UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-K

           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
                  OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended
   December 31, 1998                                 Commission File No. 0-10852

                         SOUTHERN BANCSHARES (N.C.), INC.
             (Exact name of registrant as specified in its charter)

           DELAWARE                                        56-1538087
(State or other jurisdiction of                          (I.R.S. Employer
    incorporation or organization)                     Identification Number)

121 East Main Street                                          28365
Mount Olive, North Carolina                                 (Zip Code)
(Address of Principal Executive offices)

Registrant's Telephone Number,
 including Area Code:                                    (919)  658-7000

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

Securities registered pursuant to Section 12(g) of the Act:

           Series B non-cumulative preferred stock, no par value

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                          Yes   [  X  ]    No     [   ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]

The  aggregate  market  value of the voting stock held by  nonaffiliates  of the
Registrant as of March 26, 1999:  The  Registrant's  voting stock has no readily
ascertainable  market  value  as of any  date  within  the  last  sixty  days or
otherwise  for the  reason  that such stock is not  regularly  traded and has no
quoted prices. Therefore, the aggregate market value of the voting stock held by
non-affiliates is not determinable.

The number of shares  outstanding of the  Registrant's  common stock as of March
26, 1999: Common Stock, $5.00 par value - 119,186 shares

Documents Incorporated by Reference

1. Portions  of  the  Registrant's   1998  Annual  Report  to  Shareholders  are
   incorporated by reference into Parts I and II.

2. Portions of the Registrant's  definitive Proxy Statement dated March 26, 1999
   for the 1999 Annual Meeting of  Shareholders  are  incorporated  by reference
   into Part III.
<PAGE>
PART I

ITEM 1 - BUSINESS:

General

     Southern BancShares (N.C.), Inc., a Delaware corporation (hereinafter, with
all of its subsidiaries, referred to as the "Registrant" or "BancShares"),  is a
bank holding company  pursuant to the provisions of the Bank Holding Company Act
of 1956, as amended.  BancShares is the successor to Southern BancShares (N.C.),
Inc., a North  Carolina  corporation  ("SBS") which was formed in 1982 to become
the  parent  company  of  Southern  Bank and  Trust  Company  ("Southern"),  its
principal operating  subsidiary,  which it acquired in late 1982. BancShares was
formed in 1986 in order to effect the reincorporation in Delaware of the holding
company  of  Southern  Bank by the  merger  of SBS into  BancShares,  which  was
effective  on December  28,  1986.  BancShares  has a  wholly-owned  subsidiary:
Southern  Capital Trust I, a statutory  business trust that issued $23.0 million
of 8.25% Capital  Securities  (the Capital  Securities) in June 1998 maturing in
2028.  All  significant  activities of the  Registrant  and its  subsidiary  are
banking  related so that the Registrant  operates  within one industry  segment.
Neither BancShares nor its subsidiary has any foreign operations.

     The  operating  subsidiary of BancShares is Southern Bank and Trust Company
("Southern"),  which is engaged in commercial banking primarily in eastern North
Carolina.  Southern's predecessor bank was organized on January 29, 1901, as the
Bank of Mount Olive.  In 1913, it became the First National Bank and remained so
until 1936 when it  rechartered  as the Bank of Mount Olive.  In 1967,  Southern
acquired its present name. Over the years,  Southern's growth has been generated
principally  through  branching  and by merging with five other  banks:  Roanoke
Chowan Bank,  Roxobel,  North  Carolina in 1969,  Merchants'  and Farmers' Bank,
Macclesfield,  North  Carolina in 1973,  Tarheel  Bank & Trust Co.,  Gatesville,
North Carolina in 1986,  Citizens Savings Bank,  Rocky Mount,  North Carolina in
1993 and Enfield  Savings Bank,  Enfield,  North Carolina in 1998. Also in 1993,
Southern acquired  deposits in four branches of two savings  institutions and an
office  of  NationsBank  in  Pollocksville,  North  Carolina.  In 1994  Southern
acquired deposits in branches in Scotland Neck, North Carolina and Turkey, North
Carolina  from First  Citizens  Bank.  In 1995  Southern  acquired  deposits  in
branches in Farmville,  North  Carolina;  Garland,  North  Carolina;  Kill Devil
Hills,  North Carolina and  Salemburg,  North Carolina from First Union National
Bank.  In 1995  Southern  also  acquired  the deposits of a branch in Kill Devil
Hills,  North  Carolina from First  Citizens  Bank.  In 1996  Southern  acquired
deposits  in a branch in  Windsor,  North  Carolina  from First  Citizens  Bank,
acquired  deposits in a branch in Edenton,  North Carolina from United  Carolina
Bank and sold the  deposits of its branch in Scotland  Neck,  North  Carolina to
Triangle Bank. In 1997 Southern acquired deposits in branches in Aulander, North
Carolina, Aurora, North Carolina and Hamilton, North Carolina from Wachovia Bank
of North Carolina, N.A. In 1998 Southern acquired deposits of a branch in Gates,
North Carolina from First Citizens Bank and acquired deposits of a branch in Red
Springs,  North Carolina from First Union National Bank. See Note 15 on pages 37
and 38 of BancShares' 1998 Annual Report, attached as Exhibit 13 to this Report,
for  additional  information  regarding  BancShares'   relationship  with  First
Citizens Bank. In terms of total assets, at December 31, 1998,  Southern was the
twelfth largest bank in North Carolina.
<PAGE>
Business

     Southern  conducts a general banking business designed to meet the needs of
the people of its market area.  These services,  all of which are offered at its
45 offices,  include,  among other items:  taking  deposits;  cashing checks and
providing for  individual  and  commercial  cash needs;  and providing  numerous
checking  and savings  plans,  including  automatic  transfer  services,  direct
deposit, and banking by mail.

     Southern also makes commercial,  consumer and mortgage loans at its 34 full
service offices and provides individual retirement account service, safe deposit
box  rental,  travelers'  check  service,  and Master  Card and Visa credit card
programs.

     The Bank has  nineteen  automatic  teller  machines;  one each in  Ahoskie,
Ayden,   Belhaven,   Bethel,   Edenton,   Farmville,   LaGrange,   Mount  Olive,
Murfreesboro,   Nashville,  Plymouth,  Roanoke  Rapids,  Warsaw,  Whitakers  and
Windsor,  North  Carolina  and two in Kill  Devil  Hills and Rocky  Mount, North
Carolina.

     Southern does not operate in the international financing market.

     Southern has a wholly-owned  subsidiary,  Goshen, Inc., which acts as agent
for credit life and credit accident and health  insurance  written in connection
with loans made by Southern  and sells such  insurance  to a subsidary  of First
Citizens Bank. See Note 15 on pages 37 and 38 of BancShares'  1998 Annual Report
attached  as Exhibit  13 to this  report for  additional  information  regarding
BancShares' relationship with First Citizens Bank.


Supervision and Regulation

     The  business  and  operations  of  BancShares  and Southern are subject to
extensive federal and state governmental regulation and supervision.

