CCB FINANCIAL CORP, 424B2, 1996-11-21

CCB FINANCIAL CORP
424B2, 1996-11-21
STATE COMMERCIAL BANKS

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424B2
333-12437
SALEM TRUST BANK

2140 COUNTRY CLUB ROAD
WINSTON-SALEM, NORTH CAROLINA 27104
TELEPHONE: (910) 777-1400

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

NOTICE is hereby given that a Special Meeting of Shareholders of Salem
Trust Bank ("Salem") will be held at the Arts Council Theater, 610 Coliseum
Drive, Winston-Salem, North Carolina, at 10:00 o'clock, a.m., E.S.T. on
Thursday, November 21, 1996, for the following purpose:

1. PROPOSAL TO APPROVE PROPOSED MERGER. To consider and vote on a
proposal to approve the Amended Agreement of Combination, dated initially
as of July 1, 1996 and amended as of September 6, 1996, and the related
plan of merger (collectively, the "Merger Agreement"), among Salem, CCB
Financial Corporation ("CCBF") and Central Carolina Bank and Trust Company
("CCB Bank") (a copy of which Agreement is attached as Appendix A to the
Prospectus/Proxy Statement which accompanies this Notice), and to approve
the transactions described therein, including without limitation the merger
of Salem with and into CCB Bank (the "Merger") with the result that all
outstanding shares of Salem's $2.50 par value common stock will be
converted into shares of CCBF's $5.00 par value common stock (each with an
attached preferred stock purchase right); and,

2. OTHER BUSINESS. To transact such other business as properly may be
presented for action at the Special Meeting.

At the effective time of the Merger, each outstanding share of Salem's
$2.50 par value common stock ("Salem Stock") will be converted into .41 of a
share of CCBF's $5.00 par value common stock and .41 of a CCBF preferred stock
purchase right. UNDER NORTH CAROLINA LAW EACH SALEM SHAREHOLDER HAS THE RIGHT TO
DISSENT FROM THE MERGER AND TO DEMAND PAYMENT OF THE FAIR VALUE OF HIS OR HER
SHARES OF SALEM STOCK. A SALEM SHAREHOLDER'S RIGHT TO DISSENT IS CONTINGENT UPON
HIS OR HER STRICT COMPLIANCE WITH THE REQUIREMENTS OF ARTICLE 13 OF THE NORTH
CAROLINA BUSINESS CORPORATION ACT. THE FULL TEXT OF ARTICLE 13 IS ATTACHED AS
APPENDIX B TO THE PROSPECTUS/PROXY STATEMENT WHICH ACCOMPANIES THIS NOTICE AND
IS INCORPORATED HEREIN BY REFERENCE.

EACH SALEM SHAREHOLDER IS INVITED TO ATTEND THE SPECIAL MEETING IN PERSON.
HOWEVER, TO ENSURE THAT A QUORUM IS PRESENT AT THE SPECIAL MEETING, EACH SALEM
SHAREHOLDER IS REQUESTED TO COMPLETE, SIGN AND DATE THE ENCLOSED APPOINTMENT OF
PROXY AND RETURN IT PROMPTLY TO SALEM IN THE ENCLOSED STAMPED, RETURN ENVELOPE.
SIGNING AND RETURNING AN APPOINTMENT OF PROXY WILL NOT AFFECT A SALEM
SHAREHOLDER'S RIGHT TO ATTEND THE SPECIAL MEETING AND VOTE IN PERSON.

By Order of the Board of Directors
/s/ Gordon H. T. Sheeran
PRESIDENT AND
CHIEF EXECUTIVE OFFICER

October 4, 1996

SALEM'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SALEM'S SHAREHOLDERS VOTE TO APPROVE THE MERGER AGREEMENT

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PROSPECTUS

CCB FINANCIAL CORPORATION

806,820 SHARES

COMMON STOCK
PAR VALUE $5.00

EACH WITH AN ATTACHED
PREFERRED SHARE PURCHASE RIGHT

PROXY STATEMENT
FOR THE SPECIAL MEETING OF SHAREHOLDERS OF
SALEM TRUST BANK
TO BE HELD ON NOVEMBER 21, 1996

This Prospectus relates to shares of the $5.00 par value common stock
("CCBF Stock"), each with an attached right to purchase .01 of a share of CCBF
Series A Junior Participating Preferred Stock (a "CCBF Right"), of CCB Financial
Corporation ("CCBF") that will be issued in connection with the proposed merger
(the "Merger") of Salem Trust Bank ("Salem") with and into Central Carolina Bank
and Trust Company, a wholly-owned subsidiary of CCBF ("CCB Bank"). CCBF is a
North Carolina corporation which is registered with the Board of Governors of
the Federal Reserve System as a bank holding company. CCB Bank is a North
Carolina commercial bank. Each is headquartered in Durham, North Carolina. As
described in the Agreement of Combination, dated initially as of July 1, 1996
and amended as of September 6, 1996 (the "Merger Agreement"), among Salem, CCBF
and CCB Bank, upon consummation of the Merger, Salem would be merged into CCB
Bank and each outstanding share of Salem's $2.50 par value common stock ("Salem
Stock") held by Salem's shareholders would be converted into and exchanged for
.41 of a share of CCBF Stock and .41 of a CCBF Right. See "THE MERGER".
References in this Prospectus/Proxy Statement to the CCBF Stock into which Salem
Stock will be converted shall be deemed to include the CCBF Rights attached to
such CCBF Stock. For additional information about the CCBF Rights, see "CAPITAL
STOCK OF CCBF AND SALEM."

Salem's shareholders are entitled to their statutory dissenters' rights in
accordance with North Carolina law. See "RIGHTS OF DISSENTING SHAREHOLDERS." In
lieu of issuing fractional shares of CCBF Stock, cash will be distributed to
each Salem shareholder otherwise entitled to receive a fractional share in an
amount equal to that fraction multiplied by the "market value" of one whole
share of CCBF Stock. See "THE MERGER -- Treatment of Fractional Shares".

This Prospectus also serves as Salem's Proxy Statement in connection with
its Board of Directors' solicitation of appointments of proxy to be used at the
special meeting of Salem's shareholders (the "Special Meeting"), including any
adjournments thereof, to be held for the purposes described herein. See "THE
SPECIAL MEETING".

At the Special Meeting, the holders of record of Salem Stock as of the
close of business on October 2, 1996 will consider and vote upon a proposal to
approve the Merger Agreement and the transactions described therein. Upon
consummation of the Merger, each outstanding share of Salem Stock (excluding
shares held by Salem or CCBF, CCB Bank or any of their subsidiaries, other than
in a fiduciary capacity or as a result of debts previously contracted, and
excluding shares held by Salem shareholders who exercise their statutory
dissenters' rights in accordance with North Carolina law) will be converted into
.41 of a share of CCBF Stock and .41 of a CCBF Right. See "THE MERGER -- Terms
of the Merger" and "RIGHTS OF DISSENTING SHAREHOLDERS."

The outstanding shares of CCBF Stock are listed upon the New York Stock
Exchange ("NYSE"). The shares of CCBF Stock issued in the Merger will listed on
the NYSE upon the consummation of the Merger.

This Prospectus/Proxy Statement and the accompanying form of appointment of
proxies are first being mailed to shareholders of Salem on or about October 4,
1996.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

The date of this Prospectus/Proxy Statement is October 4, 1996.

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No person is authorized to give any information or make any representation
other than those contained in this Prospectus/Proxy Statement, and, if given or
made, such information or representation should not be relied upon as having
been authorized by CCBF or Salem. This Prospectus/Proxy Statement does not
constitute an offer to sell, or a solicitation of an offer to purchase or
exchange the securities offered by this Prospectus/Proxy Statement in any
jurisdiction in which such offer is not authorized or to or from any person to
whom it is unlawful to make such offer or solicitation. The information
contained in this Prospectus/Proxy Statement regarding CCBF and its affiliates
has been furnished by CCBF, and the information herein regarding Salem and its
affiliates has been furnished by Salem. Neither the delivery of this
Prospectus/Proxy Statement nor any distribution of the securities being made
hereunder shall, under any circumstances, create any implication that there has
been no change in affairs of CCBF or Salem or their affiliates since the date of
this Prospectus/Proxy Statement or that information contained herein or in the
documents incorporated herein by reference is correct as of any time subsequent
to the date hereof or the dates thereof.

THE SHARES OF CCBF STOCK AND ATTACHED CCBF RIGHTS BEING OFFERED TO SALEM'S
SHAREHOLDERS ARE NOT DEPOSITS OF ANY BANK OR OTHER FINANCIAL INSTITUTION AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.

TABLE OF CONTENTS

PAGE
<S> <C>
AVAILABLE INFORMATION.............................. 3

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........ 3
SUMMARY................................................ 4
Special Meeting of Salem Shareholders................ 4
The Merger........................................... 5
CCBF Stock and Salem Stock; Dividends................ 8
Selected Financial Information....................... 9
COMPARATIVE PER SHARE DATA............................. 14
THE SPECIAL MEETING.................................... 16
General; Proposals to be Considered.................. 16
Date, Place and Time................................. 16
Record Date.......................................... 16
Voting Securities; Votes Required for Approval....... 16
Voting and Revocation of Proxies..................... 16
Proxy Solicitation Expenses.......................... 16
Recommendation and Reasons........................... 17
THE MERGER............................................. 17
General.............................................. 17
Conversion of Salem Stock and Salem Options; Exchange
Ratio............................................. 17
Surrender and Exchange Certificates.................. 18
Treatment of Fractional Shares....................... 18
Recommendation and Reasons........................... 19
Salem Fairness Opinion............................... 21
Required Shareholder Approvals....................... 25
Required Regulatory Approvals........................ 25
Conduct of Business Pending Merger................... 26
Prohibition on Solicitation.......................... 26
Accounting Treatment................................. 27
Certain Income Tax Consequences...................... 27
Conditions to Merger................................. 28
Amendment of Merger Agreement; Waiver................ 29
Termination of Merger Agreement...................... 29
Effective Time and Closing Date...................... 30
Directors and Officers............................... 30
Interests of Certain Persons With Respect to the
Merger............................................ 30
NYSE Listing......................................... 32
Dividend Reinvestment and Stock Purchase
Plan.............................................. 32
Restrictions on Resale of CCBF Stock by Affiliates... 32
Expenses............................................. 33
RIGHTS OF DISSENTING SHAREHOLDERS...................... 33
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION..... 35
PRO FORMA CAPITALIZATION............................... 42
CCB FINANCIAL CORPORATION.............................. 43
General.............................................. 43
Subsidiaries......................................... 43
Beneficial Ownership of CCBF Stock................... 43
Management and Additional Information................ 45
SALEM TRUST BANK....................................... 45
Description of Business.............................. 45
Management's Discussion and Analysis of Financial
Condition and Results of Operation................ 45
Beneficial Ownership of Salem Stock by Management and
Others............................................ 57
Salem Management and Additional Information.......... 59
Management Remuneration.............................. 59
Employment Agreements................................ 61
Other Transactions with Management................... 62
SUPERVISION AND REGULATION............................. 63
CAPITAL STOCK OF CCBF AND SALEM........................ 70
INDEMNIFICATION........................................ 75
LEGAL MATTERS.......................................... 76
EXPERTS................................................ 76
OTHER MATTERS.......................................... 76
PROPOSALS OF SHAREHOLDERS.............................. 77
APPENDIX A -- Amended Agreement of Combination dated as
of July 1, 1996 and amended as of September 6,
1996................................................. A-1
APPENDIX B -- Article 13 of the North Carolina Business
Corporation Act Regarding the Rights of Dissenting
Shareholders......................................... B-1
APPENDIX C -- Opinion of The Carson Medlin Company..... C-1
INDEX TO SALEM FINANCIAL STATEMENTS.................... F-1
</TABLE>

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AVAILABLE INFORMATION

CCBF is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act") and, in accordance therewith,
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy statements and other
information filed by CCBF can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
located in Chicago (Northwestern Atrium Center, Suite 1400, 500 West Madison
Street, Chicago, Illinois 60661-2511) and in New York (7 World Trade Center,
13th Floor, New York, New York 10048). Copies of such material can be obtained
by mail from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains a
Web site (http://www.sec.gov) that contains reports, proxies and other
information regarding CCBF and other registrants. Copies of reports, proxy
statements and other information filed by CCBF with the NYSE may be inspected at
20 Broad Street, New York, New York 10005.

CCBF has filed with the Commission a Registration Statement on Form S-4
under the Securities Act of 1933, as amended (the "1933 Act"), with respect to
the CCBF Stock and CCBF Rights offered hereby. As permitted by the rules and
regulations of the Commission, this Prospectus/Proxy Statement does not contain
all the information set forth in the Registration Statement and the exhibits and
schedules thereto, all of which may be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, upon payment of the prescribed fees.

AS FURTHER DESCRIBED BELOW, THIS PROSPECTUS/PROXY STATEMENT INCORPORATES BY
REFERENCE DOCUMENTS RELATING TO CCBF WHICH ARE NOT PRESENTED HEREIN OR DELIVERED
HEREWITH. STATEMENTS CONTAINED HEREIN OR IN ANY DOCUMENT INCORPORATED HEREIN BY
REFERENCE AS TO THE CONTENTS OF ANY CONTRACTS OR OTHER DOCUMENTS REFERRED TO
HEREIN OR THEREIN ARE NOT NECESSARILY COMPLETE, AND IN EACH INSTANCE REFERENCE
IS MADE TO THE COPY OF SUCH CONTRACT OR OTHER DOCUMENT FILED AS AN EXHIBIT TO
THE REGISTRATION STATEMENT OR SUCH OTHER DOCUMENT, EACH SUCH STATEMENT BEING
QUALIFIED IN ALL RESPECTS BY SUCH REFERENCE. COPIES OF THOSE DOCUMENTS (OTHER
THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY
REFERENCE INTO SUCH DOCUMENTS) WILL BE PROVIDED WITHOUT CHARGE UPON REQUEST AS
DESCRIBED BELOW. REQUESTS FOR DOCUMENTS REGARDING CCBF SHOULD BE DIRECTED TO W.
HAROLD PARKER, JR., SENIOR VICE PRESIDENT AND CONTROLLER, CCB FINANCIAL
CORPORATION, POST OFFICE BOX 931, DURHAM, N.C. 27702, TELEPHONE (919) 683-7631.
IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS BEFORE THE SPECIAL MEETING,
ANY SUCH REQUEST SHOULD BE MADE BY FIVE (5) BUSINESS DAYS PRIOR TO THE SPECIAL
MEETING.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents previously filed by CCBF with the Commission (SEC
File No. 0-12358) are incorporated by reference into this Prospectus/Proxy
Statement: (i) CCBF's Annual Report on Form 10-K for the year ended December 31,
1995; (ii) CCBF's Quarterly Reports on Form 10-Q for the quarterly periods ended
March 31, 1996 and June 30, 1996; (iii) CCBF's Current Reports on Form 8-K dated
April 16, 1996 and May 14, 1996; and (iv) the description of CCBF Stock
contained in its current report on Form 8-K dated July 1, 1983, as amended by
Form 8-K/A2 dated June 14, 1996, and its Forms 8-A dated July 29, 1996, as each
is amended by CCBF's subsequent reports filed under the 1934 Act.

In addition, all other documents filed by CCBF pursuant to Section 13(a),
13(c), 14 or 15(d) of the 1934 Act prior to the date the Special Meeting has
been finally adjourned shall be deemed to be incorporated by reference herein.
Any statements contained in a document incorporated or deemed to be incorporated
by reference herein will be deemed to be modified or superseded for purposes of
this Prospectus/Proxy Statement to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part hereof.

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SUMMARY

THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION ABOUT THE SPECIAL
MEETING, THE MERGER AGREEMENT AND THE TRANSACTIONS DESCRIBED THEREIN AND IS NOT
TO BE A COMPLETE DESCRIPTION OF ALL MATERIAL FACTS REGARDING SALEM, CCBF, CCB
BANK, THE MERGER OR OTHER MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING. THE
SUMMARY IS QUALIFIED IN ALL RESPECTS BY REFERENCE TO THE MORE DETAILED
INFORMATION INCLUDED IN THIS PROSPECTUS/PROXY STATEMENT, THE APPENDICES HERETO
(INCLUDING THE MERGER AGREEMENT, A COPY OF WHICH IS ATTACHED AS APPENDIX A) AND
THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE. SHAREHOLDERS OF SALEM ARE URGED
TO READ CAREFULLY THE ENTIRE PROSPECTUS/PROXY STATEMENT, INCLUDING APPENDICES.

SPECIAL MEETING OF SALEM SHAREHOLDERS

GENERAL. This Prospectus/Proxy Statement is being furnished in connection
with the solicitation by the Board of Directors of Salem of appointments of
proxy for use at the special meeting (the "Special Meeting") of Salem's
shareholders, and at any adjournments thereof, to be held as provided and for
the purposes described below. See "THE MERGER -- Voting and Revocation of
Proxies". Approval of the Merger Agreement by CCBF's shareholders is not
required by applicable laws. CCBF is the sole shareholder of CCB Bank and
approved the Merger by action of its Board of Directors on July 16, 1996. See
"THE MERGER -- Required Shareholder Approvals".

PURPOSE OF SPECIAL MEETING. The purpose of the Special Meeting is (i) to
consider and vote on a proposal to approve the Merger Agreement among Salem,
CCBF and CCB Bank attached as Appendix A and to approve the transactions
described therein, including without limitation the Merger and the conversion of
the outstanding shares of Salem Stock into shares of CCBF Stock, and (ii) to
transact such other business as properly may be presented for action at the
Special Meeting.

DATE, PLACE AND TIME. The Special Meeting will be held at the Arts Council
Theater, 610 Coliseum Drive, Winston-Salem, North Carolina, on Thursday,
November 21, 1996 at 10:00 o'clock, a.m., E.S.T.

RECORD DATE. The close of business on October 2, 1996 has been fixed as the
record date (the "Record Date") for the determination of shareholders entitled
to notice of and to vote at the Special Meeting. Only those Salem shareholders
of record on the Record Date will be eligible to vote at the Special Meeting on
the matters described herein. See "THE SPECIAL MEETING -- Record Date".

VOTING SECURITIES. The voting securities of Salem are the shares of Salem
Stock, of which approximately 1,841,232 shares were issued and outstanding on
the Record Date. See "THE SPECIAL MEETING -- Voting Securities, Votes Required
for Approval".

VOTES REQUIRED FOR APPROVAL. At the Special Meeting, each Salem shareholder
will be entitled to cast one vote for each share of Salem Stock held of record
on the Record Date on each matter submitted for voting. The affirmative vote of
the holders of at least two-thirds (2/3) of the shares of Salem Stock entitled
to be voted at the Special Meeting is required to approve the Merger Agreement.
Because the affirmative vote of two-thirds (2/3) of all outstanding Salem Stock
is required, abstentions, broker non-votes and shares otherwise not voted in the
affirmative will have the same effect as votes against the Merger Agreement. See
"THE SPECIAL MEETING -- Voting Securities; Vote Required for Approval". CCBF,
the sole shareholder of CCB Bank, has approved the Merger Agreement.

VOTING OF PROXIES. The persons named to represent Salem's shareholders as
proxies at the Special Meeting are Gordon H.T. Sheeran and James E. Holmes, Jr.
(the "Proxies"). Shares of Salem Stock represented by each appointment of proxy
which is properly executed and returned by a Salem shareholder, and not revoked,
will be voted by the Proxies in accordance with the directions contained
therein. If no directions are given, such shares will be voted by the Proxies
"FOR" approval of the Merger Agreement and the transactions contemplated
therein. On such other matters that may properly come before the Special
Meeting, the Proxies will be authorized to vote in accordance with their best
judgment on such matters. See "THE SPECIAL MEETING -- Voting and Revocation of
Proxies".

REVOCATION OF APPOINTMENTS OF PROXY. Any Salem shareholder who executes an
appointment of proxy has the right to revoke it at any time before it is
exercised by filing with the Secretary of Salem either an instrument revoking it
or a duly executed appointment of proxy bearing a later date, or by attending
the Special Meeting and announcing his or her intention to vote in person. See
"THE SPECIAL MEETING -- Voting and Revocation of Proxies".

PROXY SOLICITATION EXPENSES Except under certain circumstances involving a
wrongful termination or breach of the Merger Agreement, Salem will pay the
expenses associated with the Special Meeting, and Salem and CCBF will share the
costs of preparing, assembling and mailing this Prospectus/Proxy Statement. In
addition to the use of the mail, appointments

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of proxy may be solicited personally or by telephone by Salem's officers,
directors and employees, none of whom will be compensated separately for any
such solicitation activities. See "THE SPECIAL MEETING -- Proxy Solicitation
Expenses" and "THE MERGER -- Termination of Merger Agreement" and
" -- Expenses".

THE MERGER

GENERAL. Salem, CCBF and CCBF's primary banking subsidiary, CCB Bank, have
entered into the Merger Agreement which provides for the Merger and certain
other transactions as described therein. Salem is a North Carolina commercial
bank. At June 30, 1996, Salem had assets of $158 million, deposits of $139
million, and shareholders' equity of $17 million. Its principal offices are
located at 2140 Country Club Road, Winston-Salem, North Carolina 27104 and its
telephone number at that address is (910) 777-1400. See "SALEM TRUST BANK".

CCBF is a North Carolina corporation which is registered with the Board of
Governors of the Federal Reserve System (the "Federal Reserve") under the Bank
Holding Company Act of 1956, as amended (the "BHCA"), as a bank holding company.
CCBF's principal subsidiaries are (i) CCB Bank, a North Carolina commercial bank
headquartered in Durham, North Carolina, (ii) Graham Savings Bank, Inc., SSB
("Graham Savings"), a North Carolina savings bank headquartered in Graham, North
Carolina, and (iii) Central Carolina Bank-Georgia, a Georgia credit card bank
headquartered in Columbus, Georgia. CCB Bank's subsidiaries are CCB Investment
and Insurance Service Corporation, Southland Associates, Inc., and CCBDE, Inc.
CCBF currently intends to merge Graham Savings with and into CCB Bank on or
about October 4, 1996. See "CCB FINANCIAL CORPORATION -- Subsidiaries". At June
30, 1996, CCBF had consolidated assets of $5.1 billion, consolidated deposits of
$4.3 billion, and consolidated shareholders' equity of $451.3 million. CCBF's
principal offices are located at 111 Corcoran Street (Post Office Box 931),
Durham, North Carolina 27702, and its telephone number at that address is (919)
683-7777. See "CCB FINANCIAL CORPORATION".

EFFECT OF MERGER. At the time the Merger becomes effective (the "Effective
Time"), Salem will be merged with and into CCB Bank. CCB Bank will be the
surviving bank of the Merger and will continue to conduct its and Salem's
businesses. Salem will cease to exist as a separate commercial bank. After the
Effective Time, CCB Bank will continue to use the name "Salem" in conjunction
with CCB Bank's name and logos to identify certain aspects of CCB Bank's
activities. See "THE MERGER -- General" and " -- Effective Time and Closing
Date".

CONVERSION OF SALEM STOCK AND EXCHANGE RATIO. At the Effective Time, each
outstanding share of Salem Stock (other than shares as to which Salem's
shareholders exercise their "Dissenters' Rights" under North Carolina law and
shares held by CCBF, subsidiaries of CCBF or Salem other than in a fiduciary
capacity or as a result of debts previously contracted) will be converted into,
and thereafter may be exchanged for, .41 of a share of CCBF Stock and .41 of a
CCBF Right (the "Exchange Ratio"). See "THE MERGER -- Conversion of Salem Stock
and Stock Options; Exchange Ratio" and " -- Surrender and Exchange of
Certificates", "RIGHTS OF DISSENTING SHAREHOLDERS", and "CAPITAL STOCK OF CCBF
AND SALEM".

TREATMENT OF FRACTIONAL SHARES. In lieu of issuing fractional shares of
CCBF Stock, cash will be distributed to each Salem shareholder otherwise
entitled to receive a fractional share in an amount equal to that fraction
multiplied by the "market value" of one whole share of CCBF Stock. See "THE
MERGER -- Treatment of Fractional Shares".

RECOMMENDATION AND REASONS. SALEM'S BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT SALEM'S SHAREHOLDERS VOTE TO APPROVE THE MERGER AGREEMENT.
Salem's Board of Directors has adopted the Merger Agreement and believes the
Merger and the actions to be taken in connection therewith are in the best
interests of Salem and its shareholders, and unanimously recommends that Salem's
shareholders vote FOR approval of the Merger Agreement. In making its
recommendation, the Salem Board considered, among other things, the opinion of
its financial advisor that the proposed consideration to be paid by CCBF to
Salem's shareholders, in the form of the Exchange Ratio of .41 of a share of
CCBF Stock and .41 of a CCBF Right for each outstanding share of Salem Stock, is
fair to Salem's shareholders from a financial point of view. See "THE
MERGER -- Recommendation and Reasons" and " -- Salem Fairness Opinion".

