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 June 30, 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                                                    June 30,        December 31,
CONSOLIDATED BALANCE SHEETS                                                                            1999              1998
                                                                                                    ---------         ---------
(Dollars in thousands except per share data)
<S>                                                                                                  <C>               <C>
ASSETS
Cash and due from banks                                                                              $ 25,724          $ 37,419
Federal funds sold                                                                                     10,050            19,535
Investment securities:
   Available-for-sale, at fair value (amortized cost $89,570 and $92,012, respectively)               103,470           109,227
   Held-to-maturity,  at amortized cost (fair value $93,508 and $93,511, respectively)                 93,230            92,340
Loans                                                                                                 379,668           364,489
Less allowance for loan losses                                                                         (5,745)           (5,962)
                                                                                                    ---------         ---------
Net loans                                                                                             373,923           358,527
Premises and equipment                                                                                 19,570            18,902
Intangible assets                                                                                       5,952             6,972
Accrued interest receivable                                                                             4,819             4,571
Other assets                                                                                            2,023             1,932
                                                                                                    ---------         ---------
              Total assets                                                                          $ 638,761         $ 649,425
                                                                                                    =========         =========

LIABILITIES
Deposits:
     Noninterest-bearing                                                                             $ 76,497          $ 77,550
     Interest-bearing                                                                                 470,263           479,202
                                                                                                    ---------         ---------
Total deposits                                                                                        546,760           556,752
Short-term borrowings                                                                                   6,931             5,124
Long-term obligations                                                                                  23,000            23,000
Accrued interest payable                                                                                3,833             4,505
Other liabilities                                                                                       3,056             4,011
                                                                                                    ---------         ---------
          Total liabilities                                                                           583,580           593,392
                                                                                                    ---------         ---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                                                  (Unaudited)
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES                                                    June 30,        December 31,
CONSOLIDATED BALANCE SHEETS  (continued)                                                               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;  397,701  shares issued and  outstanding  at June 30, 1999 and
      398,653 shares issued and outstanding at December 31, 1998                                        1,937             1,942
Series C non-cumulative preferred stock, no par value; 43,631 shares authorized;  39,825
      shares  issued  and  outstanding  at  June  30,  1999   and  40,373  shares  issued  and
      outstanding at December 31, 1998                                                                    557               562
Common  stock,  $5  par  value;  158,485  shares authorized; 119,186 and 119,266 shares
       issued and outstanding at June 30, 1999 and December 31, 1998, respectively                        596               596
Surplus                                                                                                10,000            10,000
Retained earnings                                                                                      32,917            31,571
Accumulated other comprehensive income                                                                  9,174            11,362
                                                                                                    ---------         ---------
        Total shareholders' equity                                                                     55,181            56,033
                                                                                                    ---------         ---------

              Total liabilities and shareholders' equity                                            $ 638,761         $ 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)                   (Unaudited)
CONSOLIDATED STATEMENTS OF INCOME                                          Three Months Ended June 30,    Six  Months Ended June 30,
                                                                                 1999           1998           1999           1998
                                                                             ---------      ---------      ---------      ---------
(Dollars in thousands except share and per share data)
<S>                                                                          <C>            <C>            <C>            <C>
Interest income:
Loans                                                                        $   7,625      $   7,768      $  15,064      $  15,300
Investment securities:
    U. S. Government                                                             1,858          1,734          3,749          3,469
    State, county and municipal                                                    453            451            887            932
    Other                                                                          188            385            374            546
                                                                             ---------      ---------      ---------      ---------
            Total investment securities interest income                          2,499          2,570          5,010          4,947
Federal funds sold                                                                 153            163            430            347
                                                                             ---------      ---------      ---------      ---------
Total interest income                                                           10,277         10,501         20,504         20,594

Interest expense:
       Deposits                                                                  4,323          4,703          8,701          9,359
       Short-term borrowings                                                        49            395             97            471
       Long-term obligations                                                       518             71          1,035            141
                                                                             ---------      ---------      ---------      ---------
             Total interest expense                                              4,890          5,169          9,833          9,971
                                                                             ---------      ---------      ---------      ---------
                     Net interest income                                         5,387          5,332         10,671         10,623
      Provision for loan losses                                                     60             60            120            120
                                                                             ---------      ---------      ---------      ---------
                     Net interest income after provision for loan losses         5,327          5,272         10,551         10,503

