##### Table of Contents



U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-QSB

|                                                   |  |                                                                                          
|-------------------------------------------------- |  | -----------------------------------------------------------------------------------------
|[X]                                                |  | QUARTERLY REPORT PURSUANT TO 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934         
|                                                   |  |                                                                                          
|For the quarterly period ended       June 30, 2002
|                                                   |  |                                                                                          
|[    ]                                             |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to __________

Commission File Number:       333-85952

SOUTHERN COMMUNITY BANCSHARES, INC.

---

(Exact name of small business issuer as specified in its charter)


|                                |  |                       
|------------------------------- |  | ----------------------
|Georgia                         |  | 58  2639705          
|                                |  |                       
|(State or other jurisdiction of |  | (I.R.S. Employer      
|incorporation or organization)  |  | Identification Number)

525 North Jeff Davis Drive, Fayetteville, Georgia 30214

---

(Address of principal executive office)


(770) 461-4365

---

(Issuers telephone number)


N/A

---

(Former name, former address and former fiscal year, if changed since last report)


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.             
        Yes [X]       No [   ]

State the number of shares outstanding of each of the issuers classes of
common stock, as of August 1, 2002: 810,983; $5 par value

Transitional Small Business Disclosure Format          Yes [   ]        No [X]





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TABLE OF CONTENTS



|                                             |                                                                                                |                                                                             |  |  |  |  |  | 
|-------------------------------------------- | ---------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION              
|                                             | ITEM I. FINANCIAL STATEMENTS                                                                  
|                                             |                                                                                                | CONDENSED CONSOLIDATED BALANCE SHEET                                       
|                                             |                                                                                                | CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)
|                                             |                                                                                                | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                            
|                                             |                                                                                                | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                       
|                                             | Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS  OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|PART II  Other Information                 
|                                             | Item 4. Submission of Matters to a Vote of Security Holders.                                  
|                                             | Item 6. Exhibits and Reports on Form 8-K.                                                     
|SIGNATURES                                  
|CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
|CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER



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##### Table of Contents



SOUTHERN COMMUNITY BANCSHARES, INC. AND SUBSIDIARY

INDEX

|         |  |                       |  |  |                                                                                               |                                                                                                                                       |  |      |   | 
|-------- |  | --------------------- |  |  | --------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | - | 
|         |  |                       |  |  |                                                                                               |                                                                                                                                       |  | Page
|         |  |                       |  |  |                                                                                               |                                                                                                                                       |  |     
|Part I.  |  | Financial Information |  |  |                                                                                               |                                                                                                                                      
|         |  |                       |  |  | Item 1. Financial Statements                                                                  |                                                                                                                                       |  |      |  
|         |  |                       |  |  |                                                                                               | Condensed Consolidated Balance Sheet
as of June 30, 2002                                                                              |  |      | 3 | 
|         |  |                       |  |  |                                                                                               | Condensed Consolidated Statements of Income and
Comprehensive Income (Loss) for the Three and Six Months
Ended June 30, 2002 and 2001 |  |      | 4 | 
|         |  |                       |  |  |                                                                                               | Condensed Consolidated Statements of Cash Flows
For The Six Months Ended June 30, 2002 and 2001                                       |  |      | 5 | 
|         |  |                       |  |  |                                                                                               | Notes to Condensed Consolidated Financial Statements                                                                                  |  |      | 6 | 
|         |  |                       |  |  | Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations |                                                                                                                                       |  | 7-11 |  
|Part II. |  | Other Information     |  |  |                                                                                               |                                                                                                                                      
|         |  |                       |  |  | Item 4. Submission of Matters to a Vote of Security Holders                                   |                                                                                                                                       |  | 12   |  
|         |  |                       |  |  | Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                                                       |  | 12   |  
|         |  |                       |  |  | Signatures                                                                                    |                                                                                                                                       |  | 13   |  





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##### Table of Contents






PART I  FINANCIAL INFORMATION




ITEM I.     FINANCIAL STATEMENTS


SOUTHERN COMMUNITY BANCSHARES, INC. AND SUBSIDIARY




CONDENSED CONSOLIDATED BALANCE SHEET

JUNE 30, 2002
(Unaudited)


