SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
                                    FORM 10-Q

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

For the quarter ended March 31, 1999                 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  Mount Olive, North Carolina                28365
( Address of Principal Executive offices)                      (Zip Code)

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



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 the number of shares outstanding of the Registrant's common stock as of
the close of the period covered by this report.

                                 119,186 shares
<PAGE>
<TABLE>
<CAPTION>      
                                                                  (Unaudited)
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES                   March 31,     December 31,
CONSOLIDATED BALANCE SHEETS                                           1999            1998
                                                                   ---------      --------- 

(Dollars in thousands except per share data)
<S>                                                                <C>            <C>      
ASSETS
Cash and due from banks ......................................     $  26,283      $  37,419
Federal funds sold ...........................................        18,570         19,535
Investment securities:
Available-for-sale, at fair value (amortized cost $101,621
      and $92,012, respectively) .............................       115,701        109,227
Held-to-maturity,  at amortized cost (fair value $88,979
      and $93,511, respectively) .............................        88,111         92,340
Loans ........................................................       363,745        364,489
Less allowance for loan losses ...............................        (5,898)        (5,962)
                                                                   ---------      ---------
Net loans ....................................................       357,847        358,527
Premises and equipment .......................................        19,189         18,902
Intangible assets ............................................         6,362          6,972
Accrued interest receivable ..................................         4,868          4,571
Other assets .................................................         2,002          1,932
                                                                   ---------      ---------
              Total assets ...................................     $ 638,933      $ 649,425
                                                                   =========      =========

LIABILITIES
Deposits:
     Noninterest-bearing .....................................     $  74,047      $  77,550
     Interest-bearing ........................................       475,180        479,202
                                                                   ---------      ---------
Total deposits ...............................................       549,227        556,752
Short-term borrowings ........................................         5,418          5,124
Long-term obligations ........................................        23,000         23,000
Accrued interest payable .....................................         3,587          4,505
Other liabilities ............................................         3,201          4,011
                                                                   ---------      ---------
          Total liabilities ..................................       584,433        593,392
                                                                   ---------      ---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                  (Unaudited)
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES                   March 31,     December 31,
CONSOLIDATED BALANCE SHEETS                                           1999            1998
                                                                   ---------      --------- 

(Dollars in thousands except per share data)
<S>                                                                <C>            <C>      
SHAREHOLDERS' EQUITY
Series B non-cumulative preferred stock, no par value;
      408,728 shares authorized; 398,653 shares issued and
      outstanding at  March  31, 1999  and  December 31, 1998,
      respectively ...........................................         1,942          1,942
Series C non-cumulative preferred stock, no par value; 43,631
      shares authorized;  40,373 shares issued and outstanding
      at  March  31, 1999 and December 31, 1998, respectively            562            562
Common stock, $5 par value; 158,485 shares authorized;
      119,186 and 119,266 shares issued and outstanding at
      March 31, 1999 and December 31, 1998, respectively .....           596            596
Surplus ......................................................        10,000         10,000
Retained earnings ............................................        32,107         31,571
Accumulated other comprehensive income .......................         9,293         11,362
                                                                   ---------      ---------
        Total shareholders' equity ...........................        54,500         56,033
                                                                   ---------      ---------

              Total liabilities and shareholders' equity .....     $ 638,933      $ 649,425
                                                                   =========      =========
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES                                   (Unaudited)
CONSOLIDATED STATEMENTS OF INCOME                                          Three Months Ended March 31,
                                                                                1999           1998
                                                                             ---------      --------
(Dollars in thousands except share and per share data)
<S>                                                                          <C>            <C>     
Interest income:
Loans ..................................................................     $   7,439      $  7,532
Investment securities:
    U. S. Government ...................................................         1,891         1,735
    State, county and municipal ........................................           434           481
    Other ..............................................................           186           161
                                                                             ---------      --------
            Total investment securities interest income ................         2,511         2,377
Federal funds sold .....................................................           277           184
                                                                             ---------      --------
Total interest income ..................................................        10,227        10,093

Interest expense:
       Deposits ........................................................         4,378         4,656
       Short-term borrowings ...........................................            48            70
       Long-term obligations ...........................................           517            76
                                                                             ---------      --------
             Total interest expense ....................................         4,943         4,802
                                                                             ---------      --------
                     Net interest income ...............................         5,284         5,291
      Provision for loan losses ........................................            60            60
                                                                             ---------      --------
                     Net interest income after provision for loan losses         5,224         5,231

Noninterest income:
     Service charges on deposit accounts ...............................           807           762
     Other service charges and fees ....................................           297           246
     Insurance commissions .............................................            18            19
     Gain (loss) on sale of loans ......................................           (61)            1
     Investment securities gains, net ..................................             1         1,788
     Other .............................................................            76           117
                                                                             ---------      --------
           Total noninterest income ....................................         1,138         2,933

Noninterest expense:
      Personnel ........................................................         2,733         2,285
      Data processing ..................................................           492           432
      Intangibles amortization .........................................           610           384
      Occupancy ........................................................           382           378
      Furniture and equipment ..........................................           358           332
      FDIC insurance assessment ........................................            29            37
      Other ............................................................           826           940
                                                                             ---------      --------
             Total noninterest expense .................................         5,430         4,788
                                                                             ---------      --------
Income before income taxes .............................................           932         3,376
Income taxes ...........................................................           240           809
                                                                             ---------      --------
                       Net income ......................................           692         2,567
                                                                             ---------      --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES                                  (Unaudited)
CONSOLIDATED STATEMENTS OF INCOME                                          Three Months Ended March 31,
                                                                                1999           1998
                                                                             ---------      --------
(Dollars in thousands except share and per share data)
<S>                                                                          <C>            <C>     
Other comprehensive income net of tax:
   Unrealized (losses) gains arising during period .....................        (2,069)          787
   Less: reclassification adjustment for gains included in net income ..          --           1,180
                                                                             ---------      --------
       Comprehensive (loss) income .....................................     $  (1,377)     $  2,174
                                                                             =========      ========
Per share information:
   Earnings per common share ...........................................     $    4.99      $  20.58
   Cash dividends declared on common shares ............................          0.38          0.38
   Weighted average common shares outstanding ..........................       119,250       119,918
                                                                             =========      ========

