrence of such breach or a Material Adverse Effect.

         (d) Neither  Party nor any of their  respective  Subsidiaries  shall be
required to provide  access to or to disclose  information  where such access or
disclosure  would violate or prejudice the rights of its  customers,  jeopardize
the  attorney-client  or similar  privilege with respect to such  information or
contravene any Law, rule, regulation,  Order, judgment,  decree, fiduciary duty,
or agreement entered into prior to the date of this Agreement.  The Parties will
use  their  reasonable  efforts  to  make  appropriate   substitute   disclosure
arrangements,   to  the  extent  practicable,  in  circumstances  in  which  the
restrictions of the preceding sentence apply.




                                      A-24


         8.6 Press Releases. Prior to the Effective Time, CBI and Ridgeway shall
consult  with  each  other as to the form and  substance  of any  press  release
Materially  related  to this  Agreement  or any other  transaction  contemplated
hereby;  provided,  that nothing in this Section 8.6 shall be deemed to prohibit
any Party from  making any  disclosure  which its  counsel  deems  necessary  or
advisable  in order to satisfy such Party's  disclosure  obligations  imposed by
Law.

         8.7 No  Solicitation.  Except with  respect to this  Agreement  and the
transactions  contemplated hereby,  Ridgeway agrees that it shall not, and shall
use its reasonable efforts to cause its officers, directors, agents, Affiliates,
and Representatives not to, directly or indirectly, initiate, solicit, encourage
or  knowingly   facilitate   (including  by  way  of   furnishing   confidential
information)   any  inquiries  or  the  making  of  any  Acquisition   Proposal.
Notwithstanding  anything  herein  to the  contrary,  Ridgeway  and its Board of
Directors shall be permitted (i) to the extent  applicable,  to comply with Rule
14d-9  and  Rule  14e-2  promulgated  under  the  1934  Act  with  regard  to an
Acquisition Proposal, (ii) to engage in any discussions or negotiations with, or
provide any information  to, any Person in response to an unsolicited  bona fide
written Acquisition  Proposal by any such Person, if and only to the extent that
(a) Ridgeway's  Board of Directors  concludes in good faith and consistent  with
its fiduciary duties to Ridgeway's  shareholders  under applicable Law that such
Acquisition  Proposal  could  reasonably  be  expected  to result in a  Superior
Proposal,  (b)  prior to  providing  any  information  or data to any  Person in
connection with an Acquisition Proposal by any such Person,  Ridgeway's Board of
Directors receives from such Person an executed  confidentiality  agreement, and
(c) prior to providing  any  information  or data to any Person or entering into
discussions  or  negotiations  with any Person,  Ridgeway's  Board of  Directors
notifies CBI promptly of such inquiries,  proposals,  or offers received by, any
such information  requested from, or any such discussions or negotiations sought
to be initiated or continued  with, any of its  Representatives  indicating,  in
connection with such notice,  the name of such Person and the Material terms and
conditions of any inquiries,  proposals or offers.  Ridgeway agrees that it will
promptly  keep CBI  informed  of the status and terms of any such  proposals  or
offers  and the  status  and  terms of any  such  discussions  or  negotiations.
Ridgeway  agrees  that it will,  and will  cause  its  officers,  directors  and
Representatives to, immediately cease and cause to be terminated any activities,
discussions,  or negotiations existing as of the date of this Agreement with any
parties conducted heretofore with respect to any Acquisition Proposal.  Ridgeway
agrees  that  it will  use  reasonable  best  efforts  to  promptly  inform  its
directors,   officers,  key  employees,   agents,  and  Representatives  of  the
obligations  undertaken  in this Section 8.7.  Nothing in this Section 8.7 shall
(i) permit Ridgeway to terminate this Agreement (except as specifically provided
in Article 10 of this  Agreement) or (ii) affect any other  obligation of CBI or
Ridgeway under this Agreement.

         8.8 Tax Treatment. Each of the Parties undertakes and agrees to use its
reasonable  efforts to cause the Merger, and to take no action which would cause
the Merger  not,  to qualify  for  treatment  as a  "reorganization"  within the
meaning of Section  368(a) of the Internal  Revenue Code for federal  income tax
purposes.

         8.9 Agreement of  Affiliates.  Ridgeway has disclosed in Section 8.9 of
the Ridgeway  Disclosure  Memorandum each Person whom it reasonably believes may
be deemed an  "affiliate"  of Ridgeway  for  purposes of Rule 145 under the 1933
Act.  Ridgeway  shall use its  reasonable  efforts to cause each such  Person to
deliver  to CBI not later  than the  Effective  Time,  a written  agreement,  in
substantially  the form of Section 4 of Exhibit 1,  providing  that such  Person
will not sell, pledge,  transfer, or otherwise dispose of the shares of Ridgeway
Common Stock held by such Person except as  contemplated by such agreement or by
this Agreement and will not sell, pledge,  transfer, or otherwise dispose of the
shares of CBI Common  Stock to be received by such Person upon  consummation  of
the Merger except in compliance with  applicable  provisions of the 1933 Act and
the rules and regulations thereunder.  Shares of CBI Common Stock issued to such
affiliates of Ridgeway in exchange for shares of Ridgeway Common Stock shall not
be  transferable,  regardless  of whether each such  affiliate  has provided the
written agreement  referred to in this Section 8.9 (and CBI shall be entitled to
place  restrictive  legends  upon  certificates  for shares of CBI Common  Stock



                                      A-25


issued to  affiliates  of  Ridgeway  pursuant to this  Agreement  to enforce the
provisions of this Section  8.9),  except as provided  herein.  CBI shall not be
required to maintain the  effectiveness of the Registration  Statement under the
1933 Act for the purposes of resale of CBI Common Stock by such affiliates.

         8.10 Continuation of Certain Benefits.  Subsequent to the Closing,  the
CBI shall offer or cause the Bank of Ridgeway to continue to offer to  employees
and former  employees (to the extent  required by COBRA and other laws governing
post-employment  benefits) of the Bank of Ridgeway  receiving  benefits from the
Bank of Ridgeway  benefits  substantially  similar to those described in Section
8.10 of the Ridgeway Disclosure Memorandum.  In the event that CBI transfers the
Bank of  Ridgeway's  employees  into  CBI's  existing  401(k),  profit  sharing,
vacation, health, dental or other employee benefit plans (collectively, the "CBI
Plans") the CBI agrees to: (i) provide  full credit for prior  service  with the
Bank of Ridgeway for purposes of  eligibility  and vesting under all any and all
such CBI Plans;  and (ii) waive any  preexisting  conditions and waiting periods
with respect to the coverage requirements of any and all such CBI Plans. Nothing
in this  Agreement  shall prohibit CBI from  terminating  the Bank of Ridgeway's
existing  defined  benefit plan as permitted by applicable law. Bank of Ridgeway
employees shall be eligible to participate in CBI stock option plans on the same
basis as employees of CBI Companies.


         8.11  Indemnification.

         (a) From and after the Effective  Time, in the event of any  threatened
or actual claim,  action,  suit,  proceeding,  or investigation,  whether civil,
criminal,  or administrative,  including,  without  limitation,  any such claim,
action, suit, proceeding or investigation in which any person who is now, or has
been at any time prior to the date of this  Agreement,  or who becomes  prior to
the Effective Time, a director or officer of Ridgeway or any Ridgeway Subsidiary
(the  "Indemnified  Parties")  is, or is threatened to be, made a party based in
whole or in part on, or arising in whole or in part out of, or pertaining to (i)
the fact that he is or was a director,  officer, or employee of Ridgeway, any of
the Ridgeway Subsidiaries, or any of their respective predecessors, or (ii) this
Agreement or any of the transactions  contemplated  hereby,  whether in any case
asserted or arising before or after the Effective  Time, CBI shall indemnify and
hold  harmless,  as and to the  fullest  extent  permitted  by  Law,  each  such
Indemnified Party against any Liability  (including  reasonable  attorneys' fees
and expenses in advance of the final disposition of any claim, suit, proceeding,
or investigation  to each  Indemnified  Party to the fullest extent permitted by
Law upon receipt of any  undertaking  required by  applicable  Law),  judgments,
fines,  and amounts paid in settlement in connection with any such threatened or
actual claim, action, suit,  proceeding,  or investigation,  and in the event of
any such threatened or actual claim, action, suit, proceeding,  or investigation
(whether   asserted  or  arising  before  or  after  the  Effective  Time),  the
Indemnified  Parties  may  retain  counsel  reasonably   satisfactory  to  them;
provided,  however,  that (a) CBI shall  have the right to  assume  the  defense
thereof  and upon such  assumption  CBI  shall not be liable to any  Indemnified
Party for any legal expenses of other counsel or any other expenses subsequently
incurred by any Indemnified Party in connection with the defense thereof, except
that if CBI elects not to assume  such  defense or counsel  for the  Indemnified
Parties reasonably  advises the Indemnified  Parties that there are issues which
raise  conflicts  of  interest  between  CBI and the  Indemnified  Parties,  the
Indemnified Parties may retain counsel reasonably  satisfactory to them, and CBI
shall pay the reasonable  fees and expenses of such counsel for the  Indemnified
Parties,  (b) CBI shall not be liable for any  settlement  effected  without its
prior written  consent (which consent shall not be unreasonably  withheld),  and
(c) CBI shall have no obligation  hereunder to any Indemnified Party when and if
a  court  of  competent  jurisdiction  shall  ultimately  determine,   and  such
determination shall have become final and nonappealable, that indemnification of
such  Indemnified  Party in the  manner  contemplated  hereby is  prohibited  by
applicable Law. CBI's  obligations  under this Section 8.11(a)  continue in full
force and effect for a period of six years after the Effective  Time;  provided,



                                      A-26


however,  that all rights to indemnification in respect of any claim (a "Claim")
asserted or made within such period shall continue  until the final  disposition
of such Claim.