|                                             |                                                                                                |                                            |                                      |            |             |  |  | 
|-------------------------------------------- | ---------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------------------ | ---------- | ----------- |  |  | 
|                                             |                                                                                                |                                            |                                      | Assets     |             |  |  | 
|Cash and due from banks                      |                                                                                                | $                                          | 6,244,276                            |           
|Federal funds sold                           |                                                                                                |                                            | 3,920,000                            |           
|Securities available-for-sale, at fair value |                                                                                                |                                            | 9,107,252                            |           
|Loans                                        |                                                                                                |                                            | 78,054,982                           |           
|Less allowance for loan losses               |                                                                                                |                                            | 891,823                              |           
|                                             |                                                                                                |                                            |                                      |           
|                                             |                                                                                                | Loans, net                                 |                                      |            | 77,163,159  | 
|                                             |                                                                                                |                                            |                                      |           
|Premises and equipment                       |                                                                                                |                                            | 3,529,785                            |           
|Other assets                                 |                                                                                                |                                            | 704,943                              |           
|                                             |                                                                                                |                                            |                                      |           
|                                             |                                                                                                | Total assets                               |                                      | $          | 100,669,415 | 
|                                             |                                                                                                |                                            |                                      |           
|                                             |                                                                                                |                                            | Liabilities and Stockholders Equity |            |             |  | 
|Deposits                                     |                                                                                                |                                            |                                      |           
|                                             | Noninterest-bearing                                                                            |                                            | $                                    | 13,169,800 |            
|                                             | Interest-bearing                                                                               |                                            |                                      | 74,683,159 |            
|                                             |                                                                                                |                                            |                                      |           
|                                             |                                                                                                | Total deposits                             |                                      |            | 87,852,959  | 
|Securities sold under repurchase agreements  |                                                                                                |                                            | 3,717,388                            |           
|Other liabilities                            |                                                                                                |                                            | 339,140                              |           
|                                             |                                                                                                |                                            |                                      |           
|                                             |                                                                                                | Total liabilities                          |                                      |            | 91,909,487  | 
|                                             |                                                                                                |                                            |                                      |           
|Stockholders equity                         |                                                                                                |                                            |                                      |           
|                                             | Common stock, par value $5; 5,000,000 shares authorized;
810,983 shares issued and outstanding |                                            |                                      | 4,054,915  |            
|                                             | Capital surplus                                                                                |                                            |                                      | 4,050,868  |            
|                                             | Retained earnings                                                                              |                                            |                                      | 541,839    |            
|                                             | Accumulated other comprehensive income                                                         |                                            |                                      | 112,306    |            
|                                             |                                                                                                |                                            |                                      |           
|                                             |                                                                                                | Total stockholders equity                 |                                      |            | 8,759,928   | 
|                                             |                                                                                                |                                            |                                      |           
|                                             |                                                                                                | Total liabilities and stockholders equity |                                      | $          | 100,669,415 | 
|                                             |                                                                                                |                                            |                                      |           

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

3



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##### Table of Contents



SOUTHERN COMMUNITY BANCSHARES, INC. AND SUBSIDIARY




CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(Unaudited)