FAIRNESS OPINION. Salem's Board of Directors retained The Carson Medlin
Company, Raleigh, North Carolina ("Carson Medlin") as Salem's financial advisor
to provide an opinion to the Board of the fairness to Salem's shareholders of
any such transaction from a financial point of view. After its review of a
variety of relevant factors, Carson Medlin has given Salem's Board of Directors
a written opinion dated July 15, 1996 (the "Salem Fairness Opinion"), a copy of
which is attached as Appendix C to this Prospectus/Proxy Statement), to the
effect that the terms of the Merger as provided in the Merger Agreement are fair
to Salem's shareholders from a financial point of view. For its services, Salem
has agreed to pay Carson Medlin a fee of $13,500 in compensation for rendering
of the Salem Fairness Opinion (the "Opinion Fee"). The Opinion Fee was

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paid upon the issuance of the Salem Fairness Opinion. In addition, Salem has
agreed to reimburse Carson Medlin for its reasonable and necessary out-of-pocket
expenses and third party expenses incurred by Carson Medlin in connection with
its engagement by Salem, and to indemnify Carson Medlin against certain
liabilities. See "THE MERGER -- Salem Fairness Opinion". Salem's obligation to
consummate the Merger is conditioned on its receipt of the Salem Fairness
Opinion. See "THE MERGER -- Conditions to Merger". Salem also engaged Orr
Management Co. ("Orr & Co.") as its financial advisor to assist the Salem Board
of Directors in considering various potential merger partners and the
advisability of the Merger. See "THE MERGER -- Recommendation and Reasons".

REQUIRED APPROVAL OF SHAREHOLDERS. Under the Merger Agreement and Chapter
53 of the North Carolina General Statutes (the "Bank Act"), the Merger Agreement
must be approved by the affirmative vote of the holders of at least two-thirds
(2/3) of the shares of Salem Stock entitled to be voted at the Special Meeting
and the holder of CCB Bank's outstanding common stock. As of the Record Date,
the directors and executive officers of Salem had voting control over 322,758
shares of Salem Stock. CCBF, as CCB Bank's sole shareholder, has approved the
Merger Agreement. See "THE MERGER -- Required Shareholder Approvals".

REQUIRED REGULATORY APPROVALS. The Merger is subject to approvals of
certain regulatory authorities. Applications for all such required approvals
have been filed and are pending. While no assurances are or can be given, Salem
and CCBF believe that all such required approvals will be obtained. See "THE
MERGER -- Required Regulatory Approvals".

CONDUCT OF BUSINESS PENDING MERGER. The Merger Agreement provides that,
prior to the Effective Time, each of Salem, CCBF and the subsidiaries of CCBF
will conduct its business in the usual, regular and ordinary course consistent
with past practices, use its best efforts to maintain and preserve intact its
business organization, employees and advantageous business relationships and
retain the services of its officers and key employees, and take no action which
would adversely affect or delay the ability of either Salem or CCBF to obtain
any necessary approvals of any governmental authority required for the Merger or
the other transactions contemplated by the Merger Agreement or to perform its
covenants and agreements under the Merger Agreement. Further, except as
permitted by the Merger Agreement, Salem will refrain from taking certain
actions relating to the operation of its business without the prior approval of
CCBF. See "THE MERGER -- Conduct of Business Pending Merger".

PROHIBITION ON SOLICITATION. The Merger Agreement provides that Salem will
not solicit or encourage, or authorize any person to solicit, from any third
party any inquiries or proposals with respect to any disposition of its business
or assets, or the acquisition of its voting securities, or its merger with any
corporation or entity other than as provided by the Merger Agreement. Further,
Salem will not provide any information or assistance or negotiate with any
person in furtherance of any such inquiry or to obtain such a proposal.

If the Merger Agreement is terminated by reason by Salem entering into a
letter of intent or agreement to be acquired by, merge with or sell all or
substantially all of its assets to a third party or if, prior to the termination
of the Merger Agreement, Salem (without the consent of CCBF) engages in
negotiations with a third party with respect to any such transaction and, within
twelve months of the termination of the Merger Agreement, enters into a letter
of intent or agreement with such third party, then Salem would be obligated to
pay to CCBF a termination fee of $1 million. See "THE MERGER -- Prohibition on
Solicitation" and " -- Termination of the Merger Agreement".

ACCOUNTING TREATMENT. CCBF currently intends for the Merger to be accounted
for under the pooling-of-interests method. Generally, if the number of
fractional shares of CCBF Stock resulting from the Merger for which cash is paid
in effecting the Merger, shares of CCBF Stock or Salem Stock repurchased by CCBF
or by Salem, and shares held by Salem stockholders who exercise their
"Dissenters' Rights" together would represent more than 10% of the shares issued
by CCBF in connection with the Merger, then the Merger will not qualify for the
pooling-of-interests method of accounting. If the Merger can not be accounted
for as a pooling-of-interests, then the Merger will be accounted for under the
purchase method of accounting. Should the pooling-of-interests method of
accounting not be available, it may be necessary to amend applications seeking
various regulatory approvals of the Merger and/or seek confirmations of such
approvals, to amend CCBF's Registration Statement on Form S-4, to convene an
additional Special Meeting of Salem's shareholders and to re-solicit proxies for
use at such additional meeting, and/or to defer the consummation of the Merger.
See "THE MERGER -- Accounting Treatment", " -- Conditions to the Merger" and
" -- Termination of Merger Agreement", and "RIGHTS OF DISSENTING SHAREHOLDERS."

CERTAIN INCOME TAX CONSEQUENCES. CCBF and Salem have received an opinion
(the "Tax Opinion") from KPMG Peat Marwick LLP, tax advisors to CCBF and Salem,
to the effect that the Merger will constitute a reorganization under Section
368(a)(1)(A) and Section 368(a)(2)(D) of the Internal Revenue Code of 1986, as
amended (the "Code"), and that the

<PAGE>
shareholders of Salem will not recognize gain or loss for federal income tax
purposes to the extent such shareholders exchange shares of Salem Stock for
shares of CCBF Stock. See "THE MERGER -- Certain Income Tax Consequences".

Because of the complexity of federal income tax laws and because tax
consequences may vary depending upon a shareholder's individual circumstances or
tax status, it is recommended that each of Salem's shareholders consult his or
her own tax advisor concerning the federal (and applicable state, local or
other) tax consequences of the Merger.

CONDITIONS TO MERGER. In addition to required regulatory and shareholder
approvals, consummation of the Merger is conditioned upon the fulfillment of
certain other conditions set forth in the Merger Agreement, including, without
limitation, (i) receipt of an opinion of KPMG Peat Marwick LLP that the Merger
qualifies for pooling-of-interests accounting treatment or, if such an opinion
cannot be rendered and the Merger is to be accounted for under the purchase
method of accounting, the satisfaction of certain additional conditions designed
to ensure, if necessary or deemed appropriate by CCBF, that the Merger has been
approved by applicable regulatory authorities and Salem's shareholders in
compliance with applicable laws and regulations, (ii) receipt of the Tax Opinion
of KPMG Peat Marwick LLP to the effect that the Merger will qualify as a tax-
free reorganization under the Code, (iii) the receipt by Salem of the Salem
Fairness Opinion, (iv) the absence of any order, decree or injunction enjoining
or prohibiting the consummation of the Merger, (v) the absence of the perfection
of "Dissenters' Rights" by the holders of more than 9.90% of the Salem Stock and
(vi) certain other conditions customary in transactions of this nature. See "THE
MERGER -- Conditions to Merger", " -- Required Shareholder Approvals",
" -- Required Regulatory Approvals", and " -- Accounting Treatment".

WAIVER AND AMENDMENT. Prior to the Effective Time, any provision of the
Merger Agreement may be waived by the party entitled to the benefits of such
provision, except that no condition may be waived which, if not satisfied, would
result in the violation of any law or applicable governmental regulation. In
addition, to the extent permitted by law, the Merger Agreement may be amended at
any time upon the written agreement of Salem, CCBF and CCB Bank without the
approval of Salem's shareholders or CCB Bank's shareholder, except that no
change in the manner or basis in which shares of Salem Stock will be exchanged
for CCBF Stock may be made after the Special Meeting without such shareholder
approvals. See "THE MERGER -- Amendment of Merger Agreement; Waiver".

TERMINATION OF MERGER AGREEMENT. The Merger Agreement may be terminated and
the Merger abandoned at any time prior to the Effective Time, whether before or
after any requisite shareholder approval, (i) by mutual consent of the Board of
Directors of Salem and the Boards of Directors of CCBF and CCB Bank; or (ii) by
the Board of Directors of Salem or the Boards of Directors of CCBF and CCB Bank:
(A) at any time after March 31, 1997 (unless the Merger is to be accounted for
under the purchase method of accounting, in which case this date shall be June
30, 1997); (B) if any appropriate regulatory authority has denied approval of
the Merger, or an order, judgment or decree of any such regulatory authority or
court having jurisdiction has imposed any condition or requirement which would
so substantially and adversely impact the economic or business benefits of the
Merger as to render the consummation of the Merger inadvisable in the reasonable
opinion of the Board of Directors of Salem or the Boards of Directors of CCBF
and CCB Bank, and such denial or imposition has become final and nonappealable;
(C) in the event of a material breach by the other party of any representation,
warranty, covenant or other agreement contained in the Merger Agreement, which
breach is not cured within 30 days after written notice thereof is given by the
non-breaching party; (D) if there has occurred a suit or other proceeding by any
governmental regulatory agency or body to restrain or prohibit the Merger, or a
suit by a Salem or CCBF shareholder seeking to restrain the Merger or seeking
material monetary damages should such transaction be consummated; or (E) if the
average closing price for a share of CCBF Stock on the NYSE over the 60 trading
days preceding the date of the Closing of the Merger is less than $46.78 or
greater than $57.18. See "THE MERGER -- Termination of Merger Agreement".

EFFECTIVE TIME. Assuming the receipt of all required approvals, it
currently is expected that the Merger will become effective on or about January
24, 1997. See "THE MERGER -- Effective Time and Closing Date". The Board of
Directors of Salem or the Boards of Directors of CCBF and CCB Bank may terminate
the Merger Agreement if the Effective Time shall not have occurred by March 31,
1997 (or June 30, 1997, if the Merger is to be accounted for as a purchase). See
"THE MERGER -- Termination of Merger Agreement".

INTERESTS OF CERTAIN PERSONS. The Merger Agreement provides that, following
the Effective Time, CCBF will continue to honor in accordance with their terms
all employment, severance, deferred compensation, split dollar insurance, salary
continuation, consulting and other compensation contracts between Salem and any
current or former director, officer or employee thereof. Additionally, Salem's
stock option plans (the "Salem Option Plans") will be continued and the stock
options granted thereunder ("Salem Options") will be exchanged at the Exchange
Ratio for options to acquire CCBF Stock. Pursuant to terms of the Salem Option
Plans, all unvested Salem Options will be immediately vested at the Effective
Time. The executive officers of Salem, Gordon H.T. Sheeran, President and Chief
Executive Officer, Norman D. Potter, Chief Financial Officer

<PAGE>
and Secretary, William S. Green, Senior Vice President, and Deborah S. Marshall,
Senior Vice President, currently hold 2,000, 2,844, 2,000 and 600 unvested Salem
Options, respectively.

The current employment agreements of Messrs. Sheeran, Potter and Green and
Ms. Marshall will be amended and restated as of the Effective Time and assumed
by CCB Bank. The terms of employment of each of these officers will be extended
and certain additional benefits will be provided to each of them. Each will
become a senior officer of CCB Bank. See "THE MERGER -- Interests of Certain
Persons with Respect to the Merger".

RIGHTS OF DISSENTING SHAREHOLDERS. Subject to certain conditions, each
Salem shareholder has the right under the North Carolina Business Corporation
Act (the "NCBCA") to "dissent" from the Merger and receive the "fair value" of
the shareholder's shares of Salem Stock in cash ("Dissenters' Rights"). A Salem
shareholder who (i) does not vote in favor of the Merger Agreement, (ii) submits
timely written notice of intent to demand payment for the shareholder's shares,
(iii) demands payment and deposits the shareholder's share certificates by the
date set forth in and in accordance with the terms and conditions of the
"dissenters' notice" sent to such shareholder, and (iv) otherwise satisfies the
requirements specified in Appendix B to this Prospectus/Proxy Statement, will be
offered the amount Salem estimates to be the fair value of the shareholder's
shares of Salem Stock, plus accrued interest to the date of payment, and will be
paid such amount in cash provided the shareholder agrees in writing to accept
such amount in full satisfaction of the shareholder's demand. In order to
exercise Dissenters' Rights, a Salem shareholder must follow carefully all steps
described in Appendix B. See "RIGHTS OF DISSENTING SHAREHOLDERS" and Appendix B.
A Salem shareholder who returns a signed appointment of proxy, but fails to
provide instructions as to the manner in which such shares are to be voted, will
be deemed to have voted in favor of the Merger Agreement and will not be
entitled to assert Dissenters' Rights.

DIFFERENCES IN CAPITAL STOCK OF SALEM AND CCBF. In connection with the
Merger, Salem's shareholders (other than shareholders who exercise Dissenters'
Rights) will become CCBF shareholders. There are certain differences between the
rights of the respective shareholders of Salem and CCBF, including certain
provisions in CCBF's Restated Articles of Incorporation, as amended, that may be
deemed to have an "anti-takeover" effect in that they could discourage or
prevent an acquisition of CCBF unless the potential acquiror has obtained the
approval of CCBF's Board of Directors. Salem shareholders should consider
carefully the differences in CCBF Stock and Salem Stock under the governing
instruments of those corporations and North Carolina law. See "CAPITAL STOCK OF
CCBF AND SALEM".

RESALES OF CCBF STOCK RECEIVED IN MERGER. The shares of CCBF Stock into
which Salem Stock will be converted in the Merger will be freely transferable by
the holders thereof except in the case of shares held by persons who may be
deemed to be "Affiliates" of Salem or CCBF under applicable federal securities
laws. Generally, Salem's Affiliates include its directors, executive officers,
principal shareholders and other persons who may be deemed to "control" Salem.
See "THE MERGER -- Restrictions on Resale of CCBF Stock by Affiliates". The CCBF
Rights attached to the shares of CCBF Stock received by Salem's shareholders
will not be transferable separately from the shares of CCBF Stock to which they
relate. See "CAPITAL STOCK OF CCBF AND SALEM".

CCBF STOCK AND SALEM STOCK; DIVIDENDS

CCBF STOCK AND SALEM STOCK. Transactions in CCBF Stock were quoted on the
National Market System of The Nasdaq Stock Market, Inc. (the "Nasdaq National
Market") until August 13, 1996. On August 14, 1996, CCBF Stock was listed on the
NYSE, and the reporting of transactions in CCBF Stock on the Nasdaq National
Market terminated. As of June 30, 1996, there were 15,051,625 shares of CCBF
Stock outstanding and held by approximately 7,312 holders of record.

Currently there is no established market on which Salem Stock is regularly
traded nor are transactions in Salem Stock reported by any quotations system.
Purchases and sales of Salem Stock occur, from time to time, in private
transactions in an informal match market. As of the Record Date, there were
1,841,232 shares of Salem Stock outstanding and held by approximately 509
holders of record.

The following table sets forth for the periods indicated (i) information on
the price range of CCBF Stock and shows the high and low closing sales prices as
quoted by the Nasdaq National Market or reported by the NYSE, as applicable,
(ii) the high and low sales prices of privately negotiated transactions in Salem
Stock of which Salem is aware, and (iii) the cash dividends declared per share
by each of CCBF and Salem. All sales prices for CCBF Stock and Salem Stock are
shown without retail markups, markdowns, or commissions. Because transactions in
Salem Stock occur in private transactions and Salem may not be aware of all such
transactions occurring during the periods indicated, the sales prices for Salem
Stock

<PAGE>
shown should not be taken as indicative of the market value of Salem Stock at
any specific time or of the existence of any established trading market for
Salem Stock.

<TABLE>
<CAPTION>
CCBF STOCK SALEM STOCK
HIGH LOW DIVIDEND HIGH LOW DIVIDEND
<S> <C> <C> <C> <C> <C> <C>
1996
1st Quarter...................................................... $55.75 $49.25 $.38 $14.00 $13.50 $.10(2)
2nd Quarter...................................................... 54.75 49.75 .38 14.50 14.50 --
3rd Quarter...................................................... 55.00 49.50 .42 14.50 14.50 --
4th Quarter (1).................................................. 55.25 54.75 -- 14.50 14.50 --

1995
1st Quarter...................................................... 38.75 34.00 .34 9.00 9.00 --
2nd Quarter...................................................... 42.75 38.00 .34 9.13 9.00 --
3rd Quarter...................................................... 51.63 41.75 .38 12.25 9.75 --
4th Quarter...................................................... 56.50 48.50 .38 13.50 12.25 --

1994
1st Quarter...................................................... 37.50 32.75 .32 8.00 8.00 --
2nd Quarter...................................................... 40.00 33.25 .32 8.00 8.00 --
3rd Quarter...................................................... 44.50 39.25 .34 8.50 8.00 --
4th Quarter...................................................... 44.00 32.75 .34 9.00 8.63 .08
</TABLE>

(1) Through October 2, 1996

(2) Although this dividend was declared in January, 1996, it represents a
dividend to shareholders based on 1995 net income.

The following table sets forth the closing sales prices per share of CCBF
Stock, the sales prices per share of Salem Stock of which Salem is aware, and
the per share prices of Salem Stock equivalent to the closing sales prices of
CCBF Stock (which prices represent the closing prices per share of CCBF Stock
multiplied by the Exchange Ratio) on May 13, 1996, the business day preceding
the public announcement of the Merger, and on October 2, 1996, the most recent
practicable business day prior to the date of this Prospectus/Proxy Statement:

<TABLE>
<CAPTION>
EQUIVALENT PER
PRICE PER SHARE AT CCBF STOCK SALEM STOCK SHARE PRICE
<S> <C> <C> <C>
May 13, 1996............................................... $52.75 14.50(1) $21.63
October 2, 1996............................................ 55.25 14.50(2) $22.65
</TABLE>

(1) Sales price of trade of Salem Stock on April 30, 1996, the last trade in
Salem Stock known by Salem's management to have occurred before May 13,
1996.

(2) No transactions in Salem Stock are known by Salem's management to have
occurred since April 30, 1996.

SELECTED FINANCIAL INFORMATION

The following tables set forth certain selected consolidated financial
information for CCBF and Salem on a historical basis and for CCBF on an
unaudited pro forma combined basis. This financial information has been based
on, and should be read in conjunction with, CCBF's audited financial statements
and interim unaudited financial statements, including the related notes thereto,
which are incorporated herein by reference, see "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE", and Salem's audited financial statements and interim
unaudited financial statements, including the related notes thereto, which are
set forth herein. In the opinion of the respective managements of CCBF and
Salem, all adjustments necessary for a fair presentation of results of interim
periods of CCBF and Salem (none of which were other than normal accruals) have
been included.

The selected unaudited pro forma combined financial information has been
prepared using historical financial information for CCBF and Salem and assuming
that the Merger had been effective prior to the periods presented and was
accounted for under the pooling-of-interests method of accounting. For a
description of the pooling-of-interests accounting method with respect to the
Merger and the related effects on the historical financial statements of CCBF,
see "THE MERGER -- Accounting Treatment". The pro forma combined financial
information presented is not necessarily indicative of actual results that might
have been achieved had the Merger been consummated prior to the periods
presented, and is not indicative of future results that may be obtained on a
combined basis. The pro forma combined financial information does not reflect
any Merger-related

<PAGE>
expenses which may be recognized or cost savings from operating efficiencies
which may be realized in connection with the Merger. Current estimates of
Merger-related expenses are $1.4 million. CCBF currently anticipates cost
savings of approximately $1.5 million associated with possible operating
efficiencies and synergies, but no such savings are assured. It is anticipated
that any such cost savings will be achieved, if at all, only in the fiscal
quarters following the quarter in which the expenses of the Merger are
recognized.

CCB FINANCIAL CORPORATION

<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30
(UNAUDITED) YEARS ENDED DECEMBER 31
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE DATA)
SUMMARY OF OPERATIONS
Interest income....................... $ 194,563 188,474 383,514 309,899 254,912 241,589 269,638
Interest expense...................... 88,713 87,057 179,404 126,366 101,956 105,766 143,989
Net interest income................... 105,850 101,417 204,110 183,533 152,956 135,823 125,649
Provision for loan and
lease losses........................ 5,150 3,749 8,183 9,279 7,106 7,831 9,331
Net interest income after
provision........................... 100,700 97,668 195,927 174,254 145,850 127,992 116,318
Other income.......................... 29,563 27,285 53,267 48,630 46,617 39,570 41,261
Net investment securities gains
(losses)............................ 11 (977) (978) 357 2,962 2,073 605
Other expenses (1).................... 74,866 86,782 160,223 147,287 129,452 116,114 110,983
Income before income taxes and
cumulative changes in accounting
principles.......................... 55,408 37,194 87,993 75,954 65,977 53,521 47,201
Income taxes (2)...................... 19,292 13,107 30,133 30,843 21,913 18,238 14,470
Income before cumulative changes in
accounting principles............... 36,116 24,087 57,860 45,111 44,064 35,283 32,731
Cumulative changes in accounting
principles (3)...................... -- -- -- -- (1,371) -- --
Net income............................ $ 36,116 24,087 57,860 45,111 42,693 35,283 32,731
PER SHARE
Income before cumulative changes in
accounting principles:
Primary............................. $ 2.40 1.61 3.87 2.94 3.10 2.60 2.42
Fully diluted (4)................... 2.40 1.61 3.87 2.94 3.05 2.52 2.35
Net income:
Primary............................. 2.40 1.61 3.87 2.94 3.00 2.60 2.42
Fully diluted (4)................... 2.40 1.61 3.87 2.94 2.95 2.52 2.35
Cash dividends........................ .76 .68 1.44 1.32 1.24 1.14 1.047
Book value............................ 29.98 27.02 28.98 24.75 24.43 22.42 20.66
Average shares outstanding:
Primary............................. 15,034 14,961 14,949 15,354 14,230 13,580 13,539
Fully diluted (4)................... 15,034 14,961 14,949 15,354 14,612 14,494 14,476
AVERAGE BALANCES
Assets................................ $4,968,326 4,736,131 4,811,108 4,297,775 3,613,333 3,095,352 2,983,978
Loans and lease financing............. 3,407,023 3,228,707 3,251,613 2,823,525 2,299,599 2,018,812 1,979,879
Earning assets........................ 4,678,685 4,447,788 4,521,780 4,021,814 3,365,274 2,875,280 2,766,431
Deposits.............................. 4,253,417 4,078,212 4,148,526 3,676,139 3,137,037 2,687,980 2,584,251
Interest-bearing liabilities.......... 3,917,933 3,780,541 3,824,793 3,376,509 2,820,219 2,412,176 2,368,185
Shareholders' equity.................. 439,100 384,439 397,504 382,884 330,679 289,291 265,743
</TABLE>

<PAGE>
CCB FINANCIAL CORPORATION (CONTINUED)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30
(UNAUDITED) YEARS ENDED DECEMBER 31
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE DATA)
SELECTED PERIOD END BALANCES
Assets............................ $5,060,468 4,837,995 5,089,786 4,720,688 4,186,578 3,225,929 3,072,968
Loans and lease financing......... 3,499,741 3,197,549 3,345,345 3,158,863 2,651,100 2,033,829 1,999,955
Reserve for loan and lease
losses.......................... 45,423 42,726 43,578 41,046 34,190 25,936 23,171
Deposits.......................... 4,310,618 4,165,165 4,297,411 4,057,680 3,601,227 2,802,141 2,660,737
Shareholders' equity.............. 451,274 402,621 433,517 371,151 375,224 306,773 279,992
RATIOS (ANNUALIZED)
Income before cumulative changes
in accounting principles to:
Average assets.................. 1.46% 1.03 1.20 1.05 1.22 1.14 1.10
Average shareholders'
equity....................... 16.54 12.63 14.56 11.78 13.33 12.20 12.32
Net income to:
Average assets.................. 1.46 1.03 1.20 1.05 1.18 1.14 1.10
Average shareholders'
equity....................... 16.54 12.63 14.56 11.78 12.91 12.20 12.32
Net interest margin, taxable
equivalent (5).................. 4.71 4.78 4.70 4.75 4.76 4.88 4.72
Net loan and lease losses to
average loans and lease
financing....................... .20 .13 .17 .17 .20 .25 .37
Dividend payout ratio............. 31.67 42.24 37.21 44.90 41.33 43.85 43.26
</TABLE>

(1) Other expenses include merger-related expense of $10.3 million in 1995
related to CCBF's merger with Security Capital Bancorp ("SCBC") and $1.1
million in 1994 related to SCBC's acquisition of a savings and loan
association. As a result, income per share was decreased by $.49 per share
in 1995 and $.04 per share in 1994.

(2) Income taxes for 1994 include a one-time charge of approximately $5.6
million of deferred tax liabilities recorded in conjunction with the merger
of SCBC's three savings bank subsidiaries into its commercial bank
subsidiary. As a result, income per share was decreased by $.37 for the
year.

(3) The cumulative changes in accounting principles reflect the 1993 adoptions
of Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" ("SFAS 106")
which resulted in a one-time net charge of $2.3 million ($3.7 million
pre-tax) in recognition of the entire Accumulated Postretirement Benefit
Obligation, and Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109") which resulted in a one-time
benefit of $900,000.

(4) Assumes full conversion of convertible subordinated debentures issued by
CCBF in 1985. The convertible subordinated debentures were called for
redemption during 1993 and substantially all were converted into CCBF Stock.

(5) Net interest margin is computed by dividing taxable equivalent net interest
income by average earnings assets.