Noninterest income:
     Service charges on deposit accounts                                           916            823          1,723          1,585
     Other service charges and fees                                                272            190            519            436
     Gain (loss) on sale of loans                                                 (149)            10           (189)            11
     Investment securities gains, net                                             --             --                1          1,788
     Other                                                                         200            143            294            279
                                                                             ---------      ---------      ---------      ---------
           Total noninterest income                                              1,239          1,166          2,348          4,099
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES                                  (Unaudited)                   (Unaudited)
CONSOLIDATED STATEMENTS OF INCOME (continued)                              Three Months Ended June 30,    Six  Months Ended June 30,
                                                                                 1999           1998           1999           1998
                                                                             ---------      ---------      ---------      ---------
(Dollars in thousands except share and per share data)
<S>                                                                          <C>            <C>            <C>            <C>
Noninterest expense:
      Personnel                                                                  2,674          2,434          5,407          4,719
      Data processing                                                              469            466            961            898
      Intangibles amortization                                                     405            403            868            787
      Occupancy                                                                    397            372            779            750
      Furniture and equipment                                                      368            396            726            728
      Other                                                                      1,026            989          1,999          1,966
                                                                             ---------      ---------      ---------      ---------
             Total noninterest expense                                           5,339          5,060         10,740          9,848
                                                                             ---------      ---------      ---------      ---------
Income before income taxes                                                       1,227          1,378          2,159          4,754
Income taxes                                                                       270            451            510          1,260
                                                                             ---------      ---------      ---------      ---------
                       Net income                                                  957            927          1,649          3,494
                                                                             ---------      ---------      ---------      ---------
Other comprehensive income (loss) net of tax:
   Unrealized losses arising during period                                        (119)        (1,722)        (2,188)        (2,115)
   Less: reclassification adjustment for gains included in net income             --             --             --            1,180
                                                                             ---------      ---------      ---------      ---------
       Comprehensive (loss) income                                           $     838      $    (795)     $    (539)     $     199
                                                                             =========      =========      =========      =========
Per share information:
   Earnings per common share                                                 $    7.22      $    6.91      $   12.21      $   27.49
   Cash dividends declared on common shares                                       0.37           0.37           0.75           0.75
   Weighted average common shares outstanding                                  119,186        119,855        119,218        119,886
                                                                             =========      =========      =========      =========

</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)
                                                                                              Six months ended June 30,
(Thousands)                                                                                        1999          1998
                                                                                                --------      --------
<S>                                                                                             <C>           <C>
OPERATING ACTIVITIES:
Net income                                                                                      $  1,649      $  3,494
Adjustments to reconcile net income to net cash
      provided by operating activities:
            Provision for loan losses                                                                120           120
            Gains on sales and issuer calls of securities available-for-sale                          (1)       (1,788)
            Loss on sale and abandonment of premises and equipment                                     1            34
            Net accretion of discounts on investments                                                (42)          (39)
            Amortization of intangibles                                                            1,020           708
            Depreciation                                                                             731           673
            Net increase in accrued interest receivable                                             (248)         (425)
            Net (decrease) increase in accrued interest payable                                     (672)          136
            Net increase in other assets                                                             (91)         (478)
            Net increase (decrease) in other liabilities                                             503           104
                                                                                                --------      --------

NET CASH PROVIDED BY OPERATING ACTIVITIES                                                          2,970         2,539
                                                                                                --------      --------

INVESTING ACTIVITIES:
      Proceeds from maturities and issuer calls of investment securities available-for-sale       17,111        23,360
      Proceeds from maturities and issuer calls of investment securities held-to-maturity         22,798         3,906
      Proceeds from sales of investment securities available-for-sale                               --           1,976
      Purchases of investment securities held-to-maturity                                        (23,645)      (16,064)
      Purchases of investment securities available-for-sale                                      (15,000)      (10,433)
      Net increase in loans                                                                      (15,516)       (8,929)
      Proceeds from net cash paid for bank and branches acquired                                    --          (6,070)
      Purchases of premises and equipment                                                         (1,400)         (303)
                                                                                                --------      --------

NET CASH USED BY INVESTING ACTIVITIES                                                             15,652       (12,557)
                                                                                                --------      --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                                                                                                      (Unaudited)
                                                                                              Six months ended June 30,
(Thousands)                                                                                        1999          1998
                                                                                                --------      --------
<S>                                                                                             <C>           <C>
FINANCING ACTIVITIES:
     Net decrease in demand and interest-bearing demand deposits                                  (8,706)       (3,985)
     Net decrease in time deposits                                                                (1,286)          (98)
     Proceeds from issuance of long-term obligations                                                --          23,000
     Payments on long-term obligations                                                              --          (4,750)
     Net proceeds of short-term borrowed funds                                                     1,807           297
     Cash dividends paid                                                                            (282)         (289)
     Purchase and retirement of stock                                                                (31)          (25)
                                                                                                --------      --------

NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES                                                  (8,498)       14,150
                                                                                                --------      --------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                            $(21,180)     $  4,132
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF YEAR                                                56,954        38,621
                                                                                                --------      --------

CASH AND CASH EQUIVALENTS AT THE END OF PERIOD                                                  $ 35,774      $ 42,753
                                                                                                ========      ========

SUPPLEMENTAL DISCLOSURES OF CASH PAID DURING THE PERIOD FOR:

     Interest                                                                                   $ 10,505      $  9,835
     Income taxes                                                                               $    247      $  1,335
                                                                                                ========      ========

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Unrealized loss on securities available-for-sale, net of taxes                                  $ (2,188)     $ (2,115)
                                                                                                ========      ========
</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 SIX MONTHS ENDED JUNE 30, 1999 AND 1998

(Dollars in thousands except per share data)
(Unaudited)
                                                         Preferred Stock                   Common  Stock
                                         -------------------------------------------  --------------------
                                                 Series B              Series C
                                         ----------------------  -------------------
                                            Shares      Amount     Shares    Amount     Shares     Amount
                                           -------      ------     ------      ----     -------    ------
<S>                                        <C>          <C>        <C>         <C>      <C>          <C>
Balance, December 31, 1997                 405,645      $1,976     43,631      $578     119,918      $600