|                                                  |                                                                                              |                                                     |         |                    |           |                  |         |           |           |      |         |           |           |   |         |           |           | 
|------------------------------------------------- | -------------------------------------------------------------------------------------------- | --------------------------------------------------- | ------- | ------------------ | --------- | ---------------- | ------- | --------- | --------- | ---- | ------- | --------- | --------- | - | ------- | --------- | --------- | 
|                                                  |                                                                                              |                                                     |         | Three Months Ended |           | Six Months Ended
|                                                  |                                                                                              |                                                     |         | June 30,           |           | June 30,        
|                                                  |                                                                                              |                                                     |         |                    |           |                 
|                                                  |                                                                                              |                                                     |         | 2002               |           | 2001             |         | 2002      |           | 2001
|                                                  |                                                                                              |                                                     |         |                    |           |                  |         |           |           |     
|Interest income                                   |                                                                                              |                                                     |         |                    |           |                  |         |           |           |      |         |           |           |   |         |          
|                                                  | Loans                                                                                        |                                                     | $       | 1,449,511          |           |                  | $       | 1,060,277 |           |      | $       | 2,802,901 |           |   | $       | 1,964,836 |          
|                                                  | Taxable securities                                                                           |                                                     |         | 163,905            |           |                  |         | 359,426   |           |      |         | 342,867   |           |   |         | 649,051   |          
|                                                  | Nontaxable securities                                                                        |                                                     |         | 6,566              |           |                  |         |          |           |      |         | 7,204     |           |   |         |          |          
|                                                  | Federal funds sold                                                                           |                                                     |         | 8,655              |           |                  |         | 44,514    |           |      |         | 23,678    |           |   |         | 136,814   |          
|                                                  |                                                                                              |                                                     |         |                    |           |                  |         |           |           |      |         |           |           |   |         |          
|                                                  |                                                                                              | Total interest income                               |         |                    | 1,628,637 |                  |         |           | 1,464,217 |      |         |           | 3,176,650 |   |         |           | 2,750,701 | 
|Interest expense                                  |                                                                                              |                                                     |         |                    |           |                  |         |           |           |      |         |           |           |   |         |          
|                                                  | Deposits                                                                                     |                                                     |         | 555,417            |           |                  |         | 778,761   |           |      |         | 1,128,223 |           |   |         | 1,455,839 |          
|                                                  | Other borrowings                                                                             |                                                     |         | 9,388              |           |                  |         | 28,394    |           |      |         | 17,676    |           |   |         | 61,637    |          
|                                                  |                                                                                              |                                                     |         |                    |           |                  |         |           |           |      |         |           |           |   |         |          
|                                                  |                                                                                              | Total interest expense                              |         |                    | 564,805   |                  |         |           | 807,155   |      |         |           | 1,145,899 |   |         |           | 1,517,476 | 
|                                                  |                                                                                              | Net interest income                                 |         |                    | 1,063,832 |                  |         |           | 657,062   |      |         |           | 2,030,751 |   |         |           | 1,233,225 | 
|Provision for loan losses                         |                                                                                              |                                                     | 50,000  |                    |           |                  | 149,000 |           |           |      | 92,000  |           |           |   | 209,000 |          
|                                                  |                                                                                              |                                                     |         |                    |           |                  |         |           |           |      |         |           |           |   |         |          
|                                                  |                                                                                              | Net interest income after provision for loan losses |         |                    | 1,013,832 |                  |         |           | 508,062   |      |         |           | 1,938,751 |   |         |           | 1,024,225 | 
|                                                  |                                                                                              |                                                     |         |                    |           |                  |         |           |           |      |         |           |           |   |         |          
|Other income                                      |                                                                                              |                                                     |         |                    |           |                  |         |           |           |      |         |           |           |   |         |          
|                                                  | Service charges on deposit accounts                                                          |                                                     |         | 68,464             |           |                  |         | 33,429    |           |      |         | 123,823   |           |   |         | 60,600    |          
|                                                  | Gain on sales of securities available-for-sale                                               |                                                     |         | 330                |           |                  |         | 59,158    |           |      |         | 7,747     |           |   |         | 232,691   |          
|                                                  | Other operating income                                                                       |                                                     |         | 12,119             |           |                  |         | 5,732     |           |      |         | 23,788    |           |   |         | 35,019    |          
|                                                  |                                                                                              |                                                     |         |                    |           |                  |         |           |           |      |         |           |           |   |         |          
|                                                  |                                                                                              | Total other income                                  |         |                    | 80,913    |                  |         |           | 98,319    |      |         |           | 155,358   |   |         |           | 328,310   | 
|                                                  |                                                                                              |                                                     |         |                    |           |                  |         |           |           |      |         |           |           |   |         |          
|Other expenses                                    |                                                                                              |                                                     |         |                    |           |                  |         |           |           |      |         |           |           |   |         |          
|                                                  | Salaries and employee benefits                                                               |                                                     |         | 370,802            |           |                  |         | 275,761   |           |      |         | 715,240   |           |   |         | 507,366   |          
|                                                  | Occupancy and equipment expenses                                                             |                                                     |         | 110,750            |           |                  |         | 92,767    |           |      |         | 214,094   |           |   |         | 178,789   |          
|                                                  | Other operating expenses                                                                     |                                                     |         | 238,906            |           |                  |         | 144,738   |           |      |         | 491,084   |           |   |         | 276,454   |          
|                                                  |                                                                                              |                                                     |         |                    |           |                  |         |           |           |      |         |           |           |   |         |          
|                                                  |                                                                                              | Total other expenses                                |         |                    | 720,458   |                  |         |           | 513,266   |      |         |           | 1,420,418 |   |         |           | 962,609   | 
|                                                  |                                                                                              |                                                     |         |                    |           |                  |         |           |           |      |         |           |           |   |         |          
|                                                  |                                                                                              | Net income before income taxes                      |         |                    | 374,287   |                  |         |           | 93,115    |      |         |           | 673,691   |   |         |           | 389,926   | 
|Income tax expense                                |                                                                                              |                                                     | 142,199 |                    |           |                  | 2,309   |           |           |      | 256,015 |           |           |   | 2,309   |          
|                                                  |                                                                                              |                                                     |         |                    |           |                  |         |           |           |      |         |           |           |   |         |          
|                                                  |                                                                                              | Net income                                          |         |                    | 232,088   |                  |         |           | 90,806    |      |         |           | 417,676   |   |         |           | 387,617   | 
|                                                  |                                                                                              |                                                     |         |                    |           |                  |         |           |           |      |         |           |           |   |         |          
|Other comprehensive income (loss)                 |                                                                                              |                                                     |         |                    |           |                  |         |           |           |      |         |           |           |   |         |          
|                                                  | Unrealized gains (losses) on securities available-for-sale
arising during period, net of tax |                                                     |         | 62,584             |           |                  |         | (73,121   | )         |      |         | (13,433   | )         |   |         | 240,415   |          
|                                                  | Reclassification adjustment for gains realized in net
income, net of tax                     |                                                     |         | (205               | )         |                  |         | (59,158   | )         |      |         | (4,803    | )         |   |         | (232,691  | )        
|                                                  |                                                                                              |                                                     |         |                    |           |                  |         |           |           |      |         |           |           |   |         |          
|                                                  |                                                                                              | Other comprehensive income (loss)                   |         |                    | 62,379    |                  |         |           | (132,279  | )    |         |           | (18,236   | ) |         |           | 7,724     | 
|                                                  |                                                                                              |                                                     |         |                    |           |                  |         |           |           |      |         |           |           |   |         |          
|                                                  | Comprehensive income (loss)                                                                  |                                                     | $       | 294,467            |           |                  | $       | (41,473   | )         |      | $       | 399,440   |           |   | $       | 395,341   |          
|                                                  |                                                                                              |                                                     |         |                    |           |                  |         |           |           |      |         |           |           |   |         |          
|Basic earnings per common share                   |                                                                                              | $                                                   | 0.29    |                    |           | $                | 0.11    |           |           | $    | 0.52    |           |           | $ | 0.48    |          
|                                                  |                                                                                              |                                                     |         |                    |           |                  |         |           |           |      |         |           |           |   |         |          
|Diluted earnings per common share                 |                                                                                              | $                                                   | 0.29    |                    |           | $                | 0.11    |           |           | $    | 0.52    |           |           | $ | 0.48    |          
|                                                  |                                                                                              |                                                     |         |                    |           |                  |         |           |           |      |         |           |           |   |         |          
|Cash dividends declared per share of common stock |                                                                                              | $                                                   |        |                    |           | $                |        |           |           | $    |        |           |           | $ |        |          
|                                                  |                                                                                              |                                                     |         |                    |           |                  |         |           |           |      |         |           |           |   |         |          