<PAGE>
SALEM TRUST BANK

<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30
(UNAUDITED) YEARS ENDED DECEMBER 31
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE DATA)
SUMMARY OF OPERATIONS
Interest income....................... $ 6,148 4,002 9,337 5,320 4,457 4,490 5,230
Interest expense...................... 3,112 1,786 4,571 2,397 2,307 2,664 3,459
Net interest income................... 3,036 2,216 4,766 2,923 2,150 1,826 1,771
Provision for loan losses............. 132 165 545 50 -- 40 118
Net interest income after provision... 2,904 2,051 4,221 2,873 2,150 1,786 1,653
Other income.......................... 622 315 928 646 434 167 79
Other expenses........................ 2,047 1,632 3,385 2,210 1,876 1,403 1,232
Income before income taxes and
cumulative change in accounting
principles.......................... 1,479 734 1,764 1,309 708 550 500
Income taxes.......................... 571 342 720 506 250 196 123
Income before cumulative change in
accounting principles............... 908 392 1,044 803 458 354 377
Cumulative change in accounting
principles (1)...................... -- -- -- -- -- 61 --
Net income............................ $ 908 392 1,044 803 458 415 377
PER SHARE
Net income:
Primary............................. $ .54 .34 .72 .76 .44 .40 .36
Fully diluted (2)................... .51 .32 .67 .70 .42 .40 .36
Cash dividends........................ .10(3) -- -- .08 -- -- --
Book value............................ 9.06 8.11 8.52 7.29 6.60 6.16 5.76
Average shares outstanding:
Primary............................. 1,694 1,138 1,448 1,051 1,050 1,040 1,035
Fully diluted (2)................... 1,832 1,351 1,685 1,267 1,237 1,040 1,035
AVERAGE BALANCES
Assets................................ $156,356 94,951 113,881 83,481 80,884 76,319 66,805
Loans................................. 111,453 76,475 87,414 61,111 59,388 55,702 46,917
Earning assets........................ 150,244 88,015 107,750 77,812 76,439 72,570 63,425
Deposits.............................. 138,485 80,986 98,414 71,555 71,626 69,584 60,328
Interest-bearing liabilities.......... 128,871 77,864 93,055 69,040 67,463 65,055 57,728
Stockholders' equity.................. 14,834 8,876 11,104 7,226 6,618 6,215 5,837
SELECTED PERIOD END BALANCES
Assets................................ $157,564 115,968 154,091 90,545 88,066 86,088 79,999
Loans................................. 113,703 91,898 106,231 66,966 60,447 58,500 59,213
Allowance for loan losses............. 1,434 922 1,302 757 714 714 674
Deposits.............................. 139,434 94,446 136,451 79,316 78,314 79,042 73,367
Stockholders' equity.................. 16,683 12,945 13,608 7,581 6,861 6,404 5,989
RATIOS (ANNUALIZED)
Net income to:
Average assets...................... 1.17% .83 .92 .96 .57 .54 .56
Average stockholders' equity........ 12.31 8.91 9.40 11.11 6.92 6.68 6.46
Net interest margin, taxable
equivalent (4)...................... 4.12 5.09 4.43 3.78 2.84 2.54 2.81
Net loan losses to average loans...... -- -- -- .01 -- -- --
Dividend payout ratio................. 18.52 -- -- 10.53 -- -- --
</TABLE>

(1) The cumulative change in accounting principles reflects the 1992 adoption of
SFAS 109 which resulted in a one-time benefit of $61,000.

(2) Assumes full conversion of convertible subordinated notes issued in 1993.
The convertible subordinated notes were called for redemption in 1996 and
substantially all were converted into Salem Stock.

(3) Although this dividend was declared in January, 1996, it represents a
dividend to shareholders based on 1995 net income.

(4) Net interest margin is computed by dividing taxable equivalent net interest
income by average earning assets.

<PAGE>
CCB FINANCIAL CORPORATION PRO FORMA COMBINED

<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30
(UNAUDITED) YEARS ENDED DECEMBER 31
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE DATA)
SUMMARY OF OPERATIONS
Interest income................... $ 200,711 192,476 392,851 315,219 259,369 246,079 274,868
Interest expense.................. 91,825 88,843 183,975 128,763 104,263 108,430 147,448
Net interest income............... 108,886 103,633 208,876 186,456 155,106 137,649 127,420
Provision for loan and lease
losses.......................... 5,282 3,914 8,728 9,329 7,106 7,871 9,449
Net interest income after
provision....................... 103,604 99,719 200,148 177,127 148,000 129,778 117,971
Other income...................... 30,185 27,600 54,195 49,276 47,051 39,737 41,340
Net investment securities gains
(losses)........................ 11 (977) (978) 357 2,962 2,073 605
Other expenses (1)................ 76,913 88,414 163,608 149,497 131,328 117,517 112,215
Income before income taxes and
cumulative changes in accounting
principles...................... 56,887 37,928 89,757 77,263 66,685 54,071 47,701
Income taxes (2).................. 19,863 13,449 30,853 31,349 22,163 18,434 14,593
Income before cumulative changes
in accounting principles........ 37,024 24,479 58,904 45,914 44,522 35,637 33,108
Cumulative changes in accounting
principles (3).................. -- -- -- -- (1,371) 61 --
Net income........................ $ 37,024 24,479 58,904 45,914 43,151 35,698 33,108
PER SHARE
Income before cumulative changes
in accounting principles:
Primary......................... $ 2.35 1.59 3.79 2.91 3.04 2.54 2.37
Fully diluted (4)............... 2.35 1.58 3.77 2.90 2.94 2.48 2.31
Net income:
Primary......................... 2.35 1.59 3.79 2.91 2.94 2.55 2.37
Fully diluted (4)............... 35 1.58 3.77 2.90 2.85 2.48 2.31
Cash dividends (5)................ .76 .68 1.44 1.32 1.24 1.14 1.047
Book value........................ 29.61 26.72 28.63 24.56 24.21 22.19 20.46
Average shares outstanding:
Primary......................... 15,729 15,428 15,543 15,785 14,661 14,006 13,964
Fully diluted (4)............... 15,785 15,515 15,640 15,874 15,119 14,920 14,901
AVERAGE BALANCES
Assets............................ $5,124,682 4,831,082 4,924,989 4,381,256 3,694,217 3,171,671 3,050,783
Loans and lease financing......... 3,518,476 3,305,182 3,339,027 2,884,636 2,358,987 2,074,514 2,026,796
Earning assets.................... 4,828,929 4,535,803 4,629,530 4,099,626 3,441,713 2,947,850 2,829,856
Deposits.......................... 4,391,902 4,159,198 4,246,940 3,747,694 3,208,663 2,757,564 2,644,579
Interest-bearing liabilities...... 4,046,804 3,858,405 3,917,848 3,445,549 2,887,682 2,477,231 2,425,913
Shareholders' equity.............. 453,934 393,315 408,608 390,110 337,297 295,506 271,580
</TABLE>

<PAGE>
CCB FINANCIAL CORPORATION PRO FORMA COMBINED (CONTINUED)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30
(UNAUDITED) YEARS ENDED DECEMBER 31
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE DATA)
SELECTED PERIOD END BALANCES
Assets............................ $5,218,032 4,953,963 5,243,877 4,811,233 4,274,644 3,312,017 3,152,967
Loans and lease financing......... 3,613,444 3,289,447 3,451,576 3,225,829 2,711,547 2,092,329 2,059,168
Reserve for loan and lease
losses.......................... 46,857 43,648 44,880 41,803 34,904 26,650 23,845
Deposits.......................... 4,450,052 4,259,611 4,433,862 4,136,996 3,679,541 2,881,183 2,734,104
Shareholders' equity.............. 467,957 415,566 447,125 378,732 382,085 313,177 285,981
RATIOS (ANNUALIZED)
Income before cumulative changes
in accounting principles to:
Average assets.................. 1.45% 1.02 1.20 1.05 1.21 1.12 1.09
Average shareholders'
equity....................... 16.40 12.55 14.42 11.77 13.20 12.06 12.19
Net income to:
Average assets.................. 1.45 1.02 1.20 1.05 1.17 1.13 1.09
Average shareholders'
equity....................... 16.40 12.55 14.42 11.77 12.79 12.08 12.19
Net interest margin, taxable
equivalent (6).................. 4.70 4.81 4.70 4.73 4.72 4.90 4.76
Net loan and lease losses to
average loans and lease
financing....................... .19 .13 .17 .17 .20 .24 .36
Dividend payout ratio (5)......... 32.34 42.77 37.99 45.36 42.18 44.71 44.18
</TABLE>

(1) Other expenses include merger-related expense of $10.3 million in 1995
related to CCBF's merger with SCBC and $1.1 million in 1994 related to
SCBC's acquisition of a savings and loan association. The after-tax effect
of the merger-related expense was to decrease net income per share by $.47
per share in 1995 and $.04 per share in 1994.

(2) Income taxes for 1994 include a one-time charge of approximately $5.6
million of deferred tax liabilities recorded in conjunction with the merger
of SCBC's three savings subsidiaries into its commercial bank subsidiary. As
a result, income per share was decreased by $.35 for the year.

(3) The 1993 cumulative changes in accounting principles reflect CCBF's adoption
of SFAS 106 which resulted in a one-time net charge of $2.3 million ($3.7
million pre-tax) and adoption of SFAS 109 which resulted in a one-time
benefit of $900,000. The 1992 cumulative change in accounting principles
reflects Salem's adoption of SFAS 109 which resulted in a one-time benefit
of $61,000.

(4) Assumes (i) full conversion of convertible subordinated debentures issued by
CCBF in 1985 which were outstanding until 1993 when substantially all were
converted into CCBF Stock and (ii) full conversion of convertible
subordinated notes issued by Salem in 1993 which were outstanding until 1996
when substantially all were converted into Salem's Stock.

(5) CCBF pro forma combined dividends per share represent historical dividends
per share paid by CCBF.

(6) Net interest margin is computed by dividing taxable equivalent net interest
income by average earning assets.

COMPARATIVE PER SHARE DATA

The following unaudited consolidated financial information reflects certain
comparative per share data at the dates and for the periods presented relating
to (i) net income, book value and cash dividends per common share of CCBF Stock
and Salem Stock on a historical basis, and (ii) net income, book value and cash
dividends per common share on a pro forma combined and equivalent per share of
Salem Stock basis (each assuming the Merger became effective prior to the
periods presented and was accounted for as a pooling-of-interests). See "THE
MERGER -- Accounting Treatment". The data presented

<PAGE>
should be read in conjunction with and has been derived from the historical
consolidated financial statements of CCBF and the related notes thereto,
incorporated herein by reference, and the historical financial statements of
Salem and the related notes thereto, contained herein, and in conjunction with
the unaudited pro forma combined condensed financial information, including the
related notes thereto, included elsewhere in this Prospectus/Proxy Statement.
See "PRO FORMA COMBINED FINANCIAL INFORMATION".

<TABLE>
<CAPTION>
AT AT
JUNE 30, DECEMBER 31,
1996 1995
<S> <C> <C>
BOOK VALUE PER COMMON SHARE:
CCBF (1)........................................................................................... $29.98 28.98
Salem (1).......................................................................................... 9.06 8.52
Pro Forma Combined (2)............................................................................. 29.61 28.63
Equivalent per share of Salem Stock (3)............................................................ 12.14 11.74
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
CASH DIVIDENDS PER COMMON SHARE:
CCBF................................................................ $ .76 .68 1.44 1.32 1.24 1.14 1.047
Salem............................................................... .10(4) -- -- .08 -- -- --
Pro Forma Combined (5).............................................. .76 .68 1.44 1.32 1.24 1.14 1.047
Equivalent per share of Salem Stock (3)............................. .31 .28 .59 .54 .51 .47 .43
INCOME BEFORE CUMULATIVE CHANGES IN ACCOUNTING PRINCIPLES PER PRIMARY
COMMON SHARE:
CCBF................................................................ 2.40 1.61 3.87 2.94 3.10 2.60 2.42
Salem............................................................... .54 .34 .72 .76 .44 .34 .36
Pro Forma Combined (6).............................................. 2.35 1.59 3.79 2.91 3.04 2.54 2.37
Equivalent per share of Salem Stock (3)............................. .96 .65 1.55 1.19 1.25 1.04 .97
INCOME BEFORE CUMULATIVE CHANGE IN ACCOUNTING PRINCIPLES PER FULLY
DILUTED COMMON SHARE (7):
CCBF................................................................ 2.40 1.61 3.87 2.94 3.05 2.52 2.35
Salem............................................................... .51 .32 .67 .70 .42 .34 .36
Pro Forma Combined (8).............................................. 2.35 1.58 3.77 2.90 2.98 2.48 2.31
Equivalent per share of Salem Stock (3)............................. .96 .65 1.55 1.19 1.22 1.02 .95
</TABLE>

(1) CCBF and Salem historical book values per share are computed using period
end shares outstanding and do not include common share equivalents.

(2) The pro forma combined book values per share of CCBF Stock are based upon
the combined historical total common equity for CCBF and Salem divided by
total pro forma shares of CCBF Stock, assuming conversion of the Salem Stock
at the Exchange Ratio.

(3) Salem pro forma equivalent per share amounts are computed by multiplying the
CCBF pro forma combined amounts by the Exchange Ratio.

(4) Although this dividend was declared in January, 1996, it represents a
dividend to shareholders based on 1995 net income.

(5) CCBF pro forma combined dividends per share represent historical dividends
per share paid by CCBF.

(6) The pro forma combined income per primary common share before cumulative
changes in accounting principles is based on the combined historical income
before cumulative changes in accounting principles of CCBF and Salem divided
by the pro forma combined weighted average primary common shares of CCBF.

(7) Assumes (i) full conversion of convertible subordinated debentures issued by
CCBF in 1985 which were called for redemption during 1993 and substantially
all were converted into shares of CCBF Stock, and (ii) full conversion of
convertible subordinated notes issued by Salem in 1993 which were
outstanding until 1996 when substantially all were converted into shares of
Salem Stock.

(8) The pro forma combined income before cumulative changes in accounting
principles per fully diluted share is based on the combined historical
income before cumulative changes in accounting principles of CCBF and Salem
divided by the weighted average pro forma combined fully diluted common
shares of CCBF.

<PAGE>
THE SPECIAL MEETING

GENERAL; PROPOSALS TO BE CONSIDERED

This Prospectus/Proxy Statement is being furnished to holders of Salem
Stock in connection with the solicitation of proxies by Salem's Board of
Directors for use at the Special Meeting which has been called to consider and
vote upon (i) a proposal to approve the Merger Agreement, and (ii) to transact
such other business as may properly come before the Special Meeting or any
adjournments thereof. Each copy of this Prospectus/Proxy Statement mailed to
holders of Salem Stock is accompanied by an appointment of proxy for use at the
Special Meeting.

HOLDERS OF SALEM STOCK ARE URGED TO COMPLETE, DATE AND SIGN THE APPOINTMENT
OF PROXY WHICH ACCOMPANIES THEIR COPY OF THIS PROSPECTUS/PROXY STATEMENT AND TO
RETURN IT IMMEDIATELY TO SALEM.

DATE, PLACE AND TIME

The Special Meeting will be held at Arts Council Theater, 610 Coliseum
Drive, Winston-Salem, North Carolina on Thursday, November 21, 1996 at 10:00
o'clock, a.m., E.S.T.

RECORD DATE

Salem's Board of Directors has fixed the close of business on October 2,
1996 as the record date (the "Record Date") for the determination of the holders
of Salem Stock entitled to receive notice and to vote at the Special Meeting.

VOTING SECURITIES; VOTES REQUIRED FOR APPROVAL

As of the Record Date, there were 1,841,232 outstanding shares of Salem
Stock. Each Salem shareholder will be entitled to cast one vote for each share
of Salem Stock held of record on the Record Date on each matter submitted for
voting at the Special Meeting. The affirmative vote of the holders of at least
two-thirds (2/3) of the shares of Salem Stock entitled to vote at the Special
Meeting is required to approve the Merger Agreement. Because the affirmative
vote of at least two-thirds (2/3) of all outstanding Salem Stock is required,
abstentions, broker non-votes and shares otherwise not voted in the affirmative
will have the same effect as votes against the Merger Agreement.

Approval of the Merger Agreement by CCBF's shareholders is not required by
applicable law. CCBF, as the sole shareholder of CCB Bank, approved by Merger
Agreement by action of its Board of Directors. See "THE MERGER -- Required
Shareholder Approvals".

VOTING AND REVOCATION OF PROXIES

Shares of Salem Stock represented by an appointment of proxy properly
signed and received at or prior to the Special Meeting will be voted as
instructed therein, unless subsequently revoked by the death or incapacity of
the shareholder executing it, and notice of such death or incapacity is filed
with the Secretary of Salem or with any other person authorized to tabulate
votes on behalf of Salem before such shares are voted. If an appointment of
proxy is signed and returned without indicating any voting instructions, shares
of Salem Stock represented thereby will be voted FOR the Merger Agreement. An
appointment of proxy may be revoked by the person giving it at any time before
the shares represented thereby are voted by the filing with the Secretary of
Salem prior to or at the Special Meeting of an instrument revoking it or of a
duly executed appointment of proxy bearing a later date, or by voting in person
at the Special Meeting. All written notices of revocation and other
communications with respect to revocation of Salem proxies should be addressed
as follows: Salem Trust Bank, 2140 Country Club Road, Winston-Salem, North
Carolina 27104, Attn: Norman D. Potter, Chief Financial Officer and Secretary.
Attendance at the Special Meeting will not in and of itself constitute
revocation of an appointment of proxy.

The Board of Directors of Salem is not aware of any business to be acted
upon at the Special Meeting other than as described herein. If, however, other
matters are properly brought before the Special Meeting, or any adjournments
thereof, the Proxies appointed for the Special Meeting will have discretionary
authority to vote on such matters in accordance with their best judgment;
provided, however, that such discretionary authority (i) will only be exercised
to the extent permissible under the applicable federal securities law and (ii)
will not extend to any motion to adjourn the Special Meeting made by Salem for
the purpose of soliciting additional proxies.

<PAGE>
PROXY SOLICITATION EXPENSES

Except under certain circumstances involving a wrongful termination or
breach of the Merger Agreement, proxy solicitation costs in connection with the
Special Meeting will be borne by Salem. In addition to solicitation by mail,
directors, officers and employees of Salem, who will not be specifically
compensated for such services, may solicit appointments of proxy from Salem's
shareholders personally or by telephone or telegram or other form of
communication. Brokerage houses, nominees, fiduciaries and other custodians will
be requested to forward soliciting materials to beneficial owners of Salem Stock
and will reimbursed for their reasonable expenses incurred in doing so by Salem.
See "THE MERGER -- Termination of Merger Agreement" and " -- Expenses".

RECOMMENDATION AND REASONS

Salem's Board of Directors has unanimously adopted the Merger Agreement.
The Board believes the Merger will provide Salem's shareholders with an increase
in the value of their stockholdings, an increase in the current individual
return on their investments, and an opportunity to participate in further
appreciation in the value of the shares of CCBF Stock they acquire in the
Merger. The Board believes the combination of Salem and CCBF will allow Salem's
shareholders to participate in the ownership of a larger entity which will be
able to compete more effectively in the economic and competitive environments
facing financial institutions than would Salem on an independent basis. On this
basis, Salem's Board concluded that the Merger is fair to, and in the best
interests of, Salem's shareholders, and adopted and determined to recommend that
Salem's shareholders approve the Merger Agreement.

In reaching its conclusions, Salem's Board of Directors consulted with
legal, financial and other advisors, as well as Salem's management, and
considered a number of factors, including (i) the Board's familiarity with and
review of Salem's business, financial condition, operations, earnings, markets
and future prospects as an independent entity; (ii) the Board's review, with the
assistance of Salem's management and advisors, of the business, financial
condition, operations and earnings of CCBF on historical, pro forma and
prospective bases, and the enhanced opportunities for competitiveness and growth
that the Merger will make possible; (iii) the expectation that the Merger
generally will be a tax-free transaction to Salem and its shareholders; and (iv)
a variety of other factors affecting and relating to Salem's overall strategic
goals, the similarities in the focus of Salem's and CCBF's managements, the
business line diversity that the Merger will allow, and the geographic proximity
and contiguity of Salem's and CCBF's existing market areas. Salem's Board did
not assign any relative or specific weights to the factors considered. See "THE
MERGER -- Recommendation and Reasons".

THE MERGER

THE FOLLOWING IS A SUMMARY OF INFORMATION ABOUT THE MERGER AND CERTAIN OF
THE IMPORTANT TERMS AND CONDITIONS OF THE MERGER AGREEMENT AND THE OTHER
TRANSACTIONS DESCRIBED THEREIN, AND IS NOT INTENDED TO BE A COMPLETE DESCRIPTION
OF ALL MATERIAL FACTS REGARDING THE MERGER. THE SUMMARY IS QUALIFIED IN ALL
RESPECTS BY REFERENCE TO THE FULL MERGER AGREEMENT ATTACHED HERETO AS APPENDIX
A, THE STATUTES REGARDING DISSENTERS' RIGHTS ATTACHED HERETO AS APPENDIX B, AND
THE OTHER APPENDICES TO THE PROSPECTUS/PROXY STATEMENT (EACH OF WHICH IS
INCORPORATED HEREIN BY REFERENCE). ALL SALEM SHAREHOLDERS ARE URGED TO READ THE
MERGER AGREEMENT AND THE OTHER APPENDICES IN THEIR ENTIRETY.

GENERAL

The Merger Agreement provides for the merger of Salem into CCB Bank and the
conversion and exchange of each outstanding share of Salem Stock (other than
shares held by shareholders who exercise their Dissenters' Rights and shares
held by CCBF, subsidiaries of CCBF or Salem other than in a fiduciary capacity
or as a result of debts previously contracted) into and for newly issued shares
of CCBF Stock. At the Effective Time, (i) Salem will be merged into and its
existence will be combined with that of CCB Bank as the surviving bank, and
Salem will cease to exist as a separate entity and (ii) Salem's shareholders
(other than shareholders who exercise their Dissenters' Rights) will become
shareholders of CCBF. CCB Bank will continue to conduct its and Salem's
businesses under the management of its then current officers and directors and
under the supervision and regulation of the Federal Reserve, the FDIC and the
North Carolina Commissioner of Banks ("Commissioner"); provided, however, that
as of the Effective Time, certain senior executive officers of Salem will become
senior officers of CCB Bank. See " -- Conversion of Salem Stock and Stock
Options; Exchange Ratio" and " -- Directors and Officers," and "RIGHTS OF
DISSENTING SHAREHOLDERS".

<PAGE>
CONVERSION OF SALEM STOCK AND SALEM OPTIONS; EXCHANGE RATIO

At the Effective Time, and without any further action on the part of Salem
or its shareholders, each outstanding share of Salem Stock (other than shares
held by CCBF, subsidiaries of CCBF or Salem, and other than shares as to which
Salem shareholders properly exercise Dissenters' Rights) automatically will be
converted into and become, and thereafter may be exchanged for, .41 of a share
of a newly issued CCBF Stock and .41 of a CCBF Right. See "RIGHTS OF DISSENTING
SHAREHOLDERS". If there is a change in the number of outstanding shares of Salem
Stock prior to the Effective Time (other than pursuant to the exercise of Salem
Options (as defined below)), then appropriate and proportionate adjustments will
be made in the Exchange Ratio as necessary to eliminate any dilutive or
antidilutive effect of such change in outstanding shares. Management of CCBF and
Salem currently are not aware of any change (completed or proposed) in the
outstanding shares of Salem Stock such as would result in any adjustment in the
Exchange Ratio.

At the Effective Time, all rights with respect to then outstanding Salem
Options, whether or not then exercisable, will be converted into (at the
Exchange Ratio) and will become rights with respect to CCBF Stock, and CCBF will
assume Salem's obligations with respect to each such Salem Option in accordance
with the terms of the applicable Salem Option Plan under which such Salem Option
was granted and the related option agreement; provided, however, that pursuant
to the Salem Option Plans all unvested Salem Options will become fully vested as
a consequence of the Merger. See " -- Interests of Certain Persons with Respect
to the Merger".

SURRENDER AND EXCHANGE OF CERTIFICATES

As of the Effective Time, Salem's stock transfer books will be closed and
no further transfer of Salem Stock will be made or recognized. As soon as
possible following the Effective Time, Salem shareholders will receive
transmittal forms with instructions for forwarding their certificates formerly
evidencing shares of Salem Stock ("Old Certificates") for surrender to CCBF's
exchange agent (the "Exchange Agent"). Upon surrender to the Exchange Agent of
their Old Certificates, Salem shareholders will be entitled to receive (i)
certificates ("New Certificates") evidencing the number of whole shares of CCBF
Stock into which their shares of Salem Stock will have been converted, together
with cash for any fractional share (see " -- Treatment of Fractional Shares"),
or (ii) in the case of a shareholder properly exercising Dissenters' Rights, the
amount of cash determined as provided in Article 13 of the NCBCA. See "RIGHTS OF
DISSENTING SHAREHOLDERS".

A New Certificate, or any check representing cash in lieu of fractional
shares and/or declared but unpaid dividends, may be issued only if (i) the Old
Certificate surrendered is properly endorsed, accompanied by a guaranteed
signature if required by the transmittal form and otherwise in proper form for
transfer, and (ii) the person requesting the issuance of such New Certificate
either affixes any required stock transfer stamps to the Old Certificate
surrendered, or pays to the Exchange Agent funds for the purpose of such tax
stamps and for any other taxes required by reason of the issuance of the New
Certificate in a name other than the registered holder of the Old Certificate
surrendered, or establishes to the satisfaction of the Exchange Agent that all
such taxes have been paid or are not applicable.