</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN BANCSHARES  (N.C.), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998

(Dollars in thousands except per share data)
(Unaudited)
                                             Preferred Stock               Common  Stock                       Accumulated   
                                  ------------------------------------  ----------------                          Other      Total
                                      Series B           Series C                                                Compre-    Share-
                                  ------------------  ----------------                                Retained   hensive    holders'
                                  Shares     Amount    Shares   Amount   Shares   Amount    Surplus   Earnings   Income     Equity
                                  ------     ------    ------   ------   ------   ------    -------   --------   ------     ------
<S>                               <C>        <C>       <C>       <C>    <C>        <C>      <C>        <C>       <C>       <C>    
Balance, December 31, 1997        405,645    $1,976    43,631    $578   119,918    $600     $10,000    $26,733   $15,097   $54,984

Net income                                                                                               2,567               2,567
Cash dividends:
  Common stock ($.38 per share)                                                                            (46)                (46)
  Preferred B ($.22 per  share)                                                                            (89)                (89)
  Preferred C ($.22 per  share)                                                                            (10)                (10)
Unrealized loss on securities
  available-for-sale, net of tax                                                                                    (393)     (393)
                                  -------    ------    ------    ----   -------    ----     -------    -------   -------   -------
Balance, March 31, 1998           405,645    $1,976    43,631    $578   119,918    $600     $10,000    $29,155   $14,704   $57,013
                                  =======    ======    ======    ====   =======    ====     =======    =======   =======   =======

Balance, December 31, 1998        398,653    $1,942    40,373    $562   119,266    $596     $10,000    $31,571   $11,362   $56,033
Net income                                                                                                 692                 692
Retirement of stock                                                         (80)                           (14)                (14)
Cash dividends:
  Common stock ($.38 per share)                                                                            (45)                (45)
  Preferred B ($.22 per share)                                                                             (88)                (88)
  Preferred C ($.22 per share)                                                                              (9)                 (9)
Unrealized loss on securities
  available-for-sale, net of tax                                                                                  (2,069)   (2,069)
                                  -------    ------    ------    ----   -------    ----     -------    -------   -------   -------
Balance, March 31, 1999           398,653    $1,942    40,373    $562   119,186    $596     $10,000    $32,107    $9,293   $54,500
                                  =======    ======    ======    ====   =======    ====     =======    =======   =======   =======

</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                (Unaudited)
                                                                        Three months ended March 31,
(Thousands)                                                                  1999           1998
                                                                           ---------     -------- 
<S>                                                                        <C>           <C>     
OPERATING ACTIVITIES:
Net income ...........................................................     $    692      $  2,567
Adjustments to reconcile net income to net cash
      provided by operating activities:
            Provision for loan losses ................................           60            60
            Gains on sales and issuer calls of securities ............           (1)       (1,788)
            Loss on sale and abandonment of premises and equipment ...            2             3
            Net accretion on discounts on investments ................          (20)          (19)
            Amortization of intangibles ..............................          610           384
            Depreciation .............................................          362           334
            Net increase in accrued interest receivable ..............         (297)         (574)
            Net decrease in accrued interest payable .................         (918)         (462)
            Net increase in other assets .............................          (70)          (25)
            Net increase (decrease) in other liabilities .............          256           (39)
                                                                           --------      --------

NET CASH PROVIDED BY OPERATING ACTIVITIES ............................          676           441
                                                                           --------      --------

INVESTING ACTIVITIES:
      Proceeds from maturities and issuer calls of investment
          securities available-for-sale ..............................        6,090        16,000
      Proceeds from maturities and issuer calls of investment
          securities held-to-maturity ................................       11,196         1,198
      Proceeds from sales of investment securities available-for-sale          --           1,975
      Purchases of investment securities held-to-maturity ............       (6,967)      (15,803)
      Purchases of investment securities available-for-sale ..........      (15,678)       (6,463)
      Net decrease (increase) in loans ...............................          620        (4,868)
      Purchases of fixed assets ......................................         (651)         (165)
                                                                           --------      --------

NET CASH USED BY INVESTING ACTIVITIES ................................       (5,390)       (8,126)
                                                                           --------      --------

FINANCING ACTIVITIES:
     Net decrease in demand and interest-bearing demand deposits .....       (9,631)       (1,954)
     Net increase in time deposits ...................................        2,106         4,603
     Payments of long-term obligations ...............................         --            (450)
     Net proceeds (repayments) of short-term borrowed funds ..........          294          (590)
     Cash dividends paid .............................................         (142)         (145)
     Purchase and retirement of stock ................................          (14)         --
                                                                           --------      --------

NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES .....................       (7,387)        1,464
                                                                           --------      --------

NET DECREASE IN CASH AND CASH EQUIVALENTS ............................     $(12,101)     $ (6,221)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF YEAR ...................       56,954        38,621
                                                                           --------      --------

CASH AND CASH EQUIVALENTS AT THE END OF PERIOD .......................     $ 44,853      $ 32,400
                                                                           ========      ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                                                                                (Unaudited)
                                                                        Three months ended March 31,
(Thousands)                                                                  1999           1998
                                                                           ---------     -------- 
<S>                                                                        <C>           <C>     
SUPPLEMENTAL DISCLOSURES OF CASH PAID DURING THE PERIOD FOR:

     Interest ........................................................     $  5,861      $  5,264
     Income taxes ....................................................     $    145      $    844
                                                                           ========      ========

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Unrealized loss on securities available-for-sale .....................     $ (3,135)     $   (597)
                                                                           ========      ========
</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
<PAGE>
SOUTHERN  BANCSHARES (N. C.), INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 1. Summary Of Significant Accounting Policies

Basis of Financial Statement Presentation

Southern  BancShares  (N. C.), Inc.  ("BancShares")  is the holding  company for
Southern Bank and Trust Company ("Southern"),  which operates 45 banking offices
in eastern  North  Carolina,  and  Southern  Capital  Trust I (the  "Trust"),  a
statutory  business trust that issued $23.0 million of 8.25% Capital  Securities
("the Capital Securities") in June 1998 maturing in 2028. Southern,  which began
operations January 29, 1901, 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.  BancShares  and  Southern  are
headquartered in Mount Olive, North Carolina.