Net income
Retirement of stock                           (360)         (2)                            (122)       (1)
Cash dividends:
  Common stock ($.75 per share)
  Preferred   B   ($.44   per   share)
  Preferred   C    ($.44  per   share)
Unrealized loss on securities
  available-for-sale, net of tax
                                           -------      ------     ------      ----     -------      ----
Balance, June 30, 1998                     405,285      $1,974     43,631      $578     119,796      $599
                                           =======      =====      ======      ====     =======      ====

Balance, December 31, 1998                 398,653      $1,942     40,373      $562     119,266      $596
Net income
Retirement of stock                           (952)         (5)      (548)       (5)        (80)
Cash dividends:
  Common stock ($.75 per share)
  Preferred   B   ($.44   per   share)
  Preferred   C    ($.44  per   share)
Unrealized loss on securities
  available-for-sale, net of tax
                                           -------      ------     ------      ----     -------      ----
Balance, June 30, 1999                     397,701      $1,937     39,825      $557     119,186      $596
                                           =======      =====      ======      ====     =======      ====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN BANCSHARES  (N.C.), INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (continued)

(Dollars in thousands except per share data)
(Unaudited)



                                                                      Accumulated
                                                                        Other
                                                                        Compre-             Total
                                                       Retained         hensive         Shareholders'
                                           Surplus     Earnings         Income              Equity
                                           -------      -------        -------             -------
<S>                                        <C>          <C>            <C>                 <C>
Balance, December 31, 1997                 $10,000      $26,733        $15,097             $54,984

Net income                                                3,494                              3,494
Retirement of stock                                         (22)                               (25)
Cash dividends:
  Common stock ($.75 per share)                             (91)                               (91)
  Preferred   B   ($.44   per   share)                     (179)                              (179)
  Preferred   C    ($.44  per   share)                      (19)                               (19)
Unrealized loss on securities
  available-for-sale, net of tax                                        (2,115)             (2,115)
                                         ----------   ----------  ------------   -----------------
Balance, June 30, 1998                     $10,000      $29,916        $12,982             $56,049
                                         ==========   ==========  =============  ==================

Balance, December 31, 1998                 $10,000      $31,571        $11,362             $56,033
Net income                                                1,649                              1,649
Retirement of stock                                         (21)                               (31)
Cash dividends:
  Common stock ($.75 per share)                             (89)                               (89)
  Preferred   B   ($.44   per   share)                     (175)                              (175)
  Preferred   C    ($.44  per   share)                      (18)                               (18)
Unrealized loss on securities
  available-for-sale, net of tax                                        (2,188)             (2,188)
                                         ----------   ----------  ------------   -----------------
Balance, June 30, 1999                     $10,000      $32,917         $9,174             $55,181
                                         ==========   ==========  =============  ==================

</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 quarters presented have been included.

The preparation of financial  statements in conformity  with generally  accepted
accounting  principles  requires  management to make estimates and  assumptions.
These  estimates  and  assumptions  affect  the  reported  amounts of assets and
liabilities,  the  disclosure  of  contingent  liabilities  at the  date  of the
financial  statements and the reported  amounts of revenues and expenses for the
reporting  periods.  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,
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
<TABLE>
<CAPTION>
Note 2. Investment securities                           June 30, 1999
                                       -------------------------------------------------
(In thousands, unaudited)                            Gross         Gross      Estimated
                                       Amortized   Unrealized    Unrealized      Fair
                                         Cost        Gains         Losses        Value
                                        -------     -------      ---------      --------
<S>                                     <C>              <C>          <C>       <C>
SECURITIES HELD-TO-MATURITY:
     U.  S. Government                  $74,050          80           (330)     $ 73,800
     Obligations of states
         and political subdivisions      19,080         546            (19)       19,607
     Corporate debenture                    100           1           --             101
                                        -------     -------      ---------      --------
                                        $93,230         627           (349)     $ 93,508
                                        =======     =======      =========      ========

SECURITIES AVAILABLE-FOR-SALE:
     U.  S. Government                  $68,980          72           (443)     $ 68,609
     Marketable equity securities        10,747      14,018           --          24,765
     Obligations of states
        and political subdivisions        8,343         258             (1)        8,600
    Mortgage-backed securities            1,500          27            (31)        1,496
                                        -------     -------      ---------      --------
                                        $89,570      14,375           (475)     $103,470
                                        =======     =======      =========      ========

<CAPTION>
                                                       December 31, 1998
                                       -------------------------------------------------
(In thousands, unaudited)                            Gross         Gross       Estimated
                                       Amortized   Unrealized    Unrealized       Fair
                                         Cost        Gains         Losses         Value
                                        -------     -------      ---------      --------
<S>                                     <C>              <C>          <C>       <C>
SECURITIES HELD-TO-MATURITY:
     U.  S. Government                  $72,070         360            (41)     $ 72,389
     Obligations of states
         and political subdivisions      20,170         850             --        21,020
     Corporate debenture                    100           2             --           102
                                        -------     -------      ---------      --------
                                        $92,340       1,212            (41)     $ 93,511
                                        =======     =======      =========      ========

SECURITIES AVAILABLE-FOR-SALE:
     U.  S. Government                  $71,046         369           (135)     $ 71,280
     Marketable equity securities        10,747      16,867           (487)       27,127
     Obligations of states
        and political subdivisions        8,539         573             (1)        9,111
    Mortgage-backed securities            1,680          38             (9)        1,709
                                        -------     -------      ---------      --------
                                        $92,012      17,847           (632)     $109,227
                                        =======     =======      =========      ========