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

4



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##### Table of Contents



SOUTHERN COMMUNITY BANCSHARES, INC. AND SUBSIDIARY




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(Unaudited)


|                                             |                                                                                   |                                               |                                           |             |          |             |           |             |          |             |  
|-------------------------------------------- | --------------------------------------------------------------------------------- | --------------------------------------------- | ----------------------------------------- | ----------- | -------- | ----------- | --------- | ----------- | -------- | ----------- | -
|                                             |                                                                                   |                                               |                                           |             | 2002     |             | 2001     
|                                             |                                                                                   |                                               |                                           |             |          |             |          
|OPERATING ACTIVITIES                         |                                                                                   |                                               |                                           |             |          |             |           |            
|                                             | Net income                                                                        |                                               | $                                         | 417,676     |          |             | $         | 387,617     |         
|                                             | Adjustments to reconcile net income to net cash
provided by operating activities: |                                               |                                           |             |          |             |           |             |         
|                                             |                                                                                   | Depreciation                                  |                                           |             | 125,884  |             |           |             | 100,638  |            
|                                             |                                                                                   | Provision for loan losses                     |                                           |             | 92,000   |             |           |             | 209,000  |            
|                                             |                                                                                   | Gain on sale of securities available-for-sale |                                           |             | (7,747   | )           |           |             | (232,691 | )          
|                                             |                                                                                   | Net other operating activities                |                                           |             | (135,003 | )           |           |             | 108,129  |            
|                                             |                                                                                   |                                               |                                           |             |          |             |           |            
|                                             |                                                                                   |                                               | Net cash provided by operating activities |             |          | 492,810     |           |             |          | 572,693     |  
|                                             |                                                                                   |                                               |                                           |             |          |             |           |            
|INVESTING ACTIVITIES                         |                                                                                   |                                               |                                           |             |          |             |           |            
|                                             | Purchases of securities available-for-sale                                        |                                               |                                           | (1,981,225  | )        |             |           | (10,737,772 | )       
|                                             | Proceeds from maturities of securities available-for-sale                         |                                               |                                           | 2,278,235   |          |             |           | 1,076,096   |         
|                                             | Proceeds from sales of securities available-for-sale                              |                                               |                                           | 3,702,449   |          |             |           | 10,916,300  |         
|                                             | Net (increase) decrease in federal funds sold                                     |                                               |                                           | (1,388,000  | )        |             |           | 2,650,000   |         
|                                             | Net increase in loans                                                             |                                               |                                           | (12,335,628 | )        |             |           | (20,625,788 | )       
|                                             | Purchase of premises and equipment                                                |                                               |                                           | (594,167    | )        |             |           | (148,037    | )       
|                                             |                                                                                   |                                               |                                           |             |          |             |           |            
|                                             |                                                                                   |                                               | Net cash used in investing activities     |             |          | (10,318,336 | )         |             |          | (16,869,201 | )
|                                             |                                                                                   |                                               |                                           |             |          |             |           |            
|FINANCING ACTIVITIES                         |                                                                                   |                                               |                                           |             |          |             |           |            
|                                             | Net increase in deposits                                                          |                                               |                                           | 13,157,979  |          |             |           | 18,458,179  |         
|                                             | Net increase (decrease) in repurchase agreements                                  |                                               |                                           | 1,507,149   |          |             |           | (1,452,297  | )       
|                                             |                                                                                   |                                               |                                           |             |          |             |           |            
|                                             |                                                                                   |                                               | Net cash provided by financing activities |             |          | 14,665,128  |           |             |          | 17,005,882  |  
|                                             |                                                                                   |                                               |                                           |             |          |             |           |            
|Net increase in cash and due from banks      |                                                                                   |                                               | 4,839,602                                 |             |          |             | 709,374   |            
|Cash and due from banks, beginning of period |                                                                                   |                                               | 1,404,674                                 |             |          |             | 1,953,067 |            
|                                             |                                                                                   |                                               |                                           |             |          |             |           |            
|Cash and due from banks, end of period       |                                                                                   | $                                             | 6,244,276                                 |             |          | $           | 2,662,441 |            
|                                             |                                                                                   |                                               |                                           |             |          |             |           |            

