EXHIBIT 13

Business of Southern Community Bancshares, Inc.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

To Southern Community Bancshares, Inc.:

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

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

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

Birmingham, Alabama
October 26, 1999

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

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

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

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