</TABLE>
<PAGE>
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES
Notes to consolidated financial statements
Dollars in thousands
<TABLE>
<CAPTION>
Note 3.  LOANS  (unaudited)
      (Dollars in thousands,                             June 30,    December 31,
                                                            1999          1998
                                                         --------       --------
<S>                                                      <C>            <C>
Commercial, financial and agricultural                   $ 96,198       $ 86,980
Real estate:
      Construction                                         10,573          5,276
      Mortgage:
            One to four family residential                107,416        113,984
            Commercial                                     65,563         62,446
            Equityline                                     29,023         28,698
            Other                                          31,396         26,846
Consumer                                                   35,792         36,775
Lease financing                                             3,707          3,484
                                                         --------       --------
  Total loans                                            $379,668       $364,489
                                                         ========       ========
Loans held for sale, included above                      $  2,610       $  6,858
Loans serviced for others, not included above            $180,258       $163,455

<CAPTION>
Note 4.  ALLOWANCE FOR LOAN LOSSES
      (Dollars in thousands)                                  (Unaudited)
                                                       Six Months Ended June 30,
                                                      --------------------------
                                                        1999               1998
                                                      --------          --------
<S>                                                    <C>              <C>
Balance at beginning of year                           $ 5,962          $ 5,971
  Allowance from bank acquisition                         --                269
  Provision for loan losses                                120              120
  Loans charged off                                       (423)            (119)
  Loan recoveries                                           86               52
                                                       -------          -------
Balance at end of the period                           $ 5,745          $ 6,293
                                                       =======          =======
</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.  The following  table presents the components of
the earnings per share computations:
<PAGE>
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES
Notes to consolidated financial statements
Dollars in thousands
<TABLE>
<CAPTION>
Note 5. EARNINGS PER COMMON SHARE                (Unaudited)                    (Unaudited)
      (Dollars in thousands)              Three Months Ended June 30,    Six Months Ended June 30,
                                          ---------------------------    -------------------------
                                              1999           1998           1999           1998
                                           ---------      ----------     ----------     ----------
<S>                                        <C>            <C>            <C>            <C>
Net income                                 $     957      $     927      $   1,649      $   3,494
  Less: Preferred dividends                      (96)           (99)          (193)          (198)
                                           ---------      ---------      ---------      ---------
Net income applicable to common shares     $     861      $     828      $   1,456      $   3,296
                                           =========      =========      =========      =========

Weighted average common shares
  outstanding during the period              119,186        119,855        119,218        119,886
                                           =========      =========      =========      =========
</TABLE>
Note 6. Acquisitions

During the third  quarter of 1999 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.

Southern  has  historically  amortized  acquired  intangibles,   such  as  those
indicated above for the Ahoskie acquisition, utilizing an accelerated basis over
a ten year period.
<PAGE>
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - SIX
MONTHS ENDED 1999 VS. SIX MONTHS ENDED 1998


INTRODUCTION

In the  first  six  months  of 1999,  the net  income  of  BancShares  decreased
approximately  $1.8 million from $3.5 million in the first six months of 1998 to
$1.6  million  in the first six  months of 1999,  a decrease  of  111.89%.  This
decrease resulted primarily from the 1998 sale of available-for-sale securities,
which  resulted  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  personnel  expense and other related  operating  expenses for the six
months ended June 30, 1999.

Earnings  per  common  share  for the first six  months  of 1999 was  $12.21,  a
decrease of $15.28, or 55.58%, from $27.49 for the first six months of 1998. The
annualized  return on average  equity  decreased to 5.95%,  for the period ended
June 30, 1999,  from 16.58% for the period ended June 30, 1998 and the return on
average  assets  decreased to 0.51%,  for the period  ended June 30, 1999,  from
1.36% for the period ended June 30, 1998.

At June 30, 1999, BancShares' assets totaled $638.8 million, a decrease of $10.7
million, or 1.64%, from the $649.4 million reported at December 31, 1998. During
this six month  period,  cash and due from banks  decreased  $11.7  million,  or
45.52%  from  $37.4  million to $25.7  million.  During  this six month  period,
federal funds sold decreased $9.5 million, or 94.38% from $19.5 million to $10.1
million.  During this six month period, loans increased $15.2 million, or 4.16%,
from $364.5 million to $379.7 million. During the six months ended June 30, 1999
investment  securities  decreased $4.9 million,  or 2.41% from $201.6 million at
December 31, 1998 to $196.7 million at June 30, 1999.  Total deposits  decreased
$10.0  million,  or 1.79% from  $556.8  million at  December  31, 1998 to $546.8
million  at June 30,  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 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.
<PAGE>
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - SIX
MONTHS ENDED 1999 VS. SIX MONTHS ENDED 1998

The  comparisons  of the six months  ended June 30, 1999 to the six months ended
June 30, 1998 are accordingly  impacted by the above transactions.  Southern had
no acquisitions in the six months ended June 30, 1999.


INTEREST INCOME

Interest and fees on loans decreased $236,000,  or 1.54%, from $15.3 million for
the six months  ended June 30, 1998 to $15.1  million  for the six months  ended
June 30, 1999. This decrease was principally due to overall lower loan portfolio
yields.  Average  loans for the six  months  ended  June 30,  1999  were  $372.6
million,  an increase of 3.10% from  $361.4  million for the prior year  period.
This  increase  in  average  loans  was  principally  the  result  of  the  1998
acquisitions  discussed  above. The yield on the loan portfolio was 8.46% in the
six months ended June 30, 1998 and 8.06% in the six months ended June 30, 1999.