Until surrendered as described above, each Old Certificate will be deemed
for all corporate purposes to evidence only the right to receive the number of
shares of CCBF Stock to which the shareholder has become entitled. However,
after the Effective Time and regardless of whether they have surrendered their
Old Certificates, Salem shareholders shall be entitled to vote and to receive
any dividends or other distributions (for which the record date is after the
Effective Time) on the number of whole shares of CCBF Stock into which their
Salem Stock has been converted; provided, however, that no such dividends or
other distributions that become payable after 90 days following the Effective
Time to the owners of CCBF Stock will be paid to the holders of such Old
Certificates unless and until their Old Certificates are surrendered. Upon
surrender of each Old Certificate, there will be paid the amount, without
interest thereon, of dividends and other distributions, if any, that become
payable on the shares of CCBF Stock represented by such certificate after the
Effective Time but had not been paid to the record owner thereof.

Shareholders whose Old Certificates have been lost, stolen or destroyed
will be required to furnish to CCBF evidence satisfactory to the Exchange Agent
of ownership of such Old Certificates and of such loss, theft or destruction,
and to furnish appropriate and customary indemnification (which may include an
indemnity bond), in order to receive the New Certificates or cash to which they
are entitled.

Neither Salem, CCBF, the Exchange Agent nor any other person will be liable
to former holders of Salem Stock for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar law.

SALEM'S SHAREHOLDERS SHOULD NOT FORWARD THEIR OLD CERTIFICATES TO THE
EXCHANGE AGENT UNTIL THEY RECEIVE INSTRUCTIONS TO DO SO.

<PAGE>
TREATMENT OF FRACTIONAL SHARES

No fraction of a share of CCBF Stock (or any fraction of a CCBF Right), or
any script or certificate representing any such fractional share, will be issued
in connection with the Merger. Each Salem shareholder (and each holder of a
Salem Option) who otherwise would be entitled to receive a fraction of a share
of CCBF Stock upon the conversion of that shareholder's shares of Salem Stock at
the Effective Time (or upon the exercise of the Salem Option) shall receive, in
lieu thereof, cash (without interest) in an amount equal to that fraction
multiplied by the "market value" of one whole share of CCBF Stock at the
Effective Time (or, in the case of a Salem Option, on the date of exercise). As
used above, "market value" shall be equal to the closing price of CCBF Stock on
the NYSE on the last trading day preceding the Effective Time (or, in the case
of a Salem Option, the date of exercise). No Salem shareholders will be entitled
to any dividend or other distribution or any voting or other rights as a
shareholder with respect to any fractional share of CCBF Stock.

RECOMMENDATION AND REASONS

SALEM'S BOARD OF DIRECTORS HAS UNANIMOUSLY ADOPTED THE MERGER AGREEMENT AND
RECOMMENDS THAT SALEM'S SHAREHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT
AND THE MERGER.

HISTORY OF NEGOTIATIONS. During April and May of 1996, Salem's Board of
Directors in conjunction with management and as part of its strategic planning
selected Orr & Co. to assist Salem in exploring with a selected group of
companies the value of Salem in a potential merger transaction. CCBF was one of
these companies. Based on the indications of interest received in that process,
Salem's Board began an analysis of Salem's then current and reasonably
foreseeable strategic options in light of Salem's historical and anticipated
results of operations, its markets and its prospects for significant growth
therein, its ability to consummate acquisitions of other financial institutions,
its ability to respond to increasing competitive pressures, near-term economic
factors, and the impact of a possible decline in the securities market's
valuation of commercial banks generally having the size and other
characteristics of Salem in order to determine the most effective means of
enhancing shareholder value.

At its meeting on May 8, 1996, Salem's Board, based on the foregoing
analysis and the advice and analysis of Orr & Co., concluded that negotiation of
a definitive agreement with CCBF should be undertaken.

During the following week, CCBF presented a proposed merger agreement.
Subsequently, CCBF and Salem's management negotiated mutually acceptable
modifications thereto. A draft of the proposed definitive agreement was
distributed to the members of Salem's Board and, on June 24 1996, the Board,
together with Salem's management, reviewed and considered the provisions of the
proposed agreement after consulting with Salem's advisors. After a review of the
draft agreement and based on its prior analyses and conclusions, the advice of
legal counsel, and the advice of Orr & Co., the Board concluded that a
combination of Salem and CCBF, upon the general terms set forth in the proposed
agreement, would be in the best interests of Salem and its shareholders. The
Board authorized Salem's management to negotiate further certain issues and,
subject to management's resolution of those issues within the parameters set by
the Salem Board, unanimously determined to adopt the definitive merger agreement
and recommend its approval by Salem's shareholders.

A draft of the proposed definitive agreement was distributed to the members
of the Executive Committees of the Boards of Directors of CCBF and CCB Bank,
and, on June 17, 1996, those Committees, together with CCBF's and CCB Bank's
managements, reviewed and considered the provisions of the proposed agreement.
After a review of the agreement the Executive Committees concluded that a
combination of Salem and CCB Bank, upon the general terms set forth in the
proposed agreement (with CCBF's and CCB Bank's management being authorized to
agree to certain modifications), would be in the best interests of CCBF, CCBF's
shareholders and CCB Bank, and unanimously determined to authorize CCBF's and
CCB Bank's management to execute a definitive merger agreement (subject to the
condition of subsequent approvals by the Boards of CCBF and CCB Bank) and to
recommend its approval by the Boards of Directors of CCBF and CCB Bank. On July
16, 1996, the Boards of Directors of CCBF and CCB Bank, together with CCBF's and
CCB Bank's managements, reviewed and considered the provisions of the definitive
Merger Agreement and concluded that a combination of CCB Bank and Salem, upon
the terms set forth in the Merger Agreement, would be in the best interests of
CCBF, CCBF's shareholders and CCB Bank.

In September of 1996, the Boards of Directors of CCBF, CCB Bank and Salem
agreed to amend the Merger Agreement to provide that if the average of the
closing prices for a share of CCBF Stock on the NYSE over the 60 trading days
preceding the date of the Closing is less than $46.78 or greater than $57.18,
either CCBF and CCB Bank or Salem may terminate the Merger Agreement.
Previously, the Merger Agreement provided that if the closing price per share of
CCBF Stock on the

<PAGE>
NYSE on the last trading day before the date of the Closing was less than $46.78
or greater than $57.18, such termination rights would arise. See "THE
MERGER -- Termination of Merger Agreement".

REASONS FOR THE MERGER; RECOMMENDATION. In reaching its conclusion that the
Merger is fair to, and in the best interests of, Salem's shareholders, Salem's
Board of Directors consulted with legal, financial and other advisors, as well
as Salem's management, and considered a number of factors. Salem's Board did not
assign any relative or specific weights to the factors considered. The factors
considered included:

(i) the Salem Board's review, based in part on the advice of Orr & Co.,
its financial advisor, of presentations by Salem's management
regarding the business, operations and earnings and financial
condition of Salem and CCBF on historical, prospective and pro forma
bases, the enhanced opportunities for expanded customer service,
competitiveness and growth that the Merger will make possible, and the
respective contributions the parties would bring to a combined
institution;

(ii) a variety of factors affecting and relating to the overall strategic
goals of Salem and CCBF, including the similarity in the focus of
Salem's and CCBF managements, the business line diversity that the
combination of Salem with CCBF would allow, and the geographic
proximity and similarities of CCBF's existing market areas to Salem's
existing market areas;

(iii) the expectation that the Merger generally will be a tax-free
transaction to Salem and its shareholders (see "THE MERGER -- Certain
Income Tax Consequences") and that Salem's obligation to effect the
Merger would be subject to its receipt of an opinion of a financial
advisor that the Merger and the Exchange Ratio is fair to Salem's
shareholders from a financial point of view (see "THE MERGER -- Salem
Fairness Opinion"); and

(iv) the current and prospective economic and competitive environments
facing financial institutions, including Salem, near-term economic
factors and the impact of a possible general decline in the
securities markets' valuation of securities of banks similar to
Salem.

Orr & Co. assisted Salem's Board of Directors in determining that
negotiation of a merger agreement with CCBF was in the best interests of Salem
and its shareholders. For its services as a financial advisor to Salem, Orr &
Co. has received a fee of $200,000 from Salem.

SALEM'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SALEM'S SHAREHOLDERS
VOTE FOR APPROVAL OF THE MERGER AGREEMENT.

CCBF's Board of Directors, as a part of its long-range strategic plan to
increase shareholder value, has sought growth in CCBF's business by expanding
its geographic markets and increasing its presence in its existing markets. In
that regard, potential acquisition candidates have been identified and evaluated
and growth through other means, including the establishment of new branch
offices, has been explored. CCBF's Board of Directors believes that the
acquisition of profitable, well-managed financial institutions is the most
effective means of expanding CCBF's markets and market presence. The Boards of
Directors of CCBF and CCB Bank have concluded that the combination of Salem and
CCB Bank through the Merger fits into the Boards' long-range strategic plan to
maximize shareholder value through growth.

In reaching their conclusion that the Merger is fair to, and in the best
interests of CCBF, CCBF's shareholders and CCB Bank, CCBF's and CCB Bank's
Boards of Directors consulted with legal, financial, accounting and other
advisors, as well as CCBF's and CCB Bank's management, and considered a number
of factors. The Boards did not assign any relative or specific weights to the
factors considered. The factors considered included:

(i) The Boards' reviews of presentations by CCBF's management regarding
the business, operations, earnings and financial condition of CCBF and
Salem on historical, prospective and pro forma bases, the enhanced
opportunities for expanded customer services, competitiveness and
growth that the Merger will make possible, and the respective
contributions the parties would bring to a combined institution;

(ii) the assumptions and methodology used in setting the Exchange Ratio
and other financial terms;

(iii) a variety of factors affecting and relating to the overall strategic
focus of Salem and CCBF, including the similarity in business
outlook, approach and corporate cultures of Salem and CCBF, the
business line diversity that the combination of Salem with CCBF
would allow, the geographic proximity and similarities of CCBF's
existing market areas to Salem's existing market areas, and the
increased market share of the combined entity in the Winston-Salem
and Wilmington, North Carolina markets;

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(iv) the expectation that the Merger will be a tax-free transaction to
CCBF and CCB Bank (see "THE MERGER -- Certain Income Tax
Consequences");

(v) the expectation that the Merger will be accounted for under the
pooling-of-interests method of accounting and the ramifications for
CCBF if use of the alternative purchase method of accounting were
required (see "THE MERGER -- Accounting Treatment");

(vi) the potential dilution of CCBF's current book value and income per
share, the one-time charges to consummate the Merger, and the demands
on management resources associated with completing the transaction;
and

(vii) the current and prospective economic and competitive environments
facing financial institutions, including CCBF.

SALEM FAIRNESS OPINION

On June 25, 1996, Salem engaged Carson Medlin as its financial advisor for
the purpose of providing to Salem's Board of Directors a written opinion with
respect to the fairness to Salem's shareholders of the consideration to be paid
in the Merger from a financial point of view.

On July 15, 1996, Carson Medlin delivered to Salem's Board its written
opinion that, as of such date, the consideration to be paid by CCBF pursuant to
the Merger was fair to Salem's shareholders from a financial point of view.
Carson Medlin is not affiliated with Salem or CCBF.

The consideration to be received by Salem's shareholders in the Merger was
determined by Salem and CCBF in their negotiations. No limitations were imposed
by Salem's Board or management upon Carson Medlin with respect to the
investigations made or the procedures followed by Carson Medlin in rendering the
Salem Fairness Opinion.

THE FULL TEXT OF THE SALEM FAIRNESS OPINION, WHICH SETS FORTH THE
PROCEDURES FOLLOWED, CERTAIN ASSUMPTIONS MADE, MATTERS CONSIDERED, AND
QUALIFICATIONS AND LIMITATIONS ON THE REVIEWS UNDERTAKEN, IS ATTACHED AS
APPENDIX C AND SHOULD BE READ IN ITS ENTIRETY BY SALEM'S SHAREHOLDERS. THE
SUMMARY OF THE SALEM FAIRNESS OPINION SET FORTH BELOW IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE OPINION ITSELF.

In connection with rendering the Salem Fairness Opinion, Carson Medlin
performed a variety of financial analyses. However, the preparation of a
fairness opinion involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of those methods to
the particular circumstances, and therefore, such an opinion is not readily
susceptible to summary description.

Carson Medlin believes that its analyses must be considered together as a
whole and that selecting portions of such analyses and the facts considered
therein, without considering all other factors and analyses, could create an
incomplete or inaccurate view of the analyses and the process underlying the
Salem Fairness Opinion. In its analyses, Carson Medlin made numerous assumptions
with respect to industry performance, business and economic conditions, and
other matters, many of which are beyond the control of Salem and CCBF and many
of which may not be realized. Any estimates contained in Carson Medlin's
analyses are not necessarily predictive of future results or values, which may
be significantly more or less favorable than such estimates. Estimates of values
of companies do not purport to be appraisals or necessarily reflect the prices
at which such companies or their securities may actually be sold. Except as
described below, none of the analyses performed by Carson Medlin were assigned a
greater significance by it than any other.

Carson Medlin, in conducting its analyses and in arriving at its opinion,
did not conduct a physical inspection of any of the properties or assets of
Salem, and has not made or obtained any independent valuation or appraisals of
any properties, assets or liabilities of Salem. Carson Medlin reviewed certain
financial projections prepared by Salem. It assumed that these projections were
prepared on a reasonable basis utilizing the best and most current information
available to management of Salem, and that such projections will be realized in
the amounts and at the times contemplated thereby. Salem does not publicly
disclose internal management projections of the type provided to Carson Medlin.
Such projections were not prepared for, or with a view toward, public
disclosure. Carson Medlin has assumed and relied upon the accuracy and
completeness of the financial and other information that was provided to it by
Salem or that was publicly available.

The Salem Fairness Opinion is necessarily based on economic, market and
other conditions in effect on, and the information made available to it as of,
the date of its analyses. Carson Medlin is not expert in the evaluation of loan
portfolios, including under-performing or non-performing assets, charge-offs or
the allowance for loan losses. It has not reviewed any individual credit files
of Salem or CCBF. Instead, it has assumed that the allowances for each of Salem
and CCBF are

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adequate to cover their potential loan losses. Carson Medlin assumed that the
Merger will be recorded as a pooling-of-interests under generally accepted
accounting principles.

In connection with the Salem Fairness Opinion, Carson Medlin reviewed: (i)
the Merger Agreement; (ii) CCBF's Annual Reports to Shareholders including its
consolidated audited financial statements for the five years ended December 31,
1995 (iii) audited financial statements of Salem for the five years ended
December 31, 1995; (iv) Bank Call Reports for Salem for the five years ended
December 31, 1995 and three months ended March 31, 1996, and the unaudited
interim financial statements for the five months ended May 31, 1996; (v) the
unaudited interim financial statements of CCBF for the three months ended March
31, 1996; and (vi) certain other financial and operating information with
respect to the business, operations and prospects of Salem and CCBF. In
addition, Carson Medlin: (a) held discussions with members of the senior
management of Salem and CCBF regarding the historical and current business
operations, financial condition and future prospects of their respective
companies; (b) reviewed the historical market prices and trading activity for
the Salem Stock and the CCBF Stock and compared them with those of certain
publicly traded companies which it deemed to be relevant; (c) compared the
results of operations of Salem and CCBF with those of certain banking companies
which it deemed to be relevant; (d) compared the proposed financial terms of the
Merger with the financial terms, to the extent publicly available, of certain
other recent business combinations of commercial banking organizations; (e)
analyzed the pro forma financial impact of the Merger on CCBF; and (f) conducted
certain other studies, analyses, inquiries and examinations as Carson Medlin
deemed appropriate.

The following is a summary of the principal analyses performed by Carson
Medlin in connection with the Salem Fairness Opinion.

TRANSACTION SUMMARY. Carson Medlin calculated the transaction value of the
Merger utilizing the Exchange Ratio and the closing stock price of $51.25 for
the CCBF Stock on June 28, 1996. Based upon the foregoing, Carson Medlin
determined that the 1,841,232 shares of Salem Stock outstanding as of the time
of its analyses would be converted into approximately 754,905 shares of CCBF
Stock with a value of approximately $38.7 million, or $21.01 per share.

The Merger Agreement provides that each Salem Stock Option shall be
converted into and become rights with respect to a number of shares of CCBF
Stock equal to the product of (i) the number of shares of Salem Stock covered by
such option and (ii) the Exchange Ratio. The exercise price per share of the
resulting options to acquire CCBF Stock shall be an amount computed by dividing
(a) the exercise price per share of the original Salem Stock Option by (b) the
Exchange Ratio. For analytic purposes and to reflect the value of the Salem
Stock Options, Carson Medlin assumed that all Salem Stock Options would be
exercised prior to the Effective Time and converted into shares of Salem Stock.
If this occurred, the holders of the Salem Stock Options would receive 126,622
shares of Salem Stock, which wold be converted into approximately 51,915 shares
of CCBF Stock, with a value of approximately $2.7 million. To exercise their
Salem Stock Options, however, the holders would be required to pay approximately
$1.1 million.

Based upon the foregoing, Carson Medlin determined that the transaction
value of the Merger to the shareholders and option holders of Salem was
approximately $41.4 million (consisting of $38.7 million to be received by the
holders of Salem Stock and $2.7 million to be received by the holders of the
Salem Stock Options, assuming the full exercise of all such options).

Based on the price of $51.25 per share for CCBF Stock, Carson Medlin
calculated that the aggregate transaction value represented 236% of Salem's
adjusted book value at May 31, 1996 (assuming the exercise of all Salem Stock
Options), 27.7 times Salem's budgeted 1996 earnings, a 27.2% core deposit
premium (defined as the aggregate transaction value minus stated book value
divided by Salem's core deposits) and 25.1% of total assets of Salem at May 31,
1996.

COMPARABLE TRANSACTION ANALYSIS. Carson Medlin reviewed certain information
relating to certain selected North Carolina bank mergers announced or completed
since January 1993 (the "Comparable Transactions"). The Comparable Transactions
were (acquiror/acquiree): Centura Banks/First Charlotte Financial; First
Bancorp/Central State Bank; United Carolina Bancshares/Bank of Iredell; First
Citizens Bancshares/State Bank Fayetteville; Triangle Bancorp/Standard Bank;
Triangle Bancorp/Atlantic Community; Triangle Bancorp/Columbus National Bank;
CCBF/Security Capital Bancorp; Triangle Bancorp/Village Bank; First Charter
Corp/Bank of Union; United Carolina Bancshares/Triad Bank; Centura Banks/First
Commercial Holding; Centura Banks/First Community Bank; Centura Banks/FirstSouth
Bank; Triangle Bancorp/Granville United Bank. Carson Medlin considered, among
other factors, the earnings, capital level, asset size and quality of assets of
the acquired financial institutions. Carson Medlin compared the transaction
prices to trailing four quarters earnings, book values, total assets and core
deposit premiums.

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On the basis of Comparable Transactions, Carson Medlin calculated that the
purchase prices as a percentage of book value for the Comparable Transactions
ranged from a low of 167% to a high of 304%, with a mean of 224%. These
transactions indicated a range of values for Salem from $29.3 to $53.3 million,
with a mean of $39.3 million (based on Salem's adjusted book value of $17.537
million at May 31, 1996). The aggregate consideration implied by the terms of
the Merger Agreement is approximately $41.4 million (based on a price of $51.25
for the CCBF Stock as of June 28, 1996) and implies a price to adjusted book
value multiple of 236% which falls above the average of the range for the
Comparable Transactions.

Carson Medlin also calculated that the purchase prices as a multiple of
earnings for the Comparable Transactions ranged from a low of 16.4 times to a
high of 24.7 times, with a mean of 20.3 times. These transactions indicated a
range of values for Salem from $24.5 to $36.9 million, with a mean of $30.3
million (based on Salem's budgeted 1996 earnings of $1.493 million). The
aggregate consideration implied by the terms of the Merger Agreement is
approximately $41.4 million and implies a price to earnings multiple of 27.7
times which is above the high end of the range for the Comparable Transactions.

The core deposit premiums for the Comparable Transactions was also
examined. Carson Medlin found a range of values from a low of 8% to a high of
28.9%, with a mean of 15.3%. These transactions indicated a range of values for
Salem from $23.8 to $43.0 million, with a mean of $30.5 million based on Salem's
core deposits of $91.768 million as of May 31, 1996, (i.e. total deposits less
certificates of deposits greater than $100,000). The premium on Salem's core
deposits implied by the terms of the Merger Agreement is 27.2%, near the high
end of the range for the Comparable Transactions.

Finally, Carson Medlin calculated that the purchase prices as a percentage
of total assets for the Comparable Transactions ranged from a low of 12.2% to a
high of 31%, with a mean of 21.1%. The indicated range of values for Salem under
this approach was $20.1 to $51.1 million, with a mean value of $34.8 million
(based on Salem's total assets of $164.919 million as of May 31, 1996). The
percentage of total assets implied by the terms of the Merger Agreement is
approximately 25.1% and the aggregate purchase price of approximately $41.4
million falls above the average of the range for the Comparable Transactions.

INDUSTRY COMPARATIVE ANALYSIS. In connection with rendering the Salem
Fairness Opinion, Carson Medlin compared selected operating results of Salem to
those of 53 publicly-traded community commercial banks in Alabama, Florida,
Georgia, North Carolina, South Carolina, Virginia and West Virginia (the "SIBR
Banks") as contained in the SOUTHEASTERN INDEPENDENT BANK REVIEW, a proprietary
research publication prepared by Carson Medlin quarterly since 1991. The SIBR
Banks range in asset size from approximately $92.3 million to $2.1 billion and
in shareholders' equity from approximately $7.8 million to $211.9 million.
Approximately 96% are listed on various levels of the Nasdaq Stock Market, Inc.
and 4% are not traded on an established market. Carson Medlin considers this
group of financial institutions more comparable to Salem than larger, more
widely traded regional financial institutions. Carson Medlin compared, among
other factors, profitability, capitalization, and asset quality of Salem to
these financial institutions. It noted that based on results through the first
quarter of 1996, (i) Salem has a return on average assets ("ROA") for the three
months ended March 31, 1996 of 0.96%, compared to a mean ROA of 1.23% for the
SIBR Banks; (ii) Salem had a return on average equity ("ROE") for the three
months ended March 31, 1996 of 11.11% compared to a mean ROE of 11.4% for the
SIBR Banks; (iii) Salem had a ratio of common equity to total assets at March
31, 1996 of 8.5%, compared to mean common equity to total assets ratio of 9.8%
for the SIBR Banks; and (iv) Salem had a ratio of non-performing assets (defined
as loans 90 days past due, nonaccrual loans and other real estate) to total
loans (net of unearned income and other real estate) at March 31, 1996 of 0.0%,
compared to a mean non-performing assets to total loans (net of unearned income
and other real estate ratio) of 1.03% for the SIBR Banks. This comparison
indicated that Salem's financial performance was at or exceeded the average of
SIBR Banks for most of the factors considered.

Carson Medlin also compared selected operating results of CCBF to those of
eight other publicly-traded, mid-size regional bank holding companies defined as
those with assets between $4 and $10 billion ( the "Peer Banks") located in the
Southeast. The Peer Banks include: Centura Banks, First Citizens Bancshares,
Southern National Corporation, United Carolina Bancshares, Central Fidelity,
Crestar Financial, First Virginia Banks, Inc., and Signet Banking Corporation.
Carson Medlin considers this group of southeastern financial institutions
comparable to CCBF as to financial characteristics, stock price performance and
trading volume. Carson Medlin compared selected balance sheet data, asset
quality, capitalization, profitability ratios and market statistics using
financial data at or for the three months ended March 31, 1996 and market data
as of June 28, 1996. This comparison showed, among other things, that (i) for
the three months ended March 31, 1996, CCBF's net interest margin was 4.71%
compared to a mean of 4.45% and a median of 4.56% for the Peer Banks; (ii) for
the three months ended March 31, 1996, CCBF's efficiency ratio (defined as
non-interest expense divided by the sum of non-interest income and taxable
equivalent net interest income before provision for loan losses) was 54.8%
compared to a mean of 61.6% and a median of 61.9% for the Peer Banks; (iii) for
the three months ended March 31, 1996, CCBF's ROA was

<PAGE>
1.45% compared to a mean of 1.18% and a median of 1.15% for the Peer Banks; (iv)
for the three months ended March 31, 1996, CCBF's ROE was 16.39% compared to a
mean of 14.42% and a median of 14.11% for the Peer Banks; (v) at March 31, 1996,
CCBF's ratio of stockholders' equity to total assets was 8.74% compared to a
mean ratio of 8.00% and a median ratio of 7.71% for the Peer Banks; (vi) at
March 31, 1996, CCBF's non-performing assets to total assets ratio was 0.36%
compared to a mean ratio of 0.49% and a median ratio of 0.43% for the Peer
Banks; (vii) at March 31, 1996, the ratio of CCBF's loan loss reserves to
non-performing assets was 242% compared to a mean ratio of 226% and a median
ratio of 216% for the Peer Banks; and, (viii) at June 28, 1996, CCBF's market
capitalization was $800 million while the market capitalization of the Peer
Banks ranged from a high of $3.2 billion to a low of $500 million. This
comparison indicated that CCBF's financial performance is above average in
comparison to the Peer Banks.

No company or transaction used in the preceding Industry Comparative or
Comparable Transaction Analyses is identical to Salem, CCBF or the Merger.
Accordingly, evaluation of the results of these analyses necessarily involves
complex considerations and judgments concerning differences in financial and
operating characteristics of Salem and other factors that could affect the value
of the companies to which it is being compared. Mathematical analysis (such as
determining the average or median) is not, in itself, a meaningful method of
using comparable industry or transaction data.