     BancShares is a bank holding company registered with the Board of Governors
of the Federal  Reserve  System (the "Federal  Reserve")  under the Bank Holding
Company Act of 1956 as amended (the "BHCA"),  and is subject to supervision  and
examination by and the  regulations  and reporting  requirements  of the Federal
Reserve.  Under the BHCA,  the  activities of BancShares 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 BHCA prohibits  BancShares from acquiring direct or indirect control of
more than 5 % of the outstanding voting stock or substantially all of the assets
of any  financial  institution,  or merging or  consolidating  with another bank
holding company or savings bank holding  company,  without prior approval of the
Federal Reserve.  Additionally,  the BHCA prohibits BancShares from engaging in,
or  acquiring  ownership  or control of more than 5% of the  outstanding  voting
stock of any company  engaged in a nonbanking  activity  unless such activity is
determined by the Federal  Reserve to be so closely  related to banking as to be
properly incident  thereto.  In approving an application by BancShares to engage
in a  non-banking  activity,  the Federal  Reserve  must  consider  whether that
activity can reasonably be expected to produce  benefits to the public,  such as
greater convenience, increased competition or gains in efficiency, that outweigh
possible adverse effects, such as undue concentration of resources, decreased or
unfair competition, conflicts of interest or unsound banking practices.
<PAGE>
     There are a number of obligations and restrictions imposed by law on a bank
holding company and its insured  depository  institution  subsidiaries  that are
designed to minimize  potential loss to depositors and the FDIC insurance funds.
For  example,  if  a  bank  holding  company's  insured  depository  institution
subsidiary becomes  "undercapitalized,"  the bank holding company is required to
guarantee (subject to certain limits) the subsidiary's compliance with the terms
of any  capital  restoration  plan filed with its  appropriate  federal  banking
agency.  Also,  a bank  holding  company  is  required  to serve as a source  of
financial  strength to its  depository  institution  subsidiaries  and to commit
resources to support such  institutions in  circumstances  where it might not do
so, absent such policy. Under the BHCA, the Federal Reserve has the authority to
require a bank  holding  company to  terminate  any  activity  or to  relinquish
control of a nonbank  subsidiary upon the Federal Reserve's  determination  that
such activity or control  constitutes a serious risk to the financial  soundness
and  stability  of a  depository  institution  subsidiary  of the  bank  holding
company.

     As a result of its ownership of a North Carolina-chartered commercial bank,
BancShares  also is registered with and subject to examination and regulation by
the North Carolina  Commissioner of Banks under the state's bank holding company
laws.

     Southern is a North Carolina  commercial  bank and its deposits are insured
by the FDIC. It is subject to supervision and examination by and the regulations
and reporting  requirements  of the North  Carolina  Commissioner  of Banks (the
"Commissioner") and the FDIC.

     Southern is subject to legal  limitations on the amounts of dividends it is
permitted to pay. Prior approval of the Commissioner is required if the total of
all dividends  declared by Southern in any calendar year exceeds its net profits
(as defined by statute) for that year combined with its retained net profits (as
defined by statute)  for the  preceding  two calendar  years,  less any required
transfers to surplus.  As an insured  depository  institution,  Southern also is
prohibited  from  making  capital   distributions,   including  the  payment  of
dividends,    if,   after   making   such   distribution,    it   would   become
"undercapitalized"  (as such term is defined in the  Federal  Deposit  Insurance
Act).

     Under  current  federal  law,  certain  transactions  between a  depository
institution  and its  affiliates  are  governed  by  Sections 23A and 23B of the
Federal Reserve Act. An affiliate of a depository  institution is any company or
entity that  controls,  is  controlled  by or is under  common  control with the
institution,  and, in a holding company context, the parent holding company of a
depository  institution  and any companies  which are  controlled by such parent
holding  company  are  affiliates  of  the  depository  institution.  Generally,
Sections 23A and 23B (i) limit the extent to which a depository  institution  or
its subsidiaries may engage in covered transactions with any one affiliate,  and
(ii)  require  that  such  transactions  be on  terms  and  under  circumstances
substantially  the same, or at least as  favorable,  to the  institution  or the
subsidiary as those provided to a nonaffiliate.

     Southern  is  subject  to  various   other  state  and  federal   laws  and
regulations,  including state usury laws, laws relating to fiduciaries, consumer
credit and equal credit,  fair credit reporting laws and laws relating to branch
banking.  As an insured  institution,  Southern is prohibited from engaging as a
principal in activities that are not permitted for national banks unless (i) the
<PAGE>
FDIC  determines  that  the  activity  would  pose  no  significant  risk to the
appropriate deposit insurance fund and (ii) the institution is, and continues to
be, in compliance with all applicable  capital standards.  Insured  institutions
also are prohibited from directly  acquiring or retaining any equity  investment
of a type or in an amount not permitted for national banks.

     The Federal Reserve, the FDIC and the Commissioner all have broad powers to
enforce  laws and  regulations  applicable  to  BancShares  and  Southern and to
require  corrective  action of conditions  affecting the safety and soundness of
Southern.  Among  others,  these powers  include  cease and desist  orders,  the
imposition of civil penalties and the removal of officers and directors.


Capital Requirements

     Bank holding  companies  are required to comply with the Federal  Reserve's
risk-based  capital guidelines which require a minimum ratio of total capital to
risk-weighted assets of 8%. At least half of the total capital is required to be
Tier I capital.  In addition to the risk-based capital  guidelines,  the Federal
Reserve has adopted a minimum  leverage capital ratio under which a bank holding
company must  maintain a level of Tier I capital to average  total  consolidated
assets  of at  least 3 % in the case of a bank  holding  company  which  has the
highest  regulatory  examination  rating  and is not  contemplating  significant
growth or expansion. All other bank holding companies are expected to maintain a
leverage capital ratio of at least 1% to 2% above the stated minimum.

     Southern is also subject to capital requirements imposed by the FDIC. Under
the FDIC's  regulations,  insured  institutions  that receive the highest rating
during the examination  process and are not  anticipating  or  experiencing  any
significant  growth are required to maintain a minimum  leverage  ratio of 3% of
Tier  I  capital  to  average  total  consolidated  assets.  All  other  insured
institutions  are  required  to  maintain a minimum  ratio of 1% or 2% above the
stated minimum, with a minimum leverage ratio of not less than 4%.


Insurance Assessments

Southern is subject to insurance  assessments  imposed by the FDIC.  During 1996
the FDIC reduced the Bank Insurance Fund ("BIF")  assessment rates to a range of
0.00 % to 0.27% for the  highest  rated  banks to the  weakest  banks.  This BIF
premium reduction did not affect the deposit premium paid on Savings Association
Insurance Fund ("SAIF") insured  deposits.  The actual  assessment to be paid by
each  insured  institution  is  based  on  the  institution's   assessment  risk
classification,  which  is  determined  based  on  whether  the  institution  is
considered "well capitalized",  "adequately capitalized" or "under capitalized",
as such terms have been defined in applicable federal  regulations,  and whether
the institution is considered by its supervisory  agency to be financially sound
or to have  supervisory  concerns.  The FDIC also is authorized to impose one or
more special  assessments in any amount deemed  necessary to enable repayment of
amounts borrowed by the FDIC from the United States Treasury Department.

     The Deposit  Insurance  Funds Act of 1996  ("DIFA96")  required the FDIC to
impose a one-time  special  assessment on  SAIF-assessable  deposits,  including
those held by BIF-member  OAKAR  ("OAKAR")  institutions,  such as Southern,  to
capitalize  the  SAIF to its  target  Designated  Reserve  Ratio.  Southern  was
accordingly assessed $569 thousand in September 1996.
<PAGE>
     The DIFA96 also required  that,  beginning  January 1, 1997,  BIF banks and
OAKAR  institutions  would  begin to be  charged a separate  assessment  for the
Financing Corporation ("FICO") funding  requirements.  The FICO rate is not tied
to the FDIC risk  classification  and is  subject  to change by the FDIC  within
certain limitations.

     The FICO rate for the  first  quarter  of 1999 is set at an annual  rate of
6.10 basis  points of OAKAR  adjusted  deposits as defined by the FDIC and 1.220
basis points of BIF adjusted deposits.  At December 31, 1998 the FICO assessable
OAKAR deposit base for Southern was $109.4  million and the BIF deposit base was
$437.8  million.  If Southern's  deposits  remained at these levels and the FDIC
maintained  the same rates,  the expense for the FICO  obligation  for  Southern
would be approximately $120 thousand for 1999.


Change in Control

     State and  federal  law  restricts  the  amount  of voting  stock of a bank
holding company, or a bank, that a person may acquire without the prior approval
of banking regulators.

