EXHIBIT 13

Business of Southern Community Bancshares, Inc.

Southern Community Bancshares, Inc. (the "Holding Company"), a unitary savings and loan holding company incorporated under the laws of the State of Delaware, owns all of the issued and outstanding common shares of First Federal Savings and Loan
Association of Cullman, a savings and loan association chartered under federal law (the "Association"). In December 1996, the Holding Company acquired all of the common shares issued by the Association upon its conversion from a mutual savings and
loan association to a stock savings and loan association (the "Conversion"). Since its formation, the Holding Company's activities have been limited primarily to holding the common shares of the Association.

As a savings and loan holding company, the Holding Company is subject to regulation, supervision, and examination by the Office of Thrift Supervision of the United States Department of the Treasury (the "OTS"). As a savings and loan association
incorporated under federal law, the Association is subject to regulation, supervision, and examination by the OTS. The Association is also a member of the Federal Home Loan Bank (the "FHLB") of Atlanta.

Selected Financial Information and Other Data:

|                                                 | At September 30,      
|------------------------------------------------ | ----------------------
|                                                 | 1999                  
|                                                 | (Dollars in thousands)
|Total amount of:                                 |                       
|Assets                                           | $62,785               
|Cash and interest-bearing time deposits in banks | 4,118                 
|Investment securities                            | 8,149                 
|Mortgage-backed securities                       | 3,945                 
|Loans receivable, net                            | 44,838                
|Deposits                                         | 53,904                
|Equity                                           | 8,652                 

Summary of Earnings:

|                                                    | Year Ended September 30,
|--------------------------------------------------- | ------------------------
|                                                    | 1999                    
|                                                    | (Dollars in thousands)  
|                                                    |                         
|Interest income                                     | $4,827                  
|Interest expense                                    | 2,211                   
|Net interest income                                 | 2,616                   
|Provision for loan losses                           | 0                       
|Net interest income after provision for loan losses | 2,616                   
|Non-interest income, net                            | 102                     
|Non-interest expense, net                           | 1,745                   
|Income before provision for income taxes            | 973                     
|Income tax expense                                  | 391                     
|Net income                                          | $ 582                   
|Basic earnings per share                            | $.70                    
|Diluted earnings per share                          | $.67                    

Selected Financial Ratios:

|                                                                           | Year Ended September 30,
|-------------------------------------------------------------------------- | ------------------------
|                                                                           | 1999                    
|                                                                           | (Dollars in thousands)  
|                                                                           |                         
|Performance ratios:                                                        |                         
|Return on average assets                                                   | .9%                     
|Return on average equity                                                   | 6.9                     
|Interest rate spread (1)                                                   | 3.6                     
|Net interest margin (2)                                                    | 4.1                     
|Ratio of noninterest expenses to average assets                            | 2.7                     
|Average equity to average assets                                           | 12.8                    
|Average interest-earning assets to average
   interest-bearing liabilities | 112.9                   
|                                                                           |                         
|Assets quality ratios:                                                     |                         
|Nonperforming assets to total assets (3)                                   | .3                      
|Nonperforming loans to total loans (3)                                     | .3                      
|Allowance for loan losses to total loans                                   | 1.7                     
|Allowance for loan losses to nonperforming loans (3)                       | 557.9                   

(1)	Interest rate spread represents the difference between the weighted average yield on interest-earning assets and weighted average rate paid on interest-bearing liabilities.

(2)	Net interest margin represents annualized net interest income as a percentage of average interest-earning assets.

(3)	Nonperforming loans consist of nonaccrual loans and accruing loans 90 days or more delinquent and nonperforming assets consist of nonperforming loans and real estate owned.



COMMON STOCK DATA

The Company's common stock began trading on the NASDAQ on December 23, 1996, under the symbol "SCBS." At September 30, 1999, there were 1,025,214 shares of the common stock outstanding and approximately 400 stockholders of record. The
following table sets forth information as to high and low sales prices of the Company's common stock and cash dividends per share of common stock for the calendar quarters indicated.



|               | Price Per Share | Dividends Per Share
|-------------- | --------------- | -------------------
|               | High            | Low                
|               |                 |                    
|Fiscal 1999:   |                 |                    
|First quarter  | $17.25          | $12.00             
|Second quarter | 13.25           | 11.25              
|Third quarter  | 11.63           | 9.75               
|Fourth quarter | 10.25           | 9.75               
|               |                 |                    
|Fiscal 1998:   |                 |                    
|First quarter  | 19.00           | 17.00              
|Second quarter | 20.00           | 17.50              
|Third quarter  | 19.75           | 14.75              
|Fourth quarter | 17.75           | 14.75              
|               |                 |                    



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

General

The principal business of the Association consists of accepting deposits from the general public and investing those funds in loans secured by one- to four-family residential properties located in the Association's primary market area and loans for
other general purposes to individuals and businesses. The Association's securities portfolio consists primarily of U.S. Treasury notes and government agency securities and mortgage-backed securities.

The Association's earnings are primarily dependent upon its net interest income, the difference between interest income and interest expense. Interest income is a function of the balances of loans and investments outstanding during a given period and
the yield earned on such loans and investments. Interest expense is a function of the amount of deposits outstanding during the same period and interest rates paid on such deposits. The Association's earnings are also affected by provisions for loan
losses, service charges, and other noninterest income, operating expenses, and income taxes.

The Association is significantly affected by prevailing economic conditions, as well as government policies and regulations concerning, among other things, monetary and fiscal affairs, housing, and financial institutions. Deposit flows are influenced
by a number of factors, including interest rates paid on competing investments, account maturities, and the level of personal income and savings within the Association's market. In addition, deposit growth is affected by how customers perceive the
stability of the financial services industry amid various current events such as regulatory changes, failures of other financial institutions, and financing of the deposit insurance fund. Lending activities are influenced by the demand for and supply of
housing lenders, the availability and cost of funds, and various other items. Sources of funds for lending activities of the Association include deposits and income provided from operations.

Forward Looking Statements

This Report contains forward-looking statements. Additional written or oral forward-looking statements may be made by the Company from time to time in filings with the Securities and Exchange Commission or otherwise. The words "believe," "expect,"
"seek," and "intend," and similar expressions identify forward-looking statements, which speak only as of the date the statement is made. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements may include, but are not limited to, projections of income or loss, expenditures, acquisitions, plans for future operations, financing needs or
plans relating to services of the Company, as well as assumptions relating to the foregoing. Forward-looking statements are inherently subject to risk and uncertainties, some of which cannot be predicted or qualified. Future events and actual results
could differ materially from those set forth in, contemplated by or underlying the forward-looking statements.

The Company does not undertake, and specifically disclaims, any obligation to publicly release the results of revisions which may be made to forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances
after the date of such statements.

Changes in Financial Condition

At September 30, 1999, the Company's assets totaled $62.8 million, as compared to $66.8 million at September 30, 1998. Total assets decreased by $4.0 million or 8.9% from September 30, 1998 to September 30, 1999. The decrease in
total assets during this period resulted from the funding of a $2.1 million special dividend in the form of a return of capital, $287,000 in contributions to benefit plan trusts, and the purchase of $624,000 in treasury stock. This was reflected in
decreases in interest bearing deposits of $4.9 million, mortgage-backed securities of $2.3 and loans receivable of $1.0 million. The decrease in mortgage-backed securities was primarily due to maturities and significant prepayments due to the decreasing
rate environment. These decreases were partially offset by a $5.1 million increase in investment securities.

During the fiscal year ended September 30, 1999, total deposits decreased by $1.7 million, or 3.1%, to $53.9 million. Total equity decreased by $2.4 million, primarily as a result of the special dividend, the contribution to benefit plan trusts
and the purchase of treasury stock.

Results of Operations for the Years Ended September 30, 1999, 1998, and 1997

The Company had net income of $582,000 for the year ended September 30, 1999 compared to net income of $823,000 for the year ended September 30, 1998. The $582,000 in net income represented a 29.2% decrease over fiscal 1998. The Company's
net income of $823,000 for the fiscal year ended September 30, 1998 represented an increase of $31,000 or 4.0%, from fiscal 1997. The decrease from fiscal 1998 to fiscal 1999 was primarily the result of a decrease in average interest earning assets,
as a result of the payment of special dividends in 1999 and 1998.

Total interest income decreased by $409,000, or 7.8%, in fiscal year ended September 1998 compared to fiscal year ended September 30, 1997. The increase was primarily the result of a decrease in average interest earning assets as a result of
the payment of special dividends in 1999 and 1998.

Interest income increased by $197,000, or 7.5%, during the fiscal year ended September 1998 compared to fiscal 1997. The increase was primarily the result of an increase in the average yield on interest earning assets, primarily loans.

Net Interest Income

The Company's net interest income is determined by its interest rate spread (i.e., the difference between the yields earned on its interest-earning assets and the rates paid on its interest-bearing liabilities) and the relative amounts of
interest-earning assets and interest-bearing liabilities.

Total interest income decreased by $409,000 or 7.8%, in the fiscal year ended September 30, 1999 compared to fiscal 1998. The decrease was due primarily to a decrease average interest earning assets as a result of the payment of special dividends
in 1999 and 1998.

Total interest income increased by $188,000, or 3.7%, in the fiscal year ended September 30, 1998 compared to fiscal 1997. The increase was primarily due to an increase in interest on loans of $479,000 resulting from an increase in loan volume.
Interest income from other interest earning assets decreased $291,000 as the average balances decreased.

Provision for Loan Losses

The Association did not record a provision for loan losses during the fiscal years ended September 30, 1999, 1998, or 1997. Favorable charge-off experience has not warranted additions to the allowance.