CONTRIBUTION ANALYSIS. Under the terms of the Merger Agreement and assuming
the exercise of all Salem Stock Options prior to the Effective Time, CCBF will
issue approximately 806,820 shares of CCBF Stock in the Merger. At March 31,
1996, there were 15,069,324 shares of CCBF Stock outstanding. Accordingly, on a
pro forma basis, as of March 31, 1996, the 806,820 shares to be issued in the
Merger would represent approximately 5.1% of the outstanding shares of CCBF
after the Merger.

Carson Medlin analyzed the contribution of each of Salem and CCBF to the
assets, liabilities and historical earnings of the pro forma combined company
assuming the Merger had been consummated as of March 31, 1996. For the three
months ended March 31, 1996, Salem would have contributed 2.1% of net income,
3.3% of earning assets, 3.2% of total assets, 3.3% of total deposits, and 3.8%
of adjusted shareholders' equity. The foregoing indicated that Salem's pro forma
ownership is greater than its pro forma contribution to the assets, liabilities
and earnings of the combined entity.

PRESENT VALUE ANALYSIS. Carson Medlin calculated the present value of Salem
assuming that Salem remained an independent bank. For purposes of this analysis,
Carson Medlin utilized certain projections of Salem's future earnings. It
assumed that all of these earnings would be retained and that the Salem Stock
would be sold at the end of five years at 250% of book value. This value was
then discounted to present value utilizing discount rates of 16% through 18%.
These rates were selected because, in Carson Medlin's experience, they represent
the rates that investors in securities such as the Salem Stock would demand in
light of the potential appreciation and risks. On the basis of these
assumptions, Carson Medlin calculated that the present value of Salem as an
independent bank ranged from $29.5 to $32.1 million. The aggregate consideration
implied by the terms of the Merger Agreement is approximately $41.4 million
which falls above the high end of the range under this present value analysis.
Carson Medlin engaged in a present value analysis because such an analysis is a
widely used valuation methodology. However the results of such methodology are
highly dependent upon the numerous assumptions that must be made, including
earnings growth rates, dividend payout rates, terminal values and discount
rates.

STOCK TRADING HISTORY. Carson Medlin reviewed and analyzed the historical
trading prices and volumes for the CCBF Stock on a monthly basis from December
1992 to June 1996. It also compared price performance of the CCBF Stock during
this period to the Peer Banks.

During the four quarters ended March 31, 1996, the ratio of stock price to
trailing twelve months earnings per share for the Peer Banks ranged from a low
of 12.0 times to a high of 13.8 times, with a mean of 13.0 times. CCBF's recent
price to earnings ratio ranged from a low of 9.5 times to a high of 15.3 times,
with a mean of 12.7 times. CCBF Stock has traded on average at a lower price to
earnings ratio than the Peer Banks.

During the four quarters ended March 31, 1996, the stock price as a
percentage of book value for Peer Banks ranged from a low of 157%, a high of
170%, with a mean of 165%. CCBF's present price to book ratio ranged from a low
of 142% to a high of 200% with a mean of 176%. CCBF Stock has traded on average
at a higher price to book value ratio than the Peer Banks.

Carson Medlin also examined the recent trading volume in CCBF Stock with
that of the Peer Banks. During the four quarters ended March 31, 1996, the
quarter end monthly trading volume of outstanding shares of the Peer Banks
ranged from a low of 2.4% to a high of 3.4%, with a mean of 3.1%. CCBF's quarter
and monthly trading volume to outstanding shares ranged from a low of 5.1% to a
high of 6.5%, with a mean of 5.7%. Carson Medlin considers CCBF Stock to be
liquid and marketable in comparison with these Peer Banks and other bank holding
companies.

<PAGE>
Carson Medlin also examined the trading prices and volumes of Salem Stock.
Salem Stock has not traded in volumes sufficient to be meaningful. Therefore,
Carson Medlin did not place any weight on the trading price of the Salem Stock.

OTHER ANALYSIS. Carson Medlin also reviewed selected investment research
reports on and earnings estimates for CCBF. In addition, it prepared an overview
of the historical financial performance of both Salem and CCBF, and an analysis
of the total return of each of the Salem Stock and the CCBF Stock for the
four-year period ended December 31, 1995.

The Salem Fairness Opinion was based upon market, economic and other
relevant considerations as they existed and were evaluated as of the date
thereof. Events occurring after the date of issuance of the Salem Fairness
Opinion, including but not limited to, changes affecting the securities markets,
Salem's results of operations or material changes in the assets or liabilities
of Salem could materially affect the assumptions used in preparing the Salem
Fairness Opinion.

COMPENSATION OF CARSON MEDLIN. Pursuant to the engagement letter between
Salem and Carson Medlin, Salem agreed to pay a $13,500 Opinion Fee at the time
the Salem Fairness Opinion was rendered. Salem also will reimburse Carson Medlin
for its reasonable and necessary out-of-pocket expenses and the third party
expenses incurred by Carson Medlin in connection with its engagement by Salem.
Salem has also agreed to indemnify and hold harmless Carson Medlin and its
officers and employees against certain liabilities in connection with its
services under the engagement letter, except for liabilities resulting from the
gross negligence or willful misconduct of Carson Medlin.

As part of its investment banking business, Carson Medlin is regularly
engaged in the valuation of securities in connection with mergers and
acquisitions. Salem's Board of Directors decided to retain Carson Medlin based
on its experience as a financial advisor in mergers and acquisitions of
financial institutions, particularly transactions in the Southeast, and its
knowledge of financial institutions in particular.

REQUIRED SHAREHOLDER APPROVALS

The Merger Agreement provides that the required approvals of Salem's
shareholders and CCB Bank's shareholder are conditions to consummation of the
Merger. Under the Bank Act, the affirmative vote at the Special Meeting of the
holders of at least two-thirds ( 2/3) of the shares of Salem Stock entitled to
be voted is required for Salem's shareholders to approve the Merger Agreement.
CCBF, acting as the sole shareholder of CCB Bank, has approved the Merger
Agreement. Under the NCBCA, approval of the Merger Agreement by CCBF's
shareholders is not required. See " -- Conditions to Merger".

REQUIRED REGULATORY APPROVALS

The Merger is subject to approval by the FDIC and by the Commissioner and
the North Carolina State Banking Commission (the "Banking Commission") under the
Bank Act.

In approving a transaction such as the Merger, the FDIC is required to take
into consideration, among other factors, the financial and managerial resources
and future prospects of the combined company and its financial institution
subsidiaries and the convenience and needs of the communities served. Applicable
federal laws and regulations prohibit the FDIC from approving the Merger if it
would result in a monopoly or be in furtherance of any combination or conspiracy
to monopolize or to attempt to monopolize the business of banking in any part of
the United States, or if its effect in any section of the country may be
substantially to lessen competition or to tend to create a monopoly, or if it
would in any other manner result in a restraint of trade, unless the FDIC finds
that the anti-competitive effects of the Merger are clearly outweighed in the
public interest by the probable effect of the transaction in meeting the
convenience and needs of the communities served. In addition, under the
Community Reinvestment Act of 1977, as amended, the FDIC must take into account
the record of performance of Salem and CCBF's financial institution subsidiaries
in meeting the credit needs of the entire communities, including low- and
moderate-income neighborhoods, served by such institutions.

Under the applicable federal laws and regulations, the Merger may not be
consummated until the 30th day following the date of FDIC approval, during which
time the United States Department of Justice may challenge the Merger on
antitrust grounds. The commencement of an antitrust action would stay the
effectiveness of the FDIC's approval unless a court specifically orders
otherwise. Salem and CCBF believe that the Merger does not raise substantial
antitrust concerns, that no divestitures should be required to consummate the
Merger, and that if any divestitures were required in order to consummate the
Merger, they will not be material to the financial condition or results of
operations of CCB Bank following the Merger.

Applicable federal laws and regulations provide for the publication of
notice and public comment on the applications and authorizes the FDIC to permit
interested parties to intervene in the proceedings. If an interested party is
permitted to intervene, such intervention could delay the regulatory approvals
required for consummation of the Merger.

<PAGE>
The Merger Agreement provides that the obligation of each of Salem and CCBF
to consummate the Merger is conditioned upon the receipt of all requisite
regulatory approvals (see " -- Conditions to Merger") upon terms and conditions
that would not so significantly and adversely impact the economic benefits of
the transactions contemplated by the Merger Agreement as to render the
consummation of the Merger inadvisable in the reasonable opinion of the Board of
Directors of either Salem or CCBF. Applications for required regulatory
approvals have been filed and currently are pending. Salem and CCBF have no
reason to believe that such regulatory approvals will not be obtained. However,
there is no assurance that any governmental agency will approve or take any
other required action with respect to the Merger. Even if approvals are received
or action is taken, there can be no assurance as to the date of such approvals
or action, that such approvals or action will not be conditioned upon matters
that would cause the parties to abandon the Merger or that no action will be
brought challenging such approvals or action, including a challenge by the
Department of Justice, and if such a challenge is made, the result thereof.

Salem and CCBF are not aware of any governmental approvals or actions that
may be required for consummation of the Merger except as described above. Should
any such approval or action be required, it is presently contemplated that such
approval or action would be sought. There is no assurance, however, that any
such approval or action, if needed, could be obtained and would not be
conditioned in a manner that would cause the parties to abandon the Merger.

CONDUCT OF BUSINESS PENDING MERGER

The Merger Agreement provides that, during the period from July 1, 1996
(the date the Merger Agreement initially was executed) to the Effective Time,
except as provided in the Merger Agreement, each of Salem and CCBF will conduct,
and CCBF will cause each of its subsidiaries to conduct, its business in the
usual, regular and ordinary course consistent with past practice, use its best
efforts to maintain and preserve intact its business organization, employees and
advantageous business relationships and retain the services of its offices and
key employees, and take no action which would adversely affect or delay the
ability of either Salem, CCBF or CCB Bank to obtain any necessary approvals of
any governmental authority required for the Merger or the other transactions
contemplated by the Merger Agreement or to perform its covenants and agreements
under the Merger Agreement.

In addition to other restrictions described elsewhere herein, the Merger
Agreement provides that, prior to the Effective Time and except in the ordinary
course of its business, as otherwise required by applicable law or regulation or
with the consent of CCBF, Salem may not (in addition to other prohibited
actions) (i) incur indebtedness for borrowed money, (ii) sell, transfer,
mortgage, encumber or otherwise dispose of any of its properties or assets,
(iii) make, declare or pay any dividend or make any other distribution on, or
redeem, purchase or acquire, any shares of Salem Stock, (iv) make any
significant investment by purchase of securities, contributions to capital, or
purchase of property or assets of any person other than its direct or indirect
subsidiaries, (v) increase the compensation or fringe benefits of any of its
employees, or commit itself to any retirement or benefit plan or employment
agreement with or for the benefit of any employee, or (vi) settle any claim,
action or proceeding against it involving monetary damages. Further, prior to
the Effective Time, Salem may not (i) with certain exceptions, adjust, split,
combine or reclassify any shares of its capital stock, or sell or issue
additional shares of such stock, (ii) enter into or terminate, or make any
change in, a significant contract or lease, (iii) amend its charter or bylaws,
or (iv) agree to make any commitment to take any action prohibited by the Merger
Agreement.

Subsequent to the initial execution of the Merger Agreement, CCB Bank and
Salem entered into a Services Agreement whereby CCB Bank will provide to Salem
(i) access to CCB Bank's internal stock quotation information system, (ii)
access to certain portfolio manager employees of CCB Bank's Trust Department,
and (iii) the ability to make available to Salem's customers certain investment
products being made available by CCB Bank to its customers. The Services
Agreement will expire upon the earlier of the Effective Time and the termination
of the Merger Agreement. Salem will reimburse to CCB Bank the costs incurred by
CCB Bank in providing services under the Services Agreement.

PROHIBITION ON SOLICITATION

Salem has agreed in the Merger Agreement that it will not solicit,
encourage or authorize any individual, corporation, or other entity, including
its directors, officers and other employees, to solicit from any third party any
inquiries or proposals with respect to the disposition of its business or
assets, or the acquisition of its voting securities, or its merger with any
corporation or entity other than as provided in the Merger Agreement, or provide
any information or assistance or negotiate with any individual, corporation or
other entity in furtherance of such inquiries or to obtain such a proposal, and
that it will notify CCBF if any such inquiries or proposals are received.
Moreover, if the Merger Agreement is terminated by reason of Salem entering into
a letter of intent or agreement to be acquired by, merge with or sell all or
substantially all its assets to a

<PAGE>
third party, or if, prior to the termination of the Merger Agreement, Salem
(without the consent of CCBF) engages in negotiations with a third party
respecting any such transaction and, within twelve months of the termination of
the Merger Agreement, enters into a letter of intent or agreement with such
third party, then Salem would be obligated under the Merger Agreement to pay to
CCBF a termination fee of $1.0 million. See " -- Termination of Merger
Agreement".

ACCOUNTING TREATMENT

CCBF currently intends for the Merger to be accounted for under the
pooling-of-interests method. Accordingly, under generally accepted accounting
principles, the assets and liabilities of Salem will be reported on the books of
CCB Bank at their respective book values at the Effective Time and CCBF's
consolidated financial statements for prior periods will be restated to reflect
the assets, liabilities and operations of Salem for such periods. No goodwill or
other intangible assets will be created in connection with the Merger. CCBF has
elected to treat the Merger as a pooling-of-interests.

Among other requirements, in order for the Merger to qualify for
pooling-of-interests accounting treatment, substantially all (at least 90%) of
the outstanding shares of Salem Stock must be exchanged for CCBF Stock.
Generally, if the number of fractional shares of Salem Stock resulting from the
Merger for which cash is paid, shares held by Salem shareholders who exercise
their Dissenters' Rights, and shares of CCBF Stock or Salem Stock otherwise
deemed "tainted" for pooling-of-interests purposes (e.g. shares of Salem Stock
or CCBF Stock repurchased by Salem or CCBF, respectively, during certain
periods), together represent more than 10% of the shares to be issued by CCBF in
connection with the Merger, then the Merger will not qualify for the
pooling-of-interests method of accounting. Consummation of the Merger using the
pooling-of-interests accounting method is conditioned on receipt by CCBF of an
opinion of its independent accountants, KPMG Peat Marwick LLP, that the Merger
will qualify to be treated as a pooling-of-interests for accounting purposes.
See " -- Conditions to Merger". However, the Merger Agreement provides that, if
such treatment is not available, the Merger nevertheless will be consummated
subject to (i) the filing, if necessary or deemed appropriate by CCBF, of
amendments to applications for regulatory approvals and the re-confirmation of
all required regulatory approvals of the Merger, (ii) the filing (and
effectiveness) of post-effective amendments to CCBF's Registration Statement, if
required by the SEC or applicable laws or if deemed appropriate by CCBF, to
reflect the use of the purchase method of accounting for the Merger, (iii) the
calling of an additional Special Meeting of Salem's shareholders and the
distribution of an amended Prospectus/Proxy Statement to such shareholders, if
required by any regulatory authority or law or if deemed appropriate by CCBF,
and (iv) the approval of this Merger Agreement and the Merger by the requisite
vote of Salem's shareholders at such additional Special Meeting. CCBF knows of
no reason why pooling-of-interests accounting treatment will not be available or
such opinion of its independent accountants will not be received.

CERTAIN INCOME TAX CONSEQUENCES

The following is a summary discussion of the material federal income tax
consequences of the Merger to shareholders of Salem. The summary is based on the
law as currently constituted and is subject to change in the event of changes in
the law, including amendments to applicable statutes or regulations or changes
in judicial or administrative rulings, some of which could be given retroactive
effect.

THIS SUMMARY IS NOT A COMPLETE DESCRIPTION OF ALL TAX CONSEQUENCES OF THE
MERGER. THE SUMMARY DOES NOT ADDRESS ANY FOREIGN, STATE OR LOCAL TAX
CONSEQUENCES, EXCEPT FOR CERTAIN NORTH CAROLINA INCOME TAX CONSEQUENCES, NOR
DOES IT ADDRESS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY APPLY TO THE
MERGER. ALSO, THE TAX OPINION DOES NOT ADDRESS INCOME TAX CONSIDERATIONS THAT
MAY AFFECT THE TREATMENT OF A PARTICIPANT IN A SALEM OPTION PLAN OR A SALEM
SHAREHOLDER WHO ACQUIRED SALEM STOCK PURSUANT TO SUCH A PLAN. EACH SALEM
SHAREHOLDER'S INDIVIDUAL CIRCUMSTANCES MAY AFFECT THE TAX CONSEQUENCES OF THE
MERGER TO SUCH SHAREHOLDER. THEREFORE, SALEM'S SHAREHOLDERS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER
AND THE EXCHANGE OF THEIR SALEM STOCK FOR SHARES OF CCBF STOCK (INCLUDING,
WITHOUT LIMITATION, TAX RETURN REPORTING REQUIREMENTS, THE APPLICATION AND
EFFECT OF FEDERAL, FOREIGN, STATE AND LOCAL AND OTHER TAX LAWS AND THE
IMPLICATIONS OF ANY PROPOSED CHANGES IN THE TAX LAWS).

CCBF and Salem have received the Tax Opinion of KPMG Peat Marwick LLP, tax
advisors to CCBF and Salem, which reaches certain conclusions with respect to
certain federal and North Carolina income tax consequences of the Merger. Where
appropriate or useful, this discussion will refer to the Tax Opinion and
particular conclusions expressed therein. Additionally, the facts and
representations upon which the Tax Opinion is based are set forth in such Tax
Opinion which is an exhibit to CCBF's Registration Statement. See "AVAILABLE
INFORMATION". However, the Tax Opinion represents only that advisor's best
judgment as to the matters expressed therein and has no binding effect on the
Internal Revenue Service (the "IRS") or

<PAGE>
any official status of any kind. There is no assurance that the IRS could not
successfully contest in the courts an opinion expressed by the advisor as set
forth in the Tax Opinion or that legislative, administrative, or judicial
decisions or interpretations may not be forthcoming that would significantly
change the opinions set forth in the Tax Opinion. The IRS will not currently
issue private letter rulings concerning a transaction's qualification under
certain types of reorganizations or certain federal income tax consequences
resulting from such qualification. Accordingly, no private letter ruling has
been, nor is it anticipated that such a ruling will be, requested from the IRS
with respect to the Merger.

The Tax Opinion concludes that:

(i) The Merger will constitute a reorganization within the meaning of
Section 368(a)(1)(A) and Section 368(a)(2)(D)of the Code;

(ii) No gain or loss will be recognized by CCBF, CCB Bank or Salem by
reason of the Merger;

(iii) No gain or loss will be recognized by Salem's shareholders upon
their receipt solely of CCBF Stock (including any fractional share
interests to which they may be entitled), together with attached CCBF
Rights, in exchange for their shares of Salem Stock;

(iv) The tax basis in the CCBF Stock received by a Salem shareholder
(including any fractional share interests to which they may be entitled)
will be the same as the tax basis in the Salem Stock surrendered in
exchange therefor;

(v) The holding period for CCBF Stock received by a Salem shareholder
(including any fractional share interests to which they may be entitled) in
exchange for Salem Stock will include the period during which the
shareholder held the Salem Stock surrendered in the exchange, provided that
the Salem Stock was held as a capital asset at the Effective Time; and

(vi) The receipt of cash in lieu of a fractional share of CCBF Stock
will be treated as if the fractional share of CCBF Stock was distributed as
part of the exchange to the Salem shareholder and then redeemed by CCBF,
resulting in capital gain or loss measured by the difference, if any,
between the amount of cash received or such fractional share and the
shareholder's basis in the fractional share.

The Tax Opinion also concludes that the Merger will be treated in
substantially the same manner for North Carolina income tax purposes as for
federal income tax purposes.

SALEM'S SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISERS IN ORDER
TO MAKE AN INDIVIDUAL EVALUATION OF THE FEDERAL, STATE OR LOCAL TAX CONSEQUENCES
OF THE MERGER.

CONDITIONS TO MERGER

Consummation of the Merger is subject to various conditions specified in
the Merger Agreement, including without limitation, (i) receipt of the required
approvals of the Merger Agreement by Salem's shareholders and the shareholder of
CCB Bank; (ii) receipt of all regulatory approvals required for consummation of
the transactions described in the Merger Agreement without the imposition of any
regulatory agency of a condition or requirement to any such approval that so
materially adversely impacts the economic benefits of the Merger as to cause
Salem's or CCBF's Board of Directors to reasonably consider consummation of the
Merger to be inadvisable; (iii) the qualification of the Merger as a tax-free
reorganization under Section 368 of the Code, and receipt by Salem and CCBF of
an opinion of their tax advisor, KPMG Peat Marwick LLP, that the Merger so
qualifies; (iv) the listing on the NYSE of the shares of CCBF Stock to be issued
in the Merger as of the Effective Time; (v) the absence of any pending or
threatened action against Salem or CCBF which enjoins or prohibits the Merger or
which would have a material adverse effect on Salem or CCBF; (vi) the absence of
any pending or threatened action which seeks to obtain substantial monetary or
other relief in connection with the Merger (unless the party seeking to proceed
with the Merger shall provide the other party with an acceptable opinion of
legal counsel that such action is likely to be resolved in such a way as to not
deprive any party of any of the material benefits to be derived from the Merger
or in such a way as would not constitute a material adverse event as to the
party subject to the action; and (vii) the aggregate number of shares of Salem
Stock with respect to which Dissenters' Rights have been perfected (A) does not
exceed 9.90% of the total number of outstanding shares of Salem Stock, and (B)
the total number of shares of Salem Stock deemed "tainted" for purposes of
pooling-of-interests accounting treatment, when added to shares of CCBF Stock
deemed so "tainted," does not prevent the use of such accounting treatment.

<PAGE>
The separate obligations of Salem and of CCBF and CCB Bank (considered as
one party for such purposes) under the Merger Agreement are subject to various
other conditions specified therein, including without limitation, (i) that the
representations and warranties of the other party be and remain true and correct
in all material respects; (ii) that the other party perform, in all material
respects, the obligations and covenants required to be performed by it under the
Merger Agreement; and (iii) receipt of certain certificates and opinions of the
other party's senior officers and legal counsel.

Additionally, Salem's obligations are subject to receipt of the Salem
Fairness Opinion. CCBF's and CCB Bank's obligations also are subject to receipt
of a written agreement as to certain matters from persons who are considered
"Affiliates" of Salem (see " -- Restrictions on Resale of CCBF Stock Received by
Affiliates"), and receipt of an opinion from KPMG Peat Marwick LLP that the
Merger will qualify for pooling-of-interests accounting treatment; provided,
however, that if the use of such accounting treatment is not permissible, then
the Merger will be accounted for as a purchase subject to the satisfaction of
certain additional conditions related to the re-confirmation of regulatory
approvals of the Merger and the re-solicitation of the approval of the Merger
Agreement by Salem's shareholders, in each case if required by law or regulation
or deemed by CCBF to be appropriate. See " -- Accounting Treatment".

AMENDMENT OF MERGER AGREEMENT; WAIVER

Prior to the Effective Time, any provision of the Merger Agreement may be
waived by the party entitled to the benefit of such provision; provided,
however, that no condition may be waived which, if not satisfied, would result
in a violation of any law or applicable governmental regulation. The Merger
Agreement may be amended, modified or supplemented at any time prior to the
Effective Time, and whether before or after the Special Meeting, by an agreement
in writing approved by Salem's, CCBF's and CCB Bank's respective Board of
Directors. However, following the Special Meeting and approval of the Merger
Agreement by CCB Bank's shareholder, no changes involving material matters,
including the manner or basis in which shares of Salem Stock will be converted
into and exchanged for CCBF Stock, may be made without the approval of Salem's
shareholders and CCB Bank's shareholder.

TERMINATION OF MERGER AGREEMENT

The Merger Agreement may be terminated, whether before or after the Special
Meeting, upon the mutual consent of the Board of Directors of Salem and the
Boards of Directors of CCBF and CCB Bank, and may be terminated by the Board of
Directors of either Salem or CCBF and CCB Bank in the event, among other things,
(i) of a material breach by the other party of any representations, warranty,
covenant or other agreement in the Merger Agreement which is not cured within 30
days after written notice to the party committing such breach; (ii) that any
regulatory authority has denied approval of any of the transactions contemplated
by the Merger Agreement, or that an order, judgment or decree from any
regulatory authority or any court having competent jurisdiction has imposed any
condition or requirement which would so substantially and adversely impact the
economic or business benefits of the Merger to such party as to render
inadvisable in the reasonable opinion of such party's Board of Directors the
consummation of the Merger (provided that such denial or imposition has become
final and nonappealable); (iii) of the occurrence of a suit or other proceeding
by any regulatory authority or other governmental body or agency to restrain or
prohibit any of the transactions contemplated by the Merger Agreement, or a suit
by a Salem or CCBF shareholder seeking to restrain such transactions or to
obtain material money damages should such transactions be consummated (unless
counsel for the party wishing to proceed with the Merger renders an opinion that
such a suit is likely to be resolved in a way which would not deprive any party
of the material benefits of the Merger or in a way which would not result in
substantial money damages to one or more directors of such party which would not
be covered by insurance); or (iv) that the Effective Time shall not have
occurred on or before March 31, 1997; provided, however, that if
pooling-of-interests accounting treatment is not permissible, this date shall be
extended to June 30, 1997.