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

5



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##### Table of Contents



SOUTHERN COMMUNITY BANCSHARES, INC. AND SUBSIDIARY




NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


|        |  |                                                                                                                                                                                                                                                                                                                                                                                         
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 1. |  | BASIS OF PRESENTATION                                                                                                                                                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                         
|        |  | The consolidated financial information included for Southern
Community Bancshares, Inc. (the Company) and Southern Community
Bank (the Bank) herein is unaudited; however, such information
reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary
for a fair statement of results for the interim periods.
|        |  |                                                                                                                                                                                                                                                                                                                                                                                         
|        |  | The results of operations for the three and six month periods
ended June 30, 2002 are not necessarily indicative of the results
to be expected for the full year.                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                         
|NOTE 2. |  | EARNINGS PER COMMON SHARE                                                                                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                         
|        |  | Presented below is a summary of the components used to calculate
basic and diluted earnings per common share for the periods ended
June 30, 2002 and 2001.                                                                                                                                                                                                                              

|                                                                                                                                 |  |                    |         |                  |  |      |         |      |  |   |         |  |  |   |         | 
|-------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------- | ---------------- |  | ---- | ------- | ---- |  | - | ------- |  |  | - | ------- | 
|                                                                                                                                 |  | Three Months Ended |         | Six Months Ended
|                                                                                                                                 |  | June 30,           |         | June 30,        
|                                                                                                                                 |  |                    |         |                 
|                                                                                                                                 |  | 2002               |         | 2001             |  | 2002 |         | 2001
|                                                                                                                                 |  |                    |         |                  |  |      |         |     
|Net income                                                                                                                       |  | $                  | 232,088 |                  |  | $    | 90,806  |      |  | $ | 417,676 |  |  | $ | 387,617 | 
|                                                                                                                                 |  |                    |         |                  |  |      |         |      |  |   |         |  |  |   |         | 
|Weighted average common shares outstanding                                                                                       |  |                    | 810,983 |                  |  |      | 810,983 |      |  |   | 810,983 |  |  |   | 810,983 | 
|Net effect of the assumed exercise of stock
options based on the treasury stock method
using average market price for the period |  |                    |        |                  |  |      |        |      |  |   |        |  |  |   |        | 
|                                                                                                                                 |  |                    |         |                  |  |      |         |      |  |   |         |  |  |   |         | 
|Total weighted average common shares and
common stock equivalents outstanding                                                    |  |                    | 810,983 |                  |  |      | 810,983 |      |  |   | 810,983 |  |  |   | 810,983 | 
|                                                                                                                                 |  |                    |         |                  |  |      |         |      |  |   |         |  |  |   |         | 
|Diluted earnings per common share                                                                                                |  | $                  | 0.29    |                  |  | $    | 0.11    |      |  | $ | 0.52    |  |  | $ | 0.48    | 
|                                                                                                                                 |  |                    |         |                  |  |      |         |      |  |   |         |  |  |   |         | 

|        |  |                                                                                                                                                        
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 3. |  | COMMON STOCK OFFERING                                                                                                                                  
|        |  |                                                                                                                                                        
|        |  | The Company is offering to sell a maximum of 640,000 shares of its
common stock at a price of $12.50 per share. The offering expires
December 31, 2002.

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SOUTHERN COMMUNITY BANCSHARES, INC. AND SUBSIDIARY




|        |  |                                                                                      
|------- |  | -------------------------------------------------------------------------------------
|Item 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is managements discussion and analysis of certain significant
factors which have affected our financial position and operating results during
the periods included in the accompanying condensed consolidated financial
statements.

