##### 



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, 2003

|  |  |                                                                                          
|- |  | -----------------------------------------------------------------------------------------
|o |  | 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: 333-86082

SOUTHERN COMMUNITY BANCSHARES, INC.

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


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

State the number of shares outstanding of each of the issuers classes of
capital stock, as of August 1, 2003: 1,450,983; no par value

Transitional Small Business Disclosure Format   Yes   o   No   x





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##### 



SOUTHERN COMMUNITY BANCSHARES, INC. AND SUBSIDIARY

INDEX

|                              |                                                                                               |                                                |                                                                                                           |       |      |     | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------- | --------------------------------------------------------------------------------------------------------- | ----- | ---- | --- | 
|                              |                                                                                               |                                                |                                                                                                           |       | Page
|                              |                                                                                               |                                                |                                                                                                           |       |     
|Part I. Financial Information |                                                                                               |                                                |                                                                                                           |      
|                              | Item 1. Financial Statements                                                                  |                                                |                                                                                                           |       |     
|                              |                                                                                               | Consolidated Balance Sheet as of June 30, 2003 |                                                                                                           |       | 3    |    
|                              |                                                                                               |                                                | Consolidated Statements of Income for the Three and Six Months
Ended June 30, 2003 and 2002               |       |      | 4   | 
|                              |                                                                                               |                                                | Consolidated Statements of Comprehensive Income
for the Three and Six Months Ended June 30, 2003 and 2002 |       |      | 5   | 
|                              |                                                                                               |                                                | Consolidated Statements of Cash Flows
For The Six Months Ended June 30, 2003 and 2002                     |       |      | 6   | 
|                              |                                                                                               |                                                | Notes to Consolidated Financial Statements                                                                |       |      | 7-8 | 
|                              | Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations |                                                |                                                                                                           | 9-13  |     
|                              | Item 3. Controls and Procedures                                                               |                                                |                                                                                                           | 13    |     
|Part II. Other Information    |                                                                                               |                                                |                                                                                                           |      
|                              | Item 4. Submission of Matters to a Vote of Security Holders                                   |                                                |                                                                                                           | 14    |     
|                              | Item 6. Exhibits and Reports on Form 8-K                                                      |                                                |                                                                                                           | 14    |     
|                              | Signatures                                                                                    |                                                |                                                                                                           | 15    |     
|                              | Certifications                                                                                |                                                |                                                                                                           | 16-21 |     

2



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##### 



SOUTHERN COMMUNITY BANCSHARES, INC.
AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
June 30, 2003

|                                            |                                                                                                    |                                            |             |             |             | 
|------------------------------------------- | -------------------------------------------------------------------------------------------------- | ------------------------------------------ | ----------- | ----------- | ----------- | 
|Assets                                      |                                                                                                    | 2003                                      
|                                            |                                                                                                    |                                           
|Cash and due from banks                     |                                                                                                    | $                                          | 4,526,364   |            
|Federal funds sold                          |                                                                                                    |                                            | 12,366,000  |            
|Securities available-for-sale               |                                                                                                    |                                            | 36,035,020  |            
|Restricted equity securities                |                                                                                                    |                                            | 288,900     |            
|Loans                                       |                                                                                                    |                                            | 101,920,008 |            
|Less allowance for loan losses              |                                                                                                    |                                            | 1,220,913   |            
|                                            |                                                                                                    |                                            |             |            
|                                            |                                                                                                    | Loans, net                                 |             |             | 100,699,095 | 
|Premises and equipment                      |                                                                                                    |                                            | 4,574,442   |            
|Other assets                                |                                                                                                    |                                            | 946,598     |            
|                                            |                                                                                                    |                                            |             |            
|                                            |                                                                                                    | Total assets                               |             | $           | 159,436,419 | 
|                                            |                                                                                                    |                                            |             |            
|Liabilities and Shareholders Equity        |                                                                                                    |                                            |             |            
|Deposits                                    |                                                                                                    |                                            |             |            
|                                            | Noninterest-bearing                                                                                |                                            | $           | 16,499,755  |            
|                                            | Interest-bearing                                                                                   |                                            |             | 120,762,691 |            
|                                            |                                                                                                    |                                            |             |            
|                                            |                                                                                                    | Total deposits                             |             |             | 137,262,446 | 
|Securities sold under repurchase agreements |                                                                                                    |                                            | 3,647,360   |            
|Other liabilities                           |                                                                                                    |                                            | 408,393     |            
|                                            |                                                                                                    |                                            |             |            
|                                            |                                                                                                    | Total liabilities                          |             |             | 141,318,199 | 
|                                            |                                                                                                    |                                            |             |            
|Shareholders equity                        |                                                                                                    |                                            |             |            
|                                            | Capital stock, no par value; 10,000,000 shares authorized;
1,450,983 shares issued and outstanding |                                            |             | 16,047,815  |            
|                                            | Retained earnings                                                                                  |                                            |             | 1,843,057   |            
|                                            | Accumulated other comprehensive income                                                             |                                            |             | 227,348     |            
|                                            |                                                                                                    |                                            |             |            
|                                            |                                                                                                    | Total shareholders equity                 |             |             | 18,118,220  | 
|                                            |                                                                                                    |                                            |             |            
|                                            |                                                                                                    | Total liabilities and shareholders equity |             | $           | 159,436,419 | 
|                                            |                                                                                                    |                                            |             |            

See Notes to Consolidated Financial Statements.