Additionally, either Salem or CCBF and CCB Bank may terminate the Merger
Agreement if the average of the closing sale prices of CCBF Stock on the NYSE
over the 60 trading days preceding the date of the Closing of the Merger is less
than $46.78 or more than $57.18.

In the event of the termination and abandonment of the Merger Agreement
pursuant to the termination provisions thereof, the Merger Agreement will become
void and have no effect, except that certain provisions of the Merger Agreement
relating to expenses, indemnification and confidentiality of information
obtained pursuant to the Merger Agreement or in connection with the negotiation
thereof will survive any such termination and abandonment and no party will be
relieved or released from any liability arising out of a willful or grossly
negligent breach of any provision of the Merger Agreement. In the event the
Merger fails to be consummated because of the wrongful termination, or willful
or grossly negligent breach of any representation, warranty, covenant,
undertaking, term or restriction, of the Merger Agreement by a party, the party

<PAGE>
wrongfully terminating or breaching the Merger Agreement shall (i) reimburse the
other party for all of its expenses incident to entering into any carrying out
the Merger Agreement and the transactions contemplated thereby, including filing
fees and financial adviser, legal, accounting and investment banking fees and
expenses, and (ii) pay the other party liquidated damages of $1.0 million in
full compensation of all other harm suffered by such party as a result thereof.
Further, in the event the Merger Agreement is terminated because (x) Salem
enters into a letter of intent or an agreement with a third party that provides
for the third party to acquire Salem, whether by merger, asset purchase or
otherwise (a "Prohibited Transaction"), or (y) prior to the termination of the
Merger Agreement, Salem engages in negotiations with a third party concerning a
Prohibited Transaction and, within twelve months after termination of the Merger
Agreement, Salem enters into a letter of intent or agreement with such third
party respecting a Prohibited Transaction (without the written consent of CCBF),
then Salem shall pay CCBF a termination fee of $1.0 million.

EFFECTIVE TIME AND CLOSING DATE

The Merger will become effective on the date and at the time (the
"Effective Time") on which Articles of Merger executed by CCB Bank and Salem
have been accepted for filing by the North Carolina Secretary of State, or at
such later date and time as is specified by CCB Bank and Salem in the Articles
of Merger so filed. However, unless otherwise mutually agreed by Salem and CCBF,
the Effective Time will occur on the first business day following the last to
occur of (i) the date that is 30 days after the date of the order of the FDIC
approving the Merger, (ii) the effective date of the last required order,
approval or exemption of any federal or state regulatory agency approving or
exempting the Merger, (iii) the expiration of all required waiting periods after
the filing of notices with, or the receipt of regulatory approvals from, all
federal or state regulatory agencies required for consummation of the Merger,
and (iv) the later of the dates on which Salem's shareholders and the
shareholder of CCB Bank approve the Merger Agreement.

Following and subject to the fulfillment of all conditions described in the
Merger Agreement, the closing of the Merger will be held on the date that the
Effective Time occurs or on such other prior date as is mutually agreed upon by
Salem and CCBF (the "Closing Date"). Although there is no assurance as to
whether or when the Merger will occur, it presently is expected that the
Effective Time will occur during the first calendar quarter of 1997. See
" -- Conditions to Merger", " -- Required Shareholder Approvals", and
" -- Required Regulatory Approvals". The Board of Directors of either CCBF or
Salem may terminate the Merger Agreement if the Effective Time shall not have
occurred by March 31, 1997; provided, however, that if pooling-of-interests
accounting treatment for the Merger is not permissible, this date shall be
extended to June 30, 1997. See " -- Termination of Merger Agreement".

After the Effective Time, CCB Bank will use the name "Salem", in
conjunction with its name and logos, in certain of CCB Bank's activities. The
extent of the use of the name "Salem" in such activities is subject to
limitations and qualifications established by the FDIC.

DIRECTORS AND OFFICERS

Following the Effective Time, CCBF's and CCB Bank's then current directors
and officers will continue to serve for the remainder of their terms of office
as directors of CCBF and CCB Bank. Certain officers of Salem will become senior
officers of CCB Bank.

INTERESTS OF CERTAIN PERSONS WITH RESPECT TO THE MERGER

Certain members of Salem's management and Board of Directors have certain
interests in the Merger that are in addition to their interests as shareholders
of Salem generally. Salem's Board of Directors was aware of these interests and
considered them, among other things, in adopting the Merger Agreement and
recommending the transactions contemplated thereby.

INDEMNIFICATION AND INSURANCE. Pursuant to the Merger Agreement, from and
after the Effective Time, CCBF and CCB Bank will indemnify, defend and hold
harmless the present and former officers, directors, employees and agents of
Salem from and against all suits, actions, complaints, demands, costs, fines,
losses, claims, damages or liabilities arising out of actions or omissions
occurring on or prior to the Effective Time to the full extent then permitted
under North Carolina law and by Salem's Articles of Incorporation and Bylaws as
in effect on the date of the Merger Agreement, including provisions relating to
advances of expenses in the defense of any action or suit.

Furthermore, for a period of at least three years after the Effective Time,
CCBF will maintain a policy or policies of directors' and officers' liability
insurance covering those persons who were, on the date of the Merger Agreement,
covered by Salem's directors' and officers' liability insurance policies. CCBF's
policy or policies shall have terms no less favorable than those Salem had in
effect on the date of the Merger Agreement.

<PAGE>
EMPLOYMENT AGREEMENTS. The current employment agreements of Messrs.
Sheeran, Potter and Green and Ms. Marshall will be amended and restated at the
Effective Time. Each of these employment agreements will be assumed by CCB Bank.
Under his Amended and Restated Employment Agreement, Mr. Sheeran's term of
employment will be extended from December 7, 1998 to the anniversary of the
Closing Date occurring in 2002; his annual base salary, and employee benefit
plan and fringe benefits rights, will be fixed at an amount and at levels no
less than those existing immediately prior to the Effective Time; and certain
rights to participate in employee benefit plans and receive fringe benefits
after termination of his employment after a "change in control" may be extended
from a period of 2.99 years to a period of up to five (5) years. In the event of
a termination of Mr. Sheeran's employment without cause or upon an unapproved
"change in control", Mr. Sheeran will be entitled to receive his then base
salary and bonuses for a period of 2.99 years subsequent to such termination.
Messrs. Potter and Green and Ms. Marshall have similar rights for a period of
two years subsequent to such a termination of their employment. Under their
Amended and Restated Employment Agreements, the terms of employment of Messrs.
Potter and Green and Ms. Marshall will be extended from one (1) year to three
(3) years and their annual base salaries, and employee benefit plan and fringe
benefit rights, will be fixed at an amount and at levels no less than those
existing immediately prior to the Effective Time. In certain circumstances the
Merger could constitute a "change in control" under Mr. Sheeran's Amended and
Restated Employment Agreement such that he would receive severance payments if
he terminated his employment.

EFFECT ON EMPLOYEE BENEFIT PLANS AND OPTIONS. Salem and CCBF have agreed in
the Merger Agreement that Salem's employee benefit plans will be reviewed and
appropriate amendments, consolidations or terminations will be made thereto at
or after the Effective Time; provided, however, that the employees of Salem (i)
shall be eligible to receive group hospitalization, medical, life, disability
and similar benefits on the same basis and under the same terms available to the
present employees of CCBF and its subsidiaries, (CCBF has agreed to waive
pre-existing conditions limitations, honor previously incurred deductible and
out-of-pocket expenses, and group life insurance medical certifications up to
the coverage limits existing under Salem's comparable plan) (ii) in the event
that a Salem employee benefit plan is terminated, shall become fully vested,
with each participating Salem employee having the right or option either to
receive the benefits to which he or she is entitled as a result of such
termination or to have such benefits "rolled" into the appropriate CCBF employee
benefit plan, on the same basis and applying the same eligibility standards as
would apply to the employees of CCBF and its subsidiaries as if such employee's
prior service to Salem had been performed on behalf of CCBF and its subsidiaries
for qualification and vesting (but not for funding purposes), and (iii) in the
event a Salem employee benefit plan is merged into a CCBF employee benefit plan,
shall be entitled to participate in such CCBF plan on the same basis and
applying the same eligibility standards as would apply to employees of CCBF and
its subsidiaries. Salem and CCBF have agreed that the overall level of benefits
offered or provided to the employees of Salem under the CCBF benefits plans will
be no less than that offered or provided to the present employees of CCBF and
its subsidiaries, and that for purposes of qualification, participation and
vesting, the employees of Salem shall receive credit for their periods of
service to Salem.

Under the Merger Agreement, at the Effective Time, all rights with respect
to Salem Options which are outstanding at the Effective Time, whether or not
then exercisable, will be converted into and will become rights with respect to
CCBF Stock, and CCBF will assume Salem's obligations with respect to each such
Salem Option, in accordance with the terms of the applicable Salem Option Plan
and the related option agreements. From and after the Effective Time, (i) each
Salem Option assumed by CCBF may be exercised solely for shares of CCBF Stock,
(ii) the number of shares of CCBF Stock subject to each Salem Option will be
equal to the number of shares of Salem Stock subject to such Salem Option
immediately prior to the Effective Time multiplied by the Exchange Ratio, and
(iii) the per share exercise price under each such Salem Option will be adjusted
by dividing the per share exercise price thereunder by the Exchange Ratio and
rounding down to the nearest cent, provided that the number of shares of CCBF
Stock subject to each Salem Option and the per share price will, in accordance
with the terms of the Salem Option and the per share price, be subject to
further adjustments as appropriate to reflect any stock split, stock dividend,
recapitalization or other similar transaction subsequent to the Effective Time.
Under the Merger Agreement, after the date thereof, no further options to
acquire Salem Stock may be granted by Salem.

Under the Merger Agreement, all restrictions or limitations on transfer
with respect to Salem Stock awarded under Salem Option Plans or any other plan,
program or arrangement, to the extent that such restrictions or limitations have
not already lapsed, will remain in full force and effect with respect to the
CCBF Stock into which Salem Stock is converted pursuant to the Merger Agreement.
Pursuant to the terms of the Salem Option Plans, all granted but unvested Salem
Options will vest immediately as a consequence of the Merger. Because the
Amended and Restated Employment Agreement of Mr. Sheeran contains provisions
requiring additional payments thereunder to meet any "excise tax liability"
under the Code incurred by the employee, it is probable, that should he be
entitled to receive "change in control" payments under his Employment Agreement
within one (1) year after the Effective Time, the sum of such payments and the
deemed value under

<PAGE>
the Code of the acceleration of the vesting of Salem Options held by Mr. Sheeran
could result in additional "gross up" payments by CCB Bank to offset such
"excise tax liability".

Additional information regarding CCBF's employee benefit plans, as well as
information with regard to its executive compensation and employment agreements
is incorporated by reference or set forth in CCBF's Annual Report on Form 10-K
for the year ended December 31, 1995, which document is incorporated herein by
reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE". For additional
information regarding Salem's employee benefit plans, executive compensation and
employment agreements, see "SALEM TRUST BANK".

NYSE LISTING

At the time the Merger Agreement was initially executed, CCBF Stock was
qualified for quotation on the Nasdaq National Market. However, at that time,
CCBF had pending an application for the listing of CCBF Stock upon the NYSE.
This application was approved and CCBF Stock was listed on the NYSE on August
14, 1996. Transactions in CCBF Stock are no longer quoted on the Nasdaq National
Market. The Merger Agreement provides that the listing of the shares of the CCBF
Stock issuable pursuant to the Merger on the NYSE as of the Effective Time is a
condition to the consummation of the Merger. See " -- Conditions to Merger".

DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN

CCBF has in effect a Dividend Reinvestment and Stock Purchase Plan (the
"CCBF Plan") pursuant to which its shareholders may purchase shares of CCBF
Stock through the reinvestment of dividends and optional cash payments. Under
the CCBF Plan, CCBF Stock is purchased by the plan administrator in open market
transactions and/or in negotiated transactions only, and no newly-issued shares
of CCBF Stock are issued to participants in the CCBF Plan. After the Effective
Time, the CCBF Plan will be continued in effect and be available to Salem's
former shareholders who have become CCBF shareholders.

RESTRICTIONS ON RESALE OF CCBF STOCK BY AFFILIATES

Certain restrictions under the 1933 Act will apply to the resale of shares
of CCBF Stock issued to certain persons in connection with the Merger. Any
person who is an "Affiliate" of Salem or CCBF at the time the Merger Agreement
is submitted to a vote of Salem's shareholders may not resell or transfer shares
of CCBF Stock received in connection with the Merger during a period of three
years following the Effective Time unless (i) such person's offer and sale of
those shares has been registered under the 1933 Act, (ii) such person's offer
and resale is made in compliance with Rule 145 promulgated under the 1933 Act
(which permits limited sales under certain circumstances), or (iii) another
exemption from registration is available. Additionally, as a condition of
treating the Merger as a pooling-of-interests for accounting purposes,
Affiliates of Salem and CCBF will be prohibited from selling or transferring any
shares of CCBF Stock from the date 30 days prior to consummation of the Merger
until CCBF shall have published results of its operations for a period covering
at least 30 days following the Effective Time. Because the CCBF Rights to be
received by Salem's shareholders pursuant to the Merger are attached to, and
cannot be transferred separately from, the shares of CCBF Stock to which they
relate, the CCBF Rights held by Affiliates will be subject to these same
restrictions.

An "Affiliate" of Salem, as defined by rules promulgated under the 1933
Act, is a person who directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with Salem. The above
restrictions are expected to apply to the directors and executive officers of
Salem (and to any relative or spouse of any person or any relative of any such
spouse, any of whom live in the same house as such person, and any trust,
estate, corporation or other entity in which such person has a 10% or greater
beneficial or equity interest), and may apply to any current Salem shareholder
that owns an amount of stock sufficient to be considered to "control" Salem or
that otherwise is an "Affiliate" of Salem. Stock transfer instructions will be
given by CCBF to its stock transfer agent with respect to the CCBF Stock to be
received by persons deemed by CCBF to be subject to these restrictions, and the
certificates for such stock may be appropriately legended.

The Merger Agreement provides that Salem will use its best efforts to cause
each of its Affiliates to deliver to CCBF, at least 30 days prior to the
Effective Time, a written agreement (an "Affiliate Agreement") providing that
such person will not offer, sell, pledge, transfer or otherwise dispose of any
shares of CCBF Stock except in compliance with the restrictions described above.
CCBF's obligation to consummate the Merger is conditioned on its receipt of the
Affiliate Agreements. See " -- Conditions to Merger".

<PAGE>
PERSONS WHO ARE OR MAY BE AFFILIATES OF SALEM SHOULD CONSULT WITH THEIR OWN
LEGAL COUNSEL REGARDING THE APPLICATION OF THE ABOVE RESTRICTIONS TO THE CCBF
STOCK.

EXPENSES

The Merger Agreement provides that Salem and CCBF will each pay its own
expenses incident to preparing, entering into and carrying out the Merger
Agreement and the transactions contemplated thereby, including filing fees and
the fees and expenses of its financial advisors, investment bankers, accountants
and counsel. However, if a party wrongfully terminates or engages in a willful
or grossly negligent breach of any representation, warranty, covenant,
undertaking, term or restriction contained in the Merger Agreement, such party
shall pay all of the above-described costs and expenses of the other party,
together with the sum of $1.0 million as liquidated damages in full compensation
of all other harm suffered by the non-defaulting party as a result thereof. See
" -- Termination of Merger Agreement".

RIGHTS OF DISSENTING SHAREHOLDERS

The Merger will give rise to Dissenters' Rights under Article 13 of the
NCBCA for Salem's shareholders. Pursuant to Article 13, any Salem shareholder
who objects to the Merger may exercise Dissenters' Rights and become entitled to
be paid the fair value of such shareholders' shares of Salem Stock if the Merger
is consummated. The following is only a summary of the Dissenters' Rights of
Salem's shareholders. A COMPLETE COPY OF ARTICLE 13 IS ATTACHED HERETO AS
APPENDIX B AND INCORPORATED BY REFERENCE TO THIS PROSPECTUS/PROXY STATEMENT. ANY
SHAREHOLDER WHO INTENDS TO EXERCISE DISSENTERS' RIGHTS SHOULD REVIEW THE TEXT OF
ARTICLE 13 CAREFULLY AND COMPLY WITH ITS REQUIREMENTS, AND ALSO SHOULD CONSULT
WITH HIS OR HER ATTORNEY. EXCEPT AS PROVIDED BELOW, NO FURTHER NOTICES WILL BE
GIVEN TO SHAREHOLDERS REGARDING THE EXISTENCE OF DISSENTERS' RIGHTS OR ANY TIME
PERIODS WITHIN WHICH THOSE RIGHTS MUST BE EXERCISED.

Article 13 provides in detail the procedure that must be followed by a
dissenting shareholder in order to exercise Dissenter's Rights. That procedure
is summarized below.

Any Salem shareholder who desires to assert Dissenters' Rights MUST (i)
give to Salem, and Salem must actually receive, BEFORE THE VOTE ON THE MERGER IS
TAKEN, written notice of the shareholder's intent to demand payment for his
shares if the Merger is consummated, and (ii) not vote his shares in favor of
the Merger. Failure by a shareholder to satisfy either requirement will mean
that the shareholder will not be entitled to assert Dissenters' Rights and
obtain payment for his shares under Article 13. A dissenting shareholder's
notice to Salem should be mailed to Salem Trust Bank, 2140 Country Club Road,
Winston-Salem, North Carolina 27104, Attn: Norman D. Potter, Chief Financial
Officer and Secretary. A Salem shareholder's failure to vote against the Merger
will not constitute a waiver of the shareholder's Dissenters' Rights so long as
the shareholder gives the required notice in a timely manner as described above
and does not vote, in person or by proxy, in favor of the Merger. However, the
notice requirement will not be satisfied by a shareholder's vote in person
against the Merger, or submission of an appointment of proxy with instructions
to vote against the Merger. Accordingly, a Salem shareholder who votes against
the Merger still must give the required notice in a timely manner in order to
assert Dissenters' Rights. Shareholders should note that if they sign and return
a blank appointment of proxy with no instructions as to how their shares should
be voted, they will be deemed to have voted in favor of the Merger and
thereafter will not be entitled to assert Dissenters' Rights.

If the Merger Agreement is approved by Salem's shareholders, then, within
ten days of the date the Merger is consummated, Salem must send a written notice
(by registered or certified mail, return receipt requested) to each of its
Shareholders who has taken the actions described above and is entitled to
exercise Dissenters' Rights. That notice will: (i) state where the dissenting
shareholder's payment demand must be sent, and where and when share certificates
must be deposited; (ii) supply a form for demanding payment; (iii) set a date by
which Salem must receive the dissenting shareholder's payment demand (which may
not be fewer than 30 nor more than 60 days after the date the dissenters' notice
is mailed); and (iv) be accompanied by a copy of Article 13.

A Salem shareholder who has been sent the dissenters' notice must demand
payment and must deposit his share certificates by the date set forth in an in
accordance with the terms and conditions of the dissenters' notice; otherwise,
such shareholder is not entitled to payment for his shares under Article 13. A
shareholder who demands payment and deposits his share certificates as required
retains all other rights as a shareholder until such rights are canceled or
modified by consummation of the Merger.

<PAGE>
As soon as the Merger is consummated or upon receipt of a payment demand,
Salem will offer to pay its dissenting shareholders who complied with all
statutory requirements the amount Salem estimates to be the fair value of the
shareholder's shares, plus interest accrued to the date of payment, and will pay
this amount to each dissenting shareholder who agrees in writing to accept it in
full satisfaction of his demand. Salem's offer of payment will be accompanied
by: (i) certain of Salem's most recent available financial statements; (ii) a
statement of Salem's estimate of the fair value of its shares; (iii) an
explanation of how the interest was calculated; (iv) a statement of the
dissenting shareholder's right to demand payment if dissatisfied with Salem's
offer; and, (v) a copy of Article 13.

If the Merger is not consummated within 60 days after the date set by Salem
for demand payment and depositing share certificates, Salem must return the
deposited certificates and if, thereafter, the Merger is consummated, Salem must
send a new dissenters' notice and repeat the payment demand procedure set forth
above.

If a dissenter believes the amount offered for his shares as described
above is less than their fair value or that interest due is incorrectly
calculated, or if Salem fails to make payment within 30 days to a dissenter who
accepts its offer, or if Salem fails to consummate the Merger and does not
return the deposited certificates within 60 days after the date is set for
demanding payment, then the dissenting shareholder may notify Salem in writing
of the shareholder's own estimate of the fair value of his shares or the amount
of interest due and may demand payment of such estimate, or may reject Salem's
offer and demand payment of the fair value of his shares and interest due within
30 days of Salem's action or inaction. In any such event, if a dissenting
shareholder fails to take any such action within the 30-day period, that
shareholder will be deemed to have waived his rights under Article 13 and to
have withdrawn his dissent and demand for payment.

If a dissenting shareholder has taken all required actions and his demand
for payment remains unsettled, the shareholder may commence a proceeding within
60 days after the date of his payment demand and petition the court to determine
the fair value of his shares and accrued interest. Upon service on it of the
petition filed with the court, Salem must pay to the dissenting shareholder the
amount originally offered by it. If the shareholder does not commence the
proceeding within said 60-day period, he has an additional 30 days to either (i)
accept in writing the amount offered by Salem, upon which acceptance Salem will
pay such amount in full satisfaction of the dissenter's demand, or (ii) withdraw
his demand for payment and resume the status of a nondissenting shareholder. A
dissenting shareholder who takes no action within this 30-day period is deemed
to have withdrawn his dissent and demand for payment.

In the court proceeding described above, the court may appoint one or more
persons as appraisers to receive evidence and recommend a decision on the
question of fair value, and has discretion to make all dissenting shareholders
whose demands remain unsettled parties to the proceeding. Each dissenting
shareholder made a party to the proceeding must be served with a copy of the
petition and is entitled to judgment for the amount, if any, by which the court
finds the fair value of his shares, plus interest, to exceed the amount paid by
Salem. Court costs, appraisal and counsel fees may be assessed by the court as
it deems equitable.

Article 13 contains certain additional provisions with respect to dissent
by nominees who hold shares for others, and by beneficial owners whose shares
are held in the name of other persons, and reference is made to Appendix B for a
more complete description thereof.

<PAGE>
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION

The following unaudited Pro Forma Combined Condensed Balance Sheet and
Statements of Income and accompanying notes are presented to show the impact of
the Merger on CCBF's and Salem's historical financial position and results of
operations. The Merger is reflected in the Pro Forma Combined Condensed Balance
Sheet and Statements of Income under the pooling-of-interests method of
accounting. CCBF currently intends for the Merger to be accounted for under the
pooling-of-interests method. However, if application of such accounting method
should not be permissible, the Merger would be accounted for under the purchase
method of accounting. See "THE MERGER -- Accounting Treatment" and
" -- Conditions to Merger". Under the purchase method of accounting, the
acquiring corporation records at its costs the acquired assets less liabilities
assumed. The difference between the cost of the acquired enterprise and the sum
of the fair values of tangible and identifiable intangible assets less
liabilities assumed is recorded as goodwill. The reported income of an acquiring
corporation includes the operations of the acquired enterprise after
acquisition, adjusted for amortization of any assets arising from the
acquisition.

The unaudited Pro Forma Combined Condensed Balance Sheet presented assumes
that the Merger was consummated on June 30, 1996 and the unaudited Pro Forma
Combined Condensed Statements of Income assume that the Merger was consummated
at the beginning of each period presented.

The pro forma earnings are not necessarily indicative of actual results
that might have been achieved had the Merger been consummated at the beginning
of the periods presented, and may not be indicative of future results that will
be obtained on a combined basis. The Pro Forma Combined Condensed Balance Sheet
and Statements of Income do not reflect any Merger-related expenses which may be
recognized or cost savings from operating efficiencies which may be realized in
connection with the Merger. Current estimates of Merger-related expenses are
$1.4 million. CCBF currently anticipates cost savings of approximately $1.5
million associated with these possible operating efficiencies and synergies, but
no such savings are assured. It is anticipated that any such cost savings will
not be achieved until the fiscal quarters following the quarter in which the
expenses of the Merger are recognized.

<PAGE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET

AS OF JUNE 30, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
CCBF
PRO FORMA PRO FORMA
CCBF SALEM ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
(IN THOUSANDS)
ASSETS
Cash and due from banks................................................... $ 214,260 5,622 -- 219,882
Time deposits in other banks.............................................. 57,435 -- -- 57,435
Federal funds sold and other short-term investments....................... 198,000 17,340 -- 215,340
Investment securities:
Available for sale...................................................... 890,440 2,462 -- 892,902
Held to maturity........................................................ 75,822 16,667 -- 92,489
Loans and lease financing................................................. 3,499,741 113,703 -- 3,613,444
Less reserve for loan and lease losses.................................. 45,423 1,434 -- 46,857
Net loans and lease financing........................................ 3,454,318 112,269 -- 3,566,587
Premises and equipment.................................................... 66,862 1,860 -- 68,722
Other assets.............................................................. 103,331 1,344 -- 104,675
Total assets......................................................... $5,060,468 157,564 5,218,032
LIABILITIES
Deposits:
Noninterest-bearing..................................................... $ 550,568 17,010 -- 567,578
Interest-bearing........................................................ 3,760,050 122,424 -- 3,882,474
Total deposits....................................................... 4,310,618 139,434 -- 4,450,052
Other short-term borrowed funds........................................... 144,939 -- -- 144,939
Long-term debt............................................................ 61,243 -- -- 61,243
Other liabilities......................................................... 92,394 1,447 -- 93,841
Total liabilities.................................................... 4,609,194 140,881 -- 4,750,075
SHAREHOLDERS' EQUITY
Common stock.............................................................. 75,258 4,603 (828)(1) 79,033
Additional paid-in capital................................................ 90,174 8,063 828(1) 99,065
Retained earnings......................................................... 285,922 4,017 -- 289,939
Unrealized gain on investment securities available for sale............... 1,166 -- -- 1,166
Less: Unearned common stock held by management
recognition plans....................................................... (1,246) -- -- (1,246)
Total shareholders' equity........................................... 451,274 16,683 -- 467,957
Total liabilities and shareholders' equity........................... $5,060,468 157,564 -- 5,218,032
</TABLE>

(1) Based on the Exchange Ratio of .41 for conversion of Salem Stock into CCBF
Stock. At June 30, 1996, CCBF and Salem had 15,051,625 and 1,841,232 shares
outstanding, respectively.