The  consolidated  financial  statements  in this report are  unaudited.  In the
opinion of  management,  all  adjustments  (none of which were other than normal
accruals)  necessary  for a fair  presentation  of the  financial  position  and
results of operations for the periods presented have been included.

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  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.  The statements should be read in conjunction
with the consolidated  financial  statements and accompanying notes for the year
ended December 31, 1998,  incorporated by reference in the 1998 Annual Report on
Form 10-K.


Principles Of Consolidation

The consolidated financial statements include the accounts of BancShares and its
wholly-owned  subsidiaries,  Southern and the Trust. The statements also include
the accounts of Goshen, Inc., a wholly-owned subsidiary of Southern. BancShares'
financial  resources  are primarily  provided by dividends  from  Southern.  All
significant intercompany balances have been eliminated in consolidation.



Cash And Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash and
due from banks and federal funds sold.  Federal funds are purchased and sold for
one day periods.


Reclassifications

Certain prior period  balances have been  reclassified to conform to the current
period  presentation.  Such  reclassifications  had no effect  on net  income or
shareholders' equity as previously reported.
<PAGE>
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES
Notes to consolidated financial statements
Dollars in thousands

Note 2. Investment securities   
<TABLE>
<CAPTION>
                                                       March 31, 1999                                  December 31, 1998
                                                         (Unaudited)
                                        ---------------------------------------------   --------------------------------------------
(In thousands)                                       Gross       Gross      Estimated                  Gross      Gross    Estimated
                                        Amortized  Unrealized  Unrealized     Fair      Amortized  Unrealized   Unrealized    Fair
                                          Cost        Gains      Losses       Value        Cost       Gains       Losses      Value
                                        ---------  ----------  ----------  ----------   ----------  ---------- ----------  ---------
<S>                                      <C>             <C>        <C>      <C>          <C>             <C>       <C>      <C>    
    SECURITIES HELD-TO-MATURITY:
         U.  S. Government               $68,061         197        (129)    $68,129      $72,070         360       ($41)    $72,389
         Obligations of states
             and political subdivisions   19,950         800          (1)     20,749       20,170         850                 21,020
         Corporate debenture                 100           1           -         101          100           2                    102
                                         -------      ------      -------   --------      -------      ------      -----     -------
                                          88,111         998        (130)     88,979       92,340       1,212        (41)     93,511
                                         =======      ======      =======   ========      =======      ======     ======     =======

    SECURITIES AVAILABLE-FOR-SALE:
         U.  S. Government                75,006         212        (242)     74,976       71,046         369       (135)     71,280
         Marketable equity securities     10,747      13,575           -      24,322       10,747      16,867       (487)     27,127
         Obligations of states
            and political subdivisions    14,248         508           -      14,756        8,539         573         (1)      9,111
        Mortgage-backed securities         1,620          36          (9)      1,647        1,680          38         (9)      1,709
                                         -------     -------    --------    --------      -------      ------     ------    --------
                                         101,621      14,331        (251)    115,701       92,012      17,847       (632)    109,227
                                         =======     =======     ========   ========      =======      ======     ======    ========
</TABLE>
Note 3.  LOANS    
<TABLE>
<CAPTION>
                                                        (Unuadited)
      (Dollars in thousands)                              March 31,    December 31,
                                                            1999           1998
                                                        ------------   ------------
<S>                                                       <C>           <C>    
    Commercial, financial and agricultural .........      $ 89,113      $ 86,980
    Real estate:
          Construction .............................         6,367         5,276
          Mortgage:
                One to four family residential .....       100,739       113,984
                Commercial .........................        63,821        62,446
                Equityline .........................        27,488        28,698
                Other ..............................        38,739        26,846
    Consumer .......................................        34,327        36,775
    Lease financing ................................         3,151         3,484
                                                          --------      --------
      Total loans ..................................      $363,745      $364,489
                                                          ========      ========
    Loans held for sale ............................      $  5,102      $  6,858
    Loans serviced for others ......................      $173,011      $163,455
</TABLE>
<PAGE>
Note 4.  ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>

      (Dollars in thousands)                                       (Unaudited)
                                                           Three Months Ended March 31,
                                                           ---------------------------- 
                                                              1999            1998
                                                             ------         ------- 
<S>                                                          <C>            <C>   
    Balance at beginning of year                             $5,962         $5,971
      Provision for loan losses                                  60             60
      Loans charged off                                        (186)           (41)
      Loan recoveries                                            62             26
                                                             ------         ------ 
    Balance at end of the period                             $5,898         $6,016
                                                             ======         ====== 
</TABLE>
Note 5. Earnings Per Common Share

Earnings per common share are computed by dividing  income  applicable to common
shares by the weighted  average number of common shares  outstanding  during the
period.  Income  applicable to common shares  represents  net income  reduced by
dividends paid to preferred  shareholders.  Since  BancShares had no potentially
dilutive  securities  during 1999 or 1998, the  computation of basic and diluted
earnings per share is the same.

Note 5. EARNINGS PER COMMON SHARE   
<TABLE>
<CAPTION>
                                                             (Unaudited)
      (Dollars in thousands)                         Three Months Ended March 31,
                                                     ---------------------------- 
                                                       1999               1998
                                                     ---------        --------- 
<S>                                                  <C>              <C>      
Net income ...................................       $     692        $   2,567
  Less: Preferred dividends ..................             (97)             (99)
                                                     ---------        ---------
Net income applicable to common shares .......       $     595        $   2,468
                                                     =========        =========

Weighted average common shares
  outstanding during the period ..............         119,250          119,918
                                                     =========        =========
</TABLE>

Note 6. Acquisitions

During the third quarter of 1999, subject to regulatory approval, Southern plans
to acquire the Ahoskie  branch  office of  First-Citizens  Bank & Trust  Company
("FCB"), a related party. In connection with that transaction,  Southern expects
to assume total deposit  liabilities of approximately $16.0 million, to purchase
approximately $8.0 million of loans and to record  approximately $1.4 million in
intangible assets.
<PAGE>
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES
MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS - FIRST THREE MONTHS OF 1999 VS. FIRST THREE MONTHS OF 1998


INTRODUCTION

In the first three months of 1999,  the net income of BancShares  decreased $1.9
million  from $2.6  million in the first three months of 1998 to $692,000 in the
first  three  months of 1999,  a decrease  of  73.04%.  This  decrease  resulted
primarily from the 1998 sale of  available-for-sale  securities,  resulting in a
realized gain before tax of $1.8  million.  One branch  acquisition  each in May
1998,  October 1998 and December 1998 resulted in increased net interest income,
increased other  noninterest  income and increased  personnel  expense and other
related operating expenses for the three months ended March 31, 1999.