     Pursuant to North  Carolina  law, no person  may,  directly or  indirectly,
purchase or acquire voting stock of any bank holding company or bank which would
result in the change of control of that  entity  unless the  Commissioner  first
shall have approved that proposed  transaction.  A person will be deemed to have
acquired "control" of a bank holding company or bank if that person, directly or
indirectly,  (i)  owns,  controls  or has the  power  to vote 10% or more of the
voting stock of the bank holding company or bank, or (ii) possesses the power to
direct or cause the direction of its management and policy.  Federal law imposes
additional  restrictions on acquisitions of stock in bank holding  companies and
insured  banks.  Under the federal  Change in Bank  Control Act and  regulations
thereunder,  a person or group acting in concert must give advance notice to the
Federal Reserve or the FDIC before directly or indirectly acquiring the power to
direct the  management  or  policies  of, or to vote 25% or more of any class of
voting  securities of, any bank holding company or insured bank. Upon receipt of
such  notice,  the  federal  regulator  either  may  approve or  disapprove  the
acquisition.

     Under the Act, a change in control is  presumed  to occur if,  among  other
things, a person or group acquires more than 10% of any class of voting stock of
a holding company or insured bank and, after such acquisition, the acquirer will
be the largest shareholder.


Interstate Banking and Branching

     Federal  law  permits  adequately  capitalized  and  managed  bank  holding
companies  to  acquire  control  of  the  assets  of  banks  in any  state  (the
"Interstate Banking Law"). Acquisitions will be subject to anti-trust provisions
that cap at 10 % of the  portion of the total  deposits  of  insured  depository
institutions  in the  United  States  that a single  bank  holding  company  may
control,  and  generally  cap at 30 % of the  portion of the total  deposits  of
insured  depository  institutions  in a state that a single bank holding company
may control. Under certain circumstances,  states have the authority to increase
or decrease  the 30% cap, and states may set minimum age  requirements  of up to
five years on target banks within their borders.
<PAGE>
     Beginning June 1, 1997, and subject to certain  conditions,  the Interstate
Banking Law  permitted  interstate  branching by allowing a bank to merge with a
bank located in a different state. The Interstate Banking Law also permits banks
to  establish  branches in other  states,  by opening new  branches or acquiring
existing branches of other banks, if the laws of those other states specifically
permit that form of interstate  branching.  North Carolina has adopted  statutes
which,   subject  to  conditions  contained  therein,   specifically   authorize
out-of-state  bank  holding  companies  and banks to acquire or merge with North
Carolina banks and to establish or acquire branches in North Carolina.


Economic Considerations

     As a bank holding  company  whose  primary  asset is the capital stock of a
commercial  bank,   BancShares  is  directly  affected  by  regulatory  measures
affecting  the  banking  industry in general.  Additionally,  since  BancShares'
banking business is centered in eastern North Carolina, the general state of the
economy of eastern North Carolina,  especially the  agricultural  sector,  has a
direct effect on its business and profitability.

     Among governmental  regulators of primary importance is the Federal Reserve
which acts as the nation's central bank and can directly affect money supply and
thereby  affect  Southern's  lending  ability by increasing  or  decreasing  its
interest costs and  availability of funds. An important  function of the Federal
Reserve is to  regulate  the  national  supply of bank credit in order to combat
recession and curb  inflationary  pressures.  Among the  instruments of monetary
policy used by the Federal Reserve to implement these objectives are open market
operations  in U. S.  Government  securities,  changes in the discount  rate and
surcharge,   if  any,  on  member  bank  borrowings,   and  changes  in  reserve
requirements against bank deposits. These means are used in varying combinations
to influence overall growth of bank loans, investments and deposits and may also
affect interest rates charged on loans or paid for deposits.

     Southern is not a member of the Federal Reserve  System,  but is subject to
reserve  requirements  imposed on non-member banks by the Federal  Reserve.  The
monetary  policies of the Federal  Reserve have had a significant  effect on the
operating  results of commercial  banks in the past and are expected to continue
to do so in the future.


Competition

     The banking laws of North Carolina allow  statewide  branching;  therefore,
commercial  banking  in the  state  is  highly  competitive.  Southern  competes
directly  in many  of its  markets  with  one or  more  of the  largest  banking
organizations  in North Carolina.  Such  competitors  range in size to over $225
billion in consolidated  resources (including  resources  represented by banking
organizations  in  other  states  owned  by or  which  control  certain  of such
competitors),  have broader  geographic  markets and higher  lending  limits and
offer more services than Southern,  and can, therefore,  make more effective use
of media  advertising,  support  services  and  electronic  technology  than can
BancShares or Southern.

     In 1997 BancShares developed a plan to deal with the "Year 2000 issue". See
pages 13 through 15 of BancShares'  1998 Annual Report attached as Exhibit 13 to
this Report for additional information regarding the Year 2000 issue.
<PAGE>
Employees

     At December 31, 1998,  Southern  employed 290  full-time  employees  and 34
part-time employees.  It is not a party to any collective  bargaining agreements
and considers relations with its employees to be good.  BancShares and Goshen do
not have any separate employees.


Statistical Information

     Certain  additional  statistical  information  with respect to  BancShares'
business is included in the information incorporated herein under "Part II, Item
7" below.

I. AVERAGE BALANCE SHEET ITEMS AND NET INTEREST DIFFERENTIAL AVERAGE BALANCES
   AND AVERAGE RATES EARNED AND PAID

<TABLE>
<CAPTION>
Statistical Information
(Dollars in thousands)

I. AVERAGE BALANCE SHEET ITEMS AND NET INTEREST DIFFERENTIAL AVERAGE BALANCES
   AND AVERAGE RATES EARNED AND PAID

                                                                 DECEMBER 31, 1998                        DECEMBER 31, 1997         
                                                     ---------------------------------------       ---------------------------------
                                                      AVERAGE                        AVERAGE        AVERAGE                 AVERAGE 
ASSETS                                                BALANCE        INTEREST          RATE         BALANCE    INTEREST       RATE  
------                                                -------        --------          ----         -------    --------       ----  
<S>                                                  <C>             <C>             <C>          <C>          <C>          <C>     
Interest earning assets:
  Loans (1) (2)                                      $ 362,298       $ 31,000          8.56%      $ 340,195    $ 29,225       8.59% 
  Taxable investment securities                        141,193          8,085          5.73%        126,829       7,532       5.94% 
  Nontaxable investment securities (3)                  22,842          1,982          8.68%         24,581       2,130       8.66% 
  Federal funds sold                                    18,321            972          5.31%         11,526         623       5.41% 
  Other interest earning assets                          5,367            293          5.46%          4,840         269       5.56% 
                                                     ---------       --------        ------       ---------    --------     ------  
    Total interest earning assets                      550,021         42,332          7.70%        507,971      39,779       7.83% 
                                                                     --------                                  --------             
Non-interest earning assets:
  Cash and due from banks                               19,250                                       17,730                         
  Premises and equipment, net                           18,304                                       17,457                         
  Other                                                 28,253                                       24,078                         


    Total assets                                     $ 615,828                                    $ 567,236                         
                                                     =========                                    =========                         

LIABILITIES & EQUITY Interest bearing liabilities:
  Demand deposits                                    $  78,283       $  1,073          1.37%      $  76,080    $  1,234       1.62% 
  Savings deposits                                      92,657          2,325          2.51%         87,577       2,259       2.58% 
  Time deposits                                        285,869         15,318          5.36%        270,863      14,736       5.44% 
  Short-term borrowed funds                              6,531            292          4.47%          6,295         303       4.81% 
  Long-term obligations                                 15,056          1,320          8.77%          4,539         295       6.50% 
                                                     ---------       --------        ------       ---------    --------     ------  

    Total interest bearing liabilities                 478,396         20,328          4.25%        445,354      18,827       4.23% 
                                                                     --------                                  --------             
Non-interest bearing liabilities:
  Demand deposits                                       69,746                                       63,783                         
  Other                                                 11,263                                       12,396                         
Shareholders' equity                                    56,423                                       45,703                         
                                                      --------                                    ---------                         

    Total liabilities and equity                     $ 615,828                                    $ 567,236                         
                                                     =========                                    =========                         

 Interest rate spread (4)                                                              3.45%                                  3.60% 
 Net interest income and
 Net interest margin (5)                                             $ 22,004          4.00%                   $  20,952      4.12% 
                                                                     ========                                  =========            