3



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##### 



SOUTHERN COMMUNITY BANCSHARES, INC.
AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME
Three and Six Months Ended June 30, 2003 and 2002

|                             |                                               |                                |                                                     |           |                    |           |                  |           |         |           |         |           |           |           |         |           |         |           | 
|---------------------------- | --------------------------------------------- | ------------------------------ | --------------------------------------------------- | --------- | ------------------ | --------- | ---------------- | --------- | ------- | --------- | ------- | --------- | --------- | --------- | ------- | --------- | ------- | --------- | 
|                             |                                               |                                |                                                     |           | Three Months Ended |           | Six Months Ended
|                             |                                               |                                |                                                     |           | June 30,           |           | June 30,        
|                             |                                               |                                |                                                     |           |                    |           |                 
|                             |                                               |                                |                                                     |           | 2003               |           | 2002             |           | 2003    |           | 2002   
|                             |                                               |                                |                                                     |           |                    |           |                  |           |         |           |        
|Interest income              |                                               |                                |                                                     |           |                    |           |                  |           |         |           |         |           |           |           |         |          
|                             | Loans, including fees                         |                                |                                                     | 1,836,952 |                    |           |                  | 1,449,511 |         |           |         | 3,539,181 |           |           |         | 2,802,901 |        
|                             | Taxable securities                            |                                |                                                     | 154,050   |                    |           |                  | 163,905   |         |           |         | 293,785   |           |           |         | 342,867   |        
|                             | Nontaxable securities                         |                                |                                                     | 44,568    |                    |           |                  | 6,566     |         |           |         | 85,195    |           |           |         | 7,204     |        
|                             | Federal funds sold                            |                                |                                                     | 24,239    |                    |           |                  | 8,655     |         |           |         | 36,806    |           |           |         | 23,678    |        
|                             |                                               |                                |                                                     |           |                    |           |                  |           |         |           |         |           |           |           |         |           |        
|                             |                                               |                                | Total interest income                               |           |                    | 2,059,809 |                  |           |         | 1,628,637 |         |           |           | 3,954,967 |         |           |         | 3,176,650 | 
|                             |                                               |                                |                                                     |           |                    |           |                  |           |         |           |         |           |           |           |         |           |        
|Interest expense             |                                               |                                |                                                     |           |                    |           |                  |           |         |           |         |           |           |           |         |          
|                             | Deposits                                      |                                |                                                     | 683,889   |                    |           |                  | 555,417   |         |           |         | 1,298,707 |           |           |         | 1,128,223 |        
|                             | Other borrowings                              |                                |                                                     | 8,390     |                    |           |                  | 9,388     |         |           |         | 17,660    |           |           |         | 17,676    |        
|                             |                                               |                                |                                                     |           |                    |           |                  |           |         |           |         |           |           |           |         |           |        
|                             |                                               |                                | Total interest expense                              |           |                    | 692,279   |                  |           |         | 564,805   |         |           |           | 1,316,367 |         |           |         | 1,145,899 | 
|                             |                                               |                                |                                                     |           |                    |           |                  |           |         |           |         |           |           |           |         |           |        
|                             |                                               |                                | Net interest income                                 |           |                    | 1,367,530 |                  |           |         | 1,063,832 |         |           |           | 2,638,600 |         |           |         | 2,030,751 | 
|Provision for loan losses    |                                               |                                | 85,000                                              |           |                    |           | 50,000           |           |         |           | 155,000 |           |           |           | 92,000  |          
|                             |                                               |                                |                                                     |           |                    |           |                  |           |         |           |         |           |           |           |         |           |        
|                             |                                               |                                | Net interest income after provision for loan losses |           |                    | 1,282,530 |                  |           |         | 1,013,832 |         |           |           | 2,483,600 |         |           |         | 1,938,751 | 
|                             |                                               |                                |                                                     |           |                    |           |                  |           |         |           |         |           |           |           |         |           |        
|Other income                 |                                               |                                |                                                     |           |                    |           |                  |           |         |           |         |           |           |           |         |          
|                             | Service charges on deposit accounts           |                                |                                                     | 82,294    |                    |           |                  | 68,464    |         |           |         | 171,107   |           |           |         | 123,823   |        
|                             | Gain on sale of securities available-for-sale |                                |                                                     | 40,801    |                    |           |                  | 330       |         |           |         | 40,801    |           |           |         | 7,747     |        
|                             | Gain on sale of loans                         |                                |                                                     |          |                    |           |                  |          |         |           |         | 21,113    |           |           |         |          |        
|                             | Other operating income                        |                                |                                                     | 13,246    |                    |           |                  | 12,119    |         |           |         | 19,922    |           |           |         | 23,788    |        
|                             |                                               |                                |                                                     |           |                    |           |                  |           |         |           |         |           |           |           |         |           |        
|                             |                                               |                                | Total other income                                  |           |                    | 136,341   |                  |           |         | 80,913    |         |           |           | 252,943   |         |           |         | 155,358   | 
|                             |                                               |                                |                                                     |           |                    |           |                  |           |         |           |         |           |           |           |         |           |        
|Other expenses               |                                               |                                |                                                     |           |                    |           |                  |           |         |           |         |           |           |           |         |          
|                             | Salaries and employee benefits                |                                |                                                     | 483,461   |                    |           |                  | 370,802   |         |           |         | 924,814   |           |           |         | 715,240   |        
|                             | Equipment and occupancy expenses              |                                |                                                     | 130,453   |                    |           |                  | 110,750   |         |           |         | 244,104   |           |           |         | 214,094   |        
|                             | Other operating expenses                      |                                |                                                     | 299,279   |                    |           |                  | 238,906   |         |           |         | 553,688   |           |           |         | 491,084   |        
|                             |                                               |                                |                                                     |           |                    |           |                  |           |         |           |         |           |           |           |         |           |        
|                             |                                               |                                | Total other expenses                                |           |                    | 913,193   |                  |           |         | 720,458   |         |           |           | 1,722,606 |         |           |         | 1,420,418 | 
|                             |                                               |                                |                                                     |           |                    |           |                  |           |         |           |         |           |           |           |         |           |        
|                             |                                               | Net income before income taxes |                                                     |           | 505,678            |           |                  |           | 374,287 |           |         |           | 1,013,937 |           |         |           | 673,691 |          
|Income tax expense           |                                               |                                | 159,750                                             |           |                    |           | 142,199          |           |         |           | 352,888 |           |           |           | 256,015 |          
|                             |                                               |                                |                                                     |           |                    |           |                  |           |         |           |         |           |           |           |         |           |        
|                             |                                               | Net income                     |                                                     |           | 345,928            |           |                  |           | 232,088 |           |         |           | 661,049   |           |         |           | 417,676 |          
|                             |                                               |                                |                                                     |           |                    |           |                  |           |         |           |         |           |           |           |         |           |        
|Basic earnings per share     |                                               |                                | 0.24                                                |           |                    |           | 0.29             |           |         |           | 0.46    |           |           |           | 0.52    |          
|                             |                                               |                                |                                                     |           |                    |           |                  |           |         |           |         |           |           |           |         |           |        
|Diluted earnings per share   |                                               |                                | 0.24                                                |           |                    |           | 0.29             |           |         |           | 0.46    |           |           |           | 0.52    |          
|                             |                                               |                                |                                                     |           |                    |           |                  |           |         |           |         |           |           |           |         |           |        
|Dividends declared per share |                                               |                                |                                                    |           |                    |           |                 |           |         |           |        |           |           |           |        |          
|                             |                                               |                                |                                                     |           |                    |           |                  |           |         |           |         |           |           |           |         |           |        