The Association's methodology for evaluating the adequacy of its allowance for loan losses, which conforms with GAAP, considers collateral valuation, changes in the loan portfolio mix, and certain economic indicators, causing it to be a leading
indicator of inherent risk in the loan portfolio. The methodology incorporates economic indicators such as growth in personal income and unemployment rates as well as other economic indicators affecting the Association's market area and considers higher
risk loan groups, including growth in the Association's consumer and multi-family and non-residential loan portfolios. Commercial and consumer loans traditionally have higher rates of default and are secured by collateral that often depreciates or is less
liquid than the real estate securing mortgage loans.

Non-Interest Income

Non-interest income declined to $165,000 in fiscal 1999. Non-interest income amounted to $180,000 for the fiscal year ended September 30, 1998 compared to $187,000 for fiscal 1997. The primary differences in non-interest income between fiscal
1999 and fiscal 1998 and between fiscal 1998 and fiscal 1997 were from reductions in fees from deposit accounts.

Non-Interest Expenses

Non-interest expenses increased slightly to $1.8 million during the fiscal year ended September 30, 1999. Non-interest expense amounted to $1.7 million for the fiscal year ended September 30, 1998 compared to $1.6 million for fiscal 1997.
The primary reason for the increase in non-interest expenses in fiscal 1998 compared to fiscal 1997 was implementation of the Management Retention Plan ("MRP") during fiscal 1998.

Income Taxes

The provisions for income taxes were $391,000, $466,000, and $437,000, in fiscal 1999, 1998, and 1997, respectively. The changes in such respective amounts primarily reflect the fluctuations in levels of income before income taxes of the Company
during those fiscal years of $973,000, $1,289,000, and $1,229,000, respectively.

Liquidity and Capital Resources

The Association is required under applicable federal regulations to maintain specified levels of "liquid" investments in qualifying types of United States Government, federal agency, and other investments having maturities of five years or less.
Current OTS regulations require that a savings association maintain liquid assets of not less than 5% of its average daily balance of net withdrawable deposit accounts and borrowings payable in one year or less, of which short-term liquid assets must
consist of not less than 1%. Monetary penalties may be imposed for failure to meet applicable liquidity requirements. At September 30, 1999, the Association's liquidity, as measured for regulatory purposes, was in excess of the minimum OTS requirement.

Cash was generated by the Association's operating activities during the years ended September 30, 1999 and 1998 primarily as a result of net income. The adjustments to reconcile net income to cash provided by operating activities during the
periods presented consisted primarily of amortization of premiums and discounts, proceeds from the sale of loans, and increases or decreases in interest and dividends receivable, prepaid income taxes, accrued interest payable, and accrued expenses and
other liabilities. The primary investing activity of the Association is lending, which is funded with cash provided by operations, as well as principal collections and maturities of interest-bearing deposits in banks. For additional information about cash
flows from the Association's operating, financing, and investing activities, see the Statements of Cash Flows included in the Consolidated Financial Statements.

At September 30, 1999, the Association had outstanding $658,000 in undisbursed portion of mortgage loans. At the same date, the total amount of certificates of deposit which are scheduled to mature by September 30, 2000 was $26.4 
million. The Association believes that it has adequate resources to fund commitments as they arise and that it can adjust the rate on savings certificates to retain deposits in changing interest rate environments. If the Association requires funds beyond
its internal funding capabilities, advances from the FHLB of Atlanta are available as an additional source of funds.

The Association is required to maintain specified amounts of capital pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA") and regulations promulgated thereunder by the OTS. The capital standards generally
require the maintenance of regulatory capital sufficient to meet a tangible capital requirement, a core capital requirement, and a risk-based requirement. At September 30, 1999, the Association's tangible and core capital totaled $7.9 million,
or 12.6% of adjusted total assets, which exceeded the respective minimum requirements at that date by approximately $6.9 million and $6.0 million, respectively. The Association's risk-based capital totaled $8.4 million at September 30,
1999, or 22.3% of risk-weighted assets, which exceeded the current requirement of 8% by approximately $5.4 million, or 14.3% of risk-weighted assets.

Impact of Inflation and Changing Prices

The financial statements and related financial data presented herein have been prepared in accordance with GAAP, which requires the measurement of financial position and operating results in terms of historical dollars, without considering changes
in relative purchasing power over time due to inflation.

Unlike most industrial companies, virtually all of the Association's assets and liabilities are monetary in nature. As a result, interest rates generally have a more significant impact on a financial institution's performance than does the effect of
inflation.

Year 2000 Problem

A great deal of information has been disseminated about the global computer crash that may occur in the year 2000. Many computer programs that can only distinguish the final two digits of the year entered (a common programming practice in earlier
years) are expected to read entries for the year 2000 as the year 1900. All of the significant data processing of the Association that could be affected by this problem is provided by a third party service bureau. The service bureau of the Association has
advised the Association that it has resolved any potential problems. However, if the service bureau were to experience any problems, the Association would likely experience significant data processing delays, mistakes, or failures. These delays, mistakes,
or failures could have a material adverse impact on the financial condition and results of operations of the Association.

Risks to the Company if its computer system are not year 2000 compliant include the inability to process customer deposits or checks drawn on the Association, inaccurate interest accruals, and maturity dates of loans and time deposits, and the
inability to update accounts for daily transactions. Other risks to the Company exist if certain of its vendors', suppliers', and customers' computer systems are not Year 2000 compliant. These risks include the inability of the Association to
communicate with its third party service bureau if phone systems are not working, the interruption of business in the event of power outages, the inability of loan customers to comply with repayment terms if their businesses are interrupted, the inability
to make payment for checks drawn on the Association, receive payment for checks deposited by the Association's customers, or invest excess funds if the Federal Home Loan Bank or correspondent banks are not Year 2000 compliant.

The Company's most important mission critical system is the software and hardware responsible for maintaining and processing general ledger, deposits, and loan accounts. The Company's Year 2000 Compliance and Contingency Plans are structured in
accordance with the OTS and the FFIEC guidelines. Remediation and testing efforts relating to the Year 2000 have been completed. The Company has contacted its key vendors, suppliers, and customers to determine their Year 2000 compliance.
Although the Company currently believes that it is Year 2000 compliant, the risk of system failures cannot be eliminated. Also, the Company cannot guarantee the performance of third parties as to which it has material relationships.

Average Balance, Interest, and Average Yields and Rates

The following table sets forth certain information relating to the Company's average interest-earning assets and interest-bearing liabilities and reflects the average yield on assets and the average cost of liabilities for the periods and at the
dates indicated. Such yields and costs are derived by dividing income or expense by the average monthly balance of assets or liabilities, respectively, for the periods indicated.

The table also presents information for the periods indicated and at September 30, 1999 and 1998 with respect to the difference between the weighted average yield earned on interest-earning assets and the weighted average rate paid on
interest-bearing liabilities, or "interest rate spread," which savings institutions have traditionally used as an indicator of profitability. Another indicator of an institution's net interest income is its "net yield on interest-earning assets." which is
its net interest income divided by the average balance of interest-earning assets. Net interest income is affected by the interest rate spread and by the relative amounts of interest-earning assets and interest-bearing liabilities. When interest-earning
assets approximate or exceed interest-bearing liabilities, any positive interest rate spread will generate net interest income.



|                                                                                                | Year Ended September 30,
|----------------------------------------------------------------------------------------------- | ------------------------
|                                                                                                | 1999                    
|                                                                                                | Average                 
|                                                                                                | Balance                 
|                                                                                                | (Dollars in Thousands)  
|Interest-earning assets:                                                                        |                         
|Interest-bearing deposits in other financial institutions                                       | $ 8,213                 
|Investment securities and FHLB stock                                                            | 5,308                   
|Mortgage-backed securities                                                                      | 5,334                   
|Loans receivable                                                                                | 45,183                  
|Total interest-earning assets                                                                   | 64,038                  
|Non-interest-earning assets                                                                     | 1,439                   
|Total assets                                                                                    | $65,477                 
|                                                                                                |                         
|Interest-bearing liabilities                                                                    | $56,595                 
|Non-interest-bearing liabilities                                                                | 525                     
|Total liabilities                                                                               | 57,120                  
|                                                                                                |                         
|Equity                                                                                          | 8,357                   
|Total liabilities and retained earnings                                                         | $65,477                 
|                                                                                                |                         
|Net interest income                                                                             |                         
|Interest rate spread                                                                            |                         
|Net interest margin (net interest income as a percentage
   of average interest-earning assets) |                         
|Average interest-earning assets to average interest-bearing
   liabilities                      |                         



Rate/Volume Analysis

The table below sets forth certain information regarding changes in interest income and interest expense of the Association for the periods indicated. For each category of interest-earning asset and interest-bearing liability, information is
provided on changes attributable to: (i) changes in volume (changes in volume multiplied by prior period rate) and (ii) changes in rates (change in rate multiplied by prior period volume). Changes in rate-volume (changes in rate multiplied by changes in
volume) are allocated proportionately between changes in volume and changes in rates.

|                                                                | Year Ended September 30,
|--------------------------------------------------------------- | ------------------------
|                                                                | 1999 Compared to 1998   
|                                                                | Increase                
|                                                                | (Decrease)              
|                                                                | Due to                  
|                                                                | Rate                    
|                                                                | (In thousands)          
|Interest income attributable to:                                |                         
|Interest-bearing deposits in other
      financial institutions | $ (33)                  
|Investment securities                                           | 21                      
|Mortgage-backed securities                                      | (21)                    
|Loans receivable                                                | (115)                   
|Total interest income                                           | (148)                   
|Interest expense attributable to:                               |                         
|Deposits                                                        | (213)                   
|Increase (decrease) in net interest 
   income                  | $ 65                    



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To Southern Community Bancshares, Inc.:

We have audited the accompanying consolidated statements of financial condition of Southern Community Bancshares, Inc. (a Delaware corporation) AND SUBSIDIARY as of September 30, 1999 and 1998, and the related consolidated statements
of income, stockholders' equity, and cash flows for each of the three years in the period ended September 30, 1999. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Southern Community Bancshares, Inc. and subsidiary as of September 30, 1999, 1998, and 1997
and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1999, in conformity with generally accepted accounting principles.