Per share net income  available  to common  shares for the first three months of
1999 was $4.99, a decrease of $15.59, or 75.75%, from $20.58 in 1998. The return
on average equity  decreased to 4.96%, for the period ended March 31, 1999, from
17.95%  for the period  ended  March 31,  1998 and the return on average  assets
decreased  to 0.43%,  for the period  ended March 31,  1999,  from 1.72% for the
period ended March 31, 1998.

At March 31, 1999,  BancShares'  assets  totaled $638.9  million,  a decrease of
$10.5 million,  or 1.62%, from the $649.4 million reported at December 31, 1998.
During this three month period, loans decreased $744,000,  or 0.20%, from $364.5
million  to  $363.7  million.  During  the three  months  ended  March 31,  1999
investment  securities  increased $2.2 million,  or 1.11% from $201.6 million at
December 31, 1998 to $203.8 million at March 31, 1999. Total deposits  decreased
$7.5  million,  or 1.35% from  $556.8  million at  December  31,  1998 to $549.2
million at March 31,  1999.  The above  changes  resulted  principally  from the
seasonal impact of the agricultural markets served by Southern .


ACQUISITIONS

In May 1998,  Southern  acquired $16.7 million of the loans and $18.0 million of
the  deposits of Enfield  Savings Bank  ("ESB").  Southern  simultaneously  sold
$3,000 of the ESB loans and $2.4  million of the ESB  deposits to FCB.  Southern
recorded net intangible assets of $363,000 for the ESB acquisition.

In October 1998, Southern acquired $226,000 of the loans and $5.3 million of the
deposits of the Gates  office of FCB.  Southern  recorded  intangible  assets of
$186,000 for the Gates acquisition.

In December 1998,  Southern  acquired  $76,000 of the loans and $16.4 million of
the deposits of the Red Springs office of First Union  National  Bank.  Southern
recorded intangible assets of $1.7 million for the Red Springs acquisition.

These acquisitions were accounted for as purchases,  and, therefore, the results
of  operations  prior to the  purchases  are not  included  in the  consolidated
financial statements.  The proforma impact of the acquisitions and dispositions,
as though they had been made at the  beginning of the period  presented,  is not
material to BancShares' consolidated financial statements.

Southern had no  acquisitions  in the three  months  ended March 31,  1999.  The
comparisons  of the three  months ended March 31, 1999 to the three months ended
March 31, 1998 are accordingly impacted by the above transactions.
<PAGE>
INTEREST INCOME

Interest and fees on loans decreased  $93,000,  or 1.23%,  from $7.5 million for
the three months ended March 31, 1998 to $7.4 million for the three months ended
March 31, 1999. This decrease was due to lower overall  interest rates . Average
loans for the three months ended March 31, 1999 were $363.5 million, an increase
of 3.24% from $352.1 million for the prior year three month period. The yield on
the loan  portfolio was 8.56% in the three months ended March 31, 1998 and 8.19%
in the three months ended March 31, 1999.

Interest  income  from  investment  securities,  including  U. S.  Treasury  and
Government  obligations,  obligations of state and county subdivisions and other
securities  increased  $134,000 or 5.64%,  from $2.4 million in the three months
ended March 31, 1998 to $2.5  million in the three  months ended March 31, 1999.
This  increase  was due to an  increase  in the  volume  of  average  investment
securities  for the three  months  ended  March 31,  1999 to $190.3  million  as
compared to $160.8  million for the same 1998  period.  The yield on  investment
securities was 5.91% for the  three-month  period ended March 31, 1998 and 5.35%
for the three-month period ended March 31, 1999.

Interest income on federal funds sold increased $93,000 or 50.54%, from $184,000
for the three months ended March 31, 1998 to $277,000 for the three months ended
March 31, 1999. This increase in income  resulted  primarily from an increase in
the average federal funds sold to $23.3 million for the three months ended March
31, 1999 from an average of $13.7  million for the three  months ended March 31,
1998.  Average  federal  funds sold yields were 4.76% for the three months ended
March 31, 1999 down from 5.37% for the three months ended March 31, 1998.

Total interest income  increased  $134,000 or 1.33%,  from $10.1 million for the
three  months  ended March 31, 1998 to $10.2  million for the three months ended
March 31, 1999. This increase was primarily the result of volume  increases that
more than offset a 47 basis point decrease in average earning asset yields.

Average earning asset yields for the three months ended March 31, 1999 decreased
to 7.12% from the 7.59%  yield on average  earning  assets for the three  months
ended March 31, 1998.  Average  earning assets  increased from $531.8 million in
the three  months  ended  March 31, 1998 to $577.1  million in the period  ended
March 31,  1999.  This $45.3  million  increase  in the average  earning  assets
resulted primarily from the acquisitions discussed above.


INTEREST EXPENSE

Total interest  expense  increased  $141,000 or 2.94%,  from $4.8 million in the
three  months  ended March 31, 1998 to $4.9  million for the three  months ended
March 31,  1999.  The  principal  reason for this  increase  was the increase in
long-term  obligations  interest  related to the $23.0  million of 8.25% Capital
Securities  issued by the Trust in June, 1998.  BancShares  recorded $517,000 of
interest expense in the three months ended March 31, 1999 related to the capital
securities.  BancShares'  total cost of funds decreased from 4.14% for the three
months  ended March 31, 1998 to 3.96% for the three months ended March 31, 1999.
Average interest-bearing  deposits were $474.9 million in the three months ended
March 31, 1999, an increase of $21.8 million from the $453.1 million  average in
the three  months  ending  March 31,  1998.  The  increase  in  interest-bearing
liabilities  was primarily the result of the afore  mentioned  acquisitions  and
capital securities discussed above.
<PAGE>
NET INTEREST INCOME

Net  interest  income was $5.3 million for both the three months ended March 31,
1998 and the three months ended March 31, 1999.