         (b) CBI agrees that all rights to  indemnification  and all limitations
on Liability  existing in favor of the  directors,  officers,  and  employees of
Ridgeway  and its  Subsidiaries  (the  "Covered  Parties")  as provided in their
respective Articles of Incorporation,  Bylaws, or similar governing  instruments
as in effect as of the date of this Agreement with respect to matters  occurring
prior to the Effective  Time shall survive the Merger and shall continue in full
force and  effect,  and shall be honored by such  entities  or their  respective
successors  as if they  were the  indemnifying  party  thereunder,  without  any
amendment thereto, for a period of six years after the Effective Time; provided,
however,  that all rights to indemnification in respect of any Claim asserted or
made within such  period  shall  continue  until the final  disposition  of such
Claim;  provided,  further,  however,  that  nothing  contained  in this Section
8.11(b) shall be deemed to preclude the liquidation, consolidation, or merger of
Ridgeway  or any  Ridgeway  Subsidiary,  in  which  case all of such  rights  to
indemnification  and  limitations on Liability shall be deemed to so survive and
continue notwithstanding any such liquidation, consolidation, or merger. Without
limiting  the  foregoing,  in any case in which  approval  by CBI is required to
effectuate  any  indemnification,  CBI  shall  direct,  at the  election  of the
Indemnified  Party, that the determination of any such approval shall be made by
independent counsel mutually agreed upon between CBI and the Indemnified Party.

         (c) CBI, from and after the Effective Time, will directly or indirectly
cause the persons who served as  directors  or officers of Ridgeway at or before
the Effective Time to be covered by Ridgeway's existing directors' and officers'
liability  insurance policy (provided that CBI may substitute  therefor policies
of at least the same coverage and amounts  containing terms and conditions which
are not less  advantageous  than such policy).  Such insurance  coverage,  shall
commence at the Effective Time and will be provided for a period of no less than
three years after the Effective Time.

         (d) If CBI or any of its successors or assigns shall  consolidate  with
or merge into any other  Person  and shall not be the  continuing  or  surviving
Person of such  consolidation  or merger or shall transfer all or  substantially
all of its Assets to any Person,  then and in each case,  proper provision shall
be made so that the successors  and assigns of CBI shall assume the  obligations
set forth in this Section 8.11.

         (e) The  provisions  of this  Section  8.11 are  intended to be for the
benefit of, and shall be enforceable by, each  Indemnified  Party and his or her
heirs and representatives.

         8.12  Boards  of  Directors.  After  the  Effective  Time,  the Bank of
Ridgeway  will  increase  its board of  directors  by two  members by adding two
directors  designated by CBI.  After the Effective  Time,  CBI will increase its
board of directors by three  members.  The vacancies will be filled by the Board
of Directors of CBI from the members of  Ridgeway's  current  board of directors
and shall  include the  Chairman of the Board and the  President  of the Bank of
Ridgeway.  The  Chairman of the Board and the  President of the Bank of Ridgeway
will become  members of the  executive  committee  of CBI's board of  directors.
After the Effective  Time,  board fees for all outside  directors of the Bank of
Ridgeway will be set at $300 per month.

         8.13  Employment  Agreement.   CBI  shall  enter  into  the  employment
agreement  with William A. Harwell  which is attached  hereto as Exhibit 4 to be
effective at the Effective Time.





                                      A-27



                                    ARTICLE 9

                CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE

         9.1 Conditions to Obligations of Each Party. The respective obligations
of each Party to perform this  Agreement  and to  consummate  the Merger and the
other  transactions  contemplated  hereby are subject to the satisfaction of the
following conditions,  unless waived by both Parties pursuant to Section 11.6 of
this Agreement:

         (a) Shareholder  Approval.  The  shareholders of CBI and Ridgeway shall
have  approved  the  Plan of  Merger  attached  hereto  as  Exhibit  3,  and the
consummation  of the  transactions  contemplated  hereby,  as and to the  extent
required by Law and by the provisions of any governing instruments.

         (b) Regulatory  Approvals.  All Consents of, filings and  registrations
with, and notifications to, all Regulatory Authorities required for consummation
of the Merger  shall have been  obtained  or made and shall be in full force and
effect and all waiting  periods  required by Law shall have expired.  No Consent
obtained from any  Regulatory  Authority  which is necessary to  consummate  the
transactions  contemplated hereby shall be conditioned or restricted in a manner
(excluding  requirements  relating to the raising of  additional  capital or the
disposition of Assets or deposits)  which in the reasonable  good faith judgment
of the  Board of  Directors  of CBI would so  Materially  adversely  impact  the
economic or business benefits of the transactions contemplated by this Agreement
so as to render inadvisable the consummation of the Merger.

         (c) Consents and Approvals.  Each Party shall have obtained any and all
Consents  required for  consummation of the Merger (other than those referred to
in Section 9.1(b) of this  Agreement) or for the preventing of any Default under
any  Contract  or  Permit of such  Party  which,  if not  obtained  or made,  is
reasonably likely to have,  individually or in the aggregate, a Material Adverse
Effect on such Party after the Effective  Time and no Consent  obtained which is
necessary  to  consummate  the   transactions   contemplated   hereby  shall  be
conditioned  or  restricted  in a manner  which  in the  reasonable  good  faith
judgment of the Board of Directors of CBI would so Materially  adversely  impact
the  economic or  business  benefits of the  transactions  contemplated  by this
Agreement so as to render inadvisable the consummation of the Merger.

         (d) Legal Proceedings. No court or governmental or Regulatory Authority
of competent jurisdiction shall have enacted, issued, promulgated,  enforced, or
entered any Law or Order (whether temporary, preliminary, or permanent) which is
then in effect which prohibits,  restrains, or makes illegal consummation of the
transactions contemplated by this Agreement.

         (e)  Registration  Statement.   The  Registration  Statement  shall  be
effective under the 1933 Act, no stop orders suspending the effectiveness of the
Registration  Statement shall have been issued, and no action, suit, proceeding,
or investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing.

         (f) Tax Opinion.  Each Party shall have received a written opinion from
Haynsworth  Sinkler Boyd, P.A. in a form  reasonably  satisfactory to such Party
(the "Tax Opinion"),  dated the date of the Effective Time, substantially to the
effect that the Merger will  constitute a  reorganization  within the meaning of
Section  368(a)(1)(A)  of the  Internal  Revenue  Code  and  the  following  tax
consequences  will apply to the  following  groups.  With respect to a holder of
Ridgeway  Common Stock who exchanges all of such holder's  Ridgeway Common Stock
solely for CBI Common Stock in the Merger (i) no gain or loss will be recognized



                                      A-28


by such holder (except with respect to any cash received in lieu of a fractional
share interest in CBI Common Stock),  (ii) the tax basis of the CBI Common Stock
received  (including  fractional shares deemed received and redeemed) by holders
of Ridgeway  Common Stock who exchange all of their Ridgeway Common Stock solely
for CBI  Common  Stock in the  Merger  will be the same as the tax  basis of the
Ridgeway Common Stock  surrendered in exchange for the CBI Common Stock (reduced
by an amount allocable to a fractional share interest in CBI Common Stock deemed
received  and  redeemed),  and (iii) the holding  period of the CBI Common Stock
received  (including  fractional  shares  deemed  received and redeemed) by such
holder  will be the same as the  holding  period of the  Ridgeway  Common  Stock
surrendered in exchange  therefor,  provided that such Ridgeway  Common Stock is
held as a capital  Asset at the  Effective  Time.  With  respect  to a holder of
Ridgeway  Common Stock who exchanges all of such holder's  Ridgeway Common Stock
for a combination of CBI Common Stock and cash pursuant to the Merger,  (i) gain
(but not loss) will be  recognized by such holder to the extent of the lesser of
(A) the realized  gain of the holder with  respect to all Ridgeway  Common Stock
surrendered  by such holder in the Merger and (B) the amount of cash received by
such holder;  (ii) if the  exchange  with the holder does not have the effect of
the distribution of a dividend,  the gain shall be treated as gain received from
the sale or  exchange  of an asset,  and the  holder  will be  treated as if CBI
issued to such holder (in  addition to the number of shares of CBI Common  Stock
actually  received  by such  holder in the  Merger)  the number of shares of CBI
Common  Stock  that  such  holder  could  have  received  instead  of  the  cash
distribution and then redeemed such shares for the amount of cash distributed to
such holder;  (iii) if the exchange  with the holder does not have the effect of
the  distribution of a dividend,  any such gain shall be treated as capital gain
if the Ridgeway Common Stock  surrendered by such holder was held by such holder
as a capital  asset at the Effective  Time;  (iv) the aggregate tax basis of the
CBI Common Stock  received by such holder will equal (A) the aggregate tax basis
of the Ridgeway Common Stock  surrendered by such holder in the Merger,  reduced
by (B) the amount of cash  received and (C)  increased by the amount of any gain
recognized  by such holder;  and (v) the holding  period of the CBI Common Stock
received  (including  shares deemed received and then redeemed) will be the same
as the holding period of the Ridgeway Common Stock surrendered by such holder in
the Merger,  if such  Ridgeway  Common Stock is held by such holder as a capital
asset at the Effective  Time.  With respect to a holder of Ridgeway Common Stock
who exchanges all of such  holder's  Ridgeway  Common Stock for cash pursuant to
the Merger, more likely than not, (i) such holder will be treated as if (A) such
holder sold all of such  holder's  Ridgeway  Common Stock to CBI for cash or (B)
CBI issued to such  holder  the  number of shares of CBI Common  Stock that such
holder could have received  instead of the cash  distribution  and then redeemed
such shares for the amount of cash  distributed  to such holder or CBI;  (ii) if
the exchange with the holder is not essentially  equivalent to a dividend,  such
holder will recognize the full amount of such holder's  realized gain or loss in
the  Ridgeway  Common Stock  surrendered  in the Merger.  In rendering  such Tax
Opinions,  such  counsel  shall be  entitled  to rely  upon  representations  of
officers of Ridgeway and CBI  reasonably  satisfactory  in form and substance to
such counsel.

