EXHIBIT 13
                                   
                                   
                                   
Selected Financial Information and Other Data

                                                     At September 30,
                                                 1997     1996      1995
                                                                
Total amount of:                                                
  Assets                                       $70,885   $63,861   $62,026
  Cash and interest-bearing time deposits in                      
    other financial institution                  9,887     3,868     6,108
  Investment securities                          8,911     9,945    10,802
  Mortgage-backed securities                     7,610     8,450     5,452
  Loans receivable, net                         42,999    39,601    38,570
  Deposits                                      55,875    57,138    56,008
  Equity                                        14,470     5,685     5,606
                                                                


Summary of Earnings:

                                                Year Ended September 30,
                                                   1997     1996    1995
                                                 (Dollars in thousands)
                                                                 
Interest income                                  $ 5,048   $4,642   $4,399
Interest expense                                   2,435    2,574    2,300
                                                 -------   ------   ------
Net interest income                                2,613    2,068    2,099
Provision for loan losses                              0      190        0
                                                 -------   ------   ------
Net interest income after provision
  for loan losses                                  2,613    1,878    2,099
Noninterest income, net                              188      242      329
Noninterest expense, net                           1,572    1,781    1,496
                                                 -------   ------   ------
Income before provision for income taxes           1,229      339      932
Income tax expense                                   437      118      310
                                                 -------   ------   ------
Net income                                       $   792   $  221   $  622
                                                 =======   ======   ======

<PAGE>

Selected Financial Ratios:

                                                Year Ended September 30,
                                                 1997     1996      1995
                                                   (Dollars in thousands)
                                                                
Performance ratios:                                           
  Return on average assets                        1.1%      .3%      1.0%
  Return on average equity                        5.8      3.9      11.8
  Interest rate spread (1)                        3.0      3.0       3.2
  Net interest margin (2)                         3.8      3.3       3.5
  Ratio of noninterest expenses to
    average assets                                2.2      2.8       2.4
Average equity to average assets                 19.1      9.0       8.4
Average interest-earning assets to average                    
  interest-bearing liabilities                  121.7    107.3     106.9
                                                              
Assets quality ratios:                                        
  Nonperforming assets to total assets (3)         .4       .2        .3
  Nonperforming loans to total loans (3)           .6       .4        .3
  Allowance for loan losses to total loans        1.9      1.9       1.6
  Allowance for loan losses to nonperforming   
    loans (3)                                   304.2    524.2     302.9
                                                              

(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.
   

<PAGE>

                           COMMON STOCK DATA
                                   


The Company's common stock began trading on the NASDAQ on December 23,
1996, under the symbol "SCBS."  At September 30, 1997, there were
1,137,350 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        Regular    Special
                                                             
    Fiscal 1997:                                       
      First quarter         $13.750    $12.250    $.000      $.000
      Second quarter        $13.500    $13.000    $.075      $.000
      Third quarter         $14.625    $13.500    $.075      $.000
      Fourth quarter        $16.750    $14.750    $.075      $.000
                                                         
<PAGE>


           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 mutual funds backed by 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 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.

Changes in Financial Condition

At September 30, 1997, the Company's assets totaled $70.9 million, as
compared to $63.9 million at September 30, 1996.  Total assets
increased by $7.0 million, or 11.0%, from September 30, 1996 to
September 30, 1997.  The increase in total assets during this period
was principally funded through $9.9 million in net proceeds from the
stock offering.

The increase in total assets at September 30, 1997 was due primarily
to a $5.8 million increase in interest bearing deposits in banks, $3.4
million increase in net loans, and $1.7 million increase in investment
securities available for sale offset by $2.8 million decrease in
investment securities held to maturity.  The $5.8 million increase was
the result of the Company's election to invest a substantial portion
of its new and excess funds into investments and loans, especially
one-to-four family residential loans.

During the fiscal year ended September 30, 1997, total deposits
decreased by $1.3 million, or $2.2%, to $55.9 million.  This decrease
was the result of withdrawals from deposit accounts maintained with
the Association for payment of the Company's common stock during the
stock offering.  Primarily, as a result of the stock offering, the
Company's equity increased by $8.8 million to $14.5 million at
September 30, 1997 compared to $5.7 million at September 30, 1996.

Results of Operations for the Years Ended September 30, 1997, 1996,
and 1995

The Company had net income of $792,000 for the year ended
September 30, 1997 compared to net income of $221,000 for fiscal 1996.
The $571,000 increase in net income represented a 258.3% increase over
fiscal 1996.  Net income for fiscal 1996 was materially affected by a
one time special assessment to recapitalize the Savings Association
Insurance Fund ("SAIF") and a $190,000 provision for loan losses.  The
SAIF Assessment was approximately $370,000, $237,000 net of taxes, for
the year ended September 30, 1996.  The Company's net income of
$221,000 for the fiscal year ended September 30, 1996 represented a
decrease of $401,000, or 64.4%, from fiscal 1995.  This decrease from
fiscal 1995 to fiscal 1996 was also the result of the SAIF assessment
and provision for loan losses during fiscal 1996.

Total interest income increased by $406,000, or 8.8%, in fiscal year
ended September 1997 compared to fiscal year ended September 30, 1996.
Such increase was primarily the result of an increase in the average
interest earning assets as a result of investing the stock offering
proceeds.  The average balance of interest earning assets increased by
$7.4 million.

Interest expense on deposits increased by $273,000, or 11.9%, during
the fiscal year ended September 1996 compared to fiscal 1995.  Such
increase was due primarily to an increase in interest paid on
deposits, as a result of 40 basis point (1.0% equaling 100 basis
points) increase in the average rate paid on deposits in response to
market conditions.

Provision for Loan Losses

The Association did not have a provision for loan losses during the
fiscal year ended September 30, 1997 compared to $190,000 and $0
during fiscal 1996 and 1995, respectively.  Provisions for loan losses
are charged to earnings to bring the total allowance to a level deemed
appropriate by management based on the volume and type of lending
conducted by the Association.  The provision in fiscal 1996 was made
in order to adjust the allowance for the increased volume of mortgage
loans as well as the expansion of consumer and commercial lending.
Commercial and consumer loans traditionally have a higher rate of
default and are secured by collateral that often depreciates or is
less liquid than the real estate securing mortgage loans.

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.  Accordingly, it is not necessarily
reflective of past trends in charge-offs and other factors.  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.

Non-Interest Income

Non-interest income was $187,000 in fiscal 1997, a decrease of
$55,000, or 22.6%, compared to non-interest income of $242,000 in
fiscal 1996.  The primary difference in non-interest income between
fiscal 1997 and fiscal 1996 was from a reduction in fees from deposit
accounts.  Non-interest income amounted to $242,000 for the fiscal
year ended September 30, 1996 compared to $329,000 for fiscal 1995.
The decrease was due primarily to a $50,000 decrease in income from
real estate operations and a $72,000 decrease in gain on sale of
premises and equipment.