The interest rate spread for the three months ended March 31, 1999 was 3.15%,  a
decrease of 30 basis  points from the 3.45%  interest  rate spread for the three
months ended March 31, 1998.


ASSET QUALITY AND PROVISION FOR LOAN LOSSES

For the three  months  ended  March 31,  1999  management  recorded  $60,000  as
provision  for loan  losses.  Management  also  made a $60,000  addition  to the
provision for loan losses for the three months ended March 31, 1998.

During the first three  months of 1999  management  charged-off  loans  totaling
$186,000 and received  recoveries of $62,000,  resulting in net  charge-offs  of
$124,000.  During the same period in 1998, $41,000 in loans were charged-off and
recoveries of $26,000 were  received,  resulting in net  charge-offs of $15,000.
The following table presents comparative Asset Quality ratios of BancShares:
<TABLE>
<CAPTION>
                                                        (Unaudited)
                                                         March 31,     December 31,
                                                            1999           1998
                                                         ---------     ------------
<S>                                                         <C>            <C>  
Ratio of annualized net loans charged off
          to average loans                                  0.14%          0.12%

Allowance for loan losses
           to loans                                         1.62%          1.64%

Non-performing loans
            to loans                                        0.75%          0.28%

Non-performing loans and assets
            to total assets                                 0.50%          0.17%

Allowance for loan losses
            to non-performing loans                       214.86%        588.00%

</TABLE>
The ratio of annualized net charge-offs to average loans  outstanding  increased
to 0.14% for the three months ended March 31, 1999 from 0.12% for the year ended
December 31, 1998. The allowance for loan losses  represented  1.62% of loans at
March 31, 1999.  The  allowance  for loan losses  represented  1.64% of loans at
December 31, 1998.  Loans  decreased  $744,000,  or 0.20% from $364.5 million at
December 31, 1998 to $363.7 million at March 31, 1999.

The ratio of nonperforming loans to loans,  increased from 0.28% at December 31,
1998 to 0.75% at March 31, 1999.  Nonperforming loans and assets to total assets
increased  to 0.50% at March 31,  1999 from  0.17% at  December  31,  1998.  The
allowance  for  loan  losses  to  nonperforming  loans  represented  214.86%  of
nonperforming  loans at March 31, 1999, a decrease  from the 588.00% at December
31, 1998. The above performance  declines resulted primarily from an increase in
<PAGE>
nonperforming  loans to  $2,745,000  at March 31, 1999 from $971,000 at December
31,  1998.  The  nonperforming  loans at March 31,  1999  included  $832,000  of
nonaccrual  loans,  $1,913,000 of accruing loans 90 days or more past due and no
restructured  loans.  BancShares had $454,000 of assets classified as other real
estate at March 31, 1999.  BancShares had $84,000 of assets  classified as other
real estate at December 31, 1998.

Management considers the March 31, 1999 allowance for loan losses to be adequate
to cover the losses and risks  inherent in the loan  portfolio at March 31, 1999
and will continue to monitor its  portfolio and to adjust the relative  level of
the allowance as needed.  BancShares' impaired loans were approximately $832,000
at March 31, 1999 and $166,000 at December 31, 1998.

Management  actively  maintains a current  loan watch list and knows of no other
loans  which  are  material   and  (i)   represent  or  result  from  trends  or
uncertainties which management  reasonably expects will materially impact future
operating results,  liquidity or capital  resources,  or (ii) represent material
credits  about  which  management  is  aware  of any  information  which  causes
management to have serious  doubts as to the ability of such borrowers to comply
with the loan repayment terms.

Management  believes  it  has  established  the  allowance  in  accordance  with
generally  accepted  accounting  principles and in  consideration of the current
economic  environment.  While management uses the best information  available to
make  evaluations,  future  adjustments  may be  necessary if economic and other
conditions differ substantially from the assumptions used.

In  addition,  various  regulatory  agencies,  as  an  integral  part  of  their
examination  process,  periodically review Southern's  allowance for loan losses
and losses on other real estate  owned.  Such  agencies may require  Southern to
recognize  additions to the allowances  based on the examiners'  judgments about
information available to them at the time of their examinations.


NONINTEREST INCOME

During the three  months ended March 31, 1998,  BancShares  realized  securities
gains of $1.8 million  arising from the sale of  available-for-sale  securities.
The  decrease  of such gains  during the  quarter  ended  March 31, 1999 was the
primary reason for the decrease in noninterest income.


NONINTEREST EXPENSE

Noninterest  expense including  personnel,  occupancy,  furniture and equipment,
data processing, FDIC insurance and state assessments, printing and supplies and
other  expenses,  increased  $642,000 or 13.41%,  from $4.8 million in the three
months  ended March 31, 1998 to $5.4 million in the three months ended March 31,
1999.

This increase was primarily due to an increase in personnel expense of $448,000,
or 19.61%, from $2.3 million at March 31, 1998 to $2.7 million at March 31, 1999
and increased  occupancy,  furniture and  equipment  expense and other  expenses
resulting principally from the branch acquisitions in May 1998, October 1998 and
December 1998 discussed above.
<PAGE>
INCOME TAXES

In the three months ended March 31, 1999,  BancShares  had income tax expense of
$240,000,  a decrease of $569,000  from  $809,000 in the prior year period.  The
majority of this decrease is due to the 1998  securities  gain discussed  above.
The  resulting  effective tax rate for the three months ended March 31, 1999 was
25.75%.  The  effective  tax rate for the three  months ended March 31, 1998 was
23.96%.  The  effective  tax rate in 1999 of  25.75%  differs  from the  federal
statutory rate of 35.00% primarily due to tax exempt income.


