Citizens and Southern National Bank of Atlanta, one of the half-dozen largest banks in the South, reported net income for the year ending Dec. 31 of $3.2 million, down 78 percent from a year earlier.

As a result, the bank announced yesterday that no dividend would be declared on the bank's stock for the first quarter of 1978.

During each of the two previous quarters, C&S paid dividends of six cents a share. In June, 1977, it paid a dividend of 13 cents a share.

In the fourth quarter of 1977, the bank incurred a loss of $5.8 million before taxes and securities transactions.

C&S became known as the "go-go" bank of Atlanta's booming real estate market of the late 1960s and early 1970s. It also has been the slowest bank to recover from downturn in the real estate market, which occurred in the mid-1970s.

Of 150 major U.S. banking companies C&S was the only one in the red for the third-quarter of 1977. And C&S is the only bank so far to report a loss for the fourth quarter.

Wall Street bank analysts, who expected better results from C&S in the fourth quarter, noted nevertheless that the bank's capital was adequate.

The bank said that charge-offs against the reserve for loan losses for 1977 totaled $39 million. After these charge-offs, the company said it was left at the end of last year with a loan loss reserve of $37 million.

In a statement issued yesterday, the bank said that in 1977 "net expenses and provision for losses on real estate owned" totaled $13.3 million. Of that, $6.2 million was for the fourth quarter.

The bank has continued to have legal problems with C&S Realty Trust, the real estate investment trust for which it acts as investment adviser. The bank called recent settlements of some of its disputes "significant," adding that in 1977 C&S charged $5.1 million to earnings as a provision for loss relating to its disputes with the trust.