Forward-Looking Statements

This quarterly report contains certain forward-looking statements which are
based on certain assumptions and describe future plans, strategies, and our
expectations. These forward-looking statements are generally identified by use
of the words believe, expect, intend, anticipate, estimate,
project, or similar expressions. Our ability to predict results or the
actual effect of future plans or strategies is inherently uncertain. Factors
which could have a material adverse effect on our operations include, but are
not limited to, changes in interest rates, general economic conditions,
legislation and regulation, monetary and fiscal policies of the U.S.
Government, including policies of the U.S. Treasury and the Federal Reserve
Board, the quality or composition of our loan and investment portfolios, demand
for loan products, deposit flows, competition, demand for financial services in
our market area, and accounting principles and guidelines. You should consider
these risks and uncertainties in evaluating forward-looking statements and
should not place undue reliance on such statements. We will not publicly
release the result of any revisions which may be made to any forward-looking
statements to reflect events or circumstances after the date of such statements
or to reflect the occurrence of anticipated or unanticipated events.

FINANCIAL CONDITION

Total assets increased $15 million from $85.7 million to $100.7 million, or
17.40% for the six months ended June 30, 2002. The increase in total assets in
2002 is less than the 28.9% growth for the same period in 2001. The growth in
both years continues to be funded primarily by increases in total deposits,
which increased by $13.1 million and $18.5 million, respectively. The net
increase in total assets for the six months ended June 30, 2002 consisted
primarily of an increase of $12.3 million in total loans, an increase of $4.8
million in cash and due from banks, an increase in Federal funds sold of $1.4
million, and an increase of $468,000 in premises and equipment, offset by a
decrease in securities available-for-sale of $4.0 million. The loan to deposit
ratio at June 30, 2002 was 89% compared to 79% at June 30, 2001. The increase
in the loan to deposit ratio as compared to the same period in 2001 is due to
total loans increasing by $25.9 million and total deposits increasing by $21.5
million.

Stockholders equity increased by $399,000 for the six months ended June 30,
2002. This net increase consists of net income of $418,000 and a decrease in
unrealized gains on securities of $18,000.

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LIQUIDITY

Liquidity management involves the matching of the cash flow requirements of
customer withdrawals of funds and the funding of loan originations, and the
ability of our subsidiary bank to meet those requirements. Management monitors
and maintains appropriate levels of liquidity so that maturities of assets and
deposit growth are such that adequate funds are provided to meet estimated
customer withdrawals and loan requests.

At June 30, 2002, the Banks liquidity ratio was 16.57% which is below the
Banks target ratio of 20%. As proceeds from the stock offering currently in
process are received, the liquidity ratio will return to a level above 20%.

REGULATORY CAPITAL REQUIREMENTS

Banking regulations require us to maintain minimum capital levels in relation
to assets. At June 30, 2002, the Banks capital ratios were considered
adequate based on regulatory minimum capital requirements. The minimum capital
requirements and the actual capital ratios for the Bank at June 30, 2002 are as
follows:

|                                       |               |  |       |       |             |  |            |      |  
|-------------------------------------- | ------------- |  | ----- | ----- | ----------- |  | ---------- | ---- | -
|                                       |               |  |       |       |             |  | Regulatory
|                                       |               |  |       |       |             |  | Minimum   
|                                       |               |  | Bank  |       | Requirement
|                                       |               |  |       |       |            
|Leverage Capital Ratio                 |               |  | 9.04  | %     |             |  | 4.00       | %   
|Risk-Based Capital Ratios
Core Capital |               |  | 10.15 | %     |             |  | 4.00       | %   
|                                       | Total Capital |  |       | 11.20 | %           |  |            | 8.00 | %

We are not aware of any other recommendations by the regulatory authorities,
events or trends, which, if they were to be implemented, would have a material
effect on our liquidity, capital resources, or operations.

RESULTS OF OPERATIONS

Net Interest Income. Net interest income increased by $407,000 and $798,000
for the three and six month periods ended June 30, 2002, respectively, compared
to the same period in 2001. The increase in net interest income for both
periods ended June 30, 2002 is attributable to an increase in earning assets of
$18.8 million as compared to June 30, 2001. As noted above, loans increased
during this period by $25.9 million, which generally provide greater yields to
the Company. The increase in loans was partially funded by a decrease in
securities of $11.0 million during this period. During this same period, total
deposits increased by $21.5 million, which included an increase of $18.6
million in interest-bearing deposits and an increase of $2.9 million in
non-interest bearing deposits. The overall result of an increase in net
interest income is based on the spread between rates earned on interest earning
assets and rates paid on interest bearing liabilities. The yield on total
loans for the six months ended June 30, 2002 is approximately 7.89%, which is
217 basis points less than the average yield on loans for the six months ended
June 30, 2001.

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The net interest margin increased to 4.71% at June 30, 2002 as compared to
3.93% at June 30, 2001.