Non-Interest Expenses

The primary reason for the decrease in non-interest expenses in fiscal
1997 compared to fiscal 1996 was the 1996 one-time special assessment
of 65.7 basis points on SAIF insured deposits as of March 31, 1995
which was partially offset by the $150,000 increase in compensation
and benefits which resulted from increased personnel, merit raises,
and $95,000 in ESOP expense which was new in fiscal 1997.
Non-interest expenses amounted to $1.8 million during the fiscal year
ended September 30, 1996, a $285,000, or 19.1%, increase over the $1.5
million of non-interest expenses during the year ended September 30,
1995.  The primary reason for the increase in non-interest expenses in
fiscal 1996 compared to fiscal 1995 was the $370,000 one-time special
assessment in fiscal 1996.

Income Taxes

The provision for income taxes was $437,000, $118,000, and $310,000 in
fiscal 1997, 1996, and 1995, 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
$1,229,000, $339,000 and $932,000, respectively.

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 increased by $406,000, or 8.8%, in the fiscal
year ended September 30, 1997 compared to fiscal 1996.  The increase
was due primarily to an increase in income and dividends on securities
held to maturity and securities available for sale (including,
mortgage-backed securities and investment securities) increased
$156,000, or 14.9% resulting from an increase in the average balances
resulting from investing the stock offering proceeds.  Interest income
from other interest earning assets increased $159,000, or 77.9%, as
the average balance increased due to investing the proceeds from the
stock offering.

Total interest income increased by $242,000, or 5.5%, for the fiscal
year ended September 30, 1996 compared to the fiscal year ended
September 30, 1995.  This increase was due primarily to a $165,000, or
5.1%, increase in interest and fees on loans as the average balance
increased by $230,000 and the average yield increased by 37 basis
points.  Interest income from other interest-earning assets increased
$73,000, or 55.7%, to $204,000 for 1996 as a result of a $1.0 million
increase in the average balance.

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, 1997, 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, 1997 and 1996 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, 1997, the Association had outstanding $816,000 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, 1998 was $26.5 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, 1997, the Association's tangible and
core capital totaled $10.3 million, or 15.1% of adjusted total assets,
which exceeded the respective minimum requirements at that date by
approximately $9.2 million and $8.2 million, respectively, or 12.1%
and 13.6%, respectively.  The Association's risk-based capital totaled
$11.1 million at September 30, 1997, or 31.4% of risk-weighted assets,
which exceeded the current requirement of 8% by approximately
$8.2 million, or 23.4% 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.

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 date 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, 1997 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.

<TABLE>
<CAPTION>

                                                     As of                             Year Ended September 30,
                                                  September 30                  1997                           1996
                                                     1997         ------------------------------    ------------------------------
                                                    Weighted      Average                 Yield/    Average                 Yield/
                                                   Yield/Rate     Balance     Interest    Rate      Balance    Interest     Rate
                                                   ----------     --------    --------    ------    -------    --------     -----
                                                                                   (Dollars in thousands)
<S>                                                  <C>          <C>         <C>       <C>         <C>        <C>        <C>  
Interest-earning assets:
  Interest-bearing deposits in other financial                                                             
    institutions                                     5.50%        $  7,540    $   363     4.81%     $ 4,162    $  204       4.90%
  Investment securities and FHLB stock               5.87           13,134        731     5.57       10,417       581       5.58
  Mortgage-backed securities                         5.96            8,035        475     5.91        7,885       469       5.95
  Loans receivable                                   8.52           40,609      3,479     8.57       39,551     3,388       8.57
                                                                  --------    -------               -------    ------
     Total interest-earning assets                   7.39           69,318    $ 5,048     7.28       62,015    $4,642       7.49
Non-interest-earning assets                                          1,859                            1,788                
                                                                  --------                          -------
     Total assets                                                 $ 71,177                          $63,803
                                                                  ========                          =======             
Interest-bearing liabilities                         4.26         $ 56,950      2,435     4.28%     $57,774     2,573       4.45%
Noninterest-bearing liabilities                                        648                              319                  
                                                                  --------                          -------
     Total liabilities                                              57,598                           58,092
                                                                  --------                          -------             
Equity                                                              13,579                            5,711                
                                                                  --------                          -------
     Total liabilities and retained earnings                      $ 71,177                          $63,803
                                                                  ========    -------               =======    -------  
Net interest income                                                           $ 2,613                          $2,068     
                                                                              =======                          =======
Interest rate spread                                                                      3.00%                             3.04%
Net interest margin (net interest income as                                             =======                           =======
  a percentage of average interest-earning assets)                                        3.77%                             3.33%
                                                                                        =======                           =======
Average interest-earning assets to average                                                              
  interest-bearing liabilities                                                          121.72%                           107.34%
                                                                                        ======                            =======
</TABLE>


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.

<TABLE>
<CAPTION>


                                                                        Year Ended September 30,
                                                       1997 Compared to 1996                   1996 Compared to 1995
                                               -------------------------------------     -------------------------------------
                                                Increase      Increase                   Increase      Increase
                                               (Decrease)    (Decrease)      Total      (Decrease)    (Decrease)       Total
                                                 Due to        Due to      Increase       Due to        Due to        Increase
                                                  Rate         Volume     (Decrease)       Rate         Volume       (Decrease)

                                                                        (In Thousands)
<S>                                              <C>           <C>          <C>           <C>           <C>            <C>
Interest income attributable to:
  Interest-bearing deposits in other                                                                
    financial institutions                       $  (4)        $163         $159          $  25         $  48          $  73
  Investment securities                             (2)         151          149            (15)         (144)          (159)
  Mortgage-backed securities                        (2)           9            7             13           150            163
  Loans receivable                                   1           90           91            146            19            165
                                                  -----        -----        -----         ------        ------          -----
      Total interest income                         (7)         413          406            169            73            242
                                                  -----        -----        -----         ------        ------          -----
Interest expense attributable to:
  Deposits                                        (103)         (36)        (139)           237            36            273
                                                  -----        -----        -----         ------        ------          -----
Increase (decrease) in net interest income       $  96         $449         $545          $ (68)        $  37          $ (31)
                                                 ======        =====        =====         ======        ======         ======
                                                                                                  
</TABLE>
                                     

<PAGE>

               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, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity, and
cash flows for each of the three years in the period ended
September 30, 1997.  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, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the
period ended September 30, 1997, in conformity with generally accepted
accounting principles.