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
II. AVERAGE BALANCE SHEET ITEMS AND NET INTEREST DIFFERENTIAL ANALYSIS OF
    CHANGES IN INTEREST DIFFERENTIAL

                                                                  DECEMBER 31, 1996               
                                                     ---------------------------------------- 
                                                     AVERAGE                         AVERAGE 
                                                     BALANCE           INTEREST       RATE  
                                                     -------           --------       ----  
<S>                                                  <C>               <C>             <C>                                          
ASSETS                                           
Interest earning assets:                         
  Loans (1) (2)                                                            
  Taxable investment securities                      $ 310,389         $ 26,878        8.66%      
  Nontaxable investment securities (3)                 125,068            7,899        6.32%      
  Federal funds sold                                    25,914            2,290        8.84%      
  Other interest earning assets                          6,895              402        5.83%      
                                                         1,526               62        4.06%      
    Total interest earning assets                    ---------         --------                   
                                                       469,792           37,531        7.99%      
                                                     ---------                                                                      
Non-interest earning assets:                                                                      
  Cash and due from banks                                                                         
  Premises and equipment, net                           15,726                                    
  Other                                                 13,498                                    
                                                        20,525                                    
                                                                                                  
    Total assets                                                                                  
                                                     $ 519,541                                    
                                                     =========                                    
                                                                                                                                    
LIABILITIES & EQUITY Interest bearing liabilities                                                 
  Demand deposits                                                                                 
  Savings deposits                                   $  70,443            1,227        1.74%      
  Time deposits                                         83,761            2,202        2.63%      
  Short-term borrowed funds                            247,575           13,504        5.45%      
  Long-term obligations                                  8,160              400        4.90%      
                                                         2,021              117        5.79%      
                                                     ---------         --------      ------       
    Total interest bearing liabilities                                                            
                                                       411,960           17,450        4.24%      
                                                     ---------                                    
Non-interest bearing liabilities:                                                                 
  Demand deposits                                                                                 
  Other                                                 57,773                                    
Shareholders' equity                                     9,574                                    
                                                        40,234                                    
                                                     ---------                                    
    Total liabilities and equity                                                                  
                                                     $ 519,541                                    
                                                     ========                                     
 Interest rate spread (4)                                                                         
 Net interest income and                                                                3.75%     
 Net interest margin (5)                                                                          
                                                                       $ 20,081         4.27%     
                                                                       ========                   
</TABLE>
(1)  Includes non-accrual loans
(2)  Interest income includes amortization of loan fees.
(3)  The average rate on nontaxable investment securities has been adjusted to a
     tax equivalent yield using a 34% tax rate.
(4)  Interest  rate spread is the  difference  between  earning  asset yield and
     interest bearing liability rate.
(5)  Net  interest  margin is net  interest  income  divided by average  earning
     assets.
<PAGE>
<TABLE>
<CAPTION>
(Dollars in thousands)                                              December 31, 1998 Increase (Decrease)
                                                         ----------------------------------------------------------
                                                                          AMOUNT          AMOUNT        AMOUNT
                                                           TOTAL        ATTRIBUTABLE   ATTRIBUTABLE  ATTRIBUTABLE
                                                          CHANGE         TO CHANGE       TO CHANGE    TO CHANGE IN
                                                         1997-1998       IN VOLUME       IN RATE      RATE/VOLUME
                                                         ---------       ---------       -------      -----------
<S>                                                        <C>             <C>             <C>             <C>
ASSETS
Interest earning assets:
  Loans                                                    $1,775          $1,836          $(68)           $7
  Taxable investment securities                               577             971          (355)          (39)
  Non-taxable investment securities                          (148)           (151)            5            (2)
  Federal funds sold                                          349             368           (12)           (7)
                                                          -------         -------         -----         -----

    Total interest income                                   2,553           3,024          (430)          (41)
                                                          -------         -------         -----         -----

LIABILITIES & EQUITY Interest bearing liabilities:
  Demand deposits                                            (161)             36          (190)           (7)
  Savings deposits                                             66             131           (61)           (4)
  Time deposits                                               582             728          (135)          (11)
  Short-term borrowed funds                                    22              45           (22)           (1)
  Long-term obligations                                       992             771            67           154
                                                          -------         -------         -----         -----

    Total interest expense                                  1,501           1,711          (341)          131
                                                          -------         -------         -----         -----

Net interest income                                        $1,052          $1,313          $(89)        $(172)
                                                          =======         =======         =====         =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(Dollars in thousands)                                              December 31, 1997 Increase (Decrease)
                                                         ----------------------------------------------------------
                                                                          AMOUNT          AMOUNT        AMOUNT
                                                           TOTAL        ATTRIBUTABLE   ATTRIBUTABLE  ATTRIBUTABLE
                                                          CHANGE         TO CHANGE       TO CHANGE    TO CHANGE IN
                                                         1996-1997       IN VOLUME       IN RATE      RATE/VOLUME
                                                         ---------       ---------       -------      -----------
<S>                                                        <C>             <C>             <C>             <C>
ASSETS
Interest earning assets:
  Loans                                                    $2,347          $2,581         $(217)        ($17)
  Taxable investment securities                              (183)            339          (506)         (16)
  Non-taxable investment securities                          (161)           (144)          (18)           1
  Federal funds sold                                          221             270           (29)         (20)
                                                          -------         -------         -----         ----

    Total interest income                                   2,224           3,046          (770)         (52)
                                                          -------         -------         -----         ----

LIABILITIES & EQUITY Interest bearing liabilities:
  Demand deposits                                            (479)             98          (535)         (42)
  Savings deposits                                             57             100           (42)          (1)
  Time deposits                                             1,718           1,269           421           28
  Short-term borrowed funds                                   (97)            (91)           (7)           1
  Long-term obligations                                       178             146            14           18
                                                          -------         -------         -----         ----

    Total interest expense                                  1,377           1,522          (149)           4
                                                          -------         -------         -----         ----

Net interest income                                          $847          $1,524         $(621)        $(56)
                                                          =======         =======         =====         ====

</TABLE>
     Average loan balances include nonaccrual loans. BancShares earns tax-exempt
interest  on certain  loans and  investment  securities  due to the  borrower or
issuer being either a governmental agency or a quasi-governmental agency. Yields
related to loans and securities exempt from federal income taxes are stated on a
taxable-equivalent basis assuming a statutory federal income tax rate of 34% for
all periods. The taxable equivalent  adjustment was $543 in 1998, $2,024 in 1997
and $740 in 1996.
<PAGE>
III. INVESTMENT PORTFOLIO


The following  table sets forth the  carrying  amount of  investment  securities
<TABLE>
<CAPTION>
                                                        December 31,
                                            ------------------------------------
(Dollars in thousands)                        1998          1997          1996
                                            --------      --------      ------- 
<S>                                         <C>           <C>           <C>     
U.S. Treasury and other
  U.S. Government agencies (1)              $143,350      $118,589      $108,592
States and political subdivisions             29,281        31,150        35,086
Other (2)                                     28,936        30,394        25,011
                                            --------      --------      --------
      Total                                 $201,567      $180,133      $168,689
                                            ========      ========      ========
</TABLE>

     The following  table sets forth the maturities of investment  securities at
December 31, 1998 (dollars in thousands) and the weighted average yields of such
securities.  (Note that nontaxable  investment securities have not been adjusted
to a tax  equivalent  basis and  unrealized  gain (loss) on  available  for sale
securities is not included.)
<TABLE>
<CAPTION>
                                                                              Maturing
                                      ---------------------------------------------------------------------------------------------
                                                               After One But             After Five But
                                         Within One Year      Within Five Years         Within Ten Years           After Ten Years
                                      ------------------     -------------------       --------------------       -----------------
                                       Amount      Yield     Amount        Yield       Amount        Yield        Amount      Yield
                                       ------      -----     ------        -----       ------        -----        ------      -----
<S>                                   <C>          <C>       <C>           <C>            <C>         <C>         <C>         <C>   
U.S. Treasury and other
  U.S. Government agencies (1)        $73,904      5.81%     $68,989       4.90%          $11         5.65%       $1,892      6.45% 
States and political subdivisions       5,795      5.92%       8,057       6.37%        7,678         5.84%        7,179      5.41% 
Other (2)                              10,747      2.63%           -       -                -         -              100      6.75% 
                                      -------      ----      -------       ----        ------         ----        ------      ----  
                                                                                                                                    
                                      $90,446      5.44%     $77,046       5.05%       $7,689         5.84%       $9,171      5.62% 
                                      =======                =======                   ======                     ======            
</TABLE>
 
(1)  Mortgage-backed   securities  are  included  in  the  obligations  of  U.S.
     Government  agencies  and spread  within  the  columns  according  to their
     anticipated repayment schedules.