ARTHUR ANDERSEN LLP





Birmingham, Alabama
October 26, 1999





SOUTHERN COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, 1999 AND 1998



ASSETS



|                                                                                                  | 1999        | 1998       
|------------------------------------------------------------------------------------------------- | ----------- | -----------
|                                                                                                  |             |            
|CASH AND DUE FROM BANKS                                                                           | $ 1,036,184 | $ 1,614,385
|                                                                                                  |             |            
|INTEREST BEARING DEPOSITS IN BANKS                                                                | 3,082,242   | 7,976,978  
|                                                                                                  |             |            
|INVESTMENT SECURITIES AVAILABLE-FOR-SALE, at fair value                                           | 7,650,923   | 2,554,087  
|                                                                                                  |             |            
|MORTGAGE-BACKED SECURITIES AVAILABLE-FOR-SALE, at fair value                                      | 3,692,071   | 6,038,694  
|                                                                                                  |             |            
|INVESTMENT SECURITIES HELD-TO-MATURITY, fair value of $497,023
   and $1,004,116, respectively    | 498,271     | 999,042    
|                                                                                                  |             |            
|MORTGAGE-BACKED SECURITIES HELD-TO-MATURITY, fair value
   of $258,468 and $854,528, respectively | 253,163     | 837,224    
|                                                                                                  |             |            
|LOANS RECEIVABLE, net                                                                             | 44,837,884  | 45,846,372 
|                                                                                                  |             |            
|ACCRUED INTEREST RECEIVABLE                                                                       | 466,096     | 406,034    
|                                                                                                  |             |            
|PREMISES AND EQUIPMENT, net                                                                       | 315,548     | 297,708    
|                                                                                                  |             |            
|INCOME TAXES RECEIVABLE                                                                           | 393,440     | 203,275    
|                                                                                                  |             |            
|OTHER ASSETS                                                                                      | 558,995     | 46,420     
|Total assets                                                                                      | $62,784,817 | $66,820,219

LIABILITIES AND STOCKHOLDERS' EQUITY



|DEPOSITS                                                                                        | $53,904,055 | $55,557,060
|----------------------------------------------------------------------------------------------- | ----------- | -----------
|                                                                                                |             |            
|ACCRUED INTEREST PAYABLE                                                                        | 83,261      | 90,261     
|                                                                                                |             |            
|ACCRUED EXPENSES AND OTHER LIABILITIES                                                          | 145,516     | 72,371     
|Total liabilities                                                                               | 54,132,832  | 55,719,692 
|                                                                                                |             |            
|COMMITMENTS AND CONTINGENCIES                                                                   |             |            
|                                                                                                |             |            
|PREFERRED STOCK, par value $.01, no shares issued, 100,000 shares authorized                    | 0           | 0          
|                                                                                                |             |            
|COMMON STOCK, par value $.01 per share, 3,000,000 shares authorized, 1,137,350
   shares issued | 11,374      | 11,374     
|                                                                                                |             |            
|ADDITIONAL PAID-IN CAPITAL                                                                      | 10,820,832  | 10,807,847 
|                                                                                                |             |            
|RETAINED EARNINGS, substantially restricted                                                     | 3,157,745   | 4,865,649  
|                                                                                                |             |            
|TREASURY STOCK, at cost, 112,136 and 55,868 shares, respectively                                | (1,454,862) | (830,891)  
|                                                                                                |             |            
|UNEARNED COMPENSATION                                                                           | (3,816,655) | (3,771,076)
|                                                                                                |             |            
|UNREALIZED GAIN (LOSS) ON SECURITIES AVAILABLE-FOR-SALE, net of deferred taxes                  | (66,449)    | 17,624     
|Total stockholders' equity                                                                      | 8,651,985   | 11,100,527 
|Total liabilities and stockholders' equity                                                      | $62,784,817 | $66,820,219



The accompanying notes are an integral part of these consolidated statements.





SOUTHERN COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998, AND 1997





|                                                               | 1999       | 1998       | 1997      
|-------------------------------------------------------------- | ---------- | ---------- | ----------
|                                                               |            |            |           
|INTEREST INCOME:                                               |            |            |           
|Interest and fees on loans                                     | $3,817,834 | $3,958,307 | $3,479,134
|Interest and dividends on investment securities                | 324,655    | 413,368    | 730,798   
|Interest on mortgage-backed and related securities             | 294,300    | 381,347    | 475,408   
|Other interest income                                          | 389,810    | 483,187    | 362,505   
|Total interest income                                          | 4,826,599  | 5,236,209  | 5,047,845 
|                                                               |            |            |           
|INTEREST EXPENSE-DEPOSITS                                      | 2,210,554  | 2,426,019  | 2,434,567 
|Net interest income before provision
          for loan losses | 2,616,045  | 2,810,190  | 2,613,278 
|                                                               |            |            |           
|PROVISION FOR LOAN LOSSES                                      | 0          | 0          | 0         
|Net interest income after provision
          for loan losses  | 2,616,045  | 2,810,190  | 2,613,278 
|NONINTEREST INCOME:                                            |            |            |           
|Service charges on deposit accounts                            | 147,018    | 175,677    | 182,225   
|Gain on sale of premises and equipment                         | 0          | 1,313      | 0         
|Other                                                          | 18,092     | 2,807      | 5,224     
|Total non-interest income                                      | 165,110    | 179,797    | 187,449   
|NONINTEREST EXPENSE:                                           |            |            |           
|Compensation and benefits                                      | 1,070,535  | 1,015,113  | 869,414   
|Occupancy and equipment                                        | 132,032    | 173,374    | 171,158   
|SAIF deposit insurance                                         | 33,133     | 35,565     | 50,310    
|Data processing                                                | 152,300    | 140,541    | 119,329   
|Professional fees                                              | 53,843     | 54,854     | 55,564    
|Other                                                          | 365,852    | 281,630    | 306,388   
|Total non-interest expense                                     | 1,807,695  | 1,701,077  | 1,572,163 
|Income before income taxes                                     | 973,460    | 1,288,910  | 1,228,564 
|                                                               |            |            |           
|INCOME TAX EXPENSE                                             | 391,000    | 465,510    | 436,723   
|Net income                                                     | $ 582,460  | $ 823,400  | $ 791,841 
|                                                               |            |            |           
|BASIC earnings per share                                       | $.70       | $.91       | $.66      
|DILUTED EARNINGS PER SHARE                                     | $.67       | $.87       | $.66      
|AVERAGE SHARES OUTSTANDING-BASIC                               | 828,129    | 909,123    | 975,727   
|AVERAGE SHARES OUTSTANDING-DILUTED                             | 867,789    | 946,128    | 975,727   



The accompanying notes are an integral part of these consolidated statements.