                                   ARTHUR ANDERSEN LLP
                                   /S/ Arthur Andersen LLP


Birmingham, Alabama
October 21, 1997
                           
<PAGE>                           
<TABLE>                           
                           
                       SOUTHERN COMMUNITY BANCSHARES, INC.
                                        
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                        
                           SEPTEMBER 30, 1997 AND 1996


                                     ASSETS
<CAPTION>                                        
                                                                          1997                1996
                                                                              
<S>                                                                  <C>                  <C>
CASH AND DUE FROM BANKS                                              $     579,544        $     350,755
                                                                              
INTEREST BEARING DEPOSITS IN BANKS                                       9,307,720            3,517,485
                                                                              
INVESTMENT SECURITIES AVAILABLE-FOR-SALE, at fair value                  7,412,925            5,691,964
                                                                              
MORTGAGE-BACKED SECURITIES AVAILABLE-FOR-SALE, at fair value             5,583,924            5,936,460
                                                                              
INVESTMENT SECURITIES HELD-TO-MATURITY, fair value of                         
  $1,492,141 and $4,215,480, respectively                                1,498,407            4,253,410
                                                                              
MORTGAGE-BACKED SECURITIES HELD-TO-MATURITY, fair value                       
  of $2,033,126 and  $2,471,850, respectively                            2,026,416            2,513,997
                                                                              
LOANS RECEIVABLE, net                                                   42,998,875           39,600,795
                                                                              
ACCRUED INTEREST RECEIVABLE                                                469,453              432,010
                                                                              
PREMISES AND EQUIPMENT, net                                                545,564              603,278
                                                                              
INCOME TAXES RECEIVABLE                                                    185,579              320,478
                                                                              
OTHER ASSETS                                                               276,604              640,039
                                                                     -------------        -------------
     Total assets                                                    $  70,885,011        $  63,860,671
                                                                     =============        =============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                                        
DEPOSITS                                                             $  55,874,668        $  57,137,702
                                                                              
ACCRUED INTEREST PAYABLE                                                   102,304              108,765
                                                                              
ACCRUED EXPENSES AND OTHER LIABILITIES                                     437,922              929,423
                                                                     -------------        -------------
     Total liabilities                                                  56,414,894           58,175,890
                                                                              
COMMITMENTS AND CONTINGENCIES                                                 
                                                                              
PREFERRED STOCK, par value $.01, no shares issued, 100,000                       0                    0
  shares authorized
                                                                              
COMMON STOCK, par value $.01 per share, 3,000,000 shares                      
  authorized, 1,137,350 shares issued and outstanding                       11,374                    0
                                                                              
ADDITIONAL PAID-IN CAPITAL                                              10,786,689                    0
                                                                              
RETAINED EARNINGS, substantially restricted                              6,445,252            5,871,509
                                                                              
UNEARNED COMPENSATION                                                   (2,736,893)                   0
UNREALIZED LOSS ON AVAILABLE-FOR-SALE SECURITIES, net of                 
  deferred taxes                                                           (36,305)            (186,728)
                                                                     -------------        -------------
     Total stockholders' equity                                         14,470,117            5,684,781
                                                                     -------------        -------------
     Total liabilities and stockholders' equity                      $  70,885,011        $  63,860,671
                                                                     =============        =============

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

</TABLE>

<PAGE>
<TABLE>
                       SOUTHERN COMMUNITY BANCSHARES, INC.
                                        
                                        
                        CONSOLIDATED STATEMENTS OF INCOME
                                        
             FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995


<CAPTION>
                                                               1997           1996           1995
                                                                                     
<S>                                                          <C>           <C>            <C>
INTEREST INCOME:
  Interest and fees on loans                                 $3,479,134    $3,387,699     $3,222,506
  Interest and dividends on investment securities               730,798       581,317        740,396
  Interest on mortgage-backed and related securities            475,408       468,809        305,470
  Other interest income                                         362,505       203,800        130,907
                                                             ----------    ----------     ----------
     Total interest income                                    5,047,845     4,641,625      4,399,279
                                                             ----------    ----------     ----------
INTEREST EXPENSE--DEPOSITS                                    2,434,567     2,573,461      2,300,245
                                                             ----------    ----------     ----------
     Net interest income before provision
       for loan losses                                        2,613,278     2,068,164      2,099,034
                                                                                     
PROVISION FOR LOAN LOSSES                                             0       190,170              0
                                                             ----------    ----------     ----------
     Net interest income after provision
       for loan losses                                        2,613,278     1,877,994      2,099,034
                                                             ----------    ----------     ----------
NONINTEREST INCOME:
  Service charges on deposit accounts                           182,225       234,963        198,193
  Income (loss) from real estate operations, net                      0           838         50,815
  Gain on sale of premises and equipment                              0         1,500         73,702
  Other                                                           5,224         4,958          6,040
                                                             ----------    ----------     ----------
     Total noninterest income                                   187,449       242,259        328,750
                                                             ----------    ----------     ----------
NONINTEREST EXPENSE:
  Compensation and benefits                                     869,414       719,704        758,415
  Occupancy and equipment                                       171,158       180,007        189,158
  SAIF deposit insurance                                         50,310       498,942        131,666
  Data processing                                               119,329       118,208        114,486
  Professional fees                                              55,564        45,243         76,358
  Other                                                         306,388       219,137        225,895
                                                             ----------    ----------     ----------
     Total noninterest expense                                1,572,163     1,781,241      1,495,978
                                                             ----------    ----------     ----------
     Income before income taxes                               1,228,564       339,012        931,806
                                                                                     
INCOME TAX EXPENSE                                              436,723       118,024        310,256
                                                             ----------    ----------     ----------
     Net income                                              $  791,841    $  220,988     $  621,550
                                                             ==========    ==========     ==========
EARNINGS PER SHARE                                           $      .66           N/A           N/A
                                                             ==========    ==========     ==========
                                        
                                        
  The accompanying notes are an integral part of these consolidated statements.

</TABLE>

<PAGE>
<TABLE>
                       SOUTHERN COMMUNITY BANCSHARES, INC.
                                        
                                        
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                        
             FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995

<CAPTION>
                                                                                                           Unrealized
                                                                                                            Loss on         
                                                                                                           Available        
                                                                                             Unrealized      for           
                                                                                            Depreciation     Sale           
                                                                                             on Certain   Securities,       
                                                    Additional                               Marketable     Net of          
                                         Common      Paid-In      Retained     Unearned       Equity      Deferred         
                                         Stock       Capital      Earnings   Compensation   Securities      Taxes         Total
                                                                                                                           
<S>                                     <C>       <C>            <C>         <C>             <C>          <C>         <C>
BALANCE, SEPTEMBER 30, 1994             $     0   $         0    $5,028,971  $         0     $(33,826)    $       0   $ 4,995,145
                                                                                                                            
  Net income                                  0             0       621,550            0            0             0       621,550
  Adoption of SFAS No. 115                    0             0             0            0       33,826      (121,784)      (87,958)
  Change in net unrealized loss
    on securities available-for-sale          0             0             0            0            0        76,850        76,850
                                        --------  -----------    ----------  -----------     --------     ----------   -----------
BALANCE, SEPTEMBER 30, 1995                   0             0     5,650,521            0            0       (44,934)    5,605,587
                                                                                                                            