SHAREHOLDERS' EQUITY AND CAPITAL ADEQUACY

Sufficient  levels of capital are necessary to sustain growth and absorb losses.
To this end, the Federal  Reserve Board,  which  regulates  BancShares,  and the
Federal  Deposit  Insurance   Corporation,   which  regulates   Southern,   have
established minimum capital guidelines for the institutions they supervise.

In June  1998,  the Trust  issued  $23.0  million  of 8.25%  Capital  Securities
maturing  in 2028.  The Trust  invested  the $23.0  million  proceeds  in Junior
Subordinated  Debentures issued by BancShares (the "Junior  Debentures"),  which
upon consolidation of BancShares are eliminated.  The Junior Debentures,  with a
maturity  of 2028,  are the  primary  assets of the Trust.  With  respect to the
Capital Securities,  BancShares  irrevocably and unconditionally  guarantees the
Trust's obligations.  Capital Securities of $13.1 million are included in Tier I
capital for Southern's regulatory capital adequacy requirements.

In  June  1998,  BancShares  paid  off  the  remaining  balance  of a  long-term
obligation, $4.3 million, and contributed an additional $12.0 million in capital
to Southern which also improved each of Southern's capital ratios.

Regulatory  guidelines  define  minimum  requirements  for  Southern's  leverage
capital  ratio.  Leverage  capital equals total equity less goodwill and certain
other  intangibles and is measured  relative to total adjusted assets as defined
by regulatory  guidelines.  According to these guidelines,  Southern's  leverage
capital  ratio at March 31, 1999 was 8.22%.  At December  31,  1998,  Southern's
leverage  capital  ratio was 8.44%.  Both of these  ratios are greater  than the
level designated as "well capitalized" by the FDIC.

Southern is also  required to meet minimum  requirements  for Risk Based Capital
("RBC").  Southern's  assets,  including loan commitments and other  off-balance
sheet  items,  are  weighted  according  to  federal  guidelines  for  the  risk
considered inherent in each asset. At March 31, 1999, Southern's Total RBC ratio
was 17.17%. At December 31, 1998 the RBC ratio was 17.10%.  Both of these ratios
are greater than the level designated as "well capitalized" by the FDIC.

The regulatory  capital ratios reflect  increases in assets and liabilities from
the  acquisitions  Southern  has made.  Each of the  acquisitions  required  the
payment of a premium for the deposits received.  Each of these premiums resulted
in increased  intangible assets on BancShares'  financial  statements,  which is
deducted from total equity in the ratio calculations.

The accumulated other  comprehensive  income was $9.3 million at March 31, 1999,
and $11.4 million at December 31, 1998.  Comprehensive  income consists entirely
of unrealized gains on securities  available-for-sale,  net of taxes. Although a
part of total shareholders' equity,  comprehensive income is not included in the
calculation of either the RBC or leverage  capital ratios pursuant to regulatory
definitions of these capital requirements.  The following table presents capital
adequacy calculations and ratios of Southern:
<PAGE>
<TABLE>
<CAPTION>
                                             (Unaudited)
                                               March 31,              December 31,
                                                 1999                     1998
                                              ---------                ---------- 
      (Dollars in thousands)
<S>                                           <C>                      <C>       
Risk-based capital:
Tier 1 capital ................               $  50,259                $ 49,198  
Total capital .................                  54,339                  53,234  
Risk-adjusted assets ..........                 316,403                 311,341  
Average tangible assets .......                 611,531                 582,955  
                                                                                 
Tier 1 capital ratio (1).......                   15.88%                  15.80% 
Total capital ratio (1) .......                   17.17%                  17.10% 
Leverage capital ratio (1) ....                    8.22%                   8.44% 
</TABLE>
--------------  
(1)    These  ratios  exceed  the  minimum  ratios  required  for a  bank  to be
       classified as "well capitalized" as defined by the FDIC.


At March 31, 1999 and December 31, 1998,  BancShares was also in compliance with
its regulatory  capital  requirements  and all of its regulatory  capital ratios
exceeded the minimum ratios required by the regulators to be classified as "well
capitalized".


LIQUIDITY

Liquidity refers to the ability of Southern to generate sufficient funds to meet
its financial  obligations  and  commitments at a reasonable  cost.  Maintaining
liquidity  ensures  that  funds  will be  available  for  reserve  requirements,
customer  demand for loans,  withdrawal  of deposit  balances and  maturities of
other deposits and  liabilities.  Past  experiences  help management  anticipate
cyclical demands and amounts of cash required.  These  obligations can be met by
existing cash reserves or funds from maturing loans and investments,  but in the
normal course of business are met by deposit growth.

In  assessing  liquidity,  many  relevant  factors  are  considered,   including
stability  of  deposits,  quality of  assets,  economy  of the  markets  served,
business   concentrations,   competition  and  BancShares'   overall   financial
condition.  BancShares'  liquid assets include cash and due from banks,  federal
funds sold and investment  securities  available-for-sale.  The liquidity ratio,
which is defined as cash plus short term  available-for-sale  securities divided
by deposits plus short term liabilities, was 34.35% at March 31, 1999 and 30.78%
at December 31, 1998.

The Statement of Cash Flows  discloses  the  principal  sources and uses of cash
from  operating,  investing and financing  activities for the three months ended
March 31, 1999 and for the three months ended March 31, 1998.  BancShares has no
brokered  deposits.  Jumbo time  deposits  are  considered  to include  all time
deposits of $100,000 or more.  BancShares  has never  aggressively  bid on these
deposits.  Almost all jumbo time deposit customers have other relationships with
Southern,  including savings, demand and other time deposits, and in some cases,
loans.  At March  31,  1999  jumbo  time  deposits  represented  11.47% of total
deposits.  At December 31, 1998 jumbo time deposits  represented 10.79% of total
deposits.
<PAGE>
Management  believes  that  BancShares  has the ability to  generate  sufficient
amounts of cash to cover normal  requirements and any additional needs which may
arise,  within realistic  limitations,  and management is not aware of any known
demands,  commitments or uncertainties  that will affect liquidity in a material
way.