SOUTHERN COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998, AND 1997



|                                                                                      | Common
Stock | Additional
Paid-In
Capital | Retained
Earnings | Unearned
Compensation | Treasury
Stock | Unrealized
Gain (Loss) on
Securities Available
for Sale, Net of
Deferred Taxes | Total       | Non- Owner
Changes in
Equity
|------------------------------------------------------------------------------------- | ------------ | -------------------------- | ----------------- | --------------------- | -------------- | ------------------------------------------------------------------------------ | ----------- | ----------------------------
|                                                                                      |              |                            |                   |                       |                |                                                                                |             |                             
|BALANCE, September 30, 1996                                                           | $ 0          | $ 0                        | $5,871,509        | $ 0                   | $ 0            | $(186,728)                                                                     | $ 5,684,781 |                             
|                                                                                      |              |                            |                   |                       |                |                                                                                |             |                             
|Comprehensive income:                                                                 |              |                            |                   |                       |                |                                                                                |             |                             
|Net income                                                                            | 0            | 0                          | 791,841           | 0                     | 0              | 0                                                                              | 791,841     | $791,841                    
|Change in unrealized gain (loss)
       on securities available-for-sale,net          | 0            | 0                          | 0                 | 0                     | 0              | 150,423                                                                        | 150,423     | 150,423                     
|                                                                                      |              |                            |                   |                       |                |                                                                                |             | $942,264                    
|Issuance of common stock                                                              | 11,374       | 10,752,273                 | 0                 | (909,880)             | 0              | 0                                                                              | 9,853,767   |                             
|Amortization of unearned
      compensation                                           | 0            | 34,416                     | 0                 | 60,824                | 0              | 0                                                                              | 95,240      |                             
|Repurchase of stock for stock plan 
      trusts                                      | 0            | 0                          | 0                 | (1,878,680)           | 0              | 0                                                                              | (1,878,680) |                             
|Contribution to plan trust                                                            | 0            | 0                          | 0                 | (9,157)               | 0              | 0                                                                              | (9,157)     |                             
|Dividends declared ($.225 per 
      share)                                           | 0            | 0                          | (218,098)         | 0                     | 0              | 0                                                                              | (218,098)   |                             
|BALANCE, September 30, 1997                                                           | 11,374       | 10,786,689                 | 6,445,252         | (2,736,893)           | 0              | (36,305)                                                                       | 14,470,117  |                             
|                                                                                      |              |                            |                   |                       |                |                                                                                |             |                             
|Comprehensive income:                                                                 |              |                            |                   |                       |                |                                                                                |             |                             
|Net income                                                                            | 0            | 0                          | 823,400           | 0                     | 0              | 0                                                                              | 823,400     | $823,400                    
|Change in unrealized gain (loss)
       on securities available-for-sale, 
       net | 0            | 0                          | 0                 | 0                     | 0              | 53,929                                                                         | 53,929      | 53,929                      
|                                                                                      |              |                            |                   |                       |                |                                                                                |             | $877,329                    
|Amortization of unearned 
     compensation                                           | 0            | 21,158                     | 0                 | 225,213               | 0              | 0                                                                              | 246,371     |                             
|Repurchase of stock for stock plan
      trusts                                       | 0            | 0                          | 0                 | (563,120)             | 0              | 0                                                                              | (563,120)   |                             
|Purchase of treasury stock                                                            | 0            | 0                          | 0                 | 0                     | (830,891)      | 0                                                                              | (830,891)   |                             
|Contribution to plan trust                                                            | 0            | 0                          | 0                 | (696,276)             | 0              | 0                                                                              | (696,276)   |                             
|Dividends declared ($2.725 per 
     share)                                           | 0            | 0                          | (2,403,003)       | 0                     | 0              | 0                                                                              | (2,403,003) |                             
|BALANCE, September 30, 1998                                                           | 11,374       | 10,807,847                 | 4,865,649         | (3,771,076)           | (830,891)      | 17,624                                                                         | 11,100,527  |                             
|                                                                                      |              |                            |                   |                       |                |                                                                                |             |                             
|Comprehensive income:                                                                 |              |                            |                   |                       |                |                                                                                |             |                             
|Net income                                                                            | 0            | 0                          | 582,460           | 0                     | 0              | 0                                                                              | 582,460     | $582,460                    
|Change in unrealized gain (loss) 
     on securities available-for-sale, net          | 0            | 0                          | 0                 | 0                     | 0              | (84,073)                                                                       | (84,073)    | (84,073)                    
|                                                                                      |              |                            |                   |                       |                |                                                                                |             | $498,387                    
|Amortization of unearned 
     compensation                                           | 0            | 12,985                     | 0                 | 241,334               | 0              | 0                                                                              | 254,319     |                             
|Purchase of treasury stock                                                            | 0            | 0                          | 0                 | 0                     | (623,971)      | 0                                                                              | (623,971)   |                             
|Contribution to plan trust                                                            | 0            | 0                          | 0                 | (286,913)             | 0              | 0                                                                              | (286,913)   |                             
|Dividends declared ($2.7475 per 
     share)                                          | 0            | 0                          | (2,290,364)       | 0                     | 0              | 0                                                                              | (2,290,364) |                             
|BALANCE, September 30, 1999                                                           | $11,374      | $10,820,832                | $3,157,745        | $(3,816,655)          | $(1,454,862)   | $ (66,449)                                                                     | $8,651,985  |                             



The accompanying notes are an integral part of these consolidated statements.



SOUTHERN COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998, AND 1997



|                                                                                                  | 1999        | 1998        | 1997       
|------------------------------------------------------------------------------------------------- | ----------- | ----------- | -----------
|                                                                                                  |             |             |            
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                             |             |             |            
|Net income                                                                                        | $ 582,460   | $ 823,400   | $ 791,841  
|Adjustments to reconcile net income to net cash provided by operating
     activities:            |             |             |            
|Depreciation                                                                                      | 47,100      | 84,746      | 82,388     
|Amortization and accretion on securities, net                                                     | 37,681      | 39,634      | (35,252)   
|Amortization of unearned ESOP                                                                     | 254,319     | 246,371     | 95,240     
|Amortization of net deferred loan origination fees and costs                                      | (56,735)    | (70,023)    | (47,407)   
|Provision (benefit) for deferred income taxes                                                     | (29,430)    | (57,499)    | 122,904    
|Gain on sale of premises and equipment, net                                                       | 0           | (1,313)     | 0          
|Change in assets and liabilities:                                                                 |             |             |            
|Increase (decrease) in income taxes receivable/payable                                            | (112,639)   | 7,781       | (81,822)   
|Increase (decrease) in accrued interest receivable                                                | (60,062)    | 63,419      | (37,443)   
|Decrease (increase) in other assets                                                               | (477,526)   | 230,184     | 363,435    
|Decrease in accrued interest payable                                                              | (7,000)     | (12,043)    | (6,461)    
|Increase (decrease) in accrued expenses and other liabilities                                     | 4,995       | (280,250)   | (576,802)  
|Total adjustments                                                                                 | (399,297)   | 251,007     | (121,220)  
|Net cash provided by operating activities                                                         | 183,163     | 1,074,407   | 670,621    
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                             |             |             |            
|Proceeds from maturities/calls of investment securities available-for-sale                        | 2,570,650   | 4,950,000   | 3,620,636  
|Proceeds from maturities/calls of investment securities held-to-maturity                          | 500,000     | 500,000     | 2,760,000  
|Purchases of investment securities available-for-sale                                             | (7,717,320) | 0           | (5,272,915)
|Net loan repayments (originations)                                                                | 1,003,475   | (2,777,474) | (3,350,673)
|Proceeds from maturities of mortgage-backed securities available-for-sale                         | 2,256,160   | 1,647,192   | 1,072,607  
|Proceeds from maturities of mortgage-backed securities held-to-maturity                           | 581,978     | 1,183,680   | 474,148    
|Purchases of mortgage-backed securities available-for-sale                                        | 0           | (2,141,930) | (500,825)  
|Capital expenditures                                                                              | (64,940)    | (35,007)    | (24,674)   
|Proceeds from sale of fixed assets, net                                                           | 0           | 199,430     | 0          
|Net cash provided by (used in) investing activities                                               | (869,997)   | 3,525,891   | (1,221,696)
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                             |             |             |            
|Decrease in deposits                                                                              | (1,653,005) | (317,608)   | (1,263,034)
|Net proceeds from public stock offering                                                           | 0           | 0           | 9,853,767  
|Repurchase of stock for stock plan trusts                                                         | 0           | (563,120)   | (1,878,680)
|Contributions to plan trusts                                                                      | (286,913)   | (696,276)   | (9,157)    
|Payment of dividends                                                                              | (2,222,214) | (2,488,304) | (132,797)  
|Purchase of treasury stock                                                                        | (623,971)   | (830,891)   | 0          
|Net cash provided by (used in) financing activities                                               | (4,786,103) | (4,896,199) | 6,570,099  
|                                                                                                  |             |             |            
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                              | (5,472,937) | (295,901)   | 6,019,024  
|                                                                                                  |             |             |            
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                                    | 9,591,363   | 9,887,264   | 3,868,240  
|CASH AND CASH EQUIVALENTS AT END OF YEAR                                                          | $4,118,426  | $9,591,363  | $9,887,264 
|                                                                                                  |             |             |            
|SUPPLEMENTAL DISCLOSURES:                                                                         |             |             |            
|Cash paid for:                                                                                    |             |             |            
|Interest on deposits                                                                              | $2,217,554  | $2,438,062  | $2,341,955 
|Income taxes                                                                                      | 480,000     | 510,979     | 339,991    
|Transfers from loans to real estate acquired through foreclosure                                  | 61,748      | 7,306       | 0          
|                                                                                                  |             |             |            
|CHANGE IN UNREALIZED NET GAIN (LOSS) ON SECURITIES
     AVAILABLE-FOR-SALE, net of deferred taxes | $ (84,073)  | $ 53,929    | $ 150,423  



The accompanying notes are an integral part of these consolidated statements.





SOUTHERN COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998





1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization, Nature of Operations, and Principles of Consolidation

Southern Community Bancshares, Inc. (the "Company") was incorporated in the State of Delaware in July 1996, for the purpose of becoming a holding company to own all of the outstanding capital stock of First Federal Savings and Loan Association
of Cullman (the "Association") upon the Association's conversion from a federally chartered mutual savings association to a federally chartered stock savings association (the "Conversion"). The accounting for the conversion was in a manner similar to that
utilized in a pooling of interests.

The Association received its federal charter in 1905 and was converted to a federally chartered stock organization on December 23, 1996 through the sale of all of its common stock to the Company. The Association is primarily engaged in the
business of obtaining funds in the form of various savings deposit products and investing those funds in mortgage loans or single family real estate and, to a lesser extent, in consumer loans. The Association operates from its two offices in the primary
market area of Cullman County, Alabama.

The accompanying consolidated financial statements include the accounts of the Company and the Association. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The accounting principles and reporting policies of the Company, and the methods of applying these principles, conform with generally accepted accounting principles ("GAAP") and with general practices within the thrift industry. In preparing the
financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ
significantly from those estimates.

Material estimates that are particularly susceptible to significant changes in the near-term relate to the determination of the allowance for loan losses and the valuation of real estate acquired in connection with foreclosures or in satisfaction of
loans. In connection with the determination of the allowances for loan losses and real estate owned, management obtains independent appraisals for significant properties, evaluates the overall portfolio characteristics and delinquencies and monitors
economic conditions.

A substantial portion of the Company's loans are secured by real estate in its primary market area. Accordingly, the ultimate collectibility of a substantial portion of the Company's loan portfolio and the recovery of a portion of the carrying amount
of foreclosed real estate are susceptible to changes in economic conditions in the Company's primary market areas.