  Net income                                  0             0       220,988            0            0             0       220,988
  Change in net unrealized loss
    on securities available-for-sale          0             0             0            0            0      (141,794)     (141,794)
                                        --------  -----------    ----------  -----------     --------     ----------   -----------
BALANCE, SEPTEMBER 30, 1996                   0             0     5,871,509            0            0      (186,728)    5,684,781
                                                                                                                            
  Net income                                  0             0       791,841            0            0             0       791,841
  Change in unrealized loss
    on securities available-for-sale          0             0             0            0            0       150,423       150,423
  Issuance of common stock               11,374    10,752,273             0     (909,880)           0             0     9,853,767
  Amortization of unearned
    compensation                              0        34,416                     60,824                          0        95,240
  Repurchase of stock for stock
    plan trusts                               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                    (218,098)                                      0      (218,098)
                                        --------  -----------    ----------  -----------     --------     ----------   -----------
BALANCE, September 30, 1997             $11,374   $10,786,689    $6,445,252  $(2,736,893)    $      0     $ (36,305)  $14,470,117
                                        ========  ===========    ==========  ============    ========     ==========  ============
                                        
                                        
  The accompanying notes are an integral part of these consolidated statements.
                                        
</TABLE>

<PAGE>
<TABLE>

                                        
          SOUTHERN COMMUNITY BANCSHARES, INC.
                           
                           
         CONSOLIDATED STATEMENTS OF CASH FLOWS
                           
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995

<CAPTION>
                                                               1997            1996             1995
                                                                            
<S>                                                        <C>            <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                               $  791,841     $   220,988      $    621,550
  Adjustments to reconcile net income to net cash                             
    provided by operating activities:
        Depreciation                                           82,388          82,388            81,679
        Amortization and accretion on securities              (35,252)        (49,120)          (73,200)
        Amortization of unearned ESOP                          95,240               0                 0
        Amortization of net deferred loan origination
        fees and costs                                        (47,407)        (42,452)          (30,669)
        Provision (benefit) for deferred income taxes         122,904        (198,635)           66,314
        Provision for loan losses                                   0         190,170                 0
        (Gain) loss on sale of foreclosed real estate, net          0             291           (43,040)
        Gain on sale of premises and equipment, net                 0          (1,500)          (73,702)
        Change in assets and liabilities:                                           
          Increase (decrease) in income taxes                 (81,822)        (98,442)          188,288
            receivable/payable
          Decrease in accrued interest receivable             (37,443)        (48,029)          (38,513)
          Decrease (increase) in other assets                 363,435        (536,612)           44,636
          Increase (decrease) in accrued interest payable      (6,461)         (4,513)           65,262
          Increase (decrease) in accrued expenses and
            other liabilities                                (491,501)        693,579           (21,660)
                                                           -----------    ------------     -------------
                Total adjustments                             (35,919)        (12,875)          165,395
                                                           -----------    ------------     -------------
                Net cash provided by operating activities     755,922         208,113           786,945
                                                           -----------    ------------     -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from maturities/calls of investment  
    securities available-for-sale                           3,620,636       1,000,000                 0
  Proceeds from maturities/calls of investment  
    securities held-to-maturity                             2,760,000       3,950,497         6,550,000
  Purchases of investment securities     
    available-for-sale                                     (5,272,915)     (4,102,853)         (597,769)
  Purchases of investment securities   
    held-to-maturity                                                0               0        (3,448,595)
  Net loan repayments (originations)                       (3,350,673)     (1,217,051)        1,409,406
  Proceeds from maturities of mortgage-backed  
    securities available-for-sale                           1,072,607         672,582           498,922
  Proceeds from maturities of mortgage-backed  
    securities-held-to-maturity                               474,148         650,497           126,578
  Purchases of mortgage-backed securities      
    available-for-sale                                       (500,825)     (4,492,120)         (490,000)
  Capital expenditures                                        (24,674)        (84,678)          (23,512)
  Proceeds from sale of foreclosed real estate                      0          43,924           329,855
  Proceeds from sale of fixed assets                                0           1,500           202,066
                                                           -----------    ------------     -------------
                Net cash provided by (used in)
                  investing activities                     (1,221,696)     (3,577,702)        4,556,951

CASH FLOWS FROM FINANCING ACTIVITIES:                                       
  Increase (decrease) in deposits                          (1,263,034)      1,129,732        (2,219,802)
  Net proceeds from public stock offering                   9,853,767               0                 0
  Repurchase of stock for stock plan trusts                (1,878,680)              0                 0
  Contributions to plan trusts                                 (9,157)              0                 0
  Payment of dividends                                       (218,098)              0                 0
                                                           -----------    ------------     -------------
                Net cash provided by (used in)
                  financing activities                      6,484,798       1,129,732        (2,219,802)

                                                                            
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS        6,019,024      (2,239,857)        3,124,094
                                                                            
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR              3,868,240       6,108,097         2,984,003
                                                           -----------    ------------     -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                   $9,887,264     $ 3,868,240      $  6,108,097
                                                           ===========    ============     =============
SUPPLEMENTAL DISCLOSURES:                                                   
  Cash paid for:                                                              
        Interest on deposits                               $2,341,955     $ 2,577,974      $  2,234,983
        Income taxes                                          339,991         418,241            57,800
        Transfers from loans to real estate
          acquired through foreclosure                              0          38,771             5,444
                                                           ===========    ============     =============
                                                                            
CHANGE IN UNREALIZED NET LOSS ON SECURITIES
  AVAILABLE FOR SALE, net of deferred taxes                $  150,423     $   141,794      $     44,934

CHANGE IN UNREALIZED DEPRECIATION ON CERTAIN                                
  MARKETABLE EQUITY SECURITIES                                      0               0           (33,826)
                                        
 The accompanying notes are an integral part of these consolidated statements.

</TABLE>

<PAGE>
                  Southern Community Bancshares, Inc.
                                   
                                   
                     Notes to Financial Statements
                                   
                      September 30, 1997 AND 1996

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 is 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 three 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.
   
   Basis of Financial Statement Presentation
   
   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.
   
   The preparation of financial statements in conformity with
   generally accepted accounting principles requires management to
   make estimates and assumptions that affect the reported amounts of
   assets and liabilities and disclosure of contingent assets and
   liabilities at the date of the financial statements and the
   reported amounts of revenues and expenses during the reporting
   period.  Actual results could differ from those estimates.
   
   Material estimates that are particularly susceptible to
   significant 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 the statements of cash flows and presentation of
   the statements of financial condition, the Association considers
   cash, due from banks and interest bearing deposits in banks as
   cash and cash equivalents.
   
   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.  The Company has the
   positive intent and ability to hold these securities to maturity.
   Available-for-sale securities are carried at fair value, except
   for FHLB required stock holding which are carried at cost, and
   include all debt and equity securities 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
   additions 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 measure of the
   impaired 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 on 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, 1997.
   
   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 for accounting for deferred income taxes.
   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.
   