(2)  The "Within One Year" column of the "Other"  category  includes  marketable
     equity  securities  held by  BancShares.  Accordingly,  the  yield on these
     securities  represents  anticipated  dividend  income  rather than interest
     income.
<PAGE>
IV.  LOAN PORTFOLIO

Analysis of loans by type and maturity


     The table below classifies loans by major category (dollars in thousands):
<TABLE>
<CAPTION>
(Dollars in thousands)                                                  December 31,
                                               ------------------------------------------------------------
                                                 1998         1997          1996        1995          1994
                                               --------     --------     --------     --------     --------
<S>                                             <C>          <C>          <C>          <C>          <C>    
Commercial, financial and agricultural          $86,980      $84,281      $70,881      $57,398      $36,343
Real estate:
      Construction                                5,276        5,209        2,470        1,533        3,221
       Mortgage:
            One to four family residential      113,984      106,444      113,915      111,372      108,804
            Commercial                           62,446       58,056       52,686       43,580       41,090
            Equityline                           28,698       27,759       18,654       13,828       10,858
            Other                                26,846       27,868       21,615       20,535       17,261
Consumer                                         36,775       35,643       35,512       37,548       33,762
Lease financing                                   3,484        3,956        2,022        2,166        1,272
                                               --------     --------     --------     --------     --------

  Total loans                                  $364,489     $349,216     $317,755     $287,960     $252,611
                                               ========     ========     ========     ========     ========
</TABLE>
The following  table  identifies  the maturities of all loans as of December 31,
1998 and addresses the sensitivity of these loans to changes in interest rates.
<TABLE>
<CAPTION>
(Dollars in thousands)
                                      Within     After One Year But        After
                                     One Year     Within Five Years      Five Years        Total
                                     --------     -----------------      ----------       -------    
<S>                                   <C>               <C>               <C>             <C>         
Commercial and Financial              $68,103           $18,877           $     -         $86,980     
Real Estate:                                                                                          
  Construction                          4,383               893                 -           5,276     
  One to four family residential       31,487            48,385            34,112         113,984     
  Commercial                           17,250            26,509            18,687          62,446     
  Equityline                            7,952            12,220             8,526          28,698     
  Other                                 7,439            12,794             6,613          26,846     
                                                                                                      
Consumer                               25,386            11,389                 -          36,775     
Lease Financing                           519             2,114               851           3,484     
                                     --------          --------           -------        --------     
                                                                                                      
  Total                              $162,519          $133,181           $68,789        $364,489     
                                     ========          ========           =======        ========     
                                                                                                      
Fixed Rate                            $42,766          $107,631           $68,752        $219,149     
Variable Rate                         119,753            25,550                37         145,340     
                                     --------          --------           -------        --------     
                                                                                                      
         Total                       $162,519          $133,181           $68,789        $364,489     
                                     ========          ========           =======        ======== 
</TABLE>
<PAGE>                                                       
Non-accrual, past-due, and restructured loans

The following  analysis  identifies  other real estate owned and loans that were
either   non-accruing,   past-due  or  restructured.   Accrual  of  interest  is
discontinued  on  a  loan  when  management  believes  the  borrowers' financial
condition is such that  collection  of principal or interest is doubtful.  Loans
are  returned  to the  accrual  status  when  the  factors  indicating  doubtful
collectibility cease to exist.
<TABLE>
<CAPTION>
                                                                   December 31,
                                                  -------------------------------------------- 
(Dollars in thousands)                            1998      1997     1996     1995        1994
                                                  ----      ----     ----     ----        ---- 
<S>                                               <C>        <C>      <C>       <C>        <C>
Non-accrual loans                                 $  166     $230     $147      $50        $77
Restructured loans                                    43        -        8        -        204
Accruing loans past-due 90 days or more              805      466      343      508        234
                                                  ------     ----     ----     ----     ------
       Total non-performing loans                  1,014      696      498      558        515
Other real estate owned                               84       48        -       86      1,339
                                                  ------     ----     ----     ----     ------
        Total non-performing loans and assets     $1,098     $744     $498     $644     $1,854
                                                  ======     ====     ====     ====     ======

</TABLE>

     The  amount  of  interest  which  would  have  been  recorded  in  1998  on
non-accrual  loans,  had  they  been  in  accordance  with  the  original  terms
throughout the period, was immaterial.
<PAGE>
V.  SUMMARY OF LOAN LOSS EXPERIENCE

Analysis of the allowance for loan losses

     The table  presented  below  summarizes  activity in the allowance for loan
losses for the five years ended (dollars in thousands):
<TABLE>
<CAPTION>
                                                                                    December 31,
                                                          ----------------------------------------------------------------
(Dollars in thousands)                                       1998          1997         1996          1995          1994
                                                          --------      --------      --------      --------      --------
<S>                                                         <C>           <C>           <C>           <C>           <C>   
Allowance for loan losses - beginning of year               $5,971        $6,163        $6,321        $6,653        $6,717
Charge - offs:
    Commercial, financial and agricultural                     158            47             5             -            26
    Real estate:
           Mortgage:
                One to four family residential                  41            86           106            34            89
                Commercial                                      15             -             -             -             -
                Equityline                                      32             -             -             -             -
                Other                                            -            23             -           209             -
    Consumer                                                   298           307           428           220           181
                                                          --------      --------      --------      --------      --------

      Total charge-offs                                        544           463           539           463           296

Recoveries:
    Commercial, financial and agricultural                      11            13             -            54            29
    Real estate:
          Construction                                           -             -            19             -             -
           Mortgage:
                One to four family residential                  20            59           131            19            27
                Equityline                                       8             -             -             -            15
                Other                                            5             -             -             -            20
    Consumer                                                    67           139            91            58           141
                                                          --------      --------      --------      --------      --------

      Total recoveries                                         111           211           241           131           232
                                                          --------      --------      --------      --------      --------

Net charge-offs                                                433           252           298           332            64
Provision for loan losses                                      155            60           140             -             -
Additions from  bank acquisition                               269             -             -             -             -
                                                          --------      --------      --------      --------      --------

Allowance for loan losses - end of year                     $5,962        $5,971        $6,163        $6,321        $6,653
Average loans outstanding during the year                 $362,298      $340,195      $310,389      $270,563      $242,360
Ratio of net charge-offs to average loans outstanding         0.12%         0.07%         0.10%         0.12%         0.03%

</TABLE>
<PAGE>
     The allowances for loan losses is increased by charges to the provision for
loan  losses and  reduced by loans  charged  off, net of  recoveries. Southern's
provision  is  the  amount  necessary  to  maintain  the  allowance  at a  level
considered  adequate to provide for possible  loan losses based on  management's
internal evaluation of the loan portfolio, as well as prevailing and anticipated
economic conditions.