Provision for Loan Losses. The provision for loan losses is based on
managements evaluation of the economic environment, the history of charged off
loans and recoveries, size and composition of the loan portfolio, nonperforming
and past due loans, and other aspects of the loan portfolio. We review the
allowance for loan loss on a quarterly basis and make provisions as necessary.
A provision of $92,000 was made during the six month period ending June 30,
2002 based upon this evaluation process as compared to $209,000 for the same
period in 2001. The allowance for loan loss as a percentage of total loans was
1.14% at June 30, 2002, 1.22% at December 31, 2001, and 1.21% at June 30, 2001.
Management believes the allowance for loan loss at June 30, 2002 is adequate
to meet any future losses in the loan portfolio. The decrease in the provision
in 2002 as compared to 2001 reflects the slower loan growth for the six months
ended June 30, 2002.

At June 30, 2002 and 2001, nonaccrual, past due, and restructured loans were as
follows:

|                                                                                                         |  |                        |    |          |  |   |   | 
|-------------------------------------------------------------------------------------------------------- |  | ---------------------- | -- | -------- |  | - | - | 
|                                                                                                         |  | June 30,               |    | June 30,
|                                                                                                         |  | 2002                   |    | 2001    
|                                                                                                         |  |                        |    |         
|                                                                                                         |  | (Dollars in thousands)
|Total nonaccruing loans                                                                                  |  | $                      | 22 |          |  | $ | 8 | 
|Loans contractually past due ninety days
or more as to interest or principal
payments and still accruing |  |                        |   |          |  |   |  | 
|Restructured loans                                                                                       |  |                        |   |          |  |   |  | 

It is our policy to discontinue the accrual of interest income when, in the
opinion of management, collection of such interest becomes doubtful. This
status is accorded such interest when (1) there is a significant deterioration
in the financial condition of the borrower and full repayment of principal and
interest is not expected or (2) the principal or interest is more than ninety
days past due, unless the loan is both well-secured and in the process of
collection. Accrual of interest on such loans is resumed when, in managements
judgment, the collection of interest and principal becomes probable.

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Loans classified for regulatory purposes as loss, doubtful, substandard, or
special mention that have not been included in the table above do not represent
or result from trends or uncertainties which management reasonably expects will
materially impact future operating results, liquidity, or capital resources.
These classified loans do not represent material credits about which management
is aware of any information which causes management to have serious doubts as
to the ability of such borrowers to comply with the loan repayment terms.

Information regarding certain loans and allowance for loan loss data for the
six months ended June 30, 2002 and 2001 is as follows:

|                                                                              |                          |   |                        |    |      |   |        |   | 
|----------------------------------------------------------------------------- | ------------------------ | - | ---------------------- | -- | ---- | - | ------ | - | 
|                                                                              |                          |   | Six Months Ended      
|                                                                              |                          |   | June 30,              
|                                                                              |                          |   |                       
|                                                                              |                          |   | 2002                   |    | 2001
|                                                                              |                          |   |                        |    |     
|                                                                              |                          |   | (Dollars in thousands)
|Average amount of loans outstanding                                           |                          | $ | 71,031                 |    |      | $ | 39,070 |  
|                                                                              |                          |   |                        |    |      |   |        |  
|Balance of allowance for loan losses at beginning of period                   |                          | $ | 804                    |    |      | $ | 420    |  
|Loans charged off                                                             |                          |   |                        |    |      |   |        |  
|                                                                              | Commercial and financial |   |                        | (1 | )    |   |        |  | 
|                                                                              | Real estate              |   |                        |   |      |   |        |  | 
|                                                                              | Installment              |   |                        | (3 | )    |   |        |  | 
|                                                                              |                          |   |                        |    |      |   |        |  
|                                                                              |                          |   | (4                     | )  |      |   |       |  
|                                                                              |                          |   |                        |    |      |   |        |  
|Loans recovered                                                               |                          |   |                        |    |      |   |        |  
|                                                                              | Commercial and financial |   |                        |   |      |   |        |  | 
|                                                                              | Real estate              |   |                        |   |      |   |        |  | 
|                                                                              | Installment              |   |                        |   |      |   |        |  | 
|                                                                              |                          |   |                        |    |      |   |        |  
|                                                                              |                          |   |                       |    |      |   |       |  
|                                                                              |                          |   |                        |    |      |   |        |  
|Net charge-offs                                                               |                          |   | (4                     | )  |      |   |       |  
|                                                                              |                          |   |                        |    |      |   |        |  
|Additions to allowance charged to operating expense during period             |                          |   | 92                     |    |      |   | 209    |  
|                                                                              |                          |   |                        |    |      |   |        |  
|Balance of allowance for loan losses at end of period                         |                          |   | 892                    |    |      |   | 629    |  
|                                                                              |                          |   |                        |    |      |   |        |  
|Ratio of net loans charged-off during the
period to average loans outstanding |                          |   | 0.01                   | %  |      |   |       | %
|                                                                              |                          |   |                        |    |      |   |        |  

Other Income.Other income decreased by $17,000 and $173,000 for the three and
six months ended June 30, 2002, respectively, compared to the same period in
2001. The most significant difference which affected both periods was a
decrease in gains on sales of securities available-for-sale of $59,000 and
$225,000 for the three and six months ended June 30, 2002, respectively,
compared to the same period in 2001. Loan growth has been partially funded
with the proceeds from the sale of securities for the six months ended June 30,
2002 and 2001. The decrease was offset by an increase in service charges of
$50,000 and $78,000, respectively. The increase in service charges is
consistent with the growth in deposit accounts.