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, interest-bearing deposits in banks, and federal funds sold. Federal funds are generally purchased and sold for one-day periods.

Investment and Mortgage-Backed Securities

Securities classified as held-to-maturity are stated at cost, adjusted for amortization of premiums and accretion of discounts on the constant effective yield method. Management has the positive intent and the Company has the ability to hold these
securities to maturity. Available-for-sale securities are carried at fair value, except for FHLB required stock holdings which are carried at cost, and include all equity securities and debt not classified as held-to-maturity or trading. Trading
securities are those held principally for the purpose of selling in the near future and are carried at fair value. The Company does not currently have any trading securities.

Unrealized gains and losses for trading securities are included in earnings. Unrealized gains and losses for available-for-sale securities are excluded from earnings and reported, net of any income tax effect, as a separate component of retained
earnings. Realized gains and losses for securities classified as either available-for-sale or held-to-maturity are reported in earnings based on the adjusted cost of the specific security sold.

Loans Receivable

Loans receivable are stated at their unpaid balances, less the allowance for loan losses and net deferred loan origination fees and discounts.

The Company ceases accrual of interest on substantially all loans when payment on a loan is in excess of 90 days past due. An allowance is established by a charge to interest income equal to all interest previously accrued but unpaid. Interest income
is subsequently recognized only to the extent that cash payments are received until, in management's judgment, the borrower's ability to make periodic interest and principal payments is in accordance with the terms of the loan agreement; in which case the
loan is returned to accrual status.

The allowance for loan losses is increased by charges to income and decreased by loan charge-offs, net of recoveries. The allowance for loan losses is maintained at a level which management considers adequate to absorb losses inherent in the loan
portfolio at each reporting date. Management's estimation of this amount includes a review of all loans for which full collectibility is not reasonably assured and considers, among other factors, prior years' loss experience, economic conditions,
distribution of portfolio loans by risk class, and the estimated value of the underlying collateral. Though management believes the allowance for loan losses to be adequate, ultimate losses may vary from their estimates. However, estimates are reviewed
periodically, and as adjustments become necessary, they are reported in earnings in periods in which they become known. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance
for losses on loans and the carrying value of foreclosed real estate. Such agencies may require the Company to recognize adjustments to the allowances based on their judgments about information available to them at the time of their examinations.

Losses on individually identified impaired loans are measured based on the present value of expected future cash flows discounted at each loan's original effective interest rate. As a practical expedient, impairment may be measured based on the loan's
observable market price or the fair value of the collateral if the loan is collateral dependent. When the fair value of the loan is less than the recorded investment in the loan, the impairment is recorded through a provision added to the allowance for
loan losses. Because the Company's loan portfolio primarily consists of one-to-four family residential mortgages and consumer installment loans that are evaluated collectively for impairment, the Company had no loans designated as impaired under the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 114 at September 30, 1999 or 1998.

Loan Origination Fees and Related Costs

Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment of the yield of the related loan over the remaining period to contractual maturity.

Foreclosed Real Estate

Real estate acquired through, or in lieu of, loan foreclosure is initially recorded at fair value at the date of foreclosure, establishing a new cost basis. Costs to maintain or hold the property are expensed and amounts incurred to improve the
property, to the extent that fair value is not exceeded, are capitalized. Valuations are periodically performed by management, and an allowance for losses is established by a charge to income if the carrying value of a property exceeds its fair value less
the estimated costs to sell.

Premises and Equipment

Land is carried at cost. Buildings, leasehold improvements, and furniture, fixtures and equipment are carried at cost, less accumulated depreciation and amortization. Depreciation is provided using the straight-line and accelerated methods over the
estimated useful lives of the assets. The cost of leasehold improvements is amortized using the straight-line method over the life of the lease. The estimated useful lives of furniture, fixtures, and equipment range from 5 to 15 years and for building and
improvements range from 5 to 33 years.

Income Taxes

The Company accounts for income taxes through the use of the asset and liability method. Under the asset and liability method, deferred taxes are recognized for the tax consequences of temporary differences by applying enacted statutory rates
applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred taxes of a change in tax rates would be recognized in income in the period that
includes the enactment date.

Treasury Stock

Treasury stock purchases and sales are accounted for using the cost method.

Pending Accounting Pronouncements

Statement of Position 98-1, Accounting for the Cost of Computer Software Developed or Obtained for Internal Use, issued by the AICPA, requires capitalization of external direct costs of materials and services; payroll and
payroll-related costs for employees directly associated; and interest costs during development of computer software for internal use (planning and preliminary costs should be expensed). Also, capitalized costs of computer software developed or obtained
for internal use should be amortized on a straight-line basis unless another systematic and rational basis is more representative of the software's use. This statement was effective for financial statements for fiscal years which began after December 
15, 1998 and did not have a material effect on the Company's consolidated financial statements.

During 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities. This Statement replaces existing
pronouncements and practices with a single, integrated accounting framework for derivatives and hedging activities requiring companies to formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. During
1999, the FASB issued SFAS No. 137, which deferred the effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000. Management believes there will be no material effect on the financial statements from the adoption of this
pronouncement, and will continue to evaluate the impact and defer implementations as the standard allows.

Financial Statement Reclassification

The financial statements for prior years have been reclassified in order to conform with the 1999 financial statement presentation. The reclassification did not change total assets or net income in the prior year.

2.   EARNINGS PER SHARE

In 1998, the Company adopted SFAS No. 128, Earnings Per Share, effective December 15, 1997. Basic earnings per share were computed by dividing net income by the weighted average number of shares of common stock outstanding during
the years ended September 30, 1999 and 1998. Common stock outstanding consists of issued shares less unallocated Employee Stock Option Plan ("ESOP") shares, and shares owned by the Management Retention Plan ("MRP") and Stock Option Plan ("SOP")
Trust. Earnings per share for the period from December 23, 1996, the date of Conversion, to September 30, 1997, have been computed based on the earnings during that period and on the weighted average number of shares of common stock and common
stock equivalents outstanding during that period. The weighted average number of shares used for the period from December 23, 1996 through September 30, 1997, was 975,727. Diluted earnings per share for this period was the same as basic earnings
per share because there were no dilutive securities outstanding during the period.

The following table represents the earnings per share calculations for the years ended September 30, 1999, 1998, and 1997:



|                                                                             | Income   | Shares   | Per Share
Amount
|---------------------------------------------------------------------------- | -------- | -------- | ----------------
|                                                                             |          |          |                 
|1999:                                                                        |          |          |                 
|Net income                                                                   | $582,460 |          |                 
|Basic earnings per share:                                                    |          |          |                 
|Income available to common shareholders                                      | 582,460  | 828,129  | $.70            
|Dilutive securities                                                          |          | 39,660   |                 
|Diluted earnings per share                                                   | $582,460 | 867,789  | $.67            
|                                                                             |          |          |                 
|1998:                                                                        |          |          |                 
|Net income                                                                   | $823,400 |          |                 
|Basic earnings per share:                                                    |          |          |                 
|Income available to common shareholders                                      | 823,400  | 909,123  | $.91            
|Dilutive securities                                                          |          | 37,005   |                 
|Diluted earnings per share                                                   | $823,400 | 946,128  | $.87            
|                                                                             |          |          |                 
|1997:                                                                        |          |          |                 
|Net income for the period December 23, 1996 to September 
          30, 1997 | $643,652 |          |                 
|Basic earnings per share:                                                    |          |          |                 
|Income available to common shareholders                                      | 643,652  | 975,727  | $.66            
|Dilutive securities                                                          |          |          |                 
|Diluted earnings per share                                                   | $643,652 | $975,727 | $.66            
|                                                                             |          |          |                 



3.	INVESTMENT AND MORTGAGE-BACKED SECURITIES

Details of securities are as follows:



|                                                | September 30, 1999
|----------------------------------------------- | ------------------
|                                                | Amortized
Cost    
|                                                |                   
|Available-for-sale:                             |                   
|U.S. Treasury and federal agencies              | $ 7,267,357       
|Equity securities                               | 100,000           
|Federal Home Loan Bank stock                    | 350,400           
|Investment securities                           | 7,717,757         
|Mortgage-backed securities                      | 3,730,711         
|Total                                           | $11,448,468       
|                                                |                   
|Held-to-maturity:                               |                   
|U.S. Treasury and federal agencies              | $ 498,271         
|Investment securities                           | 498,271           
|Mortgage-backed securities                      | 253,163           
|Total                                           | $ 751,434         
|                                                |                   
|                                                | September 30, 1998
|                                                | Amortized
Cost    
|                                                |                   
|Available-for-sale:                             |                   
|U.S. Treasury and federal agencies              | $1,977,968        
|Equity securities                               | 140,000           
|Federal Home Loan Bank stock                    | 429,800           
|Investment securities                           | 2,547,768         
|Mortgage-backed securities                      | 6,018,319         
|Total                                           | $8,566,087        
|                                                |                   
|Held-to-maturity:                               |                   
|U.S. Treasury and federal agencies              | $ 849,042         
|Obligations of state and political subdivisions | 150,000           
|Investment securities                           | 999,042           
|Mortgage-backed securities                      | 837,224           
|Total                                           | $1,836,266        



The amortized cost and estimated fair value of securities, by contractual maturity, are shown below. Expected maturities will differ from contractual maturity because borrowers may have the right to call or prepay obligations:



|                                       | September 30, 1999
|-------------------------------------- | ------------------
|                                       | Available-for-Sale
|                                       | Amortized
Cost    
|                                       |                   
|Due in one year or less                | $ 0               
|Due after one year through five years  | 6,852,357         
|Due after five years through ten years | 500,000           
|Due after ten years                    | 365,400           
|                                       | 7,717,757         
|Mortgage-backed securities             | 3,730,711         
|Total                                  | $11,448,468       



All mortgage-backed securities were issued by either U.S. government agencies (Government National Mortgage Association) or government-sponsored enterprises (Federal Home Loan Mortgage Corporation or Freddie Mac).