         9.2 Conditions to Obligations of CBI. The obligations of CBI to perform
this Agreement and consummate the Merger and the other transactions contemplated
hereby are  subject to the  satisfaction  of the  following  conditions,  unless
waived by CBI pursuant to Section 11.6(a) of this Agreement:

         (a)  Representations  and  Warranties.  For  purposes  of this  Section
9.2(a),  representations  and warranties of Ridgeway set forth in this Agreement
shall be accurate as of the date of this  Agreement and as of the Effective Time
with the same effect as though all such  representations and warranties had been
made  on  and  as of the  Effective  Time  (provided  that  representations  and
warranties which speak as of the date of this Agreement or some other date shall
speak only as of such date). The  representations and warranties of Ridgeway set
forth in Section 5.3 of this  Agreement  shall be true and  correct  (except for
inaccuracies which are de minimis in amount). The representations and warranties
of Ridgeway set forth in Sections 5.18,  5.20, and 5.21 of this Agreement  shall
be true and correct in all Material respects. There shall not exist inaccuracies
in the  representations  and  warranties of Ridgeway set forth in this Agreement
(including the  representations  and warranties set forth in Sections 5.3, 5.18,
5.20,  and 5.21 of this  Agreement)  such  that  the  aggregate  effect  of such



                                      A-29


inaccuracies  has, or is reasonably likely to have, a Material Adverse Effect on
Ridgeway;   provided   that,   for  purposes  of  this  sentence   only,   those
representations  and warranties which are qualified by references to "Material,"
"Material  Adverse  Effect," or variations  thereof,  or to the  "Knowledge"  of
Ridgeway or to a matter being "known" by Ridgeway shall be deemed not to include
such qualifications.

         (b)  Performance  of  Agreements  and  Covenants.  Each  and all of the
agreements  and covenants of Ridgeway to be performed and complied with pursuant
to this  Agreement  and the other  agreements  contemplated  hereby prior to the
Effective  Time shall have been duly performed and complied with in all Material
respects.

         (c)   Certificates.   Ridgeway  shall  have  delivered  to  CBI  (i)  a
certificate,  dated as of the Effective Time and signed on Ridgeway's  behalf by
its duly  authorized  officers,  to the effect that the  conditions set forth in
Sections  9.2(a)  and 9.2(b) of this  Agreement  have been  satisfied,  and (ii)
certified  copies  of  resolutions  duly  adopted  by (1)  Ridgeway's  Board  of
Directors  evidencing the taking of all corporate  action necessary to authorize
the execution, delivery, and performance of this Agreement, and the consummation
of  the  transactions  contemplated  hereby,  and  (2)  Ridgeway's  shareholders
evidencing the approval of this Agreement,  all in such reasonable detail as CBI
and its counsel shall request.

         (d) Dissenting  Shareholders.  The number of shares of Ridgeway  Common
Stock as to which  dissenter's  rights have been and remain  perfected shall not
exceed 4,000 shares.

         9.3 Conditions to Obligations of Ridgeway.  The obligations of Ridgeway
to perform this Agreement and  consummate the Merger and the other  transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by Ridgeway pursuant to Section 11.6(b) of this Agreement:

         (a)  Representations  and  Warranties.  For  purposes  of this  Section
9.3(a),  the  representations  and warranties of CBI set forth in this Agreement
shall be accurate as of the date of this  Agreement and as of the Effective Time
with the same effect as though all such  representations and warranties had been
made  on  and  as of the  Effective  Time  (provided  that  representations  and
warranties which speak as of the date of this Agreement or some other date shall
speak only as of such date). The representations and warranties of CBI set forth
in  Section  6.3 of  this  Agreement  shall  be true  and  correct  (except  for
inaccuracies which are de minimis in amount). The representations and warranties
of CBI set forth in Section 6.12 of this Agreement  shall be true and correct in
all Material respects. There shall not exist inaccuracies in the representations
and warranties of CBI set forth in this Agreement (including the representations
and warranties set forth in Sections 6.3 and 6.12 of this  Agreement)  such that
the aggregate effect of such  inaccuracies has, or is reasonably likely to have,
a Material  Adverse Effect on CBI;  provided that, for purposes of this sentence
only, those  representations and warranties which are qualified by references to
"Material,"  "Material  Adverse  Effect,"  or  variations  thereof,  or  to  the
"Knowledge"  of CBI or to a matter  being  "known" by CBI shall be deemed not to
include such qualifications.

         (b)  Performance  of  Agreements  and  Covenants.  Each  and all of the
agreements  and  covenants of CBI to be performed  and complied with pursuant to
this  Agreement  and the  other  agreements  contemplated  hereby  prior  to the
Effective  Time shall have been duly performed and complied with in all Material
respects.

         (c)   Certificates.   CBI  shall  have  delivered  to  Ridgeway  (i)  a
certificate,  dated as of the  Effective  Time and signed on CBI's behalf by its
duly  authorized  officers,  to the  effect  that the  conditions  set  forth in




                                      A-30


Sections  9.3(a)  and 9.3(b) of this  Agreement  have been  satisfied,  and (ii)
certified  copies  of  resolutions  duly  adopted  by CBI's  Board of  Directors
evidencing  the  taking of all  corporate  action  necessary  to  authorize  the
execution,  delivery, and performance of this Agreement, and the consummation of
the transactions  contemplated hereby, all in such reasonable detail as Ridgeway
and its counsel shall request.

                                   ARTICLE 10

                                   TERMINATION

         10.1   Termination.   Notwithstanding   any  other  provision  of  this
Agreement,   and   notwithstanding   the  approval  of  this  Agreement  by  the
shareholders  of  Ridgeway,  this  Agreement  may be  terminated  and the Merger
abandoned at any time prior to the Effective Time:

         (a) By mutual consent of the Board of Directors of CBI and the Board of
Directors of Ridgeway; or

         (b) By the  Board of  Directors  of  either  Party  (provided  that the
terminating  Party is not  then in  breach  of any  representation  or  warranty
contained in this Agreement  under the applicable  standard set forth in Section
9.2(a) of this  Agreement  in the case of Ridgeway  and  Section  9.3(a) of this
Agreement  in the case of CBI or in  Material  breach of any  covenant  or other
agreement  contained in this  Agreement)  in the event of an  inaccuracy  of any
representation  or warranty of the other Party contained in this Agreement which
cannot be or has not been  cured  within 30 days  after  the  giving of  written
notice to the breaching  Party of such  inaccuracy  and which  inaccuracy  would
provide the  terminating  Party the ability to refuse to  consummate  the Merger
under the  applicable  standard set forth in Section 9.2(a) of this Agreement in
the case of Ridgeway and Section 9.3(a) of this Agreement in the case of CBI; or

         (c) By the  Board of  Directors  of  either  Party  (provided  that the
terminating  Party is not  then in  breach  of any  representation  or  warranty
contained in this Agreement  under the applicable  standard set forth in Section
9.2(a) of this  Agreement in the case of Ridgeway and Section 9.3(a) in the case
of CBI or in Material  breach of any  covenant or other  agreement  contained in
this  Agreement)  in the event of a  Material  breach by the other  Party of any
covenant or  agreement  contained in this  Agreement  which cannot be or has not
been cured  within 30 days after the giving of written  notice to the  breaching
Party of such breach; or

         (d) By the  Board of  Directors  of  either  Party in the event (i) any
Consent of any Regulatory  Authority required for consummation of the Merger and
the other  transactions  contemplated  hereby  shall  have been  denied by final
nonappealable  action  of such  authority,  or (ii) the  shareholders  of CBI or
Ridgeway  fail to vote their  approval of this  Agreement  at the  Shareholders'
Meeting where this Agreement was presented to such shareholders for approval and
voted upon; or

         (e) By the Board of  Directors  of either  Party in the event  that the
Merger shall not have been  consummated  by December 31, 2002, if the failure to
consummate the  transactions  contemplated  hereby on or before such date is not
caused  by any  breach of this  Agreement  by the Party  electing  to  terminate
pursuant to this Section 10.1(e).

         10.2  Effect  of  Termination.  In the  event  of the  termination  and
abandonment of this Agreement  pursuant to Section 10.1 of this Agreement,  this
Agreement shall become void and have no effect, and none of CBI,  Ridgeway,  any
of their respective Subsidiaries,  or any of the officers or directors of any of
them,  shall  have  any  Liability  of any  nature  whatsoever  hereunder  or in
conjunction  with the  transactions  contemplated  hereby,  except  that (i) the
provisions of Section 8.5(b) of this Agreement, this Section 10.2, Section 10.3,
Section 10.4 and Article 11 of this Agreement shall survive any such termination
and abandonment,  and (ii) a termination of this Agreement shall not relieve the



                                      A-31


breaching   Party  from   Liability   for  an  uncured   willful   breach  of  a
representation, warranty, covenant, or agreement of such Party contained in this
Agreement.