Allocation of the allowance for loan losses:

     The  composition of the allowance by loan category shown in the table below
is based upon management's  evaluation of the loan portfolio,  past history, and
prevailing economic conditions:
<TABLE>
<CAPTION>
(Dollars in thousands)                                                            December 31,
                                                ----------------------------------------------------------------------------------
                                                             % of loans                  % of loans                    % of loans   
                                                              in each                      in each                      in each     
                                                            category to                   category to                  category to  
                                                  1998      total loans        1997       total loans       1996       total loans  
                                                  ----      -----------        ----       -----------       ----       -----------  
<S>                                             <C>              <C>          <C>              <C>          <C>              <C> 
Commercial, financial and agricultural          $2,200           24%          $2,149           24%          $2,214           22% 
Real estate:                                                                                                                     
      Construction                                 100            2%              60            1%              76            1% 
       Mortgage:                                                                                                                 
            One to four family residential       1,100           31%           1,194           30%           1,245           36% 
            Commercial                             550           17%             537           17%             566           17% 
            Equityline                             200            8%             239            8%             204            6% 
            Other                                  212            7%             239            8%             248            6% 
Consumer                                         1,500           10%           1,493           10%           1,537           11% 
Lease financing                                    100            1%              60            2%              73            1% 
                                                                              ------       ------           ------       ------  
                                                                                                                                 
                                                $5,962          100%          $5,971          100%          $6,163          100% 
                                                ======          ===           ======       ======           ======       ======  
                                                                                                          
<CAPTION>
                                                              % of loans                      % of loans  
                                                                in each                         in each     
                                                              category to                      category to 
                                                    1995      total loans         1994         total loans 
                                                    ----      -----------         ----         ----------- 
<S>                                               <C>              <C>            <C>               <C>    
Commercial, financial and agricultural            $1,264           20%            $774              14%    
Real estate:                                                                                               
      Construction                                    63            1%             247               1%    
       Mortgage:                                                                                           
            One to four family residential         2,188           39%           2,813              43%    
            Commercial                               853           15%           1,061              16%    
            Equityline                               260            5%             277               4%    
            Other                                    408            7%             460               8%    
Consumer                                           1,222           13%           1,021              13%    
Lease financing                                       63            -                -               1%    
                                                  ------       ------           ------             ---     
                                                                                                           
                                                  $6,321          100%          $6,653             100%    
                                                  ======       ======           ======             ===     
</TABLE>
<PAGE>
VI.  DEPOSITS


     The average monthly volume of deposits, which is considered  representative
of  BancShares'  operations,  and the average  rates paid on such  deposits  are
presented below (dollars in thousands):
<TABLE>
<CAPTION>
                                                                   Year ended December 31,
                                      ------------------------------------------------------------------------------------- 
                                                1998                           1997                           1996
(Dollars in thousands)                ------------------------       ----------------------        ------------------------
                                      Average          Average       Average        Average         Average         Average
                                      Balances          Rates        Balances        Rates          Balances         Rates
                                      --------          -----        --------        -----          --------         -----
<S>                                   <C>                            <C>                           <C>                   
Non-interest bearing demand           $ 69,746             -         $ 63,783            -         $  57,773            -
Interest bearing demand                 78,283          1.37%          76,080         1.62%           70,443         1.74%
Savings                                 92,657          2.51%          87,577         2.58%           83,761         2.63%
Time deposits                          285,869          5.36%         270,863         5.44%          247,575         5.45%
                                      --------                       --------                      --------- 

   Total deposits                    $ 526,555                       $498,303                      $ 459,552
                                     =========                       ========                      ========= 

</TABLE>

     Maturities of $100,000 or more time certificates of deposit at December 31,
1998 are summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
Maturity Category

<S>                                                                      <C>    
Three months or less                                                     $25,728
Over three through six months                                             13,560
Over six months through twelve months                                     13,585
Over one year through five years                                           7,190
Over five years                                                                -
                                                                         -------
                                                                         $60,063
                                                                         =======
</TABLE>
<PAGE>
VII.  RETURN ON EQUITY AND ASSETS

The following table presents certain ratios of the Company:
<TABLE>
<CAPTION>
                                                                                December 31,
                                                                     -------------------------------
                                                                       1998        1997        1996
                                                                     ------       ------     ------- 

<S>                                                                    <C>         <C>         <C>  
Return on assets (net income divided by average total assets)          0.91%       1.17%       0.84%

Return on equity - including Series B and C preferred                  9.92%      14.47%      10.85%
      (net income divided by average total equity)

Dividend payout ratio (Dividends paid divided by net income)          10.38%       8.85%      13.45%


Equity to assets ratio - including Series B and C preferred            9.16%       8.06%       7.74%
      (Average equity divided by average total assets)

</TABLE>

VIII.  CAPITAL ADEQUACY

The following table presents  certain  calculations  of BancShares'  capital and
related ratios:
<TABLE>
<CAPTION>
                                              December 31,
                                 ------------------------------------
                                   1998           1997          1996
                                 -------        -------       ------- 
                                        (Dollars in thousands)


<S>                              <C>            <C>           <C>    
Total Shareholders' Equity       $56,033        $54,984       $44,778
Tier 1 capital                    51,240         34,380        27,891
Total capital  (1)                65,666         38,449        31,861

Tier 1 capital ratio (2)           16.01%         11.43%         9.33%
Total capital ratio  (2)           20.52%         12.78%        10.66%

</TABLE>

(1) The Capital Securities issued in 1998 are considered part of Tier I Capital.

(2) The minimum ratio of qualifying total capital to risk weighted assets is 8%,
    of  which  4% must be Tier 1  capital,  which  is  common  equity,  retained
    earnings,  and a limited amount of perpetual  preferred stock,  less certain
    intangibles.
<PAGE>
IX.  RATE OF INTERNAL CAPITAL GENERATION

<TABLE>
<CAPTION>
                                                                                      December 31,
                                                                       -------------------------------------------
                                                                         1998             1997              1996
                                                                        ------           ------            -------  

<S>                                                                    <C>              <C>                <C>  
Return on average assets (based on net income)                           0.91%            1.17%              0.84%

Average equity as a percentage of total average assets                   9.16%            8.06%              7.74%

Return on average equity                                                 9.92%           14.47%             10.85%

Dividend payout ratio (Dividends paid divided by net income)            10.38%            8.85%             13.45%

Earnings retention                                                      89.62%           91.15%             86.55%
     (Net income less dividends divided by net income)

Rate of internal capital generation                                      8.89%           13.19%              9.39%
      (Return on average equity times earnings retention ratio)

</TABLE>
<PAGE>
X.  INTEREST RATE SENSITIVITY ANALYSIS
<TABLE>
<CAPTION>
(Dollars in thousands)
                                                                            31-Dec-98
                                         ----------------------------------------------------------------------------------
                                                                                                     Non-Rate
                                            1-30         31-90          91-180       181-365        Sensitive
                                            Days          Days           Days          Days           & Over
                                         Sensitive     Sensitive      Sensitive      Sensitive         1 Year       Total
                                        ---------       --------       --------       --------       --------      --------
<S>                                       <C>            <C>            <C>            <C>           <C>          <C>     
Earning Assets:
Loans                                    $ 93,298        $14,098        $14,943        $     -       $242,150      $364,489
Investment Securities                       5,197         17,212         17,266         43,546        118,346       201,567
Temporary Investments                      19,535              -              -              -              -        19,535
Other                                           -          5,108              -              -              -         5,108
                                        ---------       --------       --------       --------       --------      --------
Total earning assets                     $118,030        $36,418        $32,209        $43,546       $360,496      $590,699
                                        =========       ========       ========       ========       ========      ========

Interest-Bearing Liabilities:
Savings and core time deposits           $225,668        $45,392        $64,395        $33,998        $49,686      $419,139
Time deposits of $100,000 and more         10,776         14,952         13,560         13,585          7,190        60,063
Short-term borrowings                       5,124              -              -              -              -         5,124
Long-term obligations                           -              -              -              -         23,000        23,000
                                        ---------       --------       --------       --------       --------      --------

Total interest bearing liabilites        $241,568        $60,344        $77,955        $47,583        $79,876      $507,326
                                        =========       ========       ========       ========       ========      ========