Interest  income  from  investment  securities,  including  U. S.  Treasury  and
Government  obligations,  obligations of state and county subdivisions and other
securities increased $63,000 or 1.27%, from $4.9 million in the six months ended
June 30,  1998 to $5.0  million in the six  months  ended  June 30,  1999.  This
increase was due to an increase in the volume of average  investment  securities
for the six months  ended June 30, 1999 to $197.6  million as compared to $159.8
million for the same 1998  period  that more than offset an overall  decrease in
portfolio  yields.  This  increase  in  volume  principally  resulted  from  the
acquisitions  discussed above. The yield on investment  securities was 5.94% for
the  six-month  period  ended June 30, 1998 and 5.26% for the  six-month  period
ended June 30, 1999.

Interest  income on  federal  funds sold  increased  $83,000,  or  23.92%,  from
$347,000  for the six months  ended June 30, 1998 to $430,000 for the six months
ended June 30, 1999. This increase in income resulted primarily from an increase
in the average federal funds sold to $18.1 million for the six months ended June
30, 1999 from an average of $12.9 million for the six months ended June 30, 1998
that more than offset a decrease in the yield on federal funds.  The increase in
federal funds resulted primarily from the acquisitions  discussed above. Average
federal  funds sold  yields were 4.73% for the six months  ended June 30,  1999,
down from 5.43% for the six months ended June 30, 1998.

Total interest income decreased $90,000 or 0.44%, from $20.6 million for the six
months  ended June 30, 1998 to $20.5  million for the six months  ended June 30,
1999.  This decrease was  primarily  the result of a 59 basis point  decrease in
average  earning  asset  yields  that more than  offset an  increase  in average
earning assets.

Average earning asset yields for the six months ended June 30, 1999 decreased to
7.04% from the 7.63% yield on average  earning  assets for the six months  ended
June 30, 1998.  Average earning assets  increased from $534.1 million in the six
months  ended June 30, 1998 to $583.3  million in the six months  ended June 30,
1999.  This $49.2  million  increase  in the  average  earning  assets  resulted
primarily from the acquisitions discussed above.
<PAGE>
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - SIX
MONTHS ENDED 1999 VS. SIX MONTHS ENDED 1998


INTEREST EXPENSE

Total interest expense decreased  $138,000,  or 1.38%, from $10.0 million in the
six months ended June 30, 1998 to $9.8 million for the six months ended June 30,
1999.  The  principal  reason for this  decrease was the decrease in the cost of
deposits  and the cost of  short-term  borrowings  that  more  than  offset  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 $1.0
million of interest expense in the six months ended June 30, 1999 related to the
capital  securities  compared to $141,000 in the six months ended June 30, 1998.
BancShares'  total cost of funds  decreased  from 4.18% for the six months ended
June  30,  1998 to  3.92%  for the six  months  ended  June  30,  1999.  Average
interest-bearing  deposits were $474.4  million in the six months ended June 30,
1999,  an increase of $20.9 million from the $453.5  million  average in the six
months  ending June 30,  1998.  The  increase in  interest-bearing  deposits was
primarily  the  result of the  aforementioned  October  1998 and  December  1998
acquisitions .


NET INTEREST INCOME

Net interest income was $10.6 million for the six months ended June 30, 1999 and
$10.5 million for the six months ended June 30, 1998.

The  interest  rate spread for the six months  ended June 30, 1999 was 3.11%,  a
decrease  of 34 basis  points  from the 3.45%  interest  rate spread for the six
months ended June 30, 1998.


ASSET QUALITY AND PROVISION FOR LOAN LOSSES

For the six months ended June 30, 1999 management recorded $120,000 as provision
for loan losses.  Management also made a $120,000  addition to the provision for
loan losses for the six months ended June 30, 1998.

Due to an increase in  non-performing  loans during the first six months of 1999
management  charged-off  loans  totaling  $423,000  and received  recoveries  of
$87,000,  resulting in net  charge-offs  of $336,000.  During the same period in
1998,  $119,000  in loans  were  charged-off  and  recoveries  of  $52,000  were
received, resulting in net charge-offs of $67,000. For the six months ended June
30, 1999 $120,000 was added to the allowance for loan losses through  charges to
the  operations  of  BancShares.  The  allowance  for  loan  losses  accordingly
decreased  $217,000  from  December  31,  1998.  The  following  table  presents
comparative Asset Quality ratios of BancShares:
<PAGE>
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - SIX
MONTHS ENDED 1999 VS. SIX MONTHS ENDED 1998
<TABLE>
<CAPTION>
                                                                   (Unaudited)
                                                             June 30,     December 31,
                                                               1999            1998
                                                               ----           -----
<S>                                                            <C>            <C>
Ratio of annualized net loans charged off
          to average loans                                     0.18%          0.12%

Allowance for loan losses
           to loans                                            1.51%          1.64%

Non-performing loans
            to loans                                           0.43%          0.28%

Non-performing loans and assets
            to total assets                                    0.30%          0.17%

Allowance for loan losses
            to non-performing loans                          350.95%        588.00%

</TABLE>

The ratio of annualized net charge-offs to average loans  outstanding  increased
to 0.18% for the six months  ended  June 30,  1999 from 0.12% for the year ended
December 31, 1998. The allowance for loan losses  represented  1.51% of loans at
June 30,  1999.  The  allowance  for loan losses  represented  1.64% of loans at
December 31, 1998.  Loans increased $15.2 million,  or 4.16% from $364.5 million
at December 31, 1998 to $379.7 million at June 30, 1999.