         10.3  Non-Survival  of  Representations  and Covenants.  The respective
representations,  warranties,  obligations,  covenants,  and  agreements  of the
Parties shall not survive the  Effective  Time,  except for those  covenants and
agreements  which by their terms  apply in whole or in part after the  Effective
Time.

         10.4  Termination  Fee.  Ridgeway  shall  pay  to  CBI  upon  demand  a
termination fee of $300,000 if a Triggering  Event shall occur. For the purposes
of  this  letter,  a  Triggering  Event  shall  occur  if  (a)  the  transaction
contemplated by this Agreement is not  consummated  (other than as a result of a
material  breach of the  Agreement by CBI, or as a result of a failure by CBI to
enter into the employment contract required in Section 8.13, or as a result of a
failure to obtain  regulatory  approval of the Merger on terms acceptable to the
boards of directors of Ridgeway and CBI, or as a result of Ridgeway's good faith
exercise of any right to terminate the  Agreement  that is available to Ridgeway
therein),  and (b)  within  one  year of the date of this  Agreement  any of the
following  events occur:  (i) Ridgeway is acquired by merger or otherwise by any
person  other  than  a  receiver   appointed  by  state  or  federal  regulatory
authorities or CBI or any of its affiliates (an  "Acquiror");  (ii) any Acquiror
acquires  more than 25% in value of the  consolidated  total assets of Ridgeway,
or, if such  Acquiror  who already owns 25% in value of the  consolidated  total
assets of Ridgeway,  acquires any more than 25%; (iii) Ridgeway adopts a plan of
liquidation  or  a  restructuring   or   recapitalization   plan  involving  the
disposition  to any  such  party of more  than 25% in value of the  consolidated
total assets of Ridgeway;  (iv) Ridgeway  declares an extraordinary  dividend or
distribution,  whether in cash or other property,  equal to more than 25% of its
consolidated net worth;  (v) Ridgeway or any subsidiary of Ridgeway  repurchases
more than 25% of the then outstanding shares of common stock of Ridgeway; (vi) a
transaction  or  transactions  occur  involving  the transfer to any Acquiror of
direct or indirect  beneficial  ownership (as defined in Rule 13d-3  promulgated
under  the  1934  Act) of  securities  representing,  or the  right  to  acquire
beneficial  ownership  of or to vote  securities  (or which could  result in the
acquisition  of  beneficial  ownership  of or  the  right  to  vote  securities)
representing,  more  than  25% of the  then  outstanding  voting  securities  of
Ridgeway; or (vii) Ridgeway enters into an agreement with an Acquiror other than
CBI or any of its affiliates to effectuate any of the foregoing transactions.

                                   ARTICLE 11

                                  MISCELLANEOUS

         11.1  Definitions.

         (a) Except as otherwise  provided  herein,  the  capitalized  terms set
forth below shall have the following meanings:

         "Acquisition  Proposal"  with  respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger,  acquisition of all of the
stock or Assets of, or other business combination involving such Party or any of
its  Subsidiaries or the  acquisition of a substantial  equity interest in, or a
substantial portion of the Assets of, such Party or any of its Subsidiaries.

         "Affiliate"  of a Person  shall  mean any  other  Person  directly,  or
indirectly  through one or more  intermediaries,  controlling,  controlled by or
under common control with such Person.

         "Agreement" shall mean this Agreement and Plan of Merger, including the
Exhibits delivered pursuant hereto and incorporated herein by reference.




                                      A-32


         "AMEX" shall mean the American Stock Exchange.

         " Articles of Merger" shall mean the Articles of Merger executed by CBI
and filed with the Secretary of State of the State of South Carolina relating to
the Merger as contemplated by Section 1.1 of this Agreement.

         "Assets"  of a  Person  shall  mean  all  of  the  assets,  properties,
businesses,  and rights of such Person of every  kind,  nature,  character,  and
description,  whether real, personal, or mixed, tangible or intangible,  accrued
or contingent,  or otherwise  relating to or utilized in such Person's business,
directly or indirectly, in whole or in part, whether or not carried on the books
and records of such Person,  and whether or not owned in the name of such Person
or any Affiliate of such Person and wherever located.

         "Average  Closing Price" shall mean the average of the daily last sales
prices of CBI Common  Stock as  reported  on the AMEX (as  reported  by The Wall
Street Journal or, if not reported thereby,  another authoritative source agreed
to by Ridgeway and CBI) for the ten consecutive  full trading days in which such
shares are traded on the AMEX which end five business days before the mailing of
the Proxy Statement for the Shareholders' Meetings.

         "BHC Act" shall mean the federal Bank Holding  Company Act of 1956,  as
amended.

         "CBI Common Stock" shall mean the no par value common stock of CBI.

         "CBI Companies" shall mean, collectively, CBI and all CBI Subsidiaries.

         "CBI Financial  Statements" shall mean (i) the consolidated  statements
of  condition  (including  related  notes  and  schedules,  if any) of CBI as of
September  30,  2001 and as of  December  31,  2000 and  1999,  and the  related
statements of income, changes in shareholders' equity, and cash flows (including
related notes and  schedules,  if any) for the three months ended  September 30,
2001 and for each of the three years ended December 31, 2000, 1999, and 1998, as
filed by CBI in SEC Documents, and (ii) the consolidated statements of condition
of CBI (including related notes and schedules, if any) and related statements of
income, changes in shareholders' equity, and cash flows (including related notes
and schedules,  if any) included in SEC Documents  filed with respect to periods
ended subsequent to September 30, 2001.

         "CBI  Subsidiaries"   shall  mean  the  Subsidiaries  of  CBI  and  any
corporation,  bank, savings  association,  or other  organization  acquired as a
Subsidiary of CBI in the future and owned by CBI at the Effective Time.

         "Consent" shall mean any consent, approval,  authorization,  clearance,
exemption,  waiver,  or  similar  affirmation  by  any  Person  pursuant  to any
Contract, Law, Order, or Permit.

         "Contract"  shall  mean any  written  or oral  agreement,  arrangement,
commitment,   contract,   indenture,   instrument,   lease,  understanding,   or
undertaking  of any kind or  character to which any Person is a party or that is
binding on any Person or its capital stock, Assets, or business.

         "Default"  shall mean (i) any breach or violation  of or default  under
any Contract,  Order, or Permit,  (ii) any occurrence of any event that with the
passage  of time or the giving of notice or both  would  constitute  a breach or
violation  of or default  under any  Contract,  Order,  or Permit,  or (iii) any
occurrence  of any event that with or without  the passage of time or the giving
of notice would give rise to a right to terminate or revoke,  change the current
terms of, or renegotiate,  or to accelerate,  increase,  or impose any Liability



                                      A-33


under, any Contract, Order, or Permit, where, in any such event, such Default is
reasonably likely to have,  individually or in the aggregate, a Material Adverse
Effect on a Party.

         "Environmental  Laws"  shall mean all Laws  relating  to  pollution  or
protection of human health or the environment  (including  ambient air,  surface
water,  ground  water,  land  surface,  or  subsurface  strata)  and  which  are
administered,  interpreted,  or  enforced  by the  United  States  Environmental
Protection  Agency and state and local  agencies  with  jurisdiction  over,  and
including  common law in respect of, pollution or protection of the environment,
including the Comprehensive  Environmental  Response  Compensation and Liability
Act, as amended, 42 U.S.C. 9601 et seq.  ("CERCLA"),  the Resource  Conservation
and Recovery Act, as amended, 42 U.S.C. 6901 et seq., and other Laws relating to
emissions,  discharges,  releases,  or  threatened  releases  of  any  Hazardous
Material,  or otherwise relating to the manufacture,  processing,  distribution,
use,  treatment,  storage,  disposal,  transport,  or handling of any  Hazardous
Material.

         "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.

         "Exhibits" 1, 2, 3 and 4, inclusive, shall mean the Exhibits so marked,
copies of which  are  attached  to this  Agreement.  Such  Exhibits  are  hereby
incorporated by reference herein and made a part hereof,  and may be referred to
in this  Agreement  and any other related  instrument or document  without being
attached hereto.


         "GAAP"   shall   mean   generally   accepted   accounting   principles,
consistently applied during the periods involved.

         "Hazardous Material" shall mean (i) any hazardous substance,  hazardous
material,  hazardous waste,  regulated  substance,  or toxic substance (as those
terms are defined by any applicable Environmental Laws), and (ii) any chemicals,
pollutants,  contaminants,  petroleum,  petroleum  products  that are or  become
regulated under any applicable  local,  state, or federal Law (and  specifically
shall include asbestos requiring abatement,  removal, or encapsulation  pursuant
to  the  requirements  of  governmental   authorities  and  any  polychlorinated
biphenyls).

         "HSR Act" shall mean  Section 7A of the Clayton  Act, as added by Title
II of the Hart-Scott-Rodino  Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder.

         "Intellectual  Property" shall mean  copyrights,  patents,  trademarks,
service marks,  service names, trade names,  applications  therefor,  technology
rights and licenses,  computer  software  (including  any source or object codes
therefor  or  documentation  relating  thereto),   trade  secrets,   franchises,
know-how, inventions and other intellectual property rights.

         "Internal  Revenue Code" shall mean the Internal  Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.

         "Investment Company" shall have the meaning set forth in the Investment
Company Act.