   Earnings Per Share
   
   Earnings per share are computed based on the weighted average
   number of shares of common stock outstanding during the period
   less shares of stock which have been placed in trust for possible
   future benefit plans and Employee Stock Ownership Plan ("ESOP")
   Trust shares are not considered outstanding for earnings per share
   calculation.
   
   Earnings per share for the period from December 23, 1996, the date
   of Conversion, to September 30, 1996, has 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.  If earnings per share had been computed on a
   retroactive basis for the year ended September 30, 1997,
   recognizing earnings for the entire year, earnings per share would
   have been $.81 per share as compared to the $.66 per share
   reported in the accompanying consolidated statements of income.
   
   Pending Accounting Pronouncements
   
   Earnings Per Share
   
   In February 1997, the Financial Accounting Standards Board
   ("FASB") issued SFAS No. 128, Earnings Per Share.  This Statement
   establishes standards for computing and presenting earnings per
   share ("EPS") and applies to entities with publicly held common
   stock or potential common stock.  This Statement simplifies the
   standards for computing earnings per share previously found in
   Accounting Principles Board ("APB") Opinion No. 15, Earnings per
   Share, and makes them comparable to international EPS standards.
   It replaces the presentation of primary EPS with a presentation of
   basic EPS and requires dual presentation of basic and diluted EPS
   on the face of the income statement for all entities with complex
   capital structures and requires a reconciliation of the numerator
   and denominator of the basic EPS computation to the numerator and
   denominator of the diluted EPS computation.
   
   This Statement is effective for financial statements issued for
   periods ending after December 15, 1997, including interim periods;
   earlier application is not permitted.  This Statement requires
   restatement of all prior-period EPS data presented.  The Company
   will adopt the Statement at fiscal year-end 1998.  to the extent
   the statement had been implemented for the year ended
   September 30, 1997, both basic and diluted earnings per share
   under SFAS No. 128 would be have been identical to earnings per
   share as presented in these financial statements.
   
   Disclosure of Information About Capital Structure
   
   In February 1997, the FASB issued SFAS No. 129, Disclosure of
   Information About Capital Structure.  This Statement establishes
   standards for disclosing information about an entity's capital
   structure.  It applies to all entities.  SFAS No. 129 is effective
   for financial statements for periods ending after December 15,
   1997.  It contains no change in disclosure requirements for
   entities that were previously subject to the requirements of APB
   Nos. 10 and 15 and SFAS No. 47.
   
   Management believes there will be no material effect on the
   consolidated financial statements from the adoption of this
   pronouncement.
   
   Reporting of Comprehensive Income
   
   In June 1997, the FASB issued SFAS No. 130, Reporting of
   Comprehensive Income, which establishes standards for reporting
   and display of comprehensive income and its components (revenues
   expenses, gains, and losses) in a full set of financial
   statements.  This statement also requires that all items that are
   required to be recognized under accounting standards as components
   of comprehensive income be reported in a financial statement that
   is displayed with the same prominence as other financial
   statements.
   
   This statement is effective for fiscal years beginning after
   December 15, 1997.  Earlier application is permitted.
   Reclassification of financial statements for earlier periods
   provided for comparative purposes is required.  Management
   believes there will be no material effect on the consolidated
   financial statements from the adoption of this pronouncement.
   
   Disclosure about Segments and Related Information
   
   In June 1997, the FASB issued SFAS No. 131, Disclosures about
   Segments of an Enterprise and Related Information, which
   establishes standards for the way that public business enterprises
   report information about operating segments in annual financial
   statements and requires that those enterprises report selected
   information about operating segments in interim financial reports
   issued to stockholders.
   
   This statement also establishes standards for related disclosures
   about products and services, geographic areas, and major
   customers.  This statement requires the reporting of financial and
   descriptive information about an enterprise's reportable operating
   segments.
   
   This statement is effective for financial statements for periods
   beginning after December 15, 1997. In the initial year of
   application, comparative information for earlier years is to be
   restated.  Management believes there will be no material effect on
   the consolidated financial statements from the adoption of this
   pronouncement.
   
   Financial Statement Reclassification
   
   The financial statements for prior years have been reclassified in
   order to conform with the 1997 financial statement presentation.
   The reclassification did not change total assets or net income in
   the prior year.
   

2.  INVESTMENT AND MORTGAGE-BACKED SECURITIES

   Details of securities are as follows:

<TABLE>
<CAPTION>

                                                                   September 30, 1997
                                                                  Gross          Gross            
                                               Amortized       Unrealized     Unrealized        Estimated
                                                  Cost            Gains          Losses        Fair Value
                                                                                             
<S>                                           <C>             <C>            <C>              <C>
Available-for-sale:
  U.S. Treasury and federal agencies          $  6,980,741    $     2,384    $         0      $ 6,983,125
  Mutual funds                                           0              0              0                0
  Federal Home Loan Bank stock                     429,800              0              0          429,800
                                              ------------    -----------    -----------      -----------
  Investment securities                          7,410,541          2,384              0        7,412,925
  Mortgage-backed securities                     5,643,733          4,503        (64,312)       5,583,924
                                              ------------    -----------    -----------      -----------
        Total                                 $ 13,054,274    $     6,887    $   (64,312)     $12,996,849
                                              ============    ===========    ============     ===========
Held-to-maturity:                                                                   
  U.S. Treasury and federal agencies          $  1,348,407    $         0    $   (14,869)     $ 1,333,538
  Obligations of state and political                                                  
    subdivisions                                   150,000          8,603              0          158,603
                                              ------------    -----------    -----------      -----------
  Investment securities                          1,498,407          8,603        (14,869)       1,492,141
  Mortgage-backed securities                     2,026,416         20,084        (13,374)       2,033,126
                                              ------------    -----------    -----------      -----------
        Total                                 $  3,524,823    $    28,687    $   (28,243)     $ 3,525,267
                                              ============    ===========    ============     ===========
</TABLE>

<TABLE>
<CAPTION>
                                                                  September 30, 1996
                                                                  Gross         Gross            
                                                Amortized      Unrealized     Unrealized       Estimated
                                                  Cost            Gains         Losses        Fair Value
                                                                         
<S>                                           <C>             <C>            <C>              <C>
Available-for-sale:
  U.S. Treasury and federal agencies          $  3,535,814    $         0    $   (35,755)     $ 3,500,059
  Mutual funds                                   1,774,941              0        (12,836)       1,762,105
  Federal Home Loan Bank stock                     429,800              0              0          429,800
                                              ------------    -----------    -----------      -----------
  Investment securities                          5,740,555              0        (48,591)       5,691,964
  Mortgage-backed securities                     6,184,262              0       (247,802)       5,936,460
                                              ------------    -----------    -----------      -----------
        Total                                 $ 11,924,817    $         0    $  (296,393)     $11,628,424
                                              ============    ===========    ============     ===========
Held-to-maturity:                                                                    
  U.S. Treasury and federal agencies          $  4,093,481    $         0    $   (47,894)     $ 4,045,587
  Obligations of state and political                                                   
    subdivisions                                   159,929          9,964              0          169,893
                                              ------------    -----------    -----------      -----------
  Investment securities                          4,253,410          9,964        (47,894)       4,215,480
  Mortgage-backed securities                     2,513,997              0        (42,147)       2,471,850
                                              ------------    -----------    -----------      -----------
 Total                                        $  6,767,407    $     9,964    $   (90,041)     $ 6,687,330
                                              ============    ===========    ============     ===========
</TABLE>