See Notes to Consolidated Financial Statements.

4



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##### 



SOUTHERN COMMUNITY BANCSHARES, INC.
AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three and Six Months Ended June 30, 2003 and 2002

|                                   |                                                                                              |                                   |         |                    |        |                  |         |        |        |      |         |         |         |   |         |         |         |  
|---------------------------------- | -------------------------------------------------------------------------------------------- | --------------------------------- | ------- | ------------------ | ------ | ---------------- | ------- | ------ | ------ | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | -
|                                   |                                                                                              |                                   |         | Three Months Ended |        | Six Months Ended
|                                   |                                                                                              |                                   |         | June 30,           |        | June 30,        
|                                   |                                                                                              |                                   |         |                    |        |                 
|                                   |                                                                                              |                                   |         | 2003               |        | 2002             |         | 2003   |        | 2002
|                                   |                                                                                              |                                   |         |                    |        |                  |         |        |        |     
|Net income                         |                                                                                              | $                                 | 345,928 |                    |        | $                | 232,088 |        |        | $    | 661,049 |         |         | $ | 417,676 |        
|                                   |                                                                                              |                                   |         |                    |        |                  |         |        |        |      |         |         |         |   |         |        
|Other comprehensive income (loss): |                                                                                              |                                   |         |                    |        |                  |         |        |        |      |         |         |         |   |         |        
|                                   | Unrealized gains (losses) on securities available-for-sale
arising during period, net of tax |                                   |         | 61,126             |        |                  |         | 62,584 |        |      |         | 146,571 |         |   |         | (13,433 | )      
|                                   | Reclassification adjustment for gains realized in net income,
net of tax                     |                                   |         | (26,602            | )      |                  |         | (205   | )      |      |         | (26,602 | )       |   |         | (4,803  | )      
|                                   |                                                                                              |                                   |         |                    |        |                  |         |        |        |      |         |         |         |   |         |        
|                                   |                                                                                              | Other comprehensive income (loss) |         |                    | 34,524 |                  |         |        | 62,379 |      |         |         | 119,969 |   |         |         | (18,236 | )
|                                   |                                                                                              |                                   |         |                    |        |                  |         |        |        |      |         |         |         |   |         |        
|Comprehensive income               |                                                                                              | $                                 | 380,452 |                    |        | $                | 294,467 |        |        | $    | 781,018 |         |         | $ | 399,440 |        
|                                   |                                                                                              |                                   |         |                    |        |                  |         |        |        |      |         |         |         |   |         |        