During the year ended September 30, 1998, the Company sold mutual funds with a book and fair value of $1,870,636 with no gain or loss. There were no other sales of securities during the years ended September 30, 1999, 1998, and 1997.

4.   LOANS RECEIVABLE, NET

Loans receivable are summarized as follows:



|                                      | September 30,
1999 | September 30,
1998
|------------------------------------- | ------------------ | ------------------
|Mortgage loans:                       |                    |                   
|Principal balances:                   |                    |                   
|Secured by 1-4 family residences      | $26,821,223        | $27,972,399       
|Secured by nonresidential properties  | 8,316,234          | 8,384,027         
|Secured by multifamily properties     | 3,450,332          | 2,514,375         
|Construction loans                    | 1,300,000          | 1,357,500         
|                                      | 39,887,789         | 40,228,301        
|Less:                                 |                    |                   
|Undisbursed portion of mortgage loans | (658,135)          | (691,229)         
|Net deferred loan origination fees    | (134,872)          | (161,971)         
|Total mortgage loans                  | 39,094,782         | 39,375,101        
|Commercial loans                      | 2,837,510          | 3,658,012         
|Consumer loans:                       |                    |                   
|Principal balances:                   |                    |                   
|Loans secured by automobiles          | 1,505,777          | 1,477,235         
|Loans secured by savings accounts     | 407,517            | 518,366           
|Other                                 | 1,772,822          | 1,607,372         
|Total consumer loans                  | 3,686,116          | 3,602,973         
|Total loans                           | 45,618,408         | 46,636,086        
|Less allowance for loan losses        | 780,524            | 789,714           
|Loans receivable, net                 | $44,837,884        | $45,846,372       



In the ordinary course of business, the Company makes loans to officers, directors, employees, and other related parties of the Company. Management believes that these loans are made on substantially the same terms as those prevailing for comparable
transactions with others and that they do not involve more than normal risk of collectibility nor do they present other unfavorable features. The amounts of such related party loans and commitments at September 30, 1999 and 1998 were $644,000 and
$1,020,000, respectively. During the year ended September 30, 1999, new loans totaled $172,000 and repayments were $548,000.

Activity in the allowance for loan losses is summarized as follows:



|                             | 1999     | 1998     | 1997    
|---------------------------- | -------- | -------- | --------
|                             |          |          |         
|Balance at beginning of year | $789,714 | $805,964 | $802,034
|Provision charged to income  | 0        | 0        | 0       
|Charge-offs                  | (22,577) | (23,917) | (55,878)
|Recoveries                   | 13,387   | 7,667    | 59,808  
|Balance at end of year       | $780,524 | $789,714 | $805,964



The Company had loans on nonaccrual status of approximately $140,000, $103,000, and $265,000 at September 30, 1999,1998, and 1997, respectively. Interest income foregone on these nonaccrual loans was not significant for fiscal years 1999, 1998,
and 1997.



5.  LOAN SERVICING

The Company originates and services mortgage loans for Freddie Mac. Mortgage loans serviced for Freddie Mac are not included in the accompanying statements of financial condition. Unpaid principal balances of serviced loans totaled $6,290,739 at
September 30, 1999 and $4,202,781 at September 30, 1998. The serviced loans were sold without recourse.

6.  ACCRUED INTEREST RECEIVABLE

Accrued interest receivable at September 30 is summarized as follows:



|                           | 1999     | 1998    
|-------------------------- | -------- | --------
|                           |          |         
|Investment securities      | $108,103 | $ 62,816
|Mortgage-backed securities | 22,104   | 36,206  
|Loans receivable           | 335,889  | 307,012 
|Total                      | $466,096 | $406,034



7.   PREMISES AND EQUIPMENT

A summary of premises and equipment at September 30 is as follows:



|                                               | 1999      | 1998     
|---------------------------------------------- | --------- | ---------
|                                               |           |          
|Land                                           | $ 62,500  | $ 62,500 
|Buildings and improvements                     | 567,700   | 567,700  
|Leasehold improvements                         | 30,166    | 30,166   
|Furniture, fixtures, and equipment             | 815,789   | 771,374  
|                                               | 1,476,155 | 1,431,740
|Less accumulated depreciation and amortization | 1,160,607 | 1,134,032
|Net premises and equipment                     | $ 315,548 | $ 297,708



8.  DEPOSITS

Deposits are summarized as follows:



|                                                                                                                   | September 30, 1999 | September 30, 1998
|------------------------------------------------------------------------------------------------------------------ | ------------------ | ------------------
|                                                                                                                   | Amount             | Percent           
|                                                                                                                   |                    |                   
|Demand and NOW accounts, including 
     noninterest-bearing deposits of
     $94,349 in 1999 and $104,527 in 1998 | $ 9,983,510        | 18.5%             
|Money market accounts                                                                                              | 892,280            | 1.6               
|Passbook savings                                                                                                   | 8,940,193          | 16.6              
|                                                                                                                   | 19,815,983         | 36.7              
|Certificates of deposit, rates from 
     3.26% to 7.5% in 1999                                                    | 34,088,072         | 63.3              
|Total                                                                                                              | $53,904,055        | 100.0%            



The aggregate amounts of jumbo certificates of deposit with a minimum denomination of $100,000 were $7,661,021 at September 30, 1999 and $7,150,843 at September 30, 1998. Deposits in excess of $100,000 are not federally insured.



Scheduled maturities of certificates of deposit are as follows:



|Years ending
September 30 |  | Amount     
|------------------------- |  | -----------
|                          |  |            
|2000                      |  | $26,406,787
|2001                      |  | 5,942,179  
|2002                      |  | 792,505    
|2003                      |  | 626,439    
|2004                      |  | 320,162    
|                          |  | $34,088,072



Interest expense on deposits at September 30 are summarized as follows:



|                        | 1999       | 1998       | 1997      
|----------------------- | ---------- | ---------- | ----------
|                        |            |            |           
|NOW accounts            | $ 226,866  | $ 252,214  | $ 250,614 
|Money market accounts   | 46,205     | 55,839     | 58,778    
|Passbook savings        | 175,965    | 216,857    | 250,510   
|Certificates of deposit | 1,765,486  | 1,903,411  | 1,877,771 
|Withdrawal penalties    | (3,968)    | (2,302)    | (3,106)   
|Total                   | $2,210,554 | $2,426,019 | $2,434,567



The Company has pledged U.S. government and government agency obligations totaling $1,235,000 at September 30, 1999 and 1998, as collateral against certain large deposits.

9.  INCOME TAXES

The provisions for income taxes for the years ended September 30 are as follows:



|          | 1999     | 1998     | 1997    
|--------- | -------- | -------- | --------
|Current:  |          |          |         
|Federal   | $373,646 | $431,664 | $260,611
|State     | 46,784   | 91,345   | 53,208  
|          | 420,430  | 523,009  | 313,819 
|Deferred: |          |          |         
|Federal   | (25,609) | (47,805) | 104,083 
|State     | (3,821)  | (9,694)  | 18,821  
|          | (29,430) | (57,499) | 122,904 
|Total     | $391,000 | $465,510 | $436,723
|          |          |          |         



The differences between the provision for income taxes and the amount computed by applying the statutory federal income tax rate of 34% to income before income taxes for the years ended September 30 were as follows:



|                                                               | 1999     | 1998     | 1997    
|-------------------------------------------------------------- | -------- | -------- | --------
|                                                               |          |          |         
|Expected income tax expense at
     statutory federal tax rate | $330,976 | $438,229 | $417,712
|Increase (decrease) resulting from:                            |          |          |         
|State income tax, net of federal benefit                       | 28,309   | 53,890   | 47,539  
|Tax-exempt interest income                                     | (12,549) | (23,302) | (41,063)
|Other, net                                                     | 44,264   | (3,307)  | 12,535  
|                                                               | $391,000 | $465,510 | $436,723
|                                                               |          |          |         
|Effective rate                                                 | 40%      | 36%      | 36%     



Temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities at September 30 that give rise to significant portions of the net deferred tax asset relate to the following:



|                                                                         | 1999     | 1998     
|------------------------------------------------------------------------ | -------- | ---------
|                                                                         |          |          
|Deferred loan fees, net                                                  | $ 0      | $ 4,167  
|Allowance for loan losses for financial reporting                        | 288,794  | 296,753  
|Unrealized loss on securities available for sale                         | 39,025   | 0        
|Other                                                                    | 78,131   | 53,007   
|Deferred tax asset                                                       | 405,950  | 353,927  
|Allowance for loan losses for the tax reserve in
    excess of base year | (35,378) | (42,546) 
|Depreciation                                                             | (10,034) | (15,091) 
|Unrealized gain on securities available for sale                         | 0        | (9,070)  
|Other                                                                    | (31,211) | (35,419) 
|Deferred tax liability                                                   | (76,623) | (102,126)
|Net deferred tax asset                                                   | $329,327 | $251,801 



Thrift institutions, in determining taxable income, have historically been allowed special bad debt deductions based on specified experience formulae or on a percentage of taxable income before such deductions. On August 2, 1996, Congress passed
the Small Business Job Protection Act that repealed the tax bad debt reserve method for thrifts effective for taxable years which began after December 31, 1996. As a result, thrifts must recapture into taxable income the amount of their post-1987 tax
bad debt reserves over a six-year period beginning after 1995. The Association is expected to recapture approximately $93,000; $35,000 tax effected, of its tax bad debt reserves into taxable income over the remaining two-year period as a result of this
new law. The recapture has no effect on the Association's financial statements because the related tax expense has already been accrued.