ACCOUNTING AND OTHER MATTERS

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
133,  "Accounting  for  Derivative  Instruments  and Hedging  Activities."  This
statement   establishes   accounting  and  reporting  standards  for  derivative
instruments,   including  certain  derivative   instruments  embedded  in  other
contracts, and for hedging activities.  It requires that an entity recognize all
derivatives  as either  assets or  liabilities  in the balance sheet and measure
those instruments at fair value. The accounting for changes in the fair value of
a derivative  depends on the intended use of the  derivative  and the  resulting
designation. This statement is effective for all fiscal quarters of fiscal years
beginning  after June 15, 1999.  Earlier  application  of all provisions of this
statement is encouraged.  BancShares plans to adopt this statement on January 1,
2000 and does not anticipate any material effect on its  consolidated  financial
statements.

In October 1998, the FASB issued Statement 134,  "Accounting for Mortgage-Backed
Securities  Retained after the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking  Enterprise." This statement allows mortgage banking firms to
account for certain  securities and other interests  retained after securitizing
mortgage  loans that were held for sale based on the intent and  ability to hold
or sell such  investments.  This  statement  was  effective for the first fiscal
quarter  beginning  after December 15, 1998.  BancShares  adopted this statement
effective January 1, 1999.

The FASB also  issues  exposure  drafts for  proposed  statements  of  financial
accounting  standards.  Such  exposure  drafts are  subject to comment  from the
public, to revisions by the FASB and to final issuance by the FASB as statements
of  financial  accounting  standards.  Management  considers  the  effect of the
proposed statements on the consolidated  financial  statements of BancShares and
monitors  the  status of  changes  to issued  exposure  drafts  and to  proposed
effective dates.
<PAGE>
Year 2000 Issue

Introduction

The  year  2000  issue  confronting  BancShares  and its  suppliers,  customers,
customers'  suppliers  and  competitors  centers on the  inability  of  computer
systems to recognize the year 2000. Many existing  computer programs and systems
originally were programmed with six digit dates that provided only two digits to
identify the calendar year in the date field. With the impending new millennium,
these  programs and computers  will  recognize "00" as the year 1900 rather than
the year 2000. These problems may also arise from other sources as well, such as
the use of special codes and  conventions  in software that make use of the date
field.

Awareness

Financial  institution  regulators recently have increased their focus upon year
2000 compliance issues and have issued guidance concerning the  responsibilities
of  Senior  Management  and  Directors.   The  Federal  Financial   Institutions
Examination Council ("FFIEC") has issued several interagency  statements on year
2000 issue.

These statements require financial  institutions to, among other things, examine
the year 2000 implications of their reliance on vendors and with respect to data
exchange  and the  potential  impact of the year 2000 issue on their  customers,
suppliers and borrowers.  These statements also require each federally regulated
financial  institution  to survey its  exposure,  measure its risk and prepare a
plan to address the year 2000 issue. In addition, the federal banking regulators
have issued safety and soundness guidelines to be followed by insured depository
institutions,  such as the Bank, to assure resolution of any year 2000 problems.
The  federal  banking   agencies  have  asserted  that  year  2000  testing  and
certification is a key safety and soundness issue in conjunction with regulatory
exams and, thus, that an institution's failure to address appropriately the year
2000 issue could result in  supervisory  action,  including the reduction of the
institution's  supervisory  ratings,  the denial of applications for approval of
mergers or acquisitions or the imposition of civil money penalties. Southern has
addressed, or is in the process of addressing,  each of these areas as discussed
below.
<PAGE>
Risks

Like most  financial  service  providers,  BancShares  and its operations may be
significantly  affected  by  the  year  2000  issue  due to  its  dependence  on
information  technology and date-sensitive  data. Computer hardware and software
and other equipment,  both within and outside  BancShares'  direct control,  and
third parties with whom BancShares  electronically  or operationally  interfaces
(including  without limitation its customers and third party vendors) are likely
to be  affected.  If computer  systems  are not  modified in order to be able to
identify  the  year  2000,  many  computer  applications  could  fail or  create
erroneous  results.  As a result,  many  calculations  which  rely on date field
information,  such  as  interest,  payment  or due  dates  and  other  operating
functions,  could  generate  results  which  are  significantly  misstated,  and
BancShares  could  experience  an  inability  to process  transactions,  prepare
statements or engage in similar  normal  business  activities.  Likewise,  under
certain circumstances, a failure to adequately address the year 2000 issue could
adversely  affect the viability of  BancShares'  suppliers and creditors and the
creditworthiness of its borrowers.  Thus, if not adequately addressed,  the year
2000  issue  could  result  in  a  significant  adverse  impact  on  BancShares'
operations and, in turn, its financial condition and results of operations.
<PAGE>
State of Readiness

During  October  1997,  BancShares  developed  its plan to address the year 2000
issue.  A  substantial  portion of  BancShares'  data  processing  functions are
performed  by  First-Citizens  Bank & Trust  Company  ("FCB")  on its  mainframe
systems and/or on systems supported by FCB, which also provides similar services
to  several  other  financial  institutions.  Therefore,  BancShares'  plan  for
addressing  the year 2000 issue  divides  information  technology  systems  ("IT
Systems")  into  groups  which  include  (i) FCB's  mainframe  systems  used for
processing BancShares' data ("Group A Systems"),  (ii) BancShares' non-mainframe
systems  which are supported by FCB ("Group B Systems"),  and (iii)  BancShares'
separate  non-mainframe systems ("Group C Systems").  BancShares' year 2000 plan
also addresses  non-information  technology  systems ("Non-IT  Systems").  As to
Group A Systems and Group B Systems,  BancShares'  year 2000 plan necessarily is
designed  to be  implemented  jointly  with FCB.  FCB has  retained  an  outside
consultant to plan and direct its year 2000 compliance  efforts,  and BancShares
participates in a committee made up of  representatives  of the consultant,  FCB
and each of the financial  institutions  for which FCB provides data  processing
services.  This  committee  meets  periodically  to monitor  the status of FCB's
compliance efforts.

Periodic progress reports are made to BancShares' Board of Directors.