Interest sensitive Gap                  $(123,538)      $(23,926)      $(45,746)       $(4,037)      $280,620       $83,373
                                        =========       ========       ========       ========       ========      ========
</TABLE>
Interest  sensitivity  is  continually   changing.   The  table  above  reflects
BancShares' gap position at December 31, 1998 and does not necessarily represent
its position on any other dates.
<PAGE>
XI.  SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
(Dollars in thousands)
                                                                 1998                       1997                      1996
                                                       ---------------------       --------------------      ---------------------
                                                        Amount          Rate        Amount         Rate       Amount         Rate
                                                        ------          ----        ------         ----       ------         ----
<S>                                                    <C>              <C>        <C>            <C>         <C>             <C>  
Repurchase agreements
        At December 31                                 $ 4,953          3.35%      $ 4,761        5.62%       $ 3,838         6.71%
        Average during year                              5,655          4.09%        4,819        4.18%         2,934         4.04%
        Maximum month-end balance during year            6,459                       5,929                      4,507

U. S. Treasury tax and loan accounts
        At December 31                                   $ 171          4.11%      $ 2,065        5.25%       $ 1,226         5.15%
        Average during year                                861          5.97%          997        5.85%         1,052         5.09%
        Maximum month-end balance during year            2,206                       2,215                      1,300

</TABLE>
<PAGE>
ITEM 2 - PROPERTIES

     BancShares  does not own or lease any real property.  Except for two tracts
of land that are leased and upon which are  constructed  leasehold  improvements
for the conduct of its banking business,  Southern owns all of the real property
utilized in its operations.

     Southern's  home office is located at 121 East Main  Street,  Mount  Olive,
North  Carolina.  At December  31, 1998 there were 45 Southern  offices in North
Carolina. These offices are listed on page 41 of BancShares' 1998 Annual Report.


ITEM 3 - LEGAL PROCEEDINGS:

     There  are  no  material  legal  proceedings  to  which  BancShares  or its
subsidiaries  are a party or to which any of their  property is  subject,  other
than  ordinary,  routine  litigation  incidental  to the business of  commercial
banking.


ITEM 4 -  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES
                 HOLDERS:

          None.

<PAGE>
PART II


ITEM 5 -  MARKET  FOR  THE  REGISTRANT'S  COMMON  STOCK  AND  RELATED
                SHAREHOLDER MATTERS:

         Information  required by this item is incorporated  herein by reference
to the section captioned  "Market for the Registrant's  Common Stock and Related
Shareholder Matters" on page 15, and the Table captioned "Per Share of Stock" on
page 16 of the Registrant's 1998 Annual Report.


ITEM 6 - SELECTED FINANCIAL DATA:

         Information  required by this item is incorporated  herein by reference
to the section captioned Table 1, Five-Year Financial Summary, Selected Balances
and Ratios, on page 4 of Registrant's 1998 Annual Report.


ITEM 7 - MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                AND RESULTS OF OPERATIONS:

         Information  required by this item is incorporated  herein by reference
to the section  captioned  "Management's  Discussion  and  Analysis of Financial
Condition and Results of Operations"  on pages 4 through 16 of the  Registrant's
1998 Annual Report.


ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Information  required by this item is incorporated  herein by reference
to the  section  captioned  "Market  Risk" on page 10 of the  Registrant's  1998
Annual Report.

 
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:

         The  information  required  by this  item  is  incorporated  herein  by
reference  to  the  following  financial  statements,  supplementary  data,  and
independent  auditors'  report on the indicated page numbers of the Registrant's
1998 Annual Report:

         Independent Auditors' Report                                        17

         Consolidated Balance Sheets as of December 31, 1998 and 1997        18

         Consolidated Statements of Income for the years ended
         December 31, 1998, 1997 and 1996                                    19

         Consolidated Statements of Cash Flows for the years ended
         December 31, 1998, 1997 and 1996                                    20

         Consolidated Statements of Changes in Shareholders' Equity
         for the years ended December 31, 1998, 1997 and 1996                21

         Notes To Consolidated Financial Statements                        22-38

<PAGE>
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURES:

         None


<PAGE>
PART III


ITEM 10 -  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT:

     The  information  under the captions  "PROPOSAL 1: ELECTION OF  DIRECTORS",
"Section  16(a)  Beneficial  Ownership  Reporting  Compliance,"  and  "Executive
Officers"  on pages 5  through  7 and page 9 of  Registrant's  definitive  Proxy
Statement dated March 26, 1999, is incorporated herein by reference.


ITEM 11 - EXECUTIVE COMPENSATION:

     The   information   under  the  captions   "Compensation   of   Directors",
"Compensation  Committee  Interlocks  and  Insider  Participation",   "Executive
Compensation",   "Pension  Plan",  and  "Employment  Contracts,  Termination  of
Employment and Change-in-Control Arrangements" on pages 7 through 8 and pages 10
through 11 of the Registrant's  definitive Proxy Statement dated March 26, 1999,
is incorporated herein by reference.


ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:

     The information under the captions "PRINCIPAL HOLDERS OF VOTING SECURITIES"
and  "OWNERSHIP OF VOTING  SECURITIES BY MANAGEMENT" on pages 1 through 4 of the
Registrant's  definitive  Proxy  Statement dated March 26, 1999, is incorporated
herein by reference.


ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:

     The  information  contained  in Footnote (3) to the table under the caption
"PROPOSAL 1:  ELECTION OF  DIRECTORS,"  and the  information  under the captions
"Compensation  Committee  Interlocks  and Insider  Participation"  on page 8 and
"Transactions  with  Management"  on pages  12  through  13 of the  Registrant's
definitive  Proxy  Statement  dated March 26, 1999,  is  incorporated  herein by
reference.

<PAGE>
PART IV


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

     (a) 1. Financial Statements

            The  following   consolidated   financial   statements  of  Southern
            BancShares (N.C.),  Inc. and subsidiary,  and Independent  Auditors'
            Report   thereon,   are   incorporated   herein  by  reference  from
            Registrant's 1998 Annual Report to Shareholders.

            .  Independent Auditors' Report

            .  Consolidated Balance Sheets at December 31, 1998 and 1997

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

            .  Consolidated Statements of Cash Flows for the years ended
               December 31, 1998, 1997 and 1996

            .  Consolidated Statements of Changes in Shareholders' equity for
               the years ended December 31, 1998, 1997 and 1996

            .  Notes to Consolidated Financial Statements

         2.  Financial statement schedules are omitted because of the absence of
             conditions  under which they are  required or because the  required
             information is contained in the consolidated  financial  statements
             or related notes thereto which are incorporated herein by reference
             from Registrant's 1998 Annual Report to Shareholders.

         3.  Exhibits

             The following  exhibits are filed or incorporated  herewith as part
             of this report on Form 10-K:

<PAGE>
        Exhibit                       
        Number                 Description of Exhibits
        ------                 -----------------------

          3.1  Certificate of Incorporation  and Certificate of Amendment to the
               Certificate of Incorporation of the Registrant (filed as exhibits
               3.1  and   3.2)   to    Amendment   No.  1 to  the   Registrant's
               Registration  Statement on Form S-4 (No.  33-8581)  filed October
               20, 1986 and incorporated herein by reference)

          3.2  Registrant's  Bylaws as amended April 15, 1998 (filed herewith)

          4    Southern Bank and Trust Company Indenture dated February 27, 1971
               (filed as exhibit 4 to the Registrant's Registration Statement on
               Form  S-14 (No.  2-78327)  filed  July 7,  1982 and  incorporated
               herein by reference)

       10.1*   Non-Competition  and Consulting  Agreement between R. S. Williams
               and Southern Bank and Trust Company (filed as exhibit 10.1 to the
               Registrant's  1989  Annual  Report on Form 10-K and  incorporated
               herein by reference)

       10.2*   Ninth  Amendment  to  Noncompetition  and  Consulting   Agreement
               between R. S.  Williams and Southern Bank and Trust Company dated
               December 31, 1998 (filed herewith)

       10.3*   Assignment  and  Assumption  Agreement  and  First  Amendment  of
               Noncompetition and Consultation  Agreement between First-Citizens
               Bank & Trust  Company,  Southern Bank and Trust Company and M. J.
               McSorley (filed as exhibit 10.3 to the  Registrant's  1989 Annual
               Report on Form 10-K and incorporated herein by reference)

       10.4*   Employment  Agreement between Watson N. Sherrod, Jr. and Southern
               Bank and Trust Company (filed herewith)

       10.5    Amended and Restated Trust Agreement of Southern  Capital Trust I
               (filed  as  Exhibit  4.3  to  Amendment  No.  1  to  Registrant's
               Registration  Statement on  Form S-4 (No.  333-52107) filed  June
               3, 1998 and incorporated herein by reference).