The portion of a thrift's tax bad debt reserve that is not recaptured under this new law is only subject to recapture at a later date under similar circumstances. These include stock repurchases redemptions by the thrift or if the thrift converts to a
type of institution (such as a credit union) that is not considered a bank for tax purposes. However, no further recapture would be required if the thrift converted to a commercial bank charter or was acquired by a bank. The Association does not
anticipate engaging in any transactions at this time that would require the recapture of its remaining tax bad debt reserves.

10. REGULATORY MATTERS

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

Quantitative measures established by regulation to ensure capital adequacy require the Association to maintain minimum amounts and ratios (set forth in the table which follows) of total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of September 30, 1999 and 1998, the Association meets all capital adequacy requirements to which it is subject.

As of September 30, 1999 and 1998, the most recent notification from the regulatory authorities categorized the Association as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the
Association must maintain minimum total risk-based, Tier 1 risk-based, Tier 1 leverage ratios as set forth in the table which follows.

Actual capital amounts and ratios are presented in the table below for the Association:

|                                                 | Actual                 | For Capital
Adequacy Purposes | To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
|------------------------------------------------ | ---------------------- | ----------------------------- | ----------------------------------------------------------------
|                                                 | Amount                 | Ratio                         | Amount                                                          
|                                                 | (Dollars in thousands)
|                                                 |                        |                               |                                                                 
|September 30, 1999:                              |                        |                               |                                                                 
|Total capital (to risk weighted assets)          | $ 8,356                | 22.3%                         | $2,992                                                          
|Tier 1 (core) capital (to risk weighted assets)  | 7,886                  | 21.1                          | N/A                                                             
|Tier 1 (core capital (to adjusted total assets)  | 7,886                  | 12.6                          | 1,872                                                           
|Tangible capital (to adjusted total assets)      | 7,886                  | 12.6                          | 936                                                             
|                                                 |                        |                               |                                                                 
|September 30, 1998:                              |                        |                               |                                                                 
|Total capital (to risk weighted assets)          | $11,288                | 29.5%                         | $3,064                                                          
|Tier 1 (core) capital (to risk weighted assets)  | 10,809                 | 28.2                          | N/A                                                             
|Tier 1 (core) capital (to adjusted total assets) | 10,809                 | 15.8                          | 2,048                                                           
|Tangible capital (to adjusted total assets)      | 10,809                 | 15.8                          | 1,024                                                           



The following table is a reconciliation of the Association's stockholder's equity to tangible, Tier 1, and risk-based capital as required by the OTS:



|                                                                     | 1999           | 1998   
|-------------------------------------------------------------------- | -------------- | -------
|                                                                     | (In thousands)
|                                                                     |                |        
|Stockholder's equity                                                 | $ 7,820        | $10,827
|Net unrealized loss (gain) on debt securities
    available for sale | 66             | (18)   
|Tangible and Tier 1 capital                                          | 7,886          | 10,809 
|Allowance for loan losses                                            | 470            | 479    
|Total risk-based capital                                             | $ 8,356        | $11,288
|                                                                     |                |        
|Total assets                                                         | $62,322        | $67,285
|Adjusted total assets                                                | 62,388         | 67,267 
|Total risk weighted assets                                           | 37,397         | 38,297 



Pursuant to OTS regulations, an institution that exceeds fully phased-in capital requirements before and after a proposed capital distribution and has not been advised by the OTS that it is in need of more than the normal supervision can, after prior
notice but without the approval of the OTS, make capital distributions during a calendar year equal to the greater of (i) 100% of its net income to date during the calendar year plus the amount that would reduce by one-half its "surplus capital ratio"
(the excess capital over its fully phased-in capital requirements) at the beginning of the calendar year, or (ii) 75% of its net income over the most recent four-quarter period. Any additional capital distributions require prior regulatory approval.

The Company's principal source of funds for dividend payments is dividends from the Association. Certain restrictions exist regarding the ability of the Association to pay dividends to the Company. At September 30, 1999, dividend payments by the
Association were subject to regulatory approval.

11. COMMITMENTS AND CONTINGENCIES

Lease Commitment

The Association leases property utilized as a branch office under a long-term lease expiring March 31, 2000, at an annual rental of $15,409 plus taxes and maintenance. The Association has three 5-year options to renew with rentals adjusted to
the consumer price index. Rent expense under this lease totaled $15,409 for the year ended September 30, 1999. Remaining commitments under the lease agreement totals $7,705 during fiscal year 2000.

Financial Instruments With Off-Balance-Sheet Risk

The Association does not engage in transactions involving options, standby letters of credit, financial guarantees, interest-rate swaps, and forward and future contracts. Further, the Association does not routinely issue loan commitments, other
than undisbursed portions of construction loans, and had none outstanding at September 30, 1999 and 1998.

Significant Group Concentrations of Credit Risk

The majority of the Association's business activity is with customers located in Cullman County and surrounding areas. While this area is heavily involved in agribusiness activities, there is significant diversified industry with no heavy
concentration in any one industry.

Litigation

The Company is a defendant in certain claims and legal actions arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, the ultimate disposition of these matters is not expected to have a
material adverse effect on the financial position of the Company.

12. EMPLOYEE RETIREMENT AND SAVINGS PLANS

Employee Stock Ownership Plan (ESOP")

In connection with the Conversion, the Association established an ESOP for eligible employees. The ESOP purchased 90,988 shares of the Company's common stock with the proceeds of a $909,800 note payable from the Association and secured by the
Common Stock owned by the ESOP. Principal payments under the note are due in equal and annual installments through 2006. Impact of this financing is eliminated in the consolidated financial statement presentation.

Expense related to the ESOP was approximately $104,000, $160,000, and $61,000 for 1999, 1998, and 1997, respectively. Unearned compensation related to the ESOP was approximately $1 million and $1.2 million at September 30, 1999 and 1998,
respectively, and is shown as a reduction of stockholders' equity in the accompanying consolidated statements of financial condition. Unearned compensation is amortized into compensation expense based on employee services rendered in relation to shares
which are committed to be released based on the fair value of shares. At September 30, 1999 and 1998, the ESOP Trust held approximately 73,000 and 82,000 unallocated shares, respectively.

Management Recognition Plan ("MRP")

During fiscal 1998, the Association established a MRP which purchased 45,494 shares of the Company's common stock on the open market subsequent to the Conversion. During 1999, the Company purchased an additional 6,893 shares. The MRP provides for
awards of common stock to directors and officers of the Association. The aggregate fair market value of the shares purchased by the MRP is considered unearned compensation at the time of purchase and compensation is earned ratably over the stipulated
vesting period. The expense related to the MRP was approximately $208,000 and $134,000 for 1999 and 1998, respectively. Unearned compensation related to the MRP was approximately $750,000 and $600,000 for 1999 and 1998, respectively, and is shown as a
reduction to stockholders' equity in the accompanying consolidated statements of financial condition. Contributions to the MRP during 1998 were for the purchase of shares for grants during the year. The amount of the contributions which equaled the share
price on the date of grant was debited to unearned compensation. The difference between the share repurchase price and the price on the date of grant was debited to additional paid-in capital. Contributions to the MRP, usually in the form of dividend
equivalents, which will result in future compensation to the employees are debited to unearned compensation. At September 30, 1999 and 1998, the MRP Trust held approximately 45,000 and 44,000 shares of stock, respectively.

13. STOCK-BASED COMPENSATION PLANS

The Company has a stockholder approved Option Plan. The Option Plan provides for the grant of incentive stock options ("ISO's") to employees and nonincentive stock options ("non-ISO's") to nonemployee directors. The Company utilizes the intrinsic
value method of accounting for stock option grants. As the option price is considered to be equal to the fair value of the stock at the date of grant, no compensation cost is recognized.

The Company has adopted the disclosure requirements of SFAS No. 123, Accounting for Stock-Based Compensation. This Statement establishes financial accounting and reporting standards for stock-based employee compensation plans. Those plans
include all arrangements by which employees receive shares of stock or other equity instruments of the employer or the employer incurs liabilities to employees in amounts based on the price of the employer's stock. Examples are stock purchase plans, stock
options, restricted stock, and stock appreciation rights.