         "Knowledge" as used with respect to a Person  (including  references to
such  Person  being  aware of a  particular  matter)  shall  mean  the  personal
knowledge of the chairman, president, or chief financial officer of such Person.




                                      A-34


         "Law" shall mean any code, law, ordinance, regulation, rule, or statute
applicable to a Person or its Assets, Liabilities, or business,  including those
promulgated, interpreted, or enforced by any Regulatory Authority.

         "Liability"  shall mean any direct or indirect,  primary or  secondary,
liability, indebtedness,  obligation, penalty, cost, or expense (including costs
of investigation,  collection,  and defense),  claim, deficiency, or guaranty of
any type, whether accrued,  absolute or contingent,  liquidated or unliquidated,
matured or unmatured, or otherwise.

         "Lien" shall mean any mortgage, pledge, reservation, restriction (other
than a restriction  on transfers  arising under the Securities  Laws),  security
interest,  or claim,  lien, or encumbrance  of any nature  whatsoever of, on, or
with  respect to any  property  or property  interest,  other than (i) Liens for
property  Taxes not yet due and  payable,  and (ii) for  depository  institution
Subsidiaries of a Party, pledges to secure deposits, and other Liens incurred in
the ordinary course of the banking business.

         "Litigation"  shall  mean any  action,  arbitration,  cause of  action,
claim,  complaint,  criminal prosecution,  demand letter,  governmental or other
examination  or  investigation,   hearing,  inquiry,   administrative  or  other
proceeding,  or  notice  (written  or oral)  by any  Person  alleging  potential
Liability,  but shall not include regular,  periodic  examinations of depository
institutions and their Affiliates by Regulatory Authorities.

         "Loan Property" shall mean any property owned,  leased,  or operated by
the Party in  question or by any of its  Subsidiaries  or in which such Party or
Subsidiary  holds a security  or other  interest  (including  an  interest  in a
fiduciary capacity),  and, where required by the context,  includes the owner or
operator of such property, but only with respect to such property.

         "Material" for purposes of this Agreement  shall be determined in light
of the facts and  circumstances  of the matter in  question;  provided  that any
specific monetary amount stated in this Agreement shall determine materiality in
that instance.

         "Material  Adverse Effect" on a Party shall mean an event,  change,  or
occurrence  which,  individually  or together with any other event,  change,  or
occurrence,  has a  Material  adverse  impact  on (i) the  financial  condition,
results of operations, or business of such Party and its Subsidiaries,  taken as
a whole, or (ii) the ability of such Party to perform its obligations under this
Agreement or to consummate the Merger or the other transactions  contemplated by
this Agreement,  provided that "Material  Adverse Effect" shall not be deemed to
include  the  impact of (a)  changes  in  banking  and  similar  Laws of general
applicability or interpretations thereof by courts or governmental  authorities,
(b) changes in GAAP or regulatory  accounting principles generally applicable to
banks,  investment  banks,  broker-dealers,  and their  holding  companies,  (c)
actions and  omissions  of a Party (or any of its  Subsidiaries)  taken with the
prior informed  consent of the other Party in  contemplation of the transactions
contemplated hereby, (d) general economic or market conditions or the securities
industry in general, and (e) this Agreement or the announcement thereof.

         "1933 Act" shall mean the Securities  Act of 1933, as amended,  and the
rules and regulations promulgated thereunder.

         "1934 Act" shall mean the Securities  Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.




                                      A-35


         "Order"  shall  mean any  administrative  decision  or  award,  decree,
injunction,  judgment, order,  quasi-judicial decision or award, ruling, or writ
of any federal, state, local, or foreign or other court,  arbitrator,  mediator,
tribunal, administrative agency, or Regulatory Authority.

         "Participation  Facility"  shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the management,
as such term is defined in CERCLA (including,  but not limited to, participating
in a fiduciary  capacity),  and, where required by the context,  said term means
the owner or operator of such  facility or  property,  but only with  respect to
such facility or property.

         "Party"  shall mean either  Ridgeway or CBI, and  "Parties"  shall mean
both Ridgeway and CBI.

         "Permit" shall mean any federal, state, local, and foreign governmental
approval, authorization,  certificate,  easement, filing, franchise, license, or
permit from  governmental  authorities  that is required for the  operation of a
Party's respective businesses.

         "Person"  shall  mean a natural  person or any  legal,  commercial,  or
governmental  entity,  such  as,  but not  limited  to, a  corporation,  general
partnership,  joint venture,  limited  partnership,  limited liability  company,
trust, business association,  group acting in concert, or any person acting in a
representative capacity.

         "Proxy Statement" shall mean the joint proxy statement used by Ridgeway
and  CBI to  solicit  the  approval  of  their  respective  shareholders  of the
transactions contemplated by this Agreement,  which shall include the prospectus
of CBI  relating to the  issuance of the CBI Common Stock to holders of Ridgeway
Common Stock.

         "Reasonable Efforts" shall mean the reasonable best efforts of a Party,
but shall not require any Party to take any commercially unreasonable action.

         "Registration  Statement" shall mean the Registration Statement on Form
S-4, or other  appropriate  form,  including any pre-effective or post-effective
amendments or supplements thereto,  filed with the SEC by CBI under the 1933 Act
with respect to the shares of CBI Common Stock to be issued to the  shareholders
of Ridgeway in connection with the transactions contemplated by this Agreement.

         "Regulatory  Authorities" shall mean,  collectively,  the Federal Trade
Commission,  the United States Department of Justice, the Board of the Governors
of the Federal  Reserve  System,  the Office of the Comptroller of the Currency,
the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the
Internal Revenue Service, all state regulatory agencies having jurisdiction over
the Parties and their respective Subsidiaries, the NASD, the AMEX, and the SEC.

         "Representative"  shall mean any investment banker,  financial advisor,
attorney, accountant, consultant, or other representative of a Person.

         "Ridgeway  Common  Stock"  shall  mean no par  value  common  stock  of
Ridgeway.

         "Ridgeway  Companies"  shall  mean,  collectively,   Ridgeway  and  all
Ridgeway Subsidiaries including The Bank of Ridgeway.

         "Ridgeway  Disclosure  Memorandum"  shall mean the written  information
entitled "Ridgeway  Disclosure  Memorandum"  delivered prior to the execution of
this  Agreement to CBI  describing  in reasonable  detail the matters  contained



                                      A-36


therein  and,  with  respect  to  each  disclosure  made  therein,  specifically
referencing  each  Section or  subsection  of this  Agreement  under  which such
disclosure is being made.  Information  disclosed with respect to one Section or
subsection  shall  not be  deemed  to be  disclosed  for any  other  Section  or
subsection of this Agreement. The inclusion of any matter in this document shall
not be  deemed  an  admission  or  otherwise  to imply  that any such  matter is
Material for purposes of this Agreement.

         "Ridgeway  Financial   Statements"  shall  mean  (i)  the  consolidated
statements  of condition  (including  related  notes and  schedules,  if any) of
Ridgeway as of September 30, 2001,  and as of December 31, 2000,  and 1999,  and
the related  statements of income,  changes in  shareholders'  equity,  and cash
flows (including related notes and schedules, if any) for the three months ended
September  30,  2001 and for each of the three years ended  December  31,  2000,
1999, and 1998,  included in the Ridgeway  Disclosure  Memorandum,  and (ii) the
consolidated  statements of condition of Ridgeway  (including  related notes and
schedules,  if any) and related  statements of income,  changes in shareholders'
equity,  and cash flows  (including  related notes and  schedules,  if any) with
respect to periods ended subsequent to September 30, 2001.

         "Ridgeway  Stock Plans" shall mean any existing  stock option and other
stock-based compensation plans of Ridgeway,  including,  without limitation, the
stock  option  plans and  programs  of any  Persons  acquired  by  Ridgeway or a
Ridgeway Subsidiary.

         "Ridgeway Subsidiaries" shall mean the Subsidiaries of Ridgeway,  which
shall  include  the  Ridgeway  Subsidiaries  described  in  Section  5.4 of this
Agreement and any corporation,  bank, savings association, or other organization
acquired as a Subsidiary  of Ridgeway in the future and owned by Ridgeway at the
Effective Time.

         "Rights"  shall  mean,  with  respect  to any  Person,  securities,  or
obligations  convertible into or exercisable for, or giving any Person any right
to subscribe for or acquire, or any options,  calls, or commitments relating to,
or any  stock  appreciation  right or  other  instrument  the  value of which is
determined  in whole or in part by  reference  to the market  price or value of,
shares of capital stock of such Person.

         "SCBCA"  shall mean the South  Carolina  Business  Corporation  Act, as
amended.

         "SEC" shall mean the United States Securities and Exchange Commission.

         "SEC Documents" shall mean all forms,  proxy  statements,  registration
statements,  reports,  schedules,  and other documents  filed, or required to be
filed, by a Party or any of its Subsidiaries with the SEC.

         "Securities Laws" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act, the  Investment  Advisers Act, the Trust  Indenture Act of 1939, as
amended, and the rules and regulations of any Regulatory  Authority  promulgated
thereunder.

         "Shareholders'  Meeting" shall mean the meeting of the  shareholders of
CBI or Ridgeway to be held pursuant to Section 8.1 of this Agreement,  including
any adjournment or adjournments thereof.