See Notes to Consolidated Financial Statements.

5



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##### 



SOUTHERN COMMUNITY BANCSHARES, INC.
AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2003 and 2002

|                                             |                                                                                   |                                               |                                           |                                           |          |             |           |             |          |             |         | 
|-------------------------------------------- | --------------------------------------------------------------------------------- | --------------------------------------------- | ----------------------------------------- | ----------------------------------------- | -------- | ----------- | --------- | ----------- | -------- | ----------- | ------- | 
|                                             |                                                                                   |                                               |                                           |                                           |          | 2003        |           | 2002       
|                                             |                                                                                   |                                               |                                           |                                           |          |             |           |            
|OPERATING ACTIVITIES                         |                                                                                   |                                               |                                           |                                           |          |             |           |            
|                                             | Net income                                                                        |                                               | $                                         | 661,049                                   |          |             | $         | 417,676     |         
|                                             | Adjustments to reconcile net income to net cash
provided by operating activities: |                                               |                                           |                                           |          |             |           |             |         
|                                             |                                                                                   | Depreciation                                  |                                           |                                           | 138,364  |             |           |             | 125,884  |            
|                                             |                                                                                   | Provision for loan losses                     |                                           |                                           | 155,000  |             |           |             | 92,000   |            
|                                             |                                                                                   | Gain on sale of securities available-for-sale |                                           |                                           | (40,801  | )           |           |             | (7,747   | )          
|                                             |                                                                                   | Decrease (increase) in interest receivable    |                                           |                                           | (58,728  | )           |           |             | 56,462   |            
|                                             |                                                                                   | Increase (decrease) in interest payable       |                                           |                                           | 35,656   |             |           |             | (45,635  | )          
|                                             |                                                                                   | Net other operating activities                |                                           |                                           | (130,102 | )           |           |             | (145,830 | )          
|                                             |                                                                                   |                                               |                                           |                                           |          |             |           |             |         
|                                             |                                                                                   |                                               |                                           | Net cash provided by operating activities |          |             | 760,438   |             |          |             | 492,810 | 
|                                             |                                                                                   |                                               |                                           |                                           |          |             |           |             |         
|INVESTING ACTIVITIES                         |                                                                                   |                                               |                                           |                                           |          |             |           |            
|                                             | Purchase of securities available-for-sale                                         |                                               |                                           | (19,058,762                               | )        |             |           | (1,981,225  | )       
|                                             | Proceeds from maturities of securities available-for-sale                         |                                               |                                           | 5,501,397                                 |          |             |           | 2,278,235   |         
|                                             | Proceeds from sales of securities available-for-sale                              |                                               |                                           | 514,500                                   |          |             |           | 3,702,449   |         
|                                             | Purchase of restricted equity securities                                          |                                               |                                           | (147,100                                  | )        |             |           |            |         
|                                             | Net increase in federal funds sold                                                |                                               |                                           | (12,366,000                               | )        |             |           | (1,388,000  | )       
|                                             | Net increase in loans                                                             |                                               |                                           | (11,073,611                               | )        |             |           | (12,335,628 | )       
|                                             | Purchase of premises and equipment                                                |                                               |                                           | (1,001,403                                | )        |             |           | (594,167    | )       
|                                             |                                                                                   |                                               |                                           |                                           |          |             |           |             |         
|                                             |                                                                                   |                                               | Net cash used in investing activities     |                                           |          | (37,630,979 | )         |             |          | (10,318,336 | )      
|                                             |                                                                                   |                                               |                                           |                                           |          |             |           |             |         
|FINANCING ACTIVITIES                         |                                                                                   |                                               |                                           |                                           |          |             |           |            
|                                             | Net increase in deposits                                                          |                                               |                                           | 37,753,701                                |          |             |           | 13,157,979  |         
|                                             | Proceeds from issuance of capital stock                                           |                                               |                                           | 705,200                                   |          |             |           |            |         
|                                             | Net decrease in federal funds purchased                                           |                                               |                                           | (719,000                                  | )        |             |           |            |         
|                                             | Net Increase (decrease) in repurchase agreements                                  |                                               |                                           | (132,653                                  | )        |             |           | 1,507,149   |         
|                                             |                                                                                   |                                               |                                           |                                           |          |             |           |             |         
|                                             |                                                                                   |                                               | Net cash provided by financing activities |                                           |          | 37,607,248  |           |             |          | 14,665,128  |        
|                                             |                                                                                   |                                               |                                           |                                           |          |             |           |             |         
|Net increase in cash and due from banks      |                                                                                   |                                               | 736,707                                   |                                           |          |             | 4,839,602 |            
|Cash and due from banks at beginning of year |                                                                                   |                                               | 3,789,657                                 |                                           |          |             | 1,404,674 |            
|                                             |                                                                                   |                                               |                                           |                                           |          |             |           |             |         
|Cash and due from banks at end of year       |                                                                                   | $                                             | 4,526,364                                 |                                           |          | $           | 6,244,276 |            
|                                             |                                                                                   |                                               |                                           |                                           |          |             |           |             |         