The ratio of nonperforming loans to loans,  increased from 0.28% at December 31,
1998 to 0.43% at June 30, 1999.  Nonperforming  loans and assets to total assets
increased  to 0.30% at June 30,  1999  from  0.17% at  December  31,  1998.  The
allowance  for  loan  losses  to  nonperforming  loans  represented  350.95%  of
nonperforming  loans at June 30, 1999,  a decrease  from the 588.00% at December
31, 1998. The above performance  declines resulted primarily from an increase in
nonperforming  loans to $1.7 million at June 30, 1999 from  $971,000 at December
31,  1998.  The  nonperforming  loans  at June 30,  1999  included  $298,000  of
nonaccrual  loans,  $1.3 million of accruing  loans 90 days or more past due and
$43,000 of restructured  loans.  BancShares had $305,000 of assets classified as
other real estate at June 30, 1999.  BancShares had $84,000 of assets classified
as other real estate at December 31, 1998.

Management  considers the June 30, 1999 allowance for loan losses to be adequate
to cover the losses and risks  inherent in the loan  portfolio  at June 30, 1999
and will continue to monitor its  portfolio and to adjust the relative  level of
the allowance as needed. The majority of the loans charged-off in the six months
ended  June  30,  1999  were  not  representative  of  BancShare's overall  loan
portfolio.
<PAGE>
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - SIX
MONTHS ENDED 1999 VS. SIX MONTHS ENDED 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  adjustments to the allowances based on the examiners' judgments about
information available to them at the time of their examinations.


NONINTEREST INCOME

During the six months ended June 30, 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 six months ended June 30, 1999 was the primary
reason  for the  decrease  in  noninterest  income.  Service  charges on deposit
accounts  for the six months  ended June 30, 1999  increased  $138,000 and other
service  charges  and fees for the six  months  ended  June 30,  1999  increased
$83,000  over the six months  ended June 30, 1998  primarily  as a result of the
acquisitions  discussed  above.  Loses on the sale of mortgage loans for the six
months ended June 30, 1999 increased $200,000 over the six months ended June 30,
1998  primarily as a result of  increasing  mortgage  interest  rates in the six
months ended June 30, 1999.


NONINTEREST EXPENSE

Noninterest  expense  increased  $899,000 or 9.08%, from $9.9 million in the six
months  ended June 30,  1998 to $10.8  million in the six months  ended June 30,
1999.

This increase was primarily due to an increase in personnel expense of $688,000,
or 14.58%,  from $4.7  million at June 30, 1998 to $5.4 million at June 30, 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>
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - SIX
MONTHS ENDED 1999 VS. SIX MONTHS ENDED 1998


INCOME TAXES

In the six months  ended June 30,  1999,  BancShares  had income tax  expense of
$510,000, a decrease of $750,000 from $1.3 million in the prior year period. The
majority  of this  decrease  is due to the  effect of the 1998  securities  gain
discussed above. The resulting  effective tax rate for the six months ended June
30, 1999 was 23.62%.  The  effective  tax rate for the six months ended June 30,
1998 was  26.50%.  The  effective  tax rate in 1999 of 23.62%  differs  from the
federal statutory rate of 35.00% primarily due to tax exempt income.
<PAGE>
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - SECOND
QUARTER OF 1999 VS. SECOND QUARTER OF 1998


INTRODUCTION

In the second  quarter of 1999, the net income of BancShares  increased  $30,000
from $927,000 in the second quarter of 1998 to $957,000 in the second quarter of
1999, an increase of 3.24%.  One branch  acquisition  each in May 1998,  October
1998 and December 1998 resulted in increased personnel expense and other related
operating expenses for the quarter ended June 30, 1999.

Earnings per common share for the second quarter of 1999 was $7.22,  an increase
of $0.31, or 4.49%, from $6.91 in 1998.


ACQUISITIONS

Southern had no acquisitions in the quarter ended June 30, 1999. The comparisons
of the three  months ended June 30, 1999 to the three months ended June 30, 1998
are accordingly impacted by the 1998 acquisitions discussed above.


INTEREST INCOME

Interest and fees on loans decreased  $143,000,  or 1.84%, from $7.8 million for
the quarter  ended June 30, 1998 to $7.6 million for the quarter  ended June 30,
1999.  This decrease was due primarily to lower overall 1999 interest rates that
more than  offset an increase in average  loans.  Average  loans for the quarter
ended June 30,  1999 were  $375.0  million,  an  increase  of 3.76% from  $361.4
million for the prior year  quarter.  The yield on the loan  portfolio was 8.54%
for the three  months  ended June 30, 1998 and 8.05% for the three  months ended
June 30, 1999.

Interest  income  from  investment  securities,  including  U. S.  Treasury  and
Government  obligations,  obligations of state and county subdivisions and other
securities  decreased  $71,000,  or 2.76%, from $2.6 million in the three months
ended June 30, 1998 to $2.5  million in the three  months  ended June 30,  1999.
This decrease was due primarily to lower overall  interest  rates that more than
offset  an  increase  in the  average  investment  portfolio.  The  acquisitions
discussed  above  resulted in increased  average  investment  securities for the
quarter ended June 30, 1999 to $193.9  million as compared to $158.4 million for
the same 1998  quarter.  The yield on  investment  securities  was 5.89% for the
quarter ended June 30, 1998 and 5.17% for the quarter ended June 30, 1999.