   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:

<TABLE>
<CAPTION>
                                                                September 30, 1997
                                                   Available-for-Sale               Held-to-Maturity
                                                Amortized                        Amortized        
                                                  Cost        Fair Value           Cost       Fair Value
                                                                              
  <S>                                          <C>             <C>             <C>            <C>
  Due in one year or less                      $  3,001,876    $  3,006,901    $   499,976    $  499,450
  Due after one year through five years           3,206,367       3,203,726        998,431       992,691
  Due after five years through ten years            757,498         757,498              0             0
  Due after ten years                               444,800         444,800              0             0
                                               ------------    ------------    -----------    ----------
                                                  7,410,541       7,412,925      1,498,407     1,492,141
  Mortgage-backed securities                      5,643,733       5,583,924      2,026,416     2,033,126
                                               ------------    ------------    -----------    ----------
         Total                                 $ 13,054,274    $ 12,996,849     $3,524,823    $3,525,267
                                               ============    ============    ===========    ==========
</TABLE>

   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).  The mutual funds are backed
   primarily by Federal Home Loan Mortgage Association
   mortgage-backed securities and private issuer mortgage-backed
   securities.
   
   During the year ended September 30, 1997, 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, 1997 and 1996.
   

   
3.  LOANS RECEIVABLE, NET
   
<TABLE>

   Loans receivable are summarized as follows:

<CAPTION>
                                                     September 30        September 30
                                                          1997              1996
                                                               
<S>                                                   <C>              <C>
Mortgage loans:
  Principal balances:                                           
        Secured by 1-4 family residences              $25,617,086      $23,470,482
        Secured by nonresidential properties            8,077,000        8,601,682
        Secured by multifamily properties               4,172,496        3,670,986
        Construction loans                              1,266,600          837,400
                                                      ------------     ------------
                                                       39,133,182       36,580,550
        Less:                                                         
          Undisbursed portion of mortgage loans          (815,502)        (581,781)
          Net deferred loan origination fees             (169,738)        (149,591)
                                                      ------------     ------------
                 Total mortgage loans                  38,147,942       35,849,178

Commercial loans                                        2,293,540        1,416,551
Consumer loans:                                               
  Principal balances:                                           
         Loans secured by automobiles                   1,534,822        1,367,522
         Loans secured by savings accounts                518,173          568,183
         Other                                          1,310,362        1,201,395
                                                      ------------     ------------
                 Total consumer loans                   3,363,357        3,137,100
                                                      ------------     ------------
                 Total loans                           43,804,839       40,402,829
         Less allowance for loan losses                   805,964          802,034
                                                      ------------     ------------
Loans receivable, net                                 $42,998,875      $39,600,795
                                                      ===========      ============

</TABLE>

   In the ordinary course of business, the Company makes loans to
   officers, directors, employees, and other related parties of the
   Company.  These loans are made on substantially the same terms as
   those prevailing for comparable transactions with others.  Such
   loans 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, 1997 and 1996
   were $1,035,000 and $1,105,000, respectively.  During the year
   ended September 30, 1997, new loans totaled $312,000 and
   repayments were $382,000.
   
   Activity in the allowance for loan losses is summarized as
   follows:
   
                                         1997        1996        1995
                                                           
      Balance at beginning of year     $802,034    $623,638    $632,208
      Provision charged to income             0     190,170           0
      Charge-offs                       (55,878)    (20,141)    (17,170)
      Recoveries                         59,808       8,367       8,600
                                       ---------   ---------   ---------
      Balance at end of year           $805,964    $802,034    $623,638
                                       ========    =========   =========

   The Company had loans on nonaccrual status of approximately
   $265,000 and $27,000 and at September 30, 1997 and 1996,
   respectively.  Interest income foregone on these nonaccrual loans
   was not significant for fiscal years 1997 and 1996.
   

4.  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 $1,723,251 at
   September 30, 1997 and $1,588,014 at September 30, 1996.  The
   serviced loans were sold without recourse.
   

5.  ACCRUED INTEREST RECEIVABLE
   
   Accrued interest receivable at September 30 is summarized as
   follows:
   
                                              1997          1996
                                                         
      Investment securities                 $116,948     $  88,003
      Mortgage-backed securities              41,333        45,855
      Loans receivable                       311,172       298,152
                                            --------     ---------
      Total                                 $469,453     $ 432,010
                                            ========     =========        

6.  FORECLOSED REAL ESTATE
   
   Activity in the allowance for losses on foreclosed real estate at
   September 30 is summarized as follows:
   
                                            1997     1996      1995
                                                             
      Balance at beginning of year          $0        $0     $214,609
      Provision charged to income            0         0            0
      Charge-offs                            0         0     (214,609)
                                            --        --     ---------
      Balance at end of year                $0        $0     $      0
                                            ==        ==     =========

7.  PREMISES AND EQUIPMENT
   
   A summary of premises and equipment at September 30 is as follows:
   
                                                    1997           1996
                                                             
                                                             
      Land                                      $   163,081    $   163,081
      Buildings and improvements                    731,216        753,583
      Leasehold improvements                         30,166         30,166
      Furniture, fixtures, and equipment            736,366        726,325
                                                 ----------     ----------
                                                  1,660,829      1,673,155
      Less accumulated depreciation and                      
        amortization                              1,152,265      1,069,877
                                                -----------    -----------
           Net premises and equipment           $   508,564    $   603,278
                                                ===========    ===========

   
8.  DEPOSITS

<TABLE>

   Deposits are summarized as follows:

<CAPTION>
                                                 September 30, 1997         September 30, 1996
                                                                                                 
                                                Amount       Percent       Amount        Percent
                                                                                               
<S>                                           <C>            <C>          <C>            <C>
Demand and NOW accounts, including
  noninterest-bearing deposits of                                                   
  $93,914 in 1997 and $113,594 in 1996        $10,561,301     18.9%       $11,236,279     19.7%
Money market accounts                           1,093,499      2.0            940,391      1.6
Passbook savings                                9,286,230     16.6          8,327,355     14.6
                                              -----------    ------       -----------    ------
                                               20,941,030     37.5         20,504,025     35.9
Certificates of deposit, rates from 2.51%                                           
  to 12.75% in 1997 and 1996                   34,933,638     62.5         36,633,677     64.1
                                              -----------    ------       -----------    ------
       Total                                  $55,874,668    100.0%       $57,137,702    100.0%
                                              ===========    ======       ===========    ======
</TABLE>


   The aggregate amount of jumbo certificates of deposit with a
   minimum denomination of $100,000 was $6,578,414 at September 30,
   1997 and $5,589,383 at September 30, 1996.  Deposits in excess of
   $100,000 are not federally insured.
   