See Notes to Consolidated Financial Statements.

6



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##### 



SOUTHERN COMMUNITY BANCSHARES, INC. AND SUBSIDIARY

NOTES TO 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, 2003 are not necessarily indicative of the results
to be expected for the full year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       
|NOTE 2. |  | STOCK COMPENSATION PLANS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       
|        |  | At June 30, 2003, the Company has two stock-based employee
compensation
plans. The Company accounts for those plans under the recognition
and measurement principles of APB Opinion No. 25, Accounting for
Stock Issued to Employees,and related Interpretations. No
stock-based employee compensation cost is reflected in net income,
as all options granted under these plans have an exercise price
equal to the market value of the underlying stock on the date of
grant. The following table illustrates the effect on net income and
earnings per share if the Company had applied the fair value
recognition provisions of SFAS Statement No. 123, Accounting for
Stock-Based Compensation, to stock-based employee compensation.

|                                                                                                                                            |                       |   |                    |      |                  |   |         |      |      |   |         |      |  |   |         |      | 
|------------------------------------------------------------------------------------------------------------------------------------------- | --------------------- | - | ------------------ | ---- | ---------------- | - | ------- | ---- | ---- | - | ------- | ---- |  | - | ------- | ---- | 
|                                                                                                                                            |                       |   | Three Months Ended |      | Six Months Ended
|                                                                                                                                            |                       |   | June 30,           |      | June 30,        
|                                                                                                                                            |                       |   |                    |      |                 
|                                                                                                                                            |                       |   | 2003               |      | 2002             |   | 2003    |      | 2002
|                                                                                                                                            |                       |   |                    |      |                  |   |         |      |     
|Net income, as reported                                                                                                                     |                       | $ | 345,928            |      |                  | $ | 232,088 |      |      | $ | 661,049 |      |  | $ | 417,676 |     
|Deduct: Total stock-based employee compensation
expense determined under fair value based
Method for all awards, net of related tax effects |                       |   |                    |      |                  |   |         |      |      |   |         |      |  |   |         |     
|                                                                                                                                            |                       |   |                    |      |                  |   |         |      |      |   |         |      |  |   |         |     
|Pro forma net income                                                                                                                        |                       | $ | 345,928            |      |                  | $ | 232,088 |      |      | $ | 661,049 |      |  | $ | 417,676 |     
|                                                                                                                                            |                       |   |                    |      |                  |   |         |      |      |   |         |      |  |   |         |     
|Earnings per share:                                                                                                                         |                       |   |                    |      |                  |   |         |      |      |   |         |      |  |   |         |     
|                                                                                                                                            | Basic  as reported   |   | $                  | 0.24 |                  |   | $       | 0.29 |      |   | $       | 0.46 |  |   | $       | 0.52 | 
|                                                                                                                                            |                       |   |                    |      |                  |   |         |      |      |   |         |      |  |   |         |     
|                                                                                                                                            | Basic  pro forma     |   | $                  | 0.24 |                  |   | $       | 0.29 |      |   | $       | 0.46 |  |   | $       | 0.52 | 
|                                                                                                                                            |                       |   |                    |      |                  |   |         |      |      |   |         |      |  |   |         |     
|                                                                                                                                            | Diluted  as reported |   | $                  | 0.24 |                  |   | $       | 0.29 |      |   | $       | 0.46 |  |   | $       | 0.52 | 
|                                                                                                                                            |                       |   |                    |      |                  |   |         |      |      |   |         |      |  |   |         |     
|                                                                                                                                            | Diluted  pro forma   |   | $                  | 0.24 |                  |   | $       | 0.29 |      |   | $       | 0.46 |  |   | $       | 0.52 | 
|                                                                                                                                            |                       |   |                    |      |                  |   |         |      |      |   |         |      |  |   |         |     