(2) The pro forma combined retained earnings do not reflect any Merger-related
expenses which may be recognized or cost savings from operating efficiencies
which may be realized in connection with the Merger.

<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
CCBF
PRO FORMA
CCBF SALEM COMBINED (1)
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
INTEREST INCOME
Loans and leases................................................................... $156,730 5,111 161,841
Investment securities.............................................................. 30,190 489 30,679
Other.............................................................................. 7,643 548 8,191
Total interest income........................................................... 194,563 6,148 200,711
INTEREST EXPENSE
Deposits........................................................................... 83,945 3,071 87,016
Long-term debt and other borrowings................................................ 4,768 41 4,809
Total interest expense.......................................................... 88,713 3,112 91,825
Net interest income.................................................................. 105,850 3,036 108,886
Provision for loan and lease losses.................................................. 5,150 132 5,282
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES........................ 100,700 2,904 103,604
OTHER INCOME
Service charges on deposit accounts................................................ 14,237 69 14,306
Non-deposit fees and commissions................................................... 10,874 127 11,001
Other.............................................................................. 4,452 426 4,878
Investment securities gains, net................................................... 11 -- 11
Total other income.............................................................. 29,574 622 30,196
OTHER EXPENSES
Personnel.......................................................................... 40,253 1,250 41,503
Net occupancy and equipment........................................................ 10,791 219 11,010
Deposit and other insurance........................................................ 1,082 17 1,099
Other operating.................................................................... 22,740 561 23,301
Total other expenses............................................................ 74,866 2,047 76,913
Income before income taxes........................................................... 55,408 1,479 56,887
Income taxes......................................................................... 19,292 571 19,863
NET INCOME........................................................................... $ 36,116 908 37,024
NET INCOME PER SHARE:
Primary............................................................................ $ 2.40 .54 2.35
Fully diluted...................................................................... 2.40 .51 2.35
WEIGHTED AVERAGE SHARES OUTSTANDING:
Primary............................................................................ 15,033,812 1,694,409 15,728,520(2)
Fully diluted...................................................................... 15,033,812 1,831,878 15,784,882(2)
</TABLE>

(1) No pro forma adjustments are reflected in the Pro Forma Combined Condensed
Statements of Income.

(2) Based on the Exchange Ratio of .41 for conversion of Salem Stock into CCBF
Stock.

<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
CCBF
PRO FORMA
CCBF SALEM COMBINED (1)
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
INTEREST INCOME
Loans and leases................................................................... $150,289 3,644 153,933
Investment securities.............................................................. 31,609 107 31,716
Other.............................................................................. 6,576 251 6,827
Total interest income........................................................... 188,474 4,002 192,476
INTEREST EXPENSE
Deposits........................................................................... 81,413 1,722 83,135
Long-term debt and other borrowings................................................ 5,644 64 5,708
Total interest expense.......................................................... 87,057 1,786 88,843
Net interest income.................................................................. 101,417 2,216 103,633
Provision for loan and lease losses.................................................. 3,749 165 3,914
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES........................ 97,668 2,051 99,719
OTHER INCOME
Service charges on deposit accounts................................................ 12,352 31 12,383
Non-deposit fees and commissions................................................... 9,243 147 9,390
Other.............................................................................. 5,690 137 5,827
Investment securities losses, net.................................................. (977) -- (977)
Total other income.............................................................. 26,308 315 26,623
OTHER EXPENSES
Personnel.......................................................................... 39,673 983 40,656
Net occupancy and equipment........................................................ 10,797 174 10,971
Deposit and other insurance........................................................ 4,787 101 4,888
Merger-related expense............................................................. 10,333 -- 10,333
Other operating.................................................................... 21,192 374 21,566
Total other expenses............................................................ 86,782 1,632 88,414
Income before income taxes........................................................... 37,194 734 37,928
Income taxes......................................................................... 13,107 342 13,449
NET INCOME........................................................................... $ 24,087 392 24,479
NET INCOME PER SHARE:
Primary............................................................................ $ 1.61 .34 1.59
Fully diluted...................................................................... 1.61 .32 1.58
WEIGHTED AVERAGE SHARES OUTSTANDING:
Primary............................................................................ 14,960,977 1,137,896 15,427,514(2)
Fully diluted...................................................................... 14,960,977 1,351,196 15,514,967(2)
</TABLE>

(1) No pro forma adjustments are reflected in the Pro Forma Combined Condensed
Statements of Income.

(2) Based on the Exchange Ratio of .41 for conversion of Salem Stock into CCBF
Stock.

<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
CCBF
PRO FORMA
CCBF SALEM COMBINED (1)
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
INTEREST INCOME
Loans and leases.................................................................... $305,165 8,145 313,310
Investment securities............................................................... 61,281 267 61,548
Other............................................................................... 17,068 925 17,993
Total interest income............................................................ 383,514 9,337 392,851
INTEREST EXPENSE
Deposits............................................................................ 168,983 4,437 173,420
Long-term debt and other borrowings................................................. 10,421 134 10,555
Total interest expense........................................................... 179,404 4,571 183,975
Net interest income................................................................... 204,110 4,766 208,876
Provision for loan and lease losses................................................... 8,183 545 8,728
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES......................... 195,927 4,221 200,148
OTHER INCOME
Service charges on deposit accounts................................................. 25,600 99 25,699
Non-deposit fees and commissions.................................................... 18,827 471 19,298
Other............................................................................... 8,840 358 9,198
Investment securities losses, net................................................... (978) -- (978)
Total other income............................................................... 52,289 928 53,217
OTHER EXPENSES
Personnel........................................................................... 79,298 2,061 81,359
Net occupancy and equipment......................................................... 20,929 353 21,282
Deposit and other insurance......................................................... 7,096 87 7,183
Merger-related expenses............................................................. 10,333 -- 10,333
Other operating..................................................................... 42,567 884 43,451
Total other expenses............................................................. 160,223 3,385 163,608
Income before income taxes............................................................ 87,993 1,764 89,757
Income taxes.......................................................................... 30,133 720 30,853
NET INCOME............................................................................ $ 57,860 1,044 58,904
NET INCOME PER SHARE:
Primary............................................................................. $ 3.87 .72 3.79
Fully diluted....................................................................... 3.87 .67 3.77
WEIGHTED AVERAGE SHARES OUTSTANDING:
Primary............................................................................. 14,949,063 1,447,700 15,542,620(2)
Fully diluted....................................................................... 14,949,063 1,684,659 15,639,773(2)
</TABLE>

(1) No pro forma adjustments are reflected in the Pro Forma Combined Condensed
Statements of Income.

(2) Based on the Exchange Ratio of .41 for conversion of Salem Stock into CCBF
Stock.

<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)

<TABLE>
<CAPTION>
CCBF
PRO FORMA
CCBF SALEM COMBINED (1)
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
INTEREST INCOME
Loans and leases.................................................................... $243,577 4,620 248,197
Investment securities............................................................... 58,301 319 58,620
Other............................................................................... 8,021 381 8,402
Total interest income............................................................ 309,899 5,320 315,219
INTEREST EXPENSE
Deposits............................................................................ 117,408 2,267 119,675
Long-term debt and other borrowings................................................. 8,958 130 9,088
Total interest expense........................................................... 126,366 2,397 128,763
Net interest income................................................................... 183,533 2,923 186,456
Provision for loan and lease losses................................................... 9,279 50 9,329
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES......................... 174,254 2,873 177,127
OTHER INCOME
Service charges on deposit accounts................................................. 23,452 78 23,530
Non-deposit fees and commissions.................................................... 18,923 315 19,238
Other............................................................................... 6,255 253 6,508
Investment securities gains, net.................................................... 357 -- 357
Total other income............................................................... 48,987 646 49,633
OTHER EXPENSES
Personnel........................................................................... 71,990 1,312 73,302
Net occupancy and equipment......................................................... 21,492 228 21,720
Deposit and other insurance......................................................... 9,032 170 9,202
Merger-related expense.............................................................. 1,100 -- 1,100
Other operating..................................................................... 43,673 500 44,173
Total other expenses............................................................. 147,287 2,210 149,497
Income before income taxes............................................................ 75,954 1,309 77,263
Income taxes.......................................................................... 30,843 506 31,349
NET INCOME............................................................................ $ 45,111 803 45,914
NET INCOME PER SHARE:
Primary............................................................................. $ 2.94 .76 2.91
Fully diluted....................................................................... 2.94 .70 2.90
WEIGHTED AVERAGE SHARES OUTSTANDING:
Primary............................................................................. 15,354,319 1,050,534 15,785,038(2)
Fully diluted....................................................................... 15,354,319 1,267,064 15,873,815(2)
</TABLE>

(1) No pro forma adjustments are reflected in the Pro Forma Combined Condensed
Statements of Income.

(2) Based on the Exchange Ratio of .41 for conversion of Salem Stock into CCBF
Stock.

<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 1993
(UNAUDITED)

<TABLE>
<CAPTION>
CCBF
PRO FORMA
CCBF SALEM COMBINED (1)
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
INTEREST INCOME
Loans and leases.................................................................... $196,588 3,872 200,460
Investment securities............................................................... 53,011 319 53,330
Other............................................................................... 5,313 266 5,579
Total interest income............................................................ 254,912 4,457 259,369
INTEREST EXPENSE
Deposits............................................................................ 97,194 2,200 99,394
Long-term debt and other borrowings................................................. 4,762 107 4,869
Total interest expense........................................................... 101,956 2,307 104,263
Net interest income................................................................... 152,956 2,150 155,106
Provision for loan and lease losses................................................... 7,106 -- 7,106
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES......................... 145,850 2,150 148,000
OTHER INCOME
Service charges on deposit accounts................................................. 23,184 95 23,279
Non-deposit fees and commissions.................................................... 16,143 131 16,274
Other............................................................................... 7,290 208 7,498
Investment securities gains, net.................................................... 2,962 -- 2,962
Total other income............................................................... 49,579 434 50,013
OTHER EXPENSES
Personnel........................................................................... 66,718 1,034 67,752
Net occupancy and equipment......................................................... 20,034 182 20,216
Deposit and other insurance......................................................... 7,300 171 7,471
Other operating..................................................................... 35,400 489 35,889
Total other expenses............................................................. 129,452 1,876 131,328
Income before income taxes and cumulative changes in accounting principles............ 65,977 708 66,685
Income taxes.......................................................................... 21,913 250 22,163
INCOME BEFORE CUMULATIVE CHANGES IN ACCOUNTING PRINCIPLES (2)......................... $ 44,064 458 44,522
INCOME BEFORE CUMULATIVE CHANGES IN ACCOUNTING PRINCIPLE PER SHARE (2):
Primary............................................................................. $ 3.10 .44 3.04
Fully diluted....................................................................... 3.05 .42 2.94
WEIGHTED AVERAGE SHARES OUTSTANDING
Primary............................................................................. 14,230,099 1,049,896 14,660,556(3)
Fully diluted....................................................................... 14,611,692 1,236,647 15,118,717(3)
</TABLE>

(1) No pro forma adjustments are reflected in the Pro Forma Combined Condensed
Statements of Income.

(2) Income before cumulative changes in accounting principles and primary and
fully diluted income per share before cumulative changes in accounting
principles do not include the cumulative effect of changes in accounting
principles resulting from the adoption by CCBF on January 1, 1993 of SFAS
106 and SFAS 109. The impact of adoption of SFAS 106 and SFAS 109 on net
income, primary net income per share and fully diluted net income per share
was a net charge of $1,371,000, $(.10) and $(.09), respectively.

(3) Based on the Exchange Ratio of .41 for conversion of Salem Stock into CCBF
Stock.

<PAGE>
PRO FORMA CAPITALIZATION

The following table sets forth: (i) the unaudited historical capitalization
of CCBF as of June 30, 1996; (ii) the unaudited historical capitalization of
Salem as of June 30, 1996; and (iii) the unaudited pro forma capitalization of
CCBF and Salem assuming the Merger had been consummated on June 30, 1996. This
financial information has been based on, and should be read in conjunction with,
CCBF's unaudited financial statements, including the related notes thereto,
which are incorporated by reference in this Prospectus/Proxy Statement (see
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE"), and Salem's interim
unaudited financial statements, including the related notes thereto, which are
attached hereto and incorporated herein by reference.

<TABLE>
<CAPTION>
PRO FORMA
CCBF SALEM COMBINED
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
LONG-TERM DEBT
CCBF:
Advances from Federal Home Loan Bank with varying maturities to 2016 with rates
from 3.0% to 9.25% (1)........................................................... $ 28,122 28,122
6 3/4% subordinated notes due 2003................................................ 32,985 32,985
Other long-term debt.............................................................. 136 136
Salem................................................................................ --
Total long-term debt............................................................ 61,243 -- 61,243
SHAREHOLDERS' EQUITY
CCBF:
Serial preferred stock. Authorized 5,000,000 shares; none issued.................. -- --
Common stock, $5 par value; 50,000,000 shares authorized; 15,051,625 shares issued
and 15,806,530 pro forma combined issued, respectively (2)....................... 75,258 79,033
Additional paid-in capital........................................................ 90,174 99,065
Retained earnings (3)............................................................. 285,922 289,939
Plus: Unrealized gain on investment securities available for sale................. 1,166 1,166
Less: Unearned common stock held by management recognition plans.................. (1,246) (1,246)
Salem:
Preferred stock, $25.00 par value; 60,000 shares authorized; none issued.......... --
Common stock, $2.50 par value; 5,000,000 shares authorized,
1,841,232 issued................................................................ 4,603
Additional paid-in capital........................................................ 8,063
Retained earnings................................................................. 4,017
Total shareholders' equity...................................................... 451,274 16,683 467,957
Total long-term debt and shareholders' equity................................... $512,517 16,683 529,200
</TABLE>

(1) These obligations are direct obligations of subsidiaries of CCBF and, as
such, constitute claims against such subsidiaries prior to CCBF's equity
interest therein.

(2) Based on the Exchange Ratio of .41 for conversion of Salem Stock into CCBF
Stock.

(3) The pro forma combined retained earnings do not reflect any Merger-related
expenses which may be recognized or cost savings from operating efficiencies
which may be realized in connection with the Merger.

<PAGE>
CCB FINANCIAL CORPORATION

GENERAL

CCBF is a North Carolina business corporation organized in 1982 and
registered as a bank holding company with the Federal Reserve under the BHCA and
the bank holding company laws of North Carolina. CCBF's principal business is
providing banking and other financial services through its banking subsidiaries.
CCBF's principal offices are located at 111 Corcoran Street, Durham, North
Carolina.

Through its subsidiaries, CCBF offers numerous banking services consistent
with the needs and conveniences of the areas that it serves. These services
include accepting time and demand deposits, making secured and unsecured loans,
renting safe deposit boxes, sending and receiving wire transfers, performing
trust functions for corporations, pension trusts, and individuals, and providing
certain insurance and securities brokerage services. In addition, it provides
advisory services to individuals, institutions and corporations regarding
financial matters.

Vigorous competition exists in all major areas where CCBF is presently
engaged in business. Its financial institution subsidiaries compete not only
with other major commercial banks, but also with diversified and other financial
institutions such as thrift institutions, money market and other mutual funds,
mortgage companies, leasing companies, finance companies and a variety of
financial services and advisory companies. CCBF has primarily focused its
business and strategy on meeting this competition and the commercial banking
needs of its retail and commercial customers through its branch network.

For additional information about CCBF and its business operations,
reference should be made to CCBF's Annual Report on Form 10-K for the year ended
December 31, 1995 and the other documents incorporated by reference herein. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE".

SUBSIDIARIES

CCBF's wholly-owned subsidiaries include the following:

(i) CCB Bank, a North Carolina commercial bank headquartered in Durham,
North Carolina, and which operates 154 banking offices in 26 counties, primarily
in the Piedmont region of North Carolina;

(ii) Graham Savings, a North Carolina savings bank headquartered in
Graham, North Carolina, which operates two banking offices in Alamance County,
North Carolina and which it is currently anticipated will be merged into CCB
Bank on or about October 4, 1996; and

(iii) CCB-Georgia, a Georgia credit card bank headquartered in Columbus,
Georgia.

Additionally, CCB Bank has three wholly-owned subsidiaries: CCB Investment
and Insurance Service Corporation, CCBDE, Inc., and Southland Associates, Inc.

BENEFICIAL OWNERSHIP OF CCBF STOCK

Set forth below is information regarding the only person or entity known to
management of CCBF to beneficially own more than 5% of the issued and
outstanding shares of CCBF Stock as of June 30, 1996.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS BENEFICIAL OWNERSHIP OF CLASS (1)
<S> <C> <C>
Central Carolina Bank and Trust Company
111 Corcoran Street
Post Office Box 931
Durham, North Carolina 27702-0931.......................................................... 925,710(2) 6.15%
</TABLE>

(1) The calculation of the percentage of CCBF Stock beneficially owned is based
on the 15,051,625 shares of CCBF Stock issued and outstanding on June 30,
1996.

(2) Shares beneficially owned by CCB Bank are held through its Trust Department
in various fiduciary capacities. In addition to the shares reflected above,
CCB Bank holds certain other shares in various fiduciary capacities as to
which CCB Bank disclaims beneficial ownership. The aggregate number of
shares of CCBF Stock held by CCB Bank includes 794,731 shares over which it
exercises sole voting power, 51,886 shares over which it has shared voting
power, 34,493 shares over which it has sole investment power, and 270,785
shares over which it has shared investment power.

<PAGE>
Set forth below is information as of June 30, 1996 regarding the beneficial
ownership of CCBF Stock by CCBF's current directors and its executive officers
individually, and by all directors and executive officers of CCBF as a group.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
PERCENTAGE OF PERCENTAGE OF
NAME BENEFICIAL OWNERSHIP (1) CLASS (2)
<S> <C> <C>
John M. Barnhardt...................................................................... 8,777(3) 0.06%
J. Harper Beall, III................................................................... 15,339(4) 0.10
James B. Brame, Jr..................................................................... 3,057 0.02
Timothy B. Burnett..................................................................... 1,662 0.01
W. L. Burns, Jr........................................................................ 141,510(5) 0.94
Edward S. Holmes....................................................................... 4,320(6) 0.03
Bonnie McElveen-Hunter................................................................. 2,184 0.01
David B. Jordan........................................................................ 42,364(7) 0.28
Owen G. Kenan.......................................................................... 3,730(8) 0.03
Eugene J. McDonald..................................................................... 2,011(9) 0.01
Hamilton W. McKay, Jr., M.D............................................................ 7,243(10) 0.05
George J. Morrow....................................................................... 500 *
Eric B. Munson......................................................................... 702 *
Ernest C. Roessler..................................................................... 19,364(11) 0.13
Miles J. Smith, Jr..................................................................... 67,615(12) 0.45
Jimmy K. Stegall....................................................................... 29,689(13) 0.20
H. Allen Tate, Jr...................................................................... 10,830(14) 0.07
James L. Williamson.................................................................... 4,044 0.03
Dr. Phail Wynn, Jr..................................................................... 1,202 0.01
J. Scott Edwards....................................................................... 22,012(15) 0.15
Richard L. Furr........................................................................ 19,530(16) 0.13
All current directors and executive
officers as a group (21 persons)..................................................... 407,685(17) 2.71
</TABLE>

(1) Except as otherwise noted, each individual exercises sole voting and
investment power with respect to all shares shown as beneficially owned.

(2) An asterisk (*) indicates less than .01%. The calculations of the
percentage of class beneficially owned by each individual and the group as
a whole are based, in each case, on the 15,051,625 shares of CCBF Stock
issued and outstanding at June 30, 1996 plus the number of shares capable
of being issued to that individual (if any) and to the group, respectively,
as a whole within 60 days upon the exercise of stock options held by each
of them (if any) and by the group, respectively.

(3) Includes 976 shares held by a company Mr. Barnhardt controls and 1,963
shares with respect to which he exercises shared voting and investment
power.

(4) Includes 2,880 shares with respect to which Mr. Beall exercises sole voting
power only and 4,321 shares which he could purchase under a presently
exercisable option and as to which he is considered to have sole investment
power only.

(5) Includes 34,884 shares with respect to which Mr. Burns exercises shared
voting and investment power and 4,000 shares with respect to which he
exercises sole voting power only.

(6) Does not include 21,648 shares held by Mr. Holmes' spouse and with respect
to which he disclaims any beneficial ownership.

(7) Includes 2,240 shares with respect to which Mr. Jordan exercises shared
voting and investment power.

(8) Includes 3,530 shares with respect to which Mr. Kenan exercises shared
voting and investment power.

(9) Includes 1,902 shares with respect to which Mr. McDonald exercises shared
voting and investment power.

(10) Does not include 1,256 shares held by Dr. McKay's spouse and son and with
respect to which he disclaims any beneficial ownership.

<PAGE>
(11) Includes 3,247 shares with respect to which Mr. Roessler exercises shared
voting and investment power, and 3,403 shares which he could purchase under
a presently exercisable option and as to which he is considered to have
sole investment power only.

(12) Includes 4,813 shares with respect to which Mr. Smith exercises shared
voting and investment power.

(13) Includes 4,238 shares with respect to which Mr. Stegall exercises shared
voting and investment power.

(14) Includes 108 shares with respect to which Mr. Tate exercises shared voting
and investment power. Does not include a total of 8,068 shares held by or
for Mr. Tate's spouse, mother and children and with respect to which he
disclaims any beneficial ownership.

(15) Includes 1,156 shares with respect to which Mr. Edwards could purchase
under a presently exercisable option and as to which he is considered to
have sole investment power only.

(16) Includes 4,097 shares with respect to which Mr. Furr exercises shared
voting and investment power and 2,367 shares which he could purchase under
a presently exercisable option and as to which he is considered to have
sole investment power only.

(17) Includes an aggregate of 327,060 shares with respect to which the directors
and listed executive officers exercise sole voting and investment power,
62,498 shares with respect to which they have shared voting and investment
power, and 6,880 shares with respect to which they have sole voting power
only and 11,247 shares which such persons could purchase under presently
exercisable options and as to which they have sole investment power only.

MANAGEMENT AND ADDITIONAL INFORMATION

Certain information relating to CCBF's directors and executive officers,
executive and director compensation and compensation plans, certain
relationships and related transactions and other related matters as to CCBF is
incorporated by reference or set forth in CCBF's Annual Report on Form 10-K for
the year ended December 31, 1995 which is incorporated herein by reference.
Shareholders of Salem desiring a copy of that document may contact CCBF at its
address or phone number listed elsewhere in this Prospectus/Proxy Statement
under the heading "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE".

SALEM TRUST BANK

DESCRIPTION OF BUSINESS

Salem is a state-chartered financial institution that is engaged in general
commercial and retail banking in Forsyth and New Hanover Counties, North
Carolina. Salem operates a single office in each of Winston-Salem and
Wilmington, North Carolina.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The following discussion is intended to complement Salem's unaudited
financial statements as of June 30, 1996 and 1995 and its audited financial
statements as of December 31, 1995 and 1994 and for the three-years ended
December 31, 1995 and should be read in conjunction therewith.

RESULTS OF OPERATIONS AND FINANCIAL CONDITION

NET INCOME. Net income for the six months ended June 30, 1996 totaled
$908,000, a $516,000 increase over the same period in 1995. The increase was due
primarily to a higher volume of loans. Primary earnings per share for the six
months ended June 30, 1996 amounted to $.54 compared to $.34 for the comparable
period in 1995. Fully diluted earnings per share for the same periods were $.51
and $.32, respectively. Return on assets equaled 1.17% for the 1996 period
compared to .83% for 1995. Return on average stockholders equity was 12.31% for
the first six months of 1996 and 8.91% for the same period in 1995.

Net income for the year ended December 31, 1995 was $1 million which
represented a 30.1% increase over net income of $803,000 for 1994. Despite this
increase, primary earnings per share declined $.04 from the $.76 earned in 1994
due to the higher number of average shares outstanding during 1995. The
increased average shares outstanding resulted from Salem's 1995 secondary stock
offering which increased average shares outstanding by 37.8% from year end 1994
to year end 1995.

Net income for 1994 increased 75.5% from $458,000 in 1993 to $803,000 in
1994. Primary earnings per share increased $.32 to $.76 per share for the year
ended December 31, 1994. Fully diluted earnings per share totaled $.70 compared
to $.42

<PAGE>
in 1993. Return on average assets and average stockholders equity was .96% and
11.11%, respectively, for 1994 compared to .57% and 6.92%, respectively, for
1993.

INTEREST-EARNING ASSETS. Salem's financial condition and results of
operations can be analyzed in part by reviewing the changes and trends in its
interest-earning assets and interest-bearing liabilities. Table 1 sets forth
average balance sheets and net interest income analyses for the six-month
periods ended June 30, 1996 and 1995 and Table 3 reflects the same information
for the three-year period ended December 31, 1995.