         "Subsidiaries" shall mean all those corporations,  banks, associations,
or other  entities of which the entity in question  owns or controls 50% or more
of the  outstanding  equity  securities  either  directly or through an unbroken
chain of  entities  as to each of which  50% or more of the  outstanding  equity
securities is owned directly or indirectly by its parent;  provided, there shall



                                      A-37


not be included any such entity acquired through  foreclosure or any such entity
the equity securities of which are owned or controlled in a fiduciary capacity.

         "Superior  Proposal"  means,  with  respect to  Ridgeway,  any  written
Acquisition  Proposal  made by a Person  other  than CBI  which is for (i) (a) a
merger,  reorganization,  consolidation,  share exchange,  business combination,
recapitalization,  liquidation,  dissolution,  or similar transaction  involving
Ridgeway as a result of which either (1) Ridgeway's  shareholders  prior to such
transaction (by virtue of their ownership of Ridgeway's shares) in the aggregate
cease to own at least 50% of the voting  securities  of the entity  surviving or
resulting from such  transaction  (or the ultimate parent entity thereof) or (2)
the  individuals  comprising  the Board of Directors  of Ridgeway  prior to such
transaction  do not  constitute  a majority  of the board of  directors  of such
ultimate  parent  entity,  (b) a  sale,  lease,  exchange,  transfer,  or  other
disposition  of at least 50% of the  Assets of  Ridgeway  and its  Subsidiaries,
taken as a whole, in a single  transaction or a series of related  transactions,
or (c) the  acquisition,  directly  or  indirectly,  by a Person  of  beneficial
ownership  of 25% or more of the  common  stock of  Ridgeway  whether by merger,
consolidation,  share exchange, business combination,  tender, or exchange offer
or otherwise,  and (ii) which is otherwise on terms which the Board of Directors
of Ridgeway  in good faith  concludes  (after  consultation  with its  financial
advisors and outside  counsel),  taking into account,  among other  things,  all
legal, financial,  regulatory,  and other aspects of the proposal and the Person
making the proposal, (a) would, if consummated,  result in a transaction that is
more favorable to its shareholders (in their capacities as shareholders), from a
financial point of view, than the  transactions  contemplated by this Agreement,
and (b) is reasonably capable of being completed.

         "Support Agreement" shall mean the various support agreements,  each in
substantially the form of Exhibit 1 (as to Ridgeway  directors) or Exhibit 2 (as
to CBI directors).

         "Surviving  Corporation"  shall mean CBI as the  surviving  corporation
resulting from the Merger.

         "Tax" or "Taxes"  shall mean all  federal,  state,  local,  and foreign
taxes,  levies,  imposts,  duties, or other like assessments,  including income,
gross receipts,  excise,  employment,  sales, use, transfer,  license,  payroll,
franchise,   severance,  stamp,  occupation,  windfall  profits,  environmental,
federal highway use,  commercial rent,  customs duties,  capital stock,  paid-up
capital,   profits,   withholding,   Social   Security,   single   business  and
unemployment,  disability,  real property, personal property,  registration,  ad
valorem, value added, alternative or add-on minimum,  estimated, or other tax of
any kind whatsoever,  imposed or required to be withheld by the United States or
any state,  local,  or foreign  government  or  subdivision  or agency  thereof,
including any related interest and penalties, or additions thereto.

         "Tax Return"  shall mean any report,  return,  information  return,  or
other  information  required to be supplied to a taxing  authority in connection
with Taxes,  including  any return of an affiliated or combined or unitary group
that includes a Party or its Subsidiaries.

         "Taxable  Period" shall mean any period  prescribed by any governmental
authority,  including  the  United  States  or  any  state,  local,  or  foreign
government or  subdivision  or agency thereof for which a Tax Return is required
to be filed or Tax is required to be paid.

         (b) The terms set forth below shall have the meanings  ascribed thereto
in the referenced sections:




                                      A-38


         CBI SEC Reports                             Section 6.5(a)
         Claim                                       Section 8.11(a)
         Closing                                     Section 1.2
         Continuing Employees                        Section 8.10
         Covered Parties                             Section 8.11(b)
         Effective Time                              Section 1.3
         Exchange Agent                              Section 4.1
         Exchange Ratio                              Section 3.1(b)
         Indemnified Parties                         Section 8.11(a)
         Merger                                      Section 1.1
         Ridgeway Benefit Plans                      Section 5.13(a)
         Ridgeway Contracts                          Section 5.14(a)
         Ridgeway ERISA Affiliate                    Section 5.13(e)
         Ridgeway ERISA Plan                         Section 5.13(a)
         Ridgeway Options                            Section 3.6(a)
         Ridgeway Pension Plan                       Section 5.13(a)
         Takeover Laws                               Section 5.20
         Tax Opinion                                 Section 9.1(f)

         (c) Any singular term in this Agreement  shall be deemed to include the
plural,  and any  plural  term  the  singular.  Whenever  the  words  "include,"
"includes,"  or  "including"  are used in this  Agreement,  they shall be deemed
followed by the words "without limitation."

         11.2  Expenses.

         (a) Except as  otherwise  provided in this  Section  11.2,  each of the
Parties  shall bear and pay all direct costs and  expenses  incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
filing, registration, and application fees, printing fees, and fees and expenses
of its own financial or other consultants,  investment bankers, accountants, and
counsel,  except  that  CBI  shall  bear  and pay the  filing  fees  payable  in
connection  with the  Registration  Statement  and the Proxy  Statement  and the
printing  costs  incurred in  connection  with the printing of the  Registration
Statement and the Proxy Statement.

         (b) Nothing contained in this Section 11.2 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a Party of the
terms of this Agreement or otherwise limit the rights of the nonbreaching Party.

         11.3 Brokers and Finders.  Each of the Parties  represents and warrants
that neither it nor any of its officers, directors, employees, or Affiliates has
employed  any  broker or finder or  incurred  any  Liability  for any  financial
advisory  fees,  investment  bankers'  fees,  brokerage  fees,  commissions,  or
finders' fees in connection with this Agreement or the transactions contemplated
hereby.  In the event of a claim by any broker or finder based upon his, her, or
its  representing  or  being  retained  by or  allegedly  representing  or being
retained  by  Ridgeway  or CBI,  each of  Ridgeway  and CBI, as the case may be,
agrees to indemnify and hold the other Party  harmless of and from any Liability
in respect of any such claim.

         11.4 Entire Agreement.  Except as otherwise  expressly provided herein,
this Agreement  (including the Ridgeway Disclosure  Memorandum)  constitutes the
entire   agreement   between  the  Parties  with  respect  to  the  transactions
contemplated  hereunder and supersedes all prior  arrangements or understandings
with respect thereto,  written or oral.  Nothing in this Agreement  expressed or
implied, is intended to confer upon any Person,  other than the Parties or their



                                      A-39


respective successors, any rights, remedies,  obligations,  or liabilities under
or by reason of this  Agreement  other than as provided  for in Sections 8.9 and
8.11 of this Agreement.

         11.5 Amendments.  To the extent permitted by Law, this Agreement may be
amended by a subsequent  writing signed by each of the Parties upon the approval
of the  Boards of  Directors  of each of the  Parties,  whether  before or after
shareholder  approval of this  Agreement has been obtained;  provided,  that the
provisions of this Agreement  relating to the manner or basis in which shares of
Ridgeway  Common Stock will be exchanged  for CBI Common Stock or cash shall not
be amended after the Shareholders' Meeting without the requisite approval of the
holders of the issued and  outstanding  shares of Ridgeway Common Stock entitled
to vote thereon.

         11.6  Waivers.

         (a) Prior to or at the Effective Time, CBI, acting through its Board of
Directors,  chief executive officer,  chief financial officer,  or other officer
designated  by CBI's  Board of  Directors,  shall  have the  right to waive  any
Default in the  performance of any term of this Agreement by Ridgeway,  to waive
or extend the time for the  compliance or fulfillment by Ridgeway of any and all
of  its  obligations  under  this  Agreement,  and  to  waive  any or all of the
conditions precedent to the obligations of CBI under this Agreement,  except any
condition which, if not satisfied,  would result in the violation of any Law. No
such waiver shall be  effective  unless in writing  signed by a duly  authorized
officer of CBI except that any  unfulfilled  conditions  shall be deemed to have
been waived at the Effective Time.

         (b) Prior to or at the Effective  Time,  Ridgeway,  acting  through its
Board of Directors,  chief executive officer,  chief financial officer, or other
officer  designated  by Ridgeway's  Board of Directors,  shall have the right to
waive any Default in the  performance  of any term of this  Agreement by CBI, to
waive or extend the time for the compliance or fulfillment by CBI of any and all
of  its  obligations  under  this  Agreement,  and  to  waive  any or all of the
conditions precedent to the obligations of Ridgeway under this Agreement, except
any condition which, if not satisfied, would result in the violation of any Law.
No such waiver shall be effective  unless in writing signed by a duly authorized
officer of Ridgeway  except that any unfulfilled  conditions  shall be deemed to
have been waived at the Effective Time.

         (c)  The  failure  of any  Party  at  any  time  or  times  to  require
performance of any provision  hereof shall in no manner affect the right of such
Party  at a later  time to  enforce  the  same or any  other  provision  of this
Agreement.  No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances  shall be deemed to be or construed as a
further  or  continuing  waiver of such  condition  or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.

         11.7 Assignment.  Except as expressly contemplated hereby, neither this
Agreement nor any of the rights,  interests,  or obligations  hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise)  without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by the Parties and their respective successors and assigns.