7



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##### 





|NOTE 3. |  | EARNINGS PER CAPITAL SHARE                                                                                                                                 
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|       
|        |  | Presented below is a summary of the components used to calculate
basic and diluted earnings per capital share for the periods ended
June 30, 2003 and 2002.

|                                                                                                                                 |  |                    |           |                  |  |      |         |      |  |   |           |  |  |   |         | 
|-------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | --------- | ---------------- |  | ---- | ------- | ---- |  | - | --------- |  |  | - | ------- | 
|                                                                                                                                 |  | Three Months Ended |           | Six Months Ended
|                                                                                                                                 |  | June 30,           |           | June 30,        
|                                                                                                                                 |  |                    |           |                 
|                                                                                                                                 |  | 2003               |           | 2002             |  | 2003 |         | 2002
|                                                                                                                                 |  |                    |           |                  |  |      |         |     
|Net income                                                                                                                       |  | $                  | 345,928   |                  |  | $    | 232,088 |      |  | $ | 661,049   |  |  | $ | 417,676 | 
|                                                                                                                                 |  |                    |           |                  |  |      |         |      |  |   |           |  |  |   |         | 
|Weighted average capital shares outstanding                                                                                      |  |                    | 1,450,983 |                  |  |      | 810,983 |      |  |   | 1,442,536 |  |  |   | 810,983 | 
|Net effect of the assumed exercise of stock
options based on the treasury stock method
using average market price for the period |  |                    | 5,261     |                  |  |      |        |      |  |   | 6,750     |  |  |   |        | 
|                                                                                                                                 |  |                    |           |                  |  |      |         |      |  |   |           |  |  |   |         | 
|Total weighted average capital shares and
Capital stock equivalents outstanding                                                  |  |                    | 1,456,244 |                  |  |      | 810,983 |      |  |   | 1,449,286 |  |  |   | 810,983 | 
|                                                                                                                                 |  |                    |           |                  |  |      |         |      |  |   |           |  |  |   |         | 
|Diluted earnings per capital share                                                                                               |  | $                  | 0.24      |                  |  | $    | 0.29    |      |  | $ | 0.46      |  |  | $ | 0.52    | 
|                                                                                                                                 |  |                    |           |                  |  |      |         |      |  |   |           |  |  |   |         | 



|Note 4. |  | Recent Developments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       
|        |  | In November 2002, the Financial Accounting Standards Board (FASB)
issued FASB Interpretation No. 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. The interpretation addresses
the disclosures to be made by a guarantor in its interim and annual
financial statements about its obligations under guarantees. The
interpretation also clarifies the requirements related to the
recognition of a liability by a guarantor at the inception of a
guarantee, for the fair value of the obligation undertaken in
issuing the guarantee. The initial recognition and initial
measurement provisions of the interpretation are to be applied to
guarantees issued or modified after December 31, 2002. As of June
30, 2003, the interpretation has not had a material effect on the
financial condition or results of operations, and there are no
guarantees required to disclosed.

8



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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 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 $38.3 million from $121.1 million to $159.4 million, or
31.7% for the six months ended June 30, 2003. The increase in total assets in
2003 is considerably more than the $15 million growth for the same period in
2002. The growth in both years continues to be funded primarily by increases
in total deposits, which increased by $37.8 million and $13.1 million,
respectively. Approximately $20 million of the deposit growth is directly
related to a certificate of deposit campaign which increased the deposit base
of our Peachtree City facility by $10 million and our Fayetteville location by
$10 million. This campaign was for a certificate of deposit term for one year
and a yield slightly above the market rate at that time. The net increase in
total assets for the six months ended June 30, 2003 consisted primarily of an
increase of $11 million in total loans, an increase in Federal funds sold of
$12.4 million and an increase in securities available-for-sale of $13.2
million. The loan to deposit ratio at June 30, 2003 was 74% compared to 91% at
December 31, 2002. The decrease in the loan to deposit ratio as compared to
December 31, 2002 is due to total loans increasing by only $11 million and
total deposits increasing by $37.8 million.

Shareholders equity increased by $1.5 million for the six months ended June
30, 2003. This net increase consists of net income of $661,049, an increase in
unrealized gains on securities of $120,000, and proceeds from our stock
offering of $705,000. We sold the offering maximum of 640,000 shares by the
expiration date of January 31, 2003.

9



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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, 2003, the Banks liquidity ratio was 31.91% which is above the
Banks target ratio of 20%.