Interest income on federal funds sold decreased $10,000, or 6.13%, from $163,000
for the quarter  ended June 30, 1998 to $153,000 for the quarter  ended June 30,
1999. This decrease in income  resulted  primarily from a decrease in rates that
more than offset an increase in volume resulting primarily from the acquisitions
discussed  above.  The  average  federal  funds sold was $12.9  million  for the
quarter  ended June 30,  1999  compared  to an average of $12.1  million for the
quarter  ended June 30, 1998.  Average  federal funds sold yields were 4.69% for
the quarter  ended June 30, 1999 down from 5.40% for the quarter  ended June 30,
1998.
<PAGE>
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - SECOND
QUARTER OF 1999 VS. SECOND QUARTER OF 1998

Total interest income decreased  $244,000,  or 2.13%, from $10.5 million for the
quarter  ended June 30, 1998 to $10.3  million  for the  quarter  ended June 30,
1999.  This decrease was  primarily  the result of a 66 basis point  decrease in
average  earning  asset  yields that more than offset an increase in the average
earnings assets.

Average  earning asset yields for the quarter  ended June 30, 1999  decreased to
7.02% from the 7.68% yield on average  earning assets for the quarter ended June
30, 1998.  Average  earning assets  increased from $545.6 million in the quarter
ended June 30, 1998 to $581.8  million in the quarter ended June 30, 1999.  This
$36.2 million increase in the average earning assets resulted primarily from the
acquisitions discussed above.


INTEREST EXPENSE

Total interest  expense  decreased  $279,000 or 5.40%,  from $5.2 million in the
three months ended June 30, 1998 to $4.9  million for the second  quarter  ended
June 30,  1999.  The  principal  reason  for this  decrease  was lower  costs of
deposits  and  short-term  borrowings  that more than  offset  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 $518,000 of
interest  expense in the three months ended June 30, 1999 related to the capital
securities.


NET INTEREST INCOME

Net  interest  income was $5.4  million for the three months ended June 30, 1999
and $5.3 million for the three months ended June 30, 1998.

The  interest  rate  spread for the  quarter  ended June 30,  1999 was 3.14%,  a
decrease of 37 basis points from the 3.51%  interest rate spread for the quarter
ended June 30, 1998.


ASSET QUALITY AND PROVISION FOR LOAN LOSSES

For the quarter ended June 30, 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 quarter ended June 30, 1998.

During the second quarter of 1999 management charged-off loans totaling $237,000
and received recoveries of $25,000, resulting in net charge-offs for the quarter
ended June 30, 1999 of  $212,000.  During the same  quarter in 1998,  $78,000 in
loans were charged-off and recoveries of $26,000 were received, resulting in net
charge-offs  of $52,000.  The majority of the loans  charged-off  in the quarter
ended June 30,  1999 were  related to one former  lending  officer's  failure to
follow  established  lending policies and one customer  relationship that is not
representative of BancShare's overall loan portfolio.
<PAGE>
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - SECOND
QUARTER OF 1999 VS. SECOND QUARTER OF 1998


NONINTEREST INCOME

During the three  months  ended June 30, 1999,  BancShares'  noninterest  income
increased  $73,000  principally  as a result  of the  acquisitions  in May 1998,
October 1998 and  December  1998  discussed  above.  Service  charges on deposit
accounts for the three months  ended June 30, 1999  increased  $93,000 and other
service  charges and fees for the three  months  ended June 30,  1999  increased
$82,000 over the three  months ended June 30, 1998  primarily as a result of the
acquisitions discussed above. Losses on the sale of mortgage loans for the three
months ended June 30, 1999 increased $159,000 over the six months ended June 30,
1998  primarily as a result of increasing  mortgage  interest rates in the three
months ended June 30, 1999.


NONINTEREST EXPENSE

Noninterest  expense including  personnel,  occupancy,  furniture and equipment,
data processing, FDIC insurance, state assessments, printing, supplies and other
expenses,  increased  $279,000 or 5.51%,  from $5.3  million in the three months
ended June 30, 1998 to $5.3 million in the three months ended June 30, 1999.

This increase was primarily due to an increase in personnel expense of $240,000,
or 9.86%,  from $2.4 million for the quarter ended June 30, 1998 to $2.7 million
for the  quarter  ended June 30, 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.


INCOME TAXES

In the three months ended June 30,  1999,  BancShares  had income tax expense of
$270,000,  a decrease of $181,000 from  $451,000 in the prior year quarter.  The
majority of this decrease is due to a reduction in the  estimated  effective tax
rate for the quarter ended June 30, 1999 to 22.00%. The estimated  effective tax
rate for the quarter ended June 30, 1998 was 32.73%.  The effective tax rate for
the quarter  ended June 30, 1999 of 22.00%  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
FDIC, 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
<PAGE>
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - SECOND
QUARTER OF 1999 VS. SECOND QUARTER OF 1998

Capital Securities,  BancShares  irrevocably and unconditionally  guarantees the
Trust's  obligations.  Using  the  proceeds  from the  offering  of the  Capital
Securities  discussed  above 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  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 June 30, 1999 was 8.50%.  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 June 30, 1999,  Southern's Total RBC ratio
was 17.76%. 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 above 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.