         11.8 Notices. All notices or other communications which are required or
permitted  hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight  carrier,  to the persons at the  addresses set forth below
(or at such other address as may be provided hereunder),  and shall be deemed to
have been delivered as of the date so delivered:




                                      A-40



         Ridgeway:
         Ridgeway Bancshares, Inc.
         100 Palmer Street
         Ridgeway, South Carolina 29130
         Facsimile Number: (803) 337-8268
         Attention: William A. Harwell, President

         Copy to Counsel:
         M. Craig Garner, Jr., Esquire
         McNair Law Firm, P.A.
         17th Floor
         1301 Gervais Street
         Columbia, South Carolina 29201
         Facsimile Number (803) 376-2277

         CBI:
         Community Bankshares, Inc.
         791 Broughton Street
         Orangeburg, South Carolina 29115
         Facsimile Number: (803) 535-1065
         Attention: E. J. Ayers, Chairman


         Copy to Counsel:
         George S. King, Jr., Esquire
         Haynsworth Sinkler Boyd, P.A.
         12th Floor
         1426 Main Street
         Columbia, South Carolina 29201
         Facsimile Number (803) 765-1243

         11.9 Governing  Law. This Agreement  shall be governed by and construed
in accordance  with the Laws of the State of South  Carolina,  without regard to
any applicable principles of conflicts of Laws.

         11.10  Counterparts.  This  Agreement  may be  executed  in two or more
counterparts,  each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.

         11.11  Captions.  The  captions  contained  in this  Agreement  are for
reference purposes only and are not part of this Agreement.

         11.12  Interpretations.  Neither this Agreement nor any  uncertainty or
ambiguity herein shall be construed or resolved against any Party, whether under
any rule of  construction  or  otherwise.  No Party to this  Agreement  shall be
considered the draftsman.  The Parties acknowledge and agree that this Agreement
has been reviewed,  negotiated,  and accepted by all Parties and their attorneys
and shall be construed and interpreted  according to the ordinary meaning of the
words  used so as  fairly to  accomplish  the  purposes  and  intentions  of the
Parties.

         11.13   Enforcement  of  Agreement.   The  Parties  hereto  agree  that
irreparable  damage would occur in the event that any of the  provisions of this
Agreement  was not  performed  in  accordance  with  its  specific  terms or was
otherwise breached.  It is accordingly agreed that the Parties shall be entitled
to an injunction or  injunctions  to prevent  breaches of this  Agreement and to



                                      A-41


enforce  specifically the terms and provisions hereof in any court of the United
States or any state  having  jurisdiction,  this being in  addition to any other
remedy to which they are entitled at law or in equity.

         11.14  Severability.  Any term or provision of this Agreement  which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,  be
ineffective  to the  extent  of  such  invalidity  or  unenforceability  without
rendering  invalid or  unenforceable  the remaining terms and provisions of this
Agreement or affecting  the  validity or  enforceability  of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.

         IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed  on its  behalf  and its  corporate  seal to be  hereunto  affixed  and
attested by officers  thereunto and delivered as of the day and year first above
written.

RIDGEWAY BANCSHARES, INC                   COMMUNITY BANKSHARES, INC.


By:-----------------------------------     By:----------------------------------
   J. V. Nicholson, Jr., DMD                  E. J. Ayers, Jr.
   Chairman of the Board of Directors         Chairman of the Board of Directors


By:-------------------------------------   By:----------------------------------
   William A. Harwell                         William W. Traynham
   President                                  President


















                                      A-42


                                                                      APPENDIX B
                                   CHAPTER 13.

                               DISSENTERS' RIGHTS

                                   ARTICLE 1.

                 RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES

SECTION 33-13-101. Definitions.

In this chapter:

(1) "Corporation"  means the issuer of the shares held by a dissenter before the
corporate action,  or the surviving or acquiring  corporation by merger or share
exchange of that issuer.

(2)  "Dissenter"  means a shareholder  who is entitled to dissent from corporate
action under  Section  33-13-102  and who  exercises  that right when and in the
manner required by Sections 33-13-200 through 33-13-280.

(3) "Fair value", with respect to a dissenter's  shares,  means the value of the
shares  immediately before the effectuation of the corporate action to which the
dissenter objects, excluding any appreciation or depreciation in anticipation of
the corporate action to which the dissenter objects,  excluding any appreciation
or depreciation in anticipation of the corporate  action unless  exclusion would
be  inequitable.  The value of the shares is to be determined by techniques that
are accepted generally in the financial community.

(4) "Interest"  means  interest from the effective date of the corporate  action
until the date of payment, at the average rate currently paid by the corporation
on its  principal  bank loans or, if none,  at a rate that is fair and equitable
under all the circumstances.

(5) "Record shareholder" means the person in whose name shares are registered in
the records of a corporation or the beneficial  owner of shares to the extent of
the rights granted by a nominee certificate on file with a corporation.

(6)  "Beneficial  shareholder"  means the  person who is a  beneficial  owner of
shares held by a nominee as the record shareholder.

(7) "Shareholder" means the record shareholder or the beneficial shareholder.

SECTION 33-13-102. Right to dissent.

(A) A shareholder  is entitled to dissent from,  and obtain  payment of the fair
value of, his shares in the event of any of the following corporate actions:

(1)consummation  of a plan of merger to which the  corporation is a party (i) if
shareholder  approval is  required  for the merger by Section  33-11-103  or the
articles of incorporation  and the shareholder is entitled to vote on the merger
or (ii) if the  corporation is a subsidiary that is merged with its parent under
Section  33-11-104 or 33-11-108 or if the corporation is a parent that is merged
with its subsidiary under Section 33-11-108;

(2) consummation of a plan of share exchange to which the corporation is a party
as the  corporation  whose  shares are to be  acquired,  if the  shareholder  is
entitled to vote on the plan;




                                       B-1


(3)  onsummation  of a sale or  exchange of all,  or  substantially  all, of the
property  of the  corporation  other  than in the  usual and  regular  course of
business,  if the  shareholder  is  entitled  to vote on the  sale or  exchange,
including a sale in  dissolution,  but not  including  a sale  pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale must be distributed to the shareholders  within one
year after the date of sale;

(4) an amendment of the articles of incorporation  that materially and adversely
affects  rights in respect of a  dissenter's  shares  because  it:

(i) alters or abolishes a preferential right of the shares;

(ii) creates, alters, or abolishes a right in respect of redemption, including a
provision  respecting a sinking fund for the  redemption or  repurchase,  of the
shares;

(iii)  alters or  abolishes  a  preemptive  right of the holder of the shares to
acquire shares or other securities;

(iv)  excludes  or limits the right of the shares to vote on any  matter,  or to
cumulate votes,  other than a limitation by dilution  through issuance of shares
or other securities with similar voting rights; or

(v) reduces  the number of shares  owned by the  shareholder  to a fraction of a
share if the  fractional  share so  created  is to be  acquired  for cash  under
Section 33-6-104; or

(5) in the case of corporations which are not public corporations,  the approval
of a control share acquisition under Article 1 of Chapter 2 of Title 35;

6) any corporate action to the extent the articles of incorporation,  bylaws, or
a  resolution  of the board of  directors  provides  that  voting  or  nonvoting
shareholders are entitled to dissent and obtain payment for their shares.

(B) Notwithstanding subsection (A), no dissenters' rights under this section are
available for shares of any class or series of shares which,  at the record date
fixed to  determine  shareholders  entitled  to receive  notice of a vote at the
meeting of  shareholders  to act upon the agreement of merger or exchange,  were
either  listed on a national  securities  exchange or  designated  as a national
market  system  security  on an  interdealer  quotation  system by the  National
Association of Securities Dealers, Inc.

SECTION 33-13-103. Dissent by nominees and beneficial owners.

(a) A record  shareholder may assert dissenters' rights as to fewer than all the
shares  registered  in his name only if he dissents  with  respect to all shares
beneficially  owned by any one person and notifies the corporation in writing of
the name and  address  of each  person on whose  behalf he  asserts  dissenters'
rights.  The rights of a partial  dissenter under this subsection are determined
as if the shares to which he dissents  and his other shares were  registered  in
the names of different shareholders.

(b) A beneficial  shareholder may assert dissenters' rights as to shares held on
his behalf  only if he  dissents  with  respect to all shares of which he is the
beneficial  shareholder  or over  which  he has  power to  direct  the  vote.  A
beneficial shareholder asserting dissenters' rights to shares held on his behalf
shall  notify the  corporation  in writing of the name and address of the record
shareholder of the shares, if known to him.




                                       B-2


                                   ARTICLE 2.

                  PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS

SECTION 33-13-200. Notice of dissenters' rights.

(a) If proposed  corporate  action  creating  dissenters'  rights under  Section
33-13-102 is submitted to a vote at a shareholders'  meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under  this  chapter  and be  accompanied  by a copy  of  this  chapter.

(b) If corporate action creating  dissenters'  rights under Section 33-13-102 is
taken without a vote of  shareholders,  the corporation  shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in Section 33-13-220.

SECTION 33-13-210. Notice of intent to demand payment.

(a) If proposed  corporate  action  creating  dissenters'  rights under  Section
33-13-102 is submitted to a vote at a shareholders'  meeting,  a shareholder who
wishes to assert  dissenters' rights (1) must give to the corporation before the
vote is taken written  notice of his intent to demand  payment for his shares if
the proposed  action is effectuated and (2) must not vote his shares in favor of
the proposed  action.  A vote in favor of the proposed action cast by the holder
of a proxy solicited by the corporation  shall not disqualify a shareholder from
demanding payment for his shares under this chapter.

(b) A shareholder who does not satisfy the requirements of subsection (a) is not
entitled to payment for his shares under this chapter.