REGULATORY CAPITAL REQUIREMENTS

Banking regulations require us to maintain minimum capital levels in relation
to assets. At June 30, 2003, the Banks capital ratios were considered well
capitalized based on regulatory minimum capital requirements. The minimum
capital requirements and the actual capital ratios for the Bank at June 30,
2003 are as follows:

|                          |               |  |      |       |             |  |            |      |  
|------------------------- | ------------- |  | ---- | ----- | ----------- |  | ---------- | ---- | -
|                          |               |  |      |       |             |  | Regulatory
|                          |               |  |      |       |             |  | Minimum   
|                          |               |  | Bank |       | Requirement
|                          |               |  |      |       |            
|Leverage Capital Ratio    |               |  | 8.49 | %     |             |  | 4.00       | %   
|Risk-Based Capital Ratios |               |  |      |       |             |  |            |     
|                          | Core Capital  |  |      | 10.65 | %           |  |            | 4.00 | %
|                          | Total Capital |  |      | 11.74 | %           |  |            | 8.00 | %

Our first branch facility in Peachtree City opened for business during the
second quarter of 2003. In addition, we have signed a contract for an in-store
branch scheduled to open in the second quarter of 2004.

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 $304,000 and $608,000
for the three and six month periods ended June 30, 2003 compared to the same
period in 2002. The increase in net interest income is attributable to an
increase in earning assets of $59.5 million as compared to June 2002. Loans
increased during this period by $23.9 million, which generally provide greater
yields to the Company. During this same period, total deposits increased by
$49.4 million, which included an increase of $46.1 million in interest-bearing
deposits and an increase of $3.3 million in non-interest bearing deposits. The
change in net interest income is also 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, 2003 is approximately
7.55% as compared to 7.89% for the same period in 2002. The yield on total
interest earning assets for the six months ended June 30, 2003 was 6.39%

10



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##### 



compared to 7.41% for the same period in 2002, or a decrease of 102 basis
points. The rate
paid on interest bearing liabilities for the same period decreased by 62 basis
points to 2.71% from 3.33%. These decreases in yields are directly related to
the decline in interest rates over the past two years.

Due to the continued decrease in interest rates and increased volume of loans
and deposits at their respective current yields, the net interest margin
decreased to 4.26% at June 30, 2003 as compared to 4.71% at June 30, 2002. We
utilize floors on many of our adjustable rate loans to minimize the impact of
changing rates.

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 $155,000 was made during the six month period ending June 30,
2003 based upon this evaluation process as compared to $92,000 for the same
period in 2002. The allowance for loan loss as a percentage of total loans was
1.20% at June 30, 2003, 1.25% at December 31, 2002, and 1.14% at June 30, 2002.
Management believes the allowance for loan loss at June 30, 2003 is adequate
to meet any foreseeable losses in the loan portfolio.

At June 30, 2003 and 2002, nonaccrual, past due, and restructured loans were as
follows:

|                                                                                                         |                    |   |                        |   |          |   |    |   | 
|-------------------------------------------------------------------------------------------------------- | ------------------ | - | ---------------------- | - | -------- | - | -- | - | 
|                                                                                                         |                    |   | June 30,               |   | June 30,
|                                                                                                         |                    |   | 2003                   |   | 2002    
|                                                                                                         |                    |   |                        |   |         
|                                                                                                         |                    |   | (Dollars in thousands)
|Total nonaccruing loans                                                                                  |                    | $ | 454                    |   |          | $ | 22 |  
|Loans contractually past due ninety days
or more as to interest or principal
payments and still accruing |                    |   | 97                     |   |          |   |    |  
|                                                                                                         | 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.

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.

11



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##### 



Information regarding certain loans and allowance for loan loss data for the
six months ended June 30, 2003 and 2002 is as follows:

|                                                                              |                          |   |                        |     |      |   |        |    |  
|----------------------------------------------------------------------------- | ------------------------ | - | ---------------------- | --- | ---- | - | ------ | -- | -
|                                                                              |                          |   | Six Months Ended      
|                                                                              |                          |   | June 30,              
|                                                                              |                          |   |                       
|                                                                              |                          |   | 2003                   |     | 2002
|                                                                              |                          |   |                        |     |     
|                                                                              |                          |   | (Dollars in thousands)
|Average amount of loans outstanding                                           |                          | $ | 94,478                 |     |      | $ | 71,031 |   
|                                                                              |                          |   |                        |     |      |   |        |   
|Balance of allowance for loan losses at beginning of period                   |                          | $ | 1,141                  |     |      | $ | 804    |   
|Loans charged off                                                             |                          |   |                        |     |      |   |        |   
|                                                                              | Commercial and financial |   |                        |    |      |   |        | (1 | )
|                                                                              | Real estate              |   |                        | (50 | )    |   |        |   |  
|                                                                              | Installment              |   |                        | (25 | )    |   |        | (3 | )
|                                                                              |                          |   |                        |     |      |   |        |   
|                                                                              |                          |   | (75                    | )   |      |   | (4     | ) 
|                                                                              |                          |   |                        |     |      |   |        |   
|Loans recovered                                                               |                          |   |                        |     |      |   |        |   
|                                                                              | Commercial and financial |   |                        |    |      |   |        |   |  
|                                                                              | Real estate              |   |                        |    |      |   |        |   |  
|                                                                              | Installment              |   |                        |    |      |   |        |   |  
|                                                                              |                          |   |                        |     |      |   |        |   
|                                                                              |                          |   |                       |     |      |   |       |   
|                                                                              |                          |   |                        |     |      |   |        |   
|Net charge-offs                                                               |                          |   | (75                    | )   |      |   | (4     | ) 
|                                                                              |                          |   |                        |     |      |   |        |   
|Additions to allowance charged to operating expense during period             |                          |   | 155                    |     |      |   | 92     |   
|                                                                              |                          |   |                        |     |      |   |        |   
|Balance of allowance for loan losses at end of period                         |                          |   | 1,221                  |     |      |   | 892    |   
|                                                                              |                          |   |                        |     |      |   |        |   
|Ratio of net loans charged-off during the
period to average loans outstanding |                          |   | 0.08                   | %   |      |   | 0.01   | % 
|                                                                              |                          |   |                        |     |      |   |        |   