Accumulated  other  comprehensive  income was $9.2 million at June 30, 1999, and
$11.4  million at December  31, 1998.  Accumulated  other  comprehensive  income
consists entirely of unrealized gains on securities  available-for-sale,  net of
taxes.  Although a part of total  shareholders'  equity, only 45% of accumulated
other  comprehensive   income,   consisting  entirely  of  unrealized  gains  on
marketable  equity  securities,  is included in the  calculation  of the RBC and
leverage  capital  ratios  pursuant to regulatory  definitions  of these capital
requirements.  The following table presents  capital  adequacy  calculations and
ratios of Southern:
<TABLE>
<CAPTION>
                                                  (Unaudited)
                                         June 30,       December 31,
                                           1999             1998
                                           ----             -----
(Dollars in thousands)
<S>                                    <C>               <C>
Risk-based capital:
   Tier 1 capital                      $  52,864         $ 49,198
   Total capital                          60,590           53,234
Risk-adjusted assets                     341,098          311,341
Average tangible assets                  621,997          582,955

Tier 1 capital ratio   (1)                 15.50%           15.80%
Total capital ratio    (1)                 17.76%           17.10%
Leverage capital ratio (1)                  8.50%            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.
<PAGE>
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - SECOND
QUARTER OF 1999 VS. SECOND QUARTER OF 1998

At June 30, 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 32.10% at June 30, 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 six months ended June
30, 1999 and for the six months  ended June 30,  1998.  Southern has no brokered
deposits.  Jumbo time  deposits are  considered  to include all time deposits of
$100,000 or more. Southern 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
June 30,  1999 jumbo time  deposits  represented  11.24% of total  deposits.  At
December 31, 1998 jumbo time deposits represented 10.79% of total deposits.

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
<PAGE>
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - SECOND
QUARTER OF 1999 VS. SECOND QUARTER OF 1998

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,  as amended by Statement 137, is effective for all
fiscal  quarters  of  fiscal  years  beginning  after  June  15,  2001.  Earlier
application of all provisions of this statement is encouraged.  BancShares plans
to adopt this  statement on January 1, 2001 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, resulting in no material impact.

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.


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 focused on 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 the year 2000 issue.

These statements require financial  institutions to, among other things, examine
the year 2000  implications of their reliance on vendors,  data exchange and the
potential  impact of the year 2000 issue on customers,  suppliers and borrowers.
<PAGE>
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - SECOND
QUARTER OF 1999 VS. SECOND QUARTER OF 1998

These statements also require each federally regulated financial  institution to
survey its  exposure,  to measure  its risk and to 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 Southern, 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.  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.  BancShares  has  addressed  each of these  areas as
discussed below.

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) may 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 that rely on the date field information,
such as  interest,  payments,  due dates and other  operating  functions,  could
generate results which are significantly misstated.  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,  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,  financial condition and
results of operations.

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 FCB on its mainframe  systems  and/or on systems  supported by FCB.
FCB also  provides  similar  services to several other  financial  institutions.
Accordingly,  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.  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.
<PAGE>
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - SECOND
QUARTER OF 1999 VS. SECOND QUARTER OF 1998

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.

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
coordinated  remediation  (which,  in most cases,  entailed the  installation of
upgrades provided by outside vendors) and testing,  where necessary.  This phase
is also complete.

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 September 30, 1999.
BancShares' staff has completed validation testing on Group C Systems.

Implementation Phase

Under  BancShares' plan, once new and modified systems that require testing have
been tested for functionality,  they are put into production.  BancShares' plans
to complete the implementation phases for all systems by September 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 was assigned to an officer of BancShares
whose  responsibility  was to  communicate  with the  vendor of that  system and
coordinate remediation. This phase is complete.
<PAGE>
SOUTHERN BANCSHARES (N.C.), INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - SECOND
QUARTER OF 1999 VS. SECOND QUARTER OF 1998

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 initially
estimated  that  approximately  $200,000 would be expensed for its separate year
2000  project   expenses  but  now  expects  final  year  2000  expenses  to  be
significantly less. The initial plan anticipated  substantial outside consultant
expenditures  that were later  determined to be unnecessary.  Expenses  actually
incurred  through June 30, 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  reasonably  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.  Contingency  plans for system failures on or after January 1, 2000 have
been accepted by the Bank's regulators.  Validation testing of these contingency
plans is currently in process.

Other matters

BancShares  has received  regulatory  approval to purchase  the  Ahoskie,  North
Carolina office of FCB containing  approximately  $16.0 million in deposits (see
note 6 of notes to consolidated financial statements).  This purchase is planned
for September 1999.  BancShares has also received regulatory approval to open de
novo branches in three new eastern  North  Carolina  markets.  These offices are
planned to open in 2000.  BancShares has filed an  application  with the FDIC to
open a de novo full  service  office in  Clinton,  North  Carolina.  Subject  to
regulatory approval, the Clinton office is planned to open in the fourth quarter
of 1999.

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.

Dated: August 9, 1999           /s/John C. Pegram, Jr.
                                ----------------------
                                John C. Pegram, Jr.,
                                President and Chief Executive Officer



Dated: August 9, 1999           /s/David A. Bean
                                -----------------
                                David A. Bean,
                                Secretary, Treasurer and Chief Financial Officer