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Other Expenses.Other expenses increased by $207,000 and $458,000 for the
three and six months ended June 30, 2002 as compared to the same periods in
2001. The most significant increases in 2002 are increases of $95,000 and
$208,000 in salaries and employee benefits and other operating expenses of
$94,000 and $215,000 for the three and six month periods ended June 30, 2002.
The increase in salaries and employee benefits for both the three and six month
periods represents normal increases in salaries and an increase in the number
of employees. At June 30, 2002, the number of full-time equivalent employees
was 34 compared to 20 at June 30, 2001. Other operating expenses include
one-time expenses of $92,000 related to the formation of the holding company
and stock offering. The remaining increases in other operating expenses
include increases in expenses directly related to increased activity in both
loans and deposits.

Income Taxes.Income tax expense increased by $140,000 and $254,000 for the
three and six months ended June 30, 2002 as compared to 2001. The effective
tax rate for 2002 and 2001 was 38% and %, respectively. Prior to 2002, the
Company had net operating loss carryforwards which were utilized to reduce tax
expense.

Net Income. Net income increased by $141,000 and $30,000 for the three and six
months ended June 30, 2002 as compared to the same period in 2001. The primary
reason for the increase in net income for the three and six months ended June
30, 2002 as compared to the same period in 2001 is the increase in net interest
income, less the decrease in gains on sale of securities for the six month
periods.

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##### Table of Contents






PART II  Other Information




|        |  |                                                                                                                                                                                                                                                                       
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item 4. |  | Submission of Matters to a Vote of Security Holders.                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                       
|        |  | The annual meeting of the stockholders of Southern Community
Bancshares, Inc. was held on April 23, 2002. A total of 571,659
of the shares issued and outstanding registered for the meeting
either in person or by proxy. The results of the meeting were as
follows:
|        |  |                                                                                                                                                                                                                                                                       
|        |  | (a)      The following directors were elected:                                                                                                                                                                                                                        

|                      |  |     |         |         |  |         |     |  |  |  |   | 
|--------------------- |  | --- | ------- | ------- |  | ------- | --- |  |  |  | - | 
|Directors             |  | For |         | Against |  | Abstain
|                      |  |     |         |         |  |        
|Richard J. Dumas      |  |     | 571,559 |         |  |         |     |  |  |  |  | 
|Wm. Wayne Leslie      |  |     | 571,559 |         |  |         | 100 |  |  |  |  | 
|Jackie L. Mask        |  |     | 571,559 |         |  |         |     |  |  |  |  | 
|James S. Cameron      |  |     | 571,559 |         |  |         |     |  |  |  |  | 
|Thomas D. Reese       |  |     | 571,559 |         |  |         |     |  |  |  |  | 
|Dan V. Stinchcomb     |  |     | 571,559 |         |  |         |     |  |  |  |  | 
|George R. Davis, Sr.  |  |     | 571,559 |         |  |         |     |  |  |  |  | 
|Robert B. Dixon, Jr.  |  |     | 571,559 |         |  |         |     |  |  |  |  | 
|Gary D. McGaha        |  |     | 571,559 |         |  |         |     |  |  |  |  | 
|William M. Strain, MD |  |     | 571,559 |         |  |         |     |  |  |  |  | 




|        |  |                                  
|------- |  | ---------------------------------
|Item 6. |  | Exhibits and Reports on Form 8-K.

|        |  |                                             
|------- |  | --------------------------------------------
|Exhibit |  |                                             
|Number  |  | Exhibit                                     
|        |  |                                             
|99.1    |  | Certification of Principal Executive Officer
|99.2    |  | Certification of Principal Financial Officer

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

|      |  |                 |  |                                                           | 
|----- |  | --------------- |  | --------------------------------------------------------- | 
|      |  |                 |  | SOUTHERN COMMUNITY
BANCSHARES, INC.                      
|      |  |                 |  |                                                          
|Date: |  | August 14, 2002 |  | /s/ Gary McGaha                                          
|      |  |                 |  |                                                          
|      |  |                 |  | Gary McGaha
President and Director                       
|      |  |                 |  |                                                          
|Date: |  | August 14, 2002 |  | /s/ Leslye Grindle                                       
|      |  |                 |  |                                                          
|      |  |                 |  | Leslye Grindle
Vice President and
Chief Financial Officer

13