Other Income.Other income increased by $55,000 and $98,000 for the three and
six months ended June 30, 2003 compared to the same period in 2002. The most
significant difference which affected both periods was an increase in gains on
sales of securities available-for-sale of $40,000 and $33,000 for the three and
six months ended June 30, 2003 compared to the same period in 2002. Deposit
service charges increased $14,000 and $47,000 for the three and six months
ended June 30, 2003 compared to the same period in 2002 which is directly
related to the growth in deposit accounts. Gains on sales of loans increased
$21,000 for the six months ended June 30, 2003 compared to the same period in
2002.

Other Expenses.Other expenses increased by $193,000 and $302,000 for the
three and six months ended June 30, 2003 compared to the same period in 2002.
The most significant increases in 2003 are increases of $113,000 and $210,000
in salaries and employee benefits

12



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##### 



and other operating expenses of $60,000 and
$63,000 for the three and six month periods ended June 30, 2003. The increase
in salaries and employee benefits
represent normal increases in salaries and an
increase in the number of employees. At June 30, 2003, the
number of full-time equivalent employees was 40 compared to 34 at June 30,
2002. The increases in other operating expenses are not attributable to any
one particular item, but represent normal increases. Equipment and occupancy
expenses increased $20,000 and $30,000 for the three and six month periods
ended June 30, 2003. This increase is directly related to equipment purchases
for new employees and occupancy expenses related to the opening of our
Peachtree City facility.

Income Taxes.Income tax expense increased by $18,000 and $97,000 for the
three and six months ended June 30, 2003 as compared to 2002. The effective
tax rate for 2003 and 2002 was 34.8% and 38%, respectively. The decrease in
the effective tax rate is due to the increase in nontaxable securities.

Net Income. Net income increased by $114,000 and $243,000 for the three and
six months ended June 30, 2003 as compared to the same period in 2002. The
primary reason for the increase in net income for the three and six months
ended June 30, 2003 as compared to the same period in 2002 is the increase in
net interest income.

Item 3. CONTROLS AND PROCEDURES

Our Chief Executive Officer and Chief Financial Officer have evaluated the
Companys disclosure controls and procedures as of the end of the quarterly
period covered by this Form 10-QSB and have concluded that the Companys
disclosure controls and procedures are effective. During the second quarter of
2003 there were no changes in the Companys internal control over financial
reporting that have materially affected, or that are reasonably likely to
materially affect, the Companys internal control over financial reporting.

13



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##### 



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 29, 2003.
A total of 1,079,832 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 class II directors were elected:                                                                                                                                                                                                                      

|                  |  |     |           |         |  |         |       |  |  |  |   | 
|----------------- |  | --- | --------- | ------- |  | ------- | ----- |  |  |  | - | 
|Directors         |  | For |           | Against |  | Abstain
|                  |  |     |           |         |  |        
|James S. Cameron  |  |     | 1,079,832 |         |  |         |      |  |  |  |  | 
|Thomas D. Reese   |  |     | 1,079,832 |         |  |         |      |  |  |  |  | 
|Dan V. Stinchcomb |  |     | 1,078,807 |         |  |         | 1,025 |  |  |  |  | 

Item 6. Exhibits and Reports on Form 8-K



|(a) |  | Exhibits
|--- |  | --------



| | 31.1 |  | Certificate of CEO pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
| | ---- |  | ----------------------------------------------------------------------------
|
| | 31.2 |  | Certificate of CFO pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
| | 32.1 |  | Certificate of CEO pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
| | 32.2 |  | Certificate of CFO pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002



|(b) |  | Reports on Form 8-K.
|--- |  | --------------------
|   
|    |  | None.               

14



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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 13, 2003 |  | /s/ Gary McGaha                           
|      |  |                 |  |                                           
|      |  |                 |  | Gary McGaha                               
|      |  |                 |  | President and Director                    
|      |  |                 |  |                                           
|Date  |  | August 13, 2003 |  | /s/ Leslye Grindle                        
|      |  |                 |  |                                           
|      |  |                 |  | Leslye Grindle                            
|      |  |                 |  | Vice President and
Chief Financial Officer

15