SECTION 33-13-220. Dissenters' notice.

(a) If proposed  corporate  action  creating  dissenters'  rights under  Section
33-13-102 is  authorized  at a  shareholders'  meeting,  the  corporation  shall
deliver a written  dissenters'  notice to all  shareholders  who  satisfied  the
requirements of Section 33-13-210(a).

(b) The  dissenters'  notice must be  delivered no later than ten days after the
corporate  action was taken and must:

(1) state  where the  payment  demand  must be sent and where  certificates  for
certificated shares must be deposited;

(2) inform  holders of  uncertificated  shares to what  extent  transfer  of the
shares is to be restricted after the payment demand is received;

(3) supply a form for  demanding  payment  that  includes  the date of the first
announcement  to news  media or to  shareholders  of the  terms of the  proposed
corporate  action and  requires  that the person  asserting  dissenters'  rights
certify whether or not he or, if he is a nominee asserting dissenters' rights on
behalf  of  a  beneficial  shareholder,   the  beneficial  shareholder  acquired
beneficial ownership of the shares before that date;

(4) set a date by which the corporation  must receive the payment demand,  which
may not be fewer  than  thirty  nor more  than  sixty  days  after  the date the
subsection  (a) notice is  delivered  and set a date by which  certificates  for



                                       B-3


certificated shares must be deposited, which may not be earlier than twenty days
after the demand date; and (5) be accompanied by a copy of this chapter.

SECTION 33-13-230. Shareholders' payment demand.

(a) A shareholder sent a dissenters'  notice described in Section 33-13-220 must
demand  payment,  certify  whether he (or the  beneficial  shareholder  on whose
behalf he is asserting  dissenters' rights) acquired beneficial ownership of the
shares before the date set forth in the  dissenters'  notice pursuant to Section
33-13-220(b)(3),  and deposit his  certificates  in accordance with the terms of
the notice.

(b) The  shareholder  who demands  payment and deposits  his share  certificates
under  subsection  (a) retains  all other  rights of a  shareholder  until these
rights are canceled or modified by the taking of the proposed corporate action.

(c) A shareholder who does not comply  substantially  with the requirements that
he demand payment and deposit his share certificates where required, each by the
date set in the  dissenters'  notice,  is not entitled to payment for his shares
under this chapter.

SECTION 33-13-240. Share restrictions.

(a) The corporation may restrict the transfer of uncertificated  shares from the
date the demand for payment for them is received  until the  proposed  corporate
action is taken or the restrictions are released under Section 33-13-260.

(b) The person for whom  dissenters'  rights are  asserted as to  uncertificated
shares retains all other rights of a shareholder until these rights are canceled
or modified by the taking of the proposed corporate action.

SECTION 33-13-250. Payment.

(a) Except as provided in Section  33-13-270,  as soon as the proposed corporate
action is taken, or upon receipt of a payment demand,  the corporation shall pay
each dissenter who substantially  complied with Section 33-13-230 the amount the
corporation estimates to be the fair value of his shares, plus accrued interest.

(b) The payment must be accompanied by:

(1) the  corporation's  balance  sheet as of the end of a fiscal year ending not
more than sixteen  months  before the date of payment,  an income  statement for
that year, a statement of changes in shareholders' equity for that year, and the
latest available interim financial statements, if any;

(2) a statement  of the  corporation's  estimate of the fair value of the shares
and an explanation of how the fair value was calculated;

(3) an explanation of how the interest was calculated;

(4) a statement of the  dissenter's  right to demand  additional  payment  under
Section 33-13-280; and

(5) a copy of this chapter.


                                       B-4


SECTION 33-13-260. Failure to take action.

(a) If the corporation does not take the proposed action within sixty days after
the date set for  demanding  payment  and  depositing  share  certificates,  the
corporation,  within the same  sixty-day  period,  shall  return  the  deposited
certificates  and release the transfer  restrictions  imposed on  uncertificated
shares.

(b)  If,  after  returning   deposited   certificates  and  releasing   transfer
restrictions,  the  corporation  takes the proposed  action,  it must send a new
dissenters'  notice  under  Section  33-13-220  and  repeat the  payment  demand
procedure.

SECTION 33-13-270. After-acquired shares.

(a) A corporation may elect to withhold  payment  required by section  33-13-250
from a dissenter as to any shares of which he (or the beneficial  owner on whose
behalf he is asserting  dissenters'  rights) was not the beneficial owner on the
date set forth in the dissenters'  notice as the date of the first  announcement
to news media or to shareholders of the terms of the proposed  corporate action,
unless the beneficial  ownership of the shares devolved upon him by operation of
law  from a  person  who was  the  beneficial  owner  on the  date of the  first
announcement.

(b) To the extent the corporation  elects to withhold  payment under  subsection
(a),  after taking the proposed  corporate  action,  it shall  estimate the fair
value of the shares,  plus accrued  interest,  and shall pay this amount to each
dissenter  who  agrees to  accept it in full  satisfaction  of his  demand.  The
corporation  shall send with its offer a statement  of its  estimate of the fair
value of the shares,  an  explanation  of how the fair value and  interest  were
calculated,  and a  statement  of the  dissenter's  right to  demand  additional
payment under Section 33-13-280.

SECTION 33-13-280. Procedure if shareholder dissatisfied with payment or offer.

(a) A dissenter may notify the corporation in writing of his own estimate of the
fair value of his shares and amount of  interest  due and demand  payment of his
estimate (less any payment under Section  33-13-250) or reject the corporation's
offer under Section 33-13-270 and demand payment of the fair value of his shares
and interest due, if the:

(1) dissenter  believes that the amount paid under Section  33-13-250 or offered
under  Section  33-13-270  is less than the fair value of his shares or that the
interest due is calculated incorrectly;

(2)  corporation  fails to make  payment  under  Section  33-13-250  or to offer
payment  under  Section  33-13-270  within  sixty  days  after  the date set for
demanding payment; or

(3) corporation,  having failed to take the proposed action, does not return the
deposited   certificates  or  release  the  transfer   restrictions  imposed  on
uncertificated  shares  within  sixty  days  after  the date  set for  demanding
payment.

(b) A dissenter waives his right to demand additional payment under this section
unless he notifies the corporation of his demand in writing under subsection (a)
within thirty days after the corporation made or offered payment for his shares.




                                       B-5


                                   ARTICLE 3.

                          JUDICIAL APPRAISAL OF SHARES

SECTION 33-13-300. Court action.

(a)  If  a  demand  for  additional  payment  under  Section  33-13-280  remains
unsettled,  the corporation  shall commence a proceeding within sixty days after
receiving the demand for additional  payment and petition the court to determine
the fair value of the shares and accrued  interest.  If the corporation does not
commence the proceeding within the sixty-day period, it shall pay each dissenter
whose demand remains  unsettled the amount demanded.

(b) The  corporation  shall  commence the proceeding in the circuit court of the
county where the corporation's  principal office (or, if none in this State, its
registered  office) is  located.  If the  corporation  is a foreign  corporation
without a registered  office in this State,  it shall commence the proceeding in
the county in this State where the principal  office (or, if none in this State,
the registered  office) of the domestic  corporation merged with or whose shares
were acquired by the foreign corporation was located.

(c) The corporation shall make all dissenters  (whether or not residents of this
State) whose demands remain unsettled  parties to the proceeding as in an action
against their shares and all parties must be served with a copy of the petition.
Nonresidents may be served by registered or certified mail or by publication, as
provided by law.

(d) The  jurisdiction  of the court in which the  proceeding is commenced  under
subsection  (b) is  plenary  and  exclusive.  The court may  appoint  persons as
appraisers to receive  evidence and recommend  decisions on the question of fair
value.  The appraisers have the powers described in the order appointing them or
in any amendment to it. The dissenters are entitled to the same discovery rights
as parties in other civil  proceedings.

(e) Each  dissenter  made a party to the  proceeding is entitled to judgment for
the amount, if any, by which the court finds the fair value of his shares,  plus
interest, exceeds the amount paid by the corporation.

SECTION 33-13-310. Court costs and counsel fees.

(a) The court in an appraisal proceeding commenced under Section 33-13-300 shall
determine all costs of the proceeding, including the reasonable compensation and
expenses of appraisers  appointed by the court. The court shall assess the costs
against the  corporation,  except that the court may assess costs against all or
some of the dissenters,  in amounts the court finds equitable, to the extent the
court finds the dissenters acted arbitrarily,  vexatiously, or not in good faith
in demanding payment under Section 33-13-280.

(b) The court also may assess the fees and  expenses  of counsel and experts for
the respective  parties,  in amounts the court finds equitable:  (1) against the
corporation  and in  favor  of any or all  dissenters  if the  court  finds  the
corporation  did not comply  substantially  with the  requirements  of  Sections
33-13-200  through  33-13-280;  or  (2)  against  either  the  corporation  or a
dissenter,  in favor of any  other  party,  if the  court  finds  that the party
against whom the fees and expenses are assessed acted arbitrarily,  vexatiously,
or not in good faith with respect to the rights provided by this chapter.

(c) If the court finds that the  services of counsel for any  dissenter  were of
substantial benefit to other dissenters  similarly  situated,  and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.

(d) In a  proceeding  commenced by  dissenters  to enforce the  liability  under
Section  33-13-300(a) of a corporation  that has failed to commence an appraisal
proceeding within the sixty-day period,  the court shall assess the costs of the
proceeding  and the  fees  and  expenses  of  dissenters'  counsel  against  the
corporation and in favor of the dissenters.





                                       B-6