       10.6    Form of  Guarantee  Agreement  (filed as Exhibit 4.5 to Amendment
               No.  1 to  Registrant's  Registration Statement  on Form S-4 (No.
               333-52107) filed  June  3,  1998  and   incorporated   herein  by
               reference).

       10.7    Junior  Subordinated  Indenture  between  Registrant  and Bankers
               Trust  Company,  as  Debenture  Trustee  (filed as Exhibit 4.6 to
               Amendment No. 1 to  Registrant's  Registration  Statement on Form
               S-4 (No. 333-52107)filed June 3, 1998 and  incorporated herein by
               reference).

       13      Registrant's 1998 Annual Report to Shareholders (filed herewith)

       22      Subsidiaries of the Registrant (filed herewith)

       27      Financial Data Schedule (filed herewith)

       99.1**  Registrant's  definitive  Proxy  Statement dated  March  26, 1999
               for the 1999 Annual Shareholders' Meeting
<PAGE>
     (b)    Reports on Form 8-K


            No reports on Form 8-K were filed for the fourth quarter of the year
            ended December 31, 1998.
 
*    Denotes a Management  Contract or compensatory plan or arrangement in which
     an executive officer or director of the Company participates

**   Not being refiled

<PAGE>
                                   SIGNATURES

      Pursuant  to the  requirements  of Section 13 or 15 (d) of the  Securities
      Exchange  Act of 1934,  the  registrant  has duly caused this report to be
      signed on its behalf by the undersigned, thereunto duly authorized.


DATED:    MARCH 16, 1999              SOUTHERN  BANCSHARES  (N.C.),  INC.

                           
                                      By: /s/ R. S. Williams
                                          ------------------
                                          R. S. Williams, Chairman of  the Board

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report has been signed by the following  persons on behalf of the Registrant and
in the capacities and on the dates indicated.
 
 
Signature                          Title                          Date
---------                          -----                          ----
/s/R. S. Williams             Chairman of the Board of         March 16, 1999
-----------------             Directors
R. S. Williams                

/s/David A. Bean              Treasurer (principal             March 15, 1999
----------------              financial and accounting   
David A. Bean                 officer)                   
                              

/s/Bynum R. Brown             Director                         March 19, 1999
-----------------
Bynum R. Brown

/s/William H. Bryan           Director                         March 18, 1999
-------------------
William H. Bryan

/s/D. Hugh Carlton            Director                         March 19, 1999
------------------
D. Hugh Carlton

/s/Robert J. Carroll          Director                         March 19, 1999
--------------------
Robert J. Carroll

/s/Hope H. Connell            Director                         March 18, 1999
------------------
Hope H. Connell

/s/J. Edwin Drew              Director                         March 22, 1999
----------------
J. Edwin Drew

/s/Sam E. Ewell, Jr.          Director                         March 22, 1999
-------------------
Sam E. Ewell, Jr.
<PAGE>
/s/Moses B. Gillam, Jr.       Director                         March 18, 1999
----------------------
Moses B. Gillam, Jr.

/s/Leroy C. Hand, Jr.         Director                         March 25, 1999
--------------------
LeRoy C. Hand, Jr.

/s/J. D. Hines                Director                         March 22, 1999
--------------
J. D. Hines

/s/Frank B. Holding           Director                         March 16, 1999
-------------------
Frank B. Holding

/s/George A. Hux              Director                         March 22, 1999
----------------
George A. Hux

/s/M. J. McSorley             Director                         March 16, 1999
-----------------
M. J. McSorley

/s/W. B. Midyette, Jr.        Director                         March 18, 1999
---------------------
W. B. Midyette, Jr.

/s/W. Hunter Morgan           Director                         March 19, 1999
-------------------
W. Hunter Morgan

/s/John C. Pegram, Jr.        Director                         March 16, 1999
---------------------
John C. Pegram, Jr.

/s/Charles I. Pierce          Director                         March 24, 1999
---------------------
Charles I. Pierce, Sr.

/s/W. A. Potts                Director                         March 16, 1999
--------------
W. A. Potts

/s/Charles L. Revelle, Jr.    Director                         March 19, 1999
-------------------------
Charles L. Revelle, Jr.
<PAGE>
/s/Watson N. Sherrod, Jr.     Director                         March 22, 1999
------------------------
Watson N. Sherrod, Jr.

/s/ Charles O. Sykes          Director                         March 16, 1999
--------------------
Charles O. Sykes

/s/ Raymond M. Sykes          Director                         March 23, 1999
--------------------
Raymond M. Sykes

/s/John N. Walker             Director                         March 16, 1999
-----------------
John N. Walker
<PAGE>
                                  EXHIBIT INDEX
        Exhibit                       
        Number                 Exhibits
        ------                 --------

          3.1  Certificate of Incorporation  and Certificate of Amendment to the
               Certificate of Incorporation of the Registrant (filed as exhibits
               3.1   and   3.2)  to   Amendment   No.  1  to  the   Registrant's
               Registration  Statement on Form S-4 (No.  33-8581)  filed October
               20, 1986 and incorporated herein by reference)

          3.2  Registrant's  Bylaws as amended April 15, 1998 (filed herewith)

          4    Southern Bank and Trust Company Indenture dated February 27, 1971
               (filed as exhibit 4 to the Registrant's Registration Statement on
               Form  S-14 (No.  2-78327)  filed  July 7,  1982 and  incorporated
               herein by reference)

       10.1    Non-Competition  and Consulting  Agreement between R. S. Williams
               and Southern Bank and Trust Company (filed as exhibit 10.1 to the
               Registrant's  1989  Annual  Report on Form 10-K and  incorporated
               herein by reference)

       10.2    Ninth  Amendment  to  Noncompetition  and  Consulting   Agreement
               between R. S.  Williams and Southern Bank and Trust Company dated
               December 31, 1998 (filed herewith)

       10.3    Assignment  and  Assumption  Agreement  and  First  Amendment  of
               Noncompetition and Consultation  Agreement between First-Citizens
               Bank & Trust  Company,  Southern Bank and Trust Company and M. J.
               McSorley (filed as exhibit 10.3 to the  Registrant's  1989 Annual
               Report on Form 10-K and incorporated herein by reference)

       10.4    Employment  Agreement between Watson N. Sherrod, Jr. and Southern
               Bank and Trust Company (filed herewith)

       10.5    Amended and Restated Trust Agreement of Southern  Capital Trust I
               (filed  as  Exhibit  4.3  to  Amendment  No.  1  to  Registrant's
               Registration Statement on  Form S-4  (No.  333-52107) filed  June
               3, 1998 and incorporated herein by reference).

       10.6    Form of  Guarantee  Agreement  (filed as Exhibit 4.5 to Amendment
               No.  1 to  Registrant's  Registration  Statement on Form S-4 (No.
               333-52107) filed  June  3,  1998  and   incorporated   herein  by
               reference).

       10.7    Junior  Subordinated  Indenture  between  Registrant  and Bankers
               Trust  Company,  as  Debenture  Trustee  (filed as Exhibit 4.6 to
               Amendment No. 1 to  Registrant's  Registration  Statement on Form
               S-4 No. 333-52107 filed June 3, 1998 and  incorporated  herein by
               reference).

       13      Registrant's 1998 Annual Report to Shareholders (filed herewith)

       22      Subsidiaries of the Registrant (filed herewith)

       27      Financial Data Schedule (filed herewith)

       99.1    Registrant's  definitive  Proxy  Statement dated  March  26, 1999
               for the 1999 Annual Shareholders' Meeting (not being refiled)