   Scheduled maturities of certificates of deposit are as follows:
   
                       Years Ending             
                       September 30          Amount
                                                
                           1998          $26,455,814
                           1999            4,860,063
                           2000            1,396,135
                           2001            1,928,280
                           2002              293,346
                                         $34,933,638
                                         
   Interest expense on deposits at September 30 are summarized as
   follows:
   
                                      1997         1996          1995
                                                                     
      NOW accounts                 $  250,614   $  247,313    $  286,845
      Money market accounts            58,778       55,289        37,731
      Passbook savings                250,510      240,093       229,105
      Certificates of deposit       1,877,771    2,033,947     1,754,606
      Withdrawal penalties             (3,106)      (3,181)       (8,042)
                                   -----------  -----------   -----------
      Total                        $2,434,567   $2,573,461    $2,300,245
                                   ===========  ===========   ===========

   The Company has pledged U.S. government and government agency
   obligations totaling $1,120,000 at September 30, 1997 and 1996 as
   collateral against certain large deposits.
   

9.  INCOME TAXES
   
   The provisions for income taxes for the years ended September 30
   are as follows:
   
                                  1997           1996          1995
                                                        
    Current:                                          
      Federal                   $260,611      $ 286,824      $212,262
      State                       53,208         29,835        31,680
                                --------      ---------      --------
                                 313,819        316,659       243,942
    Deferred:                                         
      Federal                    104,083       (180,222)       64,841
      State                       18,821        (18,413)        1,473
                                --------      ---------      --------
                                 122,904       (198,635)       66,314
                                --------      ---------      --------
         Total                  $436,723      $ 118,024      $310,256
                                ========      =========      ========

   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 at September 30 were as
   follows:
   
                                             1997       1996        1995
                                                               
  Expected income tax expense at                               
    statutory federal tax rate             $417,712   $115,264    $316,814
  Increase (decrease) resulting from:                          
      State income tax, net of federal                             
        benefit                              47,539      7,539      21,882
      Tax-exempt interest income            (41,063)    (2,639)    (28,000)
      Other, net                             12,535     (2,140)       (440)
                                           ---------  ---------   ---------
                                           $436,723   $118,024    $310,256
                                           ========   ========    =========
  Effective rate                                 36%        36%         33%
                                           ========   ========    ========


   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:
   
                                               1997          1996
                                                         
  Deferred loan fees, net                   $   8,333     $  16,663
  Allowance for loan losses for financial                
    reporting                                 296,753       296,753
  Unrealized loss on securities available                
    for sale                                   18,703       109,850
  SAIF assessment                                   0       136,902
  Other                                        47,913        23,228
                                            ----------    ----------
  Deferred tax asset                          371,702       583,396
  Allowance for loan losses for the tax                  
    reserve in excess of base year            (56,881)      (56,881)
  Depreciation                                (47,341)      (44,657)
  Other                                       (45,405)      (45,732)
                                            ----------    ----------
  Deferred tax liability                     (149,627)     (147,270)
                                            ----------    ----------
  Net deferred tax asset                    $ 222,075     $ 436,126
                                            ==========    ==========

   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.  The bad debt deduction based on the
   latter has been gradually reduced to 8%.  On August 2, 1996,
   Congress passed the  Small Business Job Protection Act that, will
   among other things, repeal the tax bad debt reserve method for
   thrifts effective for taxable years beginning 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.  This recapture can be deferred for
   up to two years if the thrift satisfies a residential loan
   portfolio test.  The Bank is expected to recapture approximately
   $154,000; $57,000 tax effected, of its tax bad debt reserves into
   taxable income over six years as a result of this new law.  The
   recapture will not have any effect on the Association's financial
   statements because the related tax expense has already been
   accrued.
   
   Because of such repeal, thrifts such as the Association may only
   use the same tax bad debt reserve that is allowed for banks.
   Accordingly, a thrift with assets of $500 million or less may only
   add to its tax bad debt reserves based upon its moving six-year
   average experience of actual loan losses (i.e., the experience
   method).
   
   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 allowed 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, 1997 and
   1996, the Association meets all capital adequacy requirements to
   which it is subject.
   
   As of September 30, 1997 and 1996, the most recent notification
   from the regulatory authorities categorized the Association as
   well capitalized under the regulatory framework for prompt
   corrective action.  To be categories 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:

<TABLE>
<CAPTION>
                                                                                    To Be Well
                                                                                Capitalized Under
                                                                For Capital      Prompt Corrective
                                             Actual         Adequacy Purposes    Action Provisions
                                    --------------------    -----------------    ----------------
                                     Amount      Ratio      Amount     Ratio     Amount     Ratio
                                                        (Dollars in thousands)
                                                                     
<S>                                  <C>         <C>        <C>         <C>      <C>        <C>
September 30, 1997:
  Total capital (to risk weighted                                      
    assets)                          $11,065      31.4%     $2,817      8.0%     $3,522     10.0%
  Tier 1 (core) capital (to risk                                       
    weighted assets)                  10,259      29.1         N/A      N/A       2,113      6.0
  Tier 1 (core capital (to                                             
    adjusted total assets)            10,259      15.1       2,044      3.0       3,407      5.0
  Tangible capital (to adjusted                                           
    total assets)                     10,259      15.1       1,022      1.5         N/A      N/A
                                                                     
September 30, 1996:                                                  
  Total capital (to risk weighted                                      
    assets)                            6,674      19.8       2,690      8.0       3,363     10.0
  Tier 1 (core) capital (to risk                                       
    weighted assets)                   5,872      17.4         N/A      N/A       2,018      6.0
  Tier 1 (core) capital (to                                            
    adjusted total assets)             5,872       9.2       1,908      3.0       3,181      5.0
  Tangible capital (to adjusted                                           
    total assets)                      5,872       9.2         954      1.5         N/A      N/A
                                                                     
</TABLE>

   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:
   


                                                  1997       1996
                                                   (In thousands)
                                                           
 Stockholder's equity                           $10,222    $  5,685
 Net unrealized loss on debt securities                    
   available for sale                                37         187
                                                -------    --------
         Tangible and Tier 1 capital             10,259       5,872
 Allowance for loan losses                          806         802
                                                -------    --------
         Total risk based capital               $11,065    $  6,674
                                                =======    ========       

 Total assets                                   $68,112    $ 63,431
 Adjusted total assets                           68,149      63,617
 Total risk weighted assets                      35,218      33,631
                                                           
   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 July 1, 1997, 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, 1997.
   