Under the Option Plan, the Company may grant options up to 113,735 shares and during 1999 granted options shares through September 30, 1999. Under the Option Plan, the options vest 20% per year and become exercisable upon the participant's
completion of each of five years of service

Had compensation costs for these plans been determined consistent with SFAS No. 123, the Company's net income and earnings per share would have been reduced to the following pro forma amounts for the years ended September 30, 1999 and 1998:



|                    | 1999     | 1998    
|------------------- | -------- | --------
|Net income:         |          |         
|As reported         | $582,460 | $823,400
|Pro forma           | 454,945  | 748,620 
|                    |          |         
|Earnings per share: |          |         
|As reported:        |          |         
|Basic               | $0.70    | $.91    
|Diluted             | 0.67     | .82     
|Pro forma:          |          |         
|Basic               | 0.55     | .87     
|Diluted             | 0.52     | .79     
|                    |          |         



At September 30, 1999 and 1998, the Option Plan Trust held 129,650 shares of the Company's stock which were purchased on the open market. The shares were purchased for the future exercise of options. The purchase price of the shares was debit to
unearned compensation. Unearned compensation related to the Option Plan was approximately $2.1 million at September 30, 1999 and 1998, and is shown as a reduction of stockholders' equity in the accompanying statements of financial condition.
Contributions to the SOP which will be repaid to the Company are debited to other assets. At September 30, 1998, approximately $450,000 was included in other assets. A summary of the status of the Company's stock option plan at September 30,
1999 and 1998 and the changes during the year then ended is as follows:



|                                                       | 1999    | 1998                           
|------------------------------------------------------ | ------- | -------------------------------
|                                                       | Shares  | Weighted
Average
Exercise
Price
|                                                       |         |                                
|Outstanding at beginning of year                       | 107,928 | $15.50                         
|Granted                                                | 0       | 0                              
|Forfeitures                                            | 0       | 0                              
|Exercised                                              | 0       | 0                              
|Outstanding at end of year                             | 107,928 | $13.00                         
|                                                       |         |                                
|Exercisable at end of year                             | 21,586  | N/A                            
|                                                       |         |                                
|Weighted average fair value of the options
    granted | $5.92   |                                



During 1999, the Company declared a $2.50 capital distribution, the options have been repriced to reflect the distribution. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the
following weighted-average assumptions used for grants in 1998: risk-free interest rate of 5.56%; expected life of the options is seven years from the date of grant and expected volatility and dividend yields of 16% and 17%, respectively.

14. FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, Disclosures About Fair Value of Financial Instruments, requires disclosure of fair value information about financial instruments, whether or not recognized in the statement of condition, for which it is practicable to
estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. The use of
different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Also, the fair value estimates presented herein are based on pertinent information available to Management as of September 
30, 1999. Such amounts have not been comprehensively revalued for purposes of these financial statements since those dates and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.

The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:

Investment Securities

Fair values for investment securities are primarily based on quoted market prices. If a quoted market price is not available, fair value is estimated using market prices for similar securities.

Loans

For equity lines and other loans with short-term or variable rate characteristics, the carrying value reduced by an estimate for credit losses inherent in the portfolio is a reasonable estimate of fair value. The fair value of all other loans is
estimated by discounting their future cash flows using interest rates currently being offered for loans with similar terms, reduced by an estimate of credit losses inherent in the portfolio. The discount rates used are commensurate with the interest rate
and prepayment risks involved for the various types of loans.

Deposits

The fair value disclosed for demand deposits (e.g., interest and noninterest bearing demand, savings, and money market savings), are, as required by SFAS No. 107, equal to the amounts payable on demand at the reporting date (i.e., their
carrying amounts). Fair values for certificates of deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated monthly maturities.

Commitments to Extend Credit

The value of these unrecognized financial instruments is estimated based on the fee income associated with the commitments which, in the absence of credit exposure, is considered to approximate their settlement value. As no significant credit
exposure exists and because such fee income is not material to the Company's financial statements at September 30, 1999 and 1998, the fair value of these commitments is not presented.

Many of the Company's assets and liabilities are short-term financial instruments whose carrying amounts reported in the statement of condition approximate fair value. These items include cash and due from banks, interest-bearing bank balances, accrued
interest receivable and payable, and similar assets. The estimated fair values of the Company's remaining on-balance sheet financial instruments as of September 30, 1999 and 1998, are summarized below:



|                                                                 | 1999           | 1998                
|---------------------------------------------------------------- | -------------- | --------------------
|                                                                 | Carrying
Value | Estimated
Fair Value
|                                                                 |                |                     
|Financial Assets:                                                |                |                     
|Investment securities available-for-sale                         | $ 7,650,923    | $ 7,650,923         
|Mortgage-backed and related securities 
      available-for-sale | 3,692,071      | 3,692,071           
|Investment securities held-to-maturity                           | 498,271        | 497,023             
|Mortgage backed and related securities
      held-to-maturity    | 253,163        | 258,468             
|Loans, net                                                       | 44,837,884     | 44,389,505          
|Financial Liabilities:                                           |                |                     
|Deposits                                                         | 53,904,055     | 51,747,893          



SFAS No. 107 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. The disclosures also do not include certain intangible assets, such as customer relationships, deposit base intangibles and
goodwill. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

15. STOCK CONVERSION

On December 23, 1996, the Conversion of the Bank from a federally chartered mutual institution to a federally chartered stock savings bank through amendment of its charter and issuance of common stock to the Company was completed. Related
thereto, the Company sold 1,137,350 shares of common stock, par value $.01 per share, at an initial price of $10 per share in subscription and community offerings. Costs associated with the Conversion were approximately $575,000, including underwriting
fees. These conversion costs were deducted from the gross proceeds of the sale of the common stock.

In connection with the Offering, the Association established a liquidation account in an amount equal to its regulatory capital as of the latest practicable date prior to consummation of the Offering.

The Company's ability to pay dividends will be largely dependent upon dividends to the Company from the Association. Pursuant to Office of Thrift Supervision ("OTS") regulations, the Association will not be permitted to pay dividends on its capital
stock or repurchase shares of its stock if its stockholders' equity would be reduced below the amount required for the liquidation account or if stockholders' equity would be reduced below the amount required by the OTS.

16. PARENT COMPANY FINANCIAL STATEMENTS

Separate condensed financial statements of Southern Community Bancshares, Inc. (the "Parent Company") as of and for the years ended September 30, 1999 and 1998 are presented below:



Statements of Financial Condition
September 30, 1999 and 1998
(Dollar amounts in thousands)



|                                                      | 1999    | 1998   
|----------------------------------------------------- | ------- | -------
|                                                      |         |        
|ASSETS:                                               |         |        
|Cash and cash equivalents                             | $ 384   | $ 393  
|Securities available for sale                         | 100     | 100    
|Loans receivable                                      | 99      | 0      
|Investment in subsidiary                              | 7,954   | 10,827 
|Due from subsidiary                                   | 0       | 0      
|Other assets                                          | 502     | 12     
|Total assets                                          | $ 9,039 | $11,332
|                                                      |         |        
|LIABILITIES:                                          |         |        
|Other liabilities                                     | $ 80    | $ 0    
|Due to subsidiary                                     | 307     | 231    
|                                                      |         |        
|                                                      |         |        
|STOCKHOLDERS' EQUITY:                                 |         |        
|Common stock                                          | 11      | 11     
|Additional paid-in capital                            | 10,821  | 10,808 
|Retained earnings                                     | 3,158   | 4,866  
|Treasury stock, at cost                               | (1,455) | (831)  
|Unearned compensation                                 | (3,817) | (3,771)
|Unrealized gain on securities available for sale, net | (66)    | 18     
|Total stockholders' equity                            | 8,652   | 11,101 
|Total liabilities and stockholders' equity            | $ 9,039 | $11,332



Statements of Income
For the Years Ended September 30, 1999 and 1998

(Dollar amounts in thousands)





|                                                                                             | 1999    | 1998
|-------------------------------------------------------------------------------------------- | ------- | ----
|                                                                                             |         |     
|DIVIDENDS FROM SUBSIDIARY                                                                    | $3,800  | $ 0 
|                                                                                             |         |     
|INTEREST INCOME                                                                              | 25      | 86  
|                                                                                             |         |     
|OPERATING EXPENSE                                                                            | 142     | 158 
|LOSS BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED
     CURRENT YEAR SUBSIDIARY EARNINGS   | 3,683   | (72)
|                                                                                             |         |     
|INCOME TAX (BENEFIT) EXPENSE                                                                 | 0       | (5) 
|INCOME (LOSS) BEFORE CONSIDERATION OF DISTRIBUTION OF 
     CURRENT YEAR SUBSIDIARY EARNINGS | 3,683   | (77)
|                                                                                             |         |     
|DISTRIBUTION (IN EXCESS OF) UNDER EQUITY BASIS EARNINGS OF 
     SUBSIDIARY                  | (3,101) | 900 
|Net income                                                                                   | $ 582   | $823



Statements of Cash Flows
For the Years Ended September 30, 1999 and 1998
(Dollar amounts in thousands)





|                                                                                                      | 1999    | 1998   
|----------------------------------------------------------------------------------------------------- | ------- | -------
|                                                                                                      |         |        
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                 |         |        
|Net income                                                                                            | $ 582   | $ 823  
|Distribution (in excess of) under equity basis earnings of subsidiary                                 | (3,101) | 900    
|                                                                                                      | 3,683   | (77)   
|Adjustments to reconcile net income to net cash provided by (used in)
          operating activities: |         |        
|Amortization of discounts on securities                                                               | 0       | 0      
|Increase in loans receivable                                                                          | (99)    | 0      
|(Increase) decrease in other assets                                                                   | (490)   | 14     
|Net change in due to/from subsidiary                                                                  | 76      | 2,119  
|(Increase) decrease in other liabilities                                                              | 12      | (51)   
|Net cash provided by (used in) operating activities                                                   | 3,182   | 2,005  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                 |         |        
|Purchase of securities available for sale                                                             | 0       | 0      
|Proceeds from maturity of securities available for sale                                               | 0       | 1,650  
|Net cash provided by (used in) investing activities                                                   | 0       | 1,650  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                 |         |        
|Repurchase of treasury stock                                                                          | (624)   | (831)  
|Contributions to subsidiary                                                                           | (58)    | 0      
|Contributions to plan trusts of the Association                                                       | (287)   | (696)  
|Dividends paid                                                                                        | (2,222) | (2,488)
|Net cash provided by (used in) financing activities                                                   | (3,191) | (4,015)
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                  | (9)     | (360)  
|                                                                                                      |         |        
|CASH AND CASH EQUIVALENTS, beginning of year                                                          | 393     | 753    
|CASH AND CASH EQUIVALENTS, end of year                                                                | $ 384   | $ 393