The following paragraphs summarize the phases of BancShares' year 2000 plan:

Assessment Phase

During the assessment  phase, a year 2000 corporate  inventory and business risk
assessment was made (jointly with FCB in the case of Group A Systems and Group B
Systems,  and  separately in the case of Group C Systems and Non-IT  Systems) to
quantify the extent of BancShares'  year 2000 exposure and identify systems that
required  remediation.  Each Group B and C  application  or system was given two
separate  codes; a Priority Code and a Status Code. The Priority Code quantifies
the importance of each asset to BancShares'  daily  operations.  The Status Code
represents  the  current  claim of  compliance  by the asset's  vendor.  Used in
concert,  these  codes  prioritize  the  remediation,  testing  and  contingency
planning processes. This phase is complete.
<PAGE>
Remediation and Testing Phase

With  respect to IT  Systems,  this phase  contemplates  the  implementation  of
modifications,  upgrades or system  replacements  determined  to be necessary to
achieve year 2000 compliance and the testing of modified or upgraded  systems to
determine their  functionality and operating  capability.  As to Group A Systems
and Group B Systems,  FCB's outside  consultant is responsible for  coordinating
necessary modifications, upgrades or replacements. This phase has been completed
for all  Group A and B  Systems.  As to Group C  Systems,  BancShares'  staff is
coordinating  remediation  (which,  in most cases,  entails the  installation of
upgrades provided by outside vendors) and testing. This phase has been completed
for substantially  all systems,  with completion of this phase scheduled for the
second quarter of 1999.

Validation Phase

The validation phase contemplates  testing, in an isolated  environment,  of the
ability  of  new  and  modified  systems,  which  have  been  determined  to  be
functional, to accurately process date sensitive data beginning January 1, 2000.
Validation  testing on Group A Systems and Group B Systems is being conducted by
FCB's  outside  consultant  and is expected to be  completed  by June 30,  1999.
BancShares' staff is conducting  validation  testing on Group C Systems which is
expected to be substantially completed by June 30, 1999.

Implementation Phase

Under  BancShares' plan, once new and modified systems that require testing have
been tested for functionality, they are put into production.  BancShares' target
is to have substantially  completed the validation and implementation phases for
all systems by June 30, 1999.

Non-IT Systems, Third Party Service Providers and Loan Customers

Activities  under  BancShares'  plan with respect to Non-IT  Systems  (including
security  systems,   office  equipment,   etc.)  primarily  involve  identifying
potential year 2000 problems and insuring that outside vendors provide necessary
upgrades  or  replacements.  Each  system  has been  assigned  to an  officer of
BancShares  whose  responsibility  it is to communicate  with the vendor of that
system and  coordinate  remediation.  As needed,  validation  testing for Non-IT
Systems is planned for the second quarter of 1999.

During  early  1998,  BancShares  identified  those  borrowing  customers  whose
existing  aggregate  borrowings  from  BancShares met certain  criteria based on
aggregate  credit  exposure,  loan  collateral,  and whose  businesses were of a
nature that they could be adversely  affected by the year 2000 issue.  A meeting
was held individually with each such borrowing customer to assess the customer's
plan for and progress toward addressing the year 2000 issue.  Follow-up meetings
are being held with each  customer  whose  assessment  indicated  a higher  than
typical level of risk.  With respect to new and renewed loans,  an assessment of
year 2000 risk and steps  being  taken by the  customer to address the year 2000
issue have been made a part of the credit approval process.

Costs

BancShares is expensing all costs  associated  with required  system  changes as
those costs are incurred, and such costs are being funded through operating cash
flows.  Because a substantial  portion of BancShares' data processing  functions
are performed by FCB on its  mainframe  systems  and/or on systems  supported by
FCB,  FCB is  bearing a  substantial  portion  of the  expenses  related  to the
remediation  and  testing of systems  that  affect  BancShares.  BancShares  has
budgeted $200,000 for its separate year 2000 project expenses. Expenses actually
incurred  through March 31, 1999 were not material.  BancShares  does not expect
significant  increases  in future data  processing  costs  relating to year 2000
compliance.

Contingency Plans

During  the  assessment  phase,  BancShares  began  to  identify  a  back-up  or
contingency  plan for  systems or non-IT  assets  which may be  affected by year
2000.  Virtually  all of  BancShares'  systems  are  dependent  upon third party
vendors or service providers;  therefore,  contingency plans include selecting a
new  vendor or service  provider  and  converting  to their  system.  BancShares
believes  its most  likely  worst  case  scenario  will be a failure  by certain
customers  and vendors to achieve  year 2000  readiness.  For  BancShares'  most
reasonably likely worst case sceniaro,  contingency plans are already active. In
the event a current  vendor's system fails during the validation phase and it is
determined  that the  vendor is unable or  unwilling  to  correct  the  failure,
BancShares will convert to a new system.  In each case,  realistic trigger dates
have  been  established  to  allow  for  orderly  and  successful   conversions.
Preliminary  contingency  plans for system  failures on or after January 1, 2000
have been developed. These plans will be refined when the validation and testing
phases are complete.

<PAGE>
Other matters

In  March  1999,  BancShares  announced  the  planned  acquisition,  subject  to
regulatory  approval,  of the Ahoskie,  North Carolina  office of FCB containing
approximately  $16.0  million in  deposits  (see note 6of notes to  consolidated
financial  statements).  BancShares has received  regulatory approval to open de
novo branches in three new eastern  North  Carolina  markets.  These offices are
planned to open in 2000.

Management is not aware of any other trends, events,  uncertainties,  or current
recommendations by regulatory  authorities that will have or that are reasonably
likely to have a material effect on BancShares' liquidity,  capital resources or
other operations.
<PAGE>


Signatures

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



                                          SOUTHERN BANCSHARES (N.C.), INC.
                                          /s/John C. Pegram, Jr.
Dated: May 10, 1999                       ----------------------
                                          John C. Pegram, Jr.,
                                          President and Chief Executive Officer


                                          /s/David A. Bean
Dated: May 10, 1999                       ----------------
                                          David A. Bean,
                                          Secretary, Treasurer and 
                                          Chief Financial Officer