   At September 30, 1997, projected minimum lease payments for years
   ending September 30 are as follows:
   
                     1998                 $15,409
                     1999                  15,409
                     2000                   7,705
                     2001                       0
                     2002                       0
                         Total            $38,523
                                           
   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, 1997 and 1996.
   
   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.
   
   FDIC Assessment
   
   The deposits of the Association are currently insured by the
   Savings Association Insurance Fund ("SAIF").  Both the SAIF and
   the Bank Insurance Fund ("BIF"), the federal deposit insurance
   fund that covers the deposits of state and national banks and
   certain state savings banks, are required by law to attain and
   thereafter maintain a reserve ratio of 1.25% of insured deposits.
   The BIF has achieved the required reserve rate, and, as discussed
   below, during the period year the FDIC reduced the average deposit
   insurance premium paid by BIF-insured banks to a level
   substantially below the average premium paid by savings
   institutions.
   
   Banking legislation was enacted September 30, 1996 to eliminate
   the premium differential between SAIF-insured institutions and
   BIF-insured institutions.  The FDIC Board of Directors established
   a special assessment necessary to recapitalize the SAIF at 65.7
   basis points of SAIF assessable deposits held by affected
   institutions as of March 31, 1995.  Based upon its level of SAIF
   deposits as of March 31, 1995, the Association paid a special
   assessment of approximately $370,000 during the year ended
   September 30, 1997.  Upon recapitalization of the SAIF, premiums
   paid by SAIF-insured institutions were reduced.  The legislation
   also provides for the merger of the BIF and the SAIF, with such
   merger being conditioned upon the poor elimination of the thrift
   charter.
   
   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. COMPENSATION AND EMPLOYEE BENEFITS
   
   Profit Sharing Plan
   
   The Company maintains a defined contribution profit sharing plan
   covering all full-time employees who meet certain eligibility
   requirements.  Contributions to the Plan are at the discretion of
   the Board of Directors and are determined on a calendar-year
   basis.  For the plan year ended December 31, 1997 management
   intends to make a contribution of approximately $19,700, of which
   the total amount had been accrued at September 30, 1997 and is
   included in other liabilities in the accompanying consolidated
   statements of financial condition.
   
   Employee Stock Ownership Plan
   
   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.  Expense related to the ESOP for the
   year ended September 30, 1997 was approximately $61,000.  Unearned
   compensation related to the ESOP was approximately $2,737,000 at
   September 30, 1997 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.
   

13. 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, 1997.  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 values 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, 1997 and 1996, 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, 1997, are summarized
   below:

<TABLE>
<CAPTION>
                                                 1997                             1996
                                       Carrying       Estimated          Carrying      Estimated
                                        Value         Fair Value          Value        Fair Value
<S>                                 <C>             <C>               <C>             <C>
 Financial Assets:                                                          
   Investment securities                                                      
     available for sale             $  7,412,925    $  7,412,925      $  5,691,964    $  5,691,964
   Mortgage backed and related                                                
     securities available for sale     5,583,924       5,583,924         5,936,460       5,936,460
   Investment securities                                                      
     held-to-maturity                  1,498,407       1,492,141         4,253,410       4,215,480
   Mortgage backed and related                                                
     securities held-to-maturity       2,026,416       2,033,126         2,513,997       2,471,850
   Loans, net                         49,998,875      50,413,865        39,600,795      39,605,896
 Financial Liabilities:                                                     
   Deposits                           55,874,668      55,982,666        57,137,702      57,196,530
                                                                            
</TABLE>

   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.
   

14. 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.
   

15. PARENT COMPANY FINANCIAL STATEMENTS
   
   Separate condensed financial statements of Southern Community
   Bancshares, Inc. (the "Parent Company") as of and for the year
   ended September 30, 1997 are presented below:
   

                   Statement of Financial Condition
                          September 30, 1997
                     (Dollar amounts in thousands)
                                   
 ASSETS:                                                  
   Cash and cash equivalents                                    $   753
   Securities available for sale                                  1,750
   Investment in subsidiary                                      10,222
   Due from subsidiary                                            1,888
   Other assets                                                      26
                                                                -------
         Total assets                                           $14,639
                                                                =======
 LIABILITIES:                                      
   Other liabilities                                            $   169
                                                   
 STOCKHOLDERS' EQUITY:                             
   Common stock                                                      11
   Additional paid-in capital                                    10,787
   Retained earnings                                              6,445
   Unearned compensation                                         (2,737)
 Unrealized gain on securities available for sale, net              (36)
                                                                --------
         Total stockholders' equity                              14,470
                                                                -------
         Total liabilities and stockholders' equity             $14,639
                                                                =======
                                                   
<PAGE>

                          Statement of Income
                 For the Year Ended September 30, 1997
                     (Dollar amounts in thousands)
                                   
 INTEREST INCOME                                                   $   143
                                                               
 OPERATING EXPENSE                                                     151
 LOSS BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED          
   CURRENT YEAR SUBSIDIARY EARNINGS                                     (8)
                                                               
 INCOME TAX BENEFIT                                                      3
 LOSS BEFORE EQUITY IN UNDISTRIBUTED CURRENT YEAR              
   SUBSIDIARY EARNINGS                                                  (5)
                                                               
 EQUITY IN UNDISTRIBUTED CURRENT YEAR SUBSIDIARY EARNINGS              797
         Net income                                                $   792


<PAGE>

                        Statement of Cash Flows
                                   
                 For the Year Ended September 30, 1997
                                   
                     (Dollar amounts in thousands)
                                   
                                   
                                   
                                   
CASH FLOWS FROM OPERATING ACTIVITIES:                              
  Net income                                                        $   792
  Equity in undistributed current year earnings of subsidiary   
                                                                        797
                                                                    --------
                                                                         (5)
  Adjustments to reconcile net income to net cash provided by   
  operating activities:
    Amortization of discounts on securities                              (1)
    Increase in other assets                                            (26)
    Increase in other liabilities                                       169
                                                                    --------
        Net cash provided by operating activities                       137
                                                                    --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of securities available for sale                          (3,250)
  Proceeds from maturity of securities available for sale             1,500
                                                                    --------
        Net cash used by investing activities                        (1,750)
                                                                    --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of common stock                              9,854
  Purchase of Bank's common stock                                    (5,382)
  Contributions to plan trusts of the Association                    (1,888)
  Dividends paid                                                       (218)
                                                                    --------
        Net cash provided by financing activities                     2,366
                                                                    --------
NET INCREASE IN CASH AND CASH EQUIVALENTS                               753
                                                              
CASH AND CASH EQUIVALENTS, beginning of year                              0
                                                                    --------
CASH AND CASH EQUIVALENTS, end of year                              $   753
                                                                    ========
                                                              
  Earnings are presented on a retroactive basis, recognizing
  earnings of the subsidiary for the year ended September 30, 1997.
  This presentation is based on the accounting for the Conversion at
  historical cost, in a manner similar to that utilized in a pooling
  of interests.