TABLE 1
AVERAGE BALANCES AND NET INTEREST INCOME ANALYSIS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(TAXABLE EQUIVALENT BASIS -- IN THOUSANDS) (1)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
1996 1995

INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS:
Loans (2)....................................................... $111,453 5,111 9.22% 76,475 3,644 9.61
U.S. Treasury and U.S. Government agencies and corporations..... 16,398 489 6.00 3,443 97 5.68
States and political subdivisions............................... 1,211 30 4.98 124 3 4.88
Equity and other securities..................................... 390 9 4.64 284 11 7.81
Other earning assets............................................ 20,792 548 5.30 7,689 251 6.58
Total earning assets............................................ 150,244 6,187 8.28% 88,015 4,006 9.18
NON-EARNING ASSETS:
Cash and due from banks......................................... 4,499 3,503
Premises and equipment.......................................... 1,884 1,741
All other assets, net........................................... (271) 1,692
Total assets.................................................... $156,356 94,951
INTEREST-BEARING LIABILITIES:
Savings and time deposits....................................... $127,494 3,071 4.84% 73,645 1,722 4.72
Other borrowed funds............................................ 1,377 41 5.98 4,219 64 3.06
Total interest-bearing liabilities.............................. 128,871 3,112 4.86 77,864 1,786 4.63
OTHER LIABILITIES AND SHAREHOLDERS' EQUITY:
Demand deposits................................................. 10,991 7,341
Other liabilities............................................... 1,660 870
Shareholders' equity............................................ 14,834 8,876
Total liabilities and shareholders' equity...................... $156,356 94,951
NET INTEREST INCOME AND NET INTEREST MARGIN (3)................. $3,075 4.12% 2,220 5.09
INTEREST RATE SPREAD (4)........................................ 3.42% 4.55
</TABLE>

(1) The taxable equivalent basis is computed using 35% federal and 7.75% state
tax rates where applicable.

(2) The average loan balances include nonaccruing loans. Loan fees of $126,000
and $89,000 for the six months ended June 30, 1996 and 1995, respectively,
are included in interest income.

(3) Net interest margin is computed by dividing net interest income by total
earning assets.

(4) Interest rate spread equals the earning asset yield minus the
interest-bearing liability rate.

As shown in Table 1, average earning assets at June 30, 1996 grew $62.2
million (or 71%) from the June 30, 1995 level. Average loan growth during this
period of $35 million was due to increased loan demand from the Wilmington
office which opened in the first quarter of 1995.

<PAGE>
Table 2 presents Salem's outstanding loans by category as of June 30, 1996
and 1995 and for each of the past five years:

TABLE 2
LOANS
(IN THOUSANDS)

<TABLE>
<CAPTION>
AS OF JUNE 30 AS OF DECEMBER 31
<S> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1995 1994 1993 1992 1991
Commercial, financial and agricultural............. $ 17,881 15,745 18,307 9,879 9,765 9,395 16,758
Real estate -- construction........................ 18,120 7,476 12,253 4,259 2,040 3,035 2,820
Real estate -- mortgage............................ 73,194 64,804 71,297 48,765 43,965 41,309 34,186
Installment loans to individuals................... 3,853 3,303 3,736 3,512 3,940 4,216 5,029
Credit card receivables............................ 655 570 638 551 737 545 420
Total loans and lease financing.................... $113,703 91,898 106,231 66,966 60,447 58,500 59,213
</TABLE>

Despite increases in average loans, loans as a percentage of total average
interest-earning assets fell from 87% for the six months ended June 30, 1995 to
74% for the same period in 1996. The shift from loans to lower-yielding
investment securities and other interest-earning assets was a result of
management s decision to improve Salem's overall liquidity position. The mix of
average interest-earning assets also shifted during 1995. Average loans
outstanding comprised 81% of average earning assets for 1995 compared to 79% for
1994. This shift occurred due to strong loan demand.

As shown in Table 3, average earning assets for the year ended December 31,
1995 grew $30 million over the level for the prior year, with average loan
growth comprising $26.3 million of the increase. Most of this growth resulted
from the opening of the Wilmington office. The higher loan levels were funded
primarily by increases in savings and time deposits.

TABLE 3
AVERAGE BALANCES AND NET INTEREST INCOME ANALYSIS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(TAXABLE EQUIVALENT BASIS -- IN THOUSANDS) (1)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1995 1994 1993

INTEREST AVERAGE INTEREST AVERAGE INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EARNING ASSETS:
Loans (2)....................................... $ 87,414 8,145 9.32% 61,111 4,620 7.56 59,388 3,872
U.S. Treasury and U.S. Government agencies and
corporations.................................. 4,215 241 5.72 5,800 259 4.47 5,655 239
States and political subdivisions............... 74 5 6.76 313 16 5.11 377 13
Equity and other securities..................... 458 31 6.77 1,077 62 5.76 995 90
Other earning assets............................ 15,589 925 5.93 9,511 380 4.00 10,024 266
Total earning assets............................ 107,750 9,347 8.67% 77,812 5,337 6.86 76,439 4,480
NON-EARNING ASSETS:
Cash and due from banks......................... 3,736 2,349 2,478
Premises and equipment.......................... 1,809 1,741 1,735
All other assets, net........................... 586 1,579 232
Total assets.................................... $113,881 83,481 80,884
INTEREST-BEARING LIABILITIES:
Savings and time deposits....................... $ 89,860 4,437 4.94% 65,025 2,267 3.49 65,424 2,199
Other borrowed funds............................ 3,195 134 4.19 4,015 130 3.24 2,039 107
Total interest-bearing liabilities.............. 93,055 4,571 4.91% 69,040 2,397 3.47 67,463 2,306
OTHER LIABILITIES AND SHAREHOLDERS' EQUITY:
Demand deposits................................. 8,554 6,530 6,202
Other liabilities............................... 1,168 685 601
Shareholders' equity............................ 11,104 7,226 6,618
Total liabilities and shareholders' equity...... $113,881 83,481 80,884
NET INTEREST INCOME AND NET INTEREST MARGIN
(3)........................................... $4,776 4.43% 2,940 3.78 2,174
Interest rate spread (4)........................ 3.76% 3.39

<CAPTION>
AVERAGE
YIELD/
RATE
<S> <C>
EARNING ASSETS:
Loans (2)....................................... 6.52
U.S. Treasury and U.S. Government agencies and
corporations.................................. 4.23
States and political subdivisions............... 3.45
Equity and other securities..................... 9.05
Other earning assets............................ 2.65
Total earning assets............................ 5.86
NON-EARNING ASSETS:
Cash and due from banks.........................
Premises and equipment..........................
All other assets, net...........................
Total assets....................................
INTEREST-BEARING LIABILITIES:
Savings and time deposits....................... 3.36
Other borrowed funds............................ 5.25
Total interest-bearing liabilities.............. 3.42
OTHER LIABILITIES AND SHAREHOLDERS' EQUITY:
Demand deposits.................................
Other liabilities...............................
Shareholders' equity............................
Total liabilities and shareholders' equity......
NET INTEREST INCOME AND NET INTEREST MARGIN
(3)........................................... 2.84
Interest rate spread (4)........................ 2.44
</TABLE>

<PAGE>
(1) The taxable equivalent basis is computed using 35% federal and 7.75% state
tax rates where applicable.

(2) The average loan balances include nonaccruing loans. Loan fees of $194,000,
$88,000 and $76,000 for the years ended December 31, 1995, 1994, and 1993,
respectively, are included in interest income.

(3) Net interest margin is computed by dividing net interest income by total
earning assets.

(4) Interest rate spread equals the earning asset yield minus the
interest-bearing liability rate.

Salem's investment securities portfolio is comprised primarily of U. S.
Government and state, county and municipal obligations. The portfolio can be
segregated into three possible categories: available for sale, held to maturity
and held for trading. Salem categorizes the majority of its investment
securities as held to maturity. Salem has never held any investments for
trading. Table 4 sets forth detailed schedules of investment securities as of
June 30, 1996 and 1995 and as of December 31 for the three-year period ended
December 31, 1995. As of June 30, 1996 and December 31, 1995, the carrying value
of Salem's investments held to maturity exceeded their market value by $73,000
and $14,000, respectively.

<PAGE>
TABLE 4
INVESTMENT SECURITIES PORTFOLIO
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF JUNE 30 AS OF DECEMBER 31
1996 1995 1995 1994 1993

AMORTIZED CARRYING AMORTIZED CARRYING AMORTIZED CARRYING AMORTIZED CARRYING AMORTIZED
COST VALUE COST VALUE COST VALUE COST VALUE COST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR
SALE
States and political
subdivisions............ $ 2,000 2,000 -- -- -- -- -- -- --
Equity securities......... 462 462 295 295 295 295 269 269 --
Total securities
available
for sale............ $ 2,462 2,462 295 295 295 295 269 269 --
Maturity and Yield
Schedule as of June 30,
1996

CARRYING
VALUE
<S> <C>
SECURITIES AVAILABLE FOR
SALE
States and political
subdivisions............ --
Equity securities......... --
Total securities
available
for sale............ --
Maturity and Yield
Schedule as of June 30,
1996
</TABLE>

<TABLE>
<CAPTION>
WEIGHTED
CARRYING AVERAGE
VALUE YIELD
<S> <C> <C>
States and political
subdivisions:
Within 1 year........... $ 2,000 5.25%
Equity securities......... 462 5.50
Total securities
available
for sale............ $ 2,462 5.30%
</TABLE>

AS OF JUNE 30 AS OF DECEMBER 31
1996 1995 1995 1994 1993
CARRYING MARKET CARRYING MARKET CARRYING MARKET CARRYING MARKET CARRYING
VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SECURITIES HELD TO
MATURITY
U.S. Treasury............. $ 7,949 7,915 1,477 1,481 500 503 1,476 1,466 1,482
U.S. Governmental agencies
and corporations........ 8,694 8,654 1,482 1,489 16,650 16,632 2,975 2,941 3,982
States and political
subdivisions............ 24 25 24 25 24 25 500 498 --
Corporate debt and other
securities.............. -- -- -- -- -- -- -- -- 2,821
Total securities held
to
maturity............ $16,667 16,594 2,983 2,995 17,174 17,160 4,951 4,905 8,285
Maturity and Yield
Schedule as of June 30,
1996

<CAPTION>
MARKET
VALUE
<S> <C>
SECURITIES HELD TO
MATURITY
U.S. Treasury............. 1,480
U.S. Governmental agencies
and corporations........ 3,988
States and political
subdivisions............ --
Corporate debt and other
securities.............. 2,801
Total securities held
to
maturity............ 8,269
Maturity and Yield
Schedule as of June 30,
1996
</TABLE>

<TABLE>
<CAPTION>
WEIGHTED
CARRYING AVERAGE
VALUE YIELD
<S> <C> <C>
U.S. Treasury:
Within 1 year........... $ 2,522 5.63%
After 1 but within 5
years................... 5,427 5.78
Total U.S. Treasury... 7,949 5.73
U.S. Governmental agencies
and corporations:
Within 1 year........... 6,699 5.30
After 1 but within 5
years................... 1,995 6.39
Total U.S. Govenmental
agencies and
corporations........ 8,694 5.55
States and political
subdivisions:
After 1 but within 5
years................... 24 5.26
Total securities held
to
maturity............ $16,667 5.61%
</TABLE>

<PAGE>
INTEREST-BEARING LIABILITIES. Interest-bearing liabilities, Salem's primary
source of funding, are mainly comprised of savings and time deposits. Table 5
provides a summary of average total deposits and average rates paid thereon as
of June 30, 1996 and 1995 and for the three-year period ended December 31, 1995.
Demand deposits comprise approximately 10% of total deposits and serve as an
interest-free funding source for interest-earning assets. Included within
savings and time deposits are higher-costing deposits in denominations greater
than $100,000. For the six months ended June 30, 1996 and year ended December
31, 1995, average deposits greater than $100,000 amounted to $54.5 million and
$48.8 million, respectively.

TABLE 5
AVERAGE TOTAL DEPOSITS AND RATES
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30 YEARS ENDED DECEMBER 31
1996 1995 1995 1994 1993

BALANCE RATE BALANCE RATE BALANCE RATE BALANCE RATE BALANCE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Savings and time deposits:
Savings and NOW accounts................. $ 10,814 1.71% 8,029 2.08 8,638 2.06 7,298 1.99 6,087
Money market accounts.................... 29,926 3.93 18,215 3.52 20,538 3.66 19,459 2.72 20,386
Time deposits............................ 86,754 5.55 47,401 5.62 60,684 5.78 38,268 4.16 38,951
Total savings and time deposits.......... 127,494 4.84% 73,645 4.71 89,860 4.94 65,025 3.49 65,424
Demand deposits.......................... 10,991 7,341 8,554 6,530 6,202
Total deposits........................... $138,485 80,986 98,414 71,555 71,626

<CAPTION>
RATE
<S> <C>
Savings and time deposits:
Savings and NOW accounts................. 2.14
Money market accounts.................... 2.60
Time deposits............................ 3.95
Total savings and time deposits.......... 3.36
Demand deposits..........................
Total deposits...........................
</TABLE>

Salem's convertible subordinated notes are included within other borrowed
funds in Table 1 and Table 2. The notes, which bore interest at 6%, were called
in May 1996 and averaged $1.4 million in the six months ended June 30, 1996 and
$2.1 million for the same period in 1995. No convertible subordinated notes were
outstanding at June 30, 1996.

NET INTEREST INCOME. Net interest income, which is Salem's principal source
of earnings, has increased steadily over the past three years in conjunction
with its balance sheet growth. Tables 1, 2 and 6 present information about net
interest income earned and the effects of changes in rate and volume thereon.

As shown in Table 6, decreases in rates earned on interest-earning assets
during the six-month period in 1996 ($579,000) were more than offset by
increases in interest income due to higher volume ($2.8 million). However, due
to the previously discussed shift in the mix of interest-earning assets and the
changes in rates earned, the yield on interest-earning assets fell from 9.18% in
1995 to 8.28% in 1996. Interest expense was impacted by the higher rates paid on
savings and time deposits and by the higher volume of accounts. The rate paid on
other borrowed funds remained relatively constant from June 30, 1995 to June 30,
1996 with increases in volume being largely offset by decreases in rate paid. As
a result of these factors, the rate paid on interest-bearing liabilities rose
from 4.63% for the six-month period ended June 30, 1995 to 4.86% for 1996.
Consequently, the net interest margin on a taxable equivalent basis fell from
5.09% for 1995 to 4.12% for 1996 and the interest rate spread tightened from
4.55% to 3.42% for the same periods.

<PAGE>
TABLE 6
VOLUME AND RATE VARIANCE ANALYSIS
(TAXABLE EQUIVALENT BASIS -- IN THOUSANDS) (1)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
SIX MONTHS ENDED JUNE 30, 1996 1995 1994

VOLUME RATE TOTAL VOLUME RATE TOTAL VOLUME
VARIANCE (2) VARIANCE (2) VARIANCE VARIANCE (2) VARIANCE (2) VARIANCE VARIANCE (2)
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans...................... $1,895 (428) 1,467 2,283 1,242 3,525 119
U.S. Treasury and U.S.
Government agencies and
corporations............... 386 6 392 (81) 63 (18) 6
States and political
subdivisions............... 27 0 27 (15) 4 (11) (2)
Equity and other
securities................. 8 (10) (2) (40) 9 (31) 7
Other earning assets....... 444 (147) 297 314 231 545 (16)
Total interest income.... 2,760 (579) 2,181 2,461 1,549 4,010 114
INTEREST EXPENSE:
Savings and time
deposits................... 1,296 53 1,349 1,038 1,132 2,170 (14)
Other borrowed funds....... (112) 89 (23) (30) 34 4 75
Total interest expense... 1,184 142 1,326 1,008 1,166 2,174 61
INCREASE (DECREASE) IN NET
INTEREST INCOME.......... $1,576 (721) 855 1,453 383 1,836 53

<CAPTION>
1994
RATE TOTAL
VARIANCE (2) VARIANCE
<S> <C> <C>
INTEREST INCOME:
Loans...................... 629 748
U.S. Treasury and U.S.
Government agencies and
corporations............... 14 20
States and political
subdivisions............... 5 3
Equity and other
securities................. (35) (28)
Other earning assets....... 130 114
Total interest income.... 743 857
INTEREST EXPENSE:
Savings and time
deposits................... 82 68
Other borrowed funds....... (52) 23
Total interest expense... 30 91
INCREASE (DECREASE) IN NET
INTEREST INCOME.......... 713 766
</TABLE>

(1) The taxable equivalent basis is computed using 35% federal and 7.75% state
tax rates where applicable.

(2) The rate /volume variance for each category has been allocated on a
consistent basis between rate and volume variances based on the percentage
of the rate or volume variance to the sum of the absolute value of the two
variances.

For the year ended December 31, 1995, average yields on earning assets
increased significantly from those earned in 1994. Loan yields increased from
7.56% in 1994 to 9.32% in 1995 due to a higher volume of loans earning higher
rates. Increases in volume accounted for two-thirds of the increase in loan
interest income as reflected in Table 6. Rates paid on savings and time deposits
increased from 3.49% for 1994 to 4.94% for 1995 due to increased volume and
increased rate. A new time deposit product offered in the Wilmington market
caused the cost of interest-bearing deposits to go up 50 to 60 basis points but
brought in significant amounts of deposits. The combination of these factors
resulted in the net interest margin rising 65 basis points to 4.43% and the
interest rate spread growing 37 basis points during 1995.

OTHER INCOME AND EXPENSES. Other income rose $307,000 in the six months
ended June 30, 1996 from the $315,000 earned in the 1995 period. Service charges
on deposit accounts rose to $69,000 from 1995 s $31,000 due to the previously
discussed increased deposit volume. Income from trust activities increased
$87,000 from 1995 due to the higher level of assets managed. Salem's trust
operations provide investment management services to individuals and companies
and operational services to institutional clients. Salem's investment operations
provide discount brokerage services to individuals and institutional clients.
Fees from investment operations decreased $7,000 to $59,000 due to decreased
trading volumes. Salem's mortgage operations generate income through the sale of
mortgage loans that are originated by Salem or are purchased by it for resale.
All purchased loans are presold to secondary market investors prior to their
purchase by Salem. Income from the mortgage operation increased $102,000 to
$180,000 for the six months ended June 30, 1996.

Other expenses, comprised primarily of personnel expenses, increased
$415,000 from 1995's level to $2 million for the six months ended June 30, 1996.
Personnel expense increased $267,000 due in part to the Wilmington branch being
open only four months during the six months ended June 30, 1995 but all of the
six month period ended June 30, 1996. Equipment and occupancy expense increased
between the two six-month periods for the same reason. Deposit and other
insurance experienced a significant drop from $101,000 for the six months ended
June 30, 1995 to $17,000 for the same period in 1996 due to a reduction in FDIC
deposit premium rates.

The provision for loan losses fell from $165,000 for the six months ended
June 30, 1995 to $132,000 for the same period in 1996. The decreased provision
was due primarily to the low level of nonperforming assets and nonaccrual loans
as will be discussed below.

<PAGE>
For the year ended December 31, 1995, other income increased $282,000. Of
that increase, $239,000 is due to higher levels of activity in Salem's mortgage,
trust and investment operations. Mortgage operations increased due in part to
the opening of a mortgage origination office in Wilmington and due to improved
overall volumes. As of December 31, 1995, the trust operation managed assets
totaling $195.4 million versus $78.4 million at year end 1994. The investment
operation had assets in brokerage accounts totaling $21.2 million at year end
1995 compared to $26.2 million at year end 1994.

Other expenses increased $1.2 million in 1995 over 1994. The largest
increase was experienced in personnel expense, $750,000, due primarily to the
opening of the Wilmington office during 1995. Net occupancy and equipment also
increased $125,000 for this same reason. FDIC insurance expense fell 48% to
$88,000 for 1995 due to the previously discussed reduction in deposit assessment
rates.

The provision for loan losses totaled $545,000 for 1995 compared to $50,000
for 1994. The increased provision was a result of the dramatic loan growth
experienced in 1995, not from an increase in nonperforming loans.

For the year ended December 31, 1994, other income increased $212,000 over
the prior year's level. The largest increases were experienced in higher levels
of fees earned from the mortgage, trust and investment operations. Assets
managed by trust operations grew from $36.5 million at year end 1993 to $78.4
million at year end 1994. Other expenses increased $333,000 from 1993 to 1994
due primarily to increased personnel expense. Salem made a $50,000 provision for
loan losses in 1994; no provision was deemed necessary in 1993 due to the level
of the allowance for loan losses in comparison to the perceived risks in the
loan portfolio.

Table 7 sets forth certain of Salem's operating efficiency ratios. Salem's
noninterest income as a percentage of average assets has improved steadily over
the prior three years due to the previously discussed increases in fee revenues.
The noninterest expense items as a percentage of average assets for both the six
months ended June 30, 1995 and the year ended December 31, 1995 were adversely
impacted by non-recurring expenses incurred in the March 1995 opening of the
Wilmington office, including overtime paid to employees, marketing expenses and
legal and consulting fees. Except for the ratio for the six months ended June
30, 1995, Salem's operating efficiency ratio (noninterest income as a percentage
of net interest income and other income) has improved steadily from year end
1995 through June 30, 1996.

TABLE 7
OPERATING EFFICIENCY RATIOS (ANNUALIZED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30 YEARS ENDED DECEMBER 31

1996 1995 1995 1994 1993
<S> <C> <C> <C> <C> <C>
As a percentage of average assets:
Noninterest income................................................... .80% .67 .81 .77 .54
Personnel expense.................................................... 1.60 2.10 1.81 1.57 1.28
Occupancy and equipment expense...................................... .28 .38 .31 .27 .23
Other operating expense.............................................. .74 .99 .85 .80 .81
Total noninterest expense............................................ 2.62 3.47 2.97 2.64 2.32
Net overhead (noninterest expense less noninterest income)........... 1.82% 2.80 2.16 1.87 1.78
Noninterest expense as a percentage of net interest income and other
income (1)........................................................... 55.37% 64.38 59.34 61.63 71.93
</TABLE>

(1) The taxable equivalent basis is computed using 35% federal and 7.75% state
tax rates where applicable.

NONPERFORMING LOANS

Nonperforming loans consist of nonaccrual and restructured loans. Risk
assets are comprised of nonperforming loans and accruing loans 90 days or more
past due. As shown in Table 8, Salem has experienced very few instances of non-
performing loans or risk assets over the past five years.

<PAGE>
TABLE 8
NONPERFORMING AND RISK ASSETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
AS OF JUNE 30 AS OF DECEMBER 31

1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Nonaccrual loans......................................... $ -- -- -- 1 -- -- --
Restructured loans....................................... -- 5 -- 6 7 8 8
Total nonperforming assets............................. -- 5 -- 7 7 8 8
Accruing loans 90 days or more past due.................. -- -- -- -- 50 -- --
Total risk assets........................................ $ -- 5 -- 7 57 8 8

Ratio of nonperforming assets to:
Loans outstanding...................................... -- % .01 -- .01 .01 .01 .01
Total assets........................................... -- -- -- .01 .01 .01 .01
Ratio of risk assets to:
Loans outstanding...................................... -- .01 -- .01 .09 .01 .01
Total assets........................................... -- -- -- .01 .06 .01 .01
Allowance for loan losses to risk assets................. -- 184.40 -- 108.14 12.53 89.25 84.25
</TABLE>

ALLOWANCE FOR LOAN LOSSES

Salem's management analyzes the growth and risk characteristics of the loan
portfolio under current and anticipated future economic conditions to evaluate
the adequacy of the allowance for loan losses. The financial condition of the
borrower, value of collateral and general economic projections are among the
factors considered in evaluation of the allowance's adequacy. Management strives
to maintain the allowance at a level sufficient to absorb both potential losses
on identified nonperforming assets as well as projected general losses. The
allowance for loan losses stood at $1.4 million as of June 30, 1996 and $1.3
million as of December 31, 1995. Table 9 summarizes the allowance for loan
losses for the six months ended June 30, 1996 and 1995 and for the prior five
years and Table 10 sets forth the allocation of the allowance for loan losses to
the various types of loans as of June 30, 1996 and 1995 and as of the end of the
year for the prior five years. Management considers the allowance at June 30,
1996 adequate to absorb future losses that relate to loans outstanding as of
that date.

TABLE 9
SUMMARY OF LOAN LOSS EXPERIENCE
AND THE ALLOWANCE FOR LOAN LOSSES
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30 YEARS ENDED DECEMBER 31

1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at beginning of period............................. $ 1,302 757 757 714 714 674 556
Loan losses charged to allowance:
Installment loans to individuals......................... -- -- -- (9) -- -- --
Credit card receivables.................................. -- -- -- (1) -- -- --
Total loan losses charged to allowance................. -- -- -- (10) -- -- --
Recoveries of loans previously charged off:
Installment loans to individuals......................... -- -- -- 3 -- -- --
Net charge-offs............................................ -- -- -- (7) -- -- --
Provision charged to operations............................ 132 165 545 50 -- 40 118
Balance at end of period................................... $ 1,434 922 1,302 757 714 714 674
Loans outstanding at end of period......................... $113,703 91,898 106,231 66,966 60,447 58,500 59,213
Ratio of allowance for loan losses to loans outstanding at
end of period............................................ 1.26% 1.00 1.23 1.13 1.18 1.22 1.14
Average loans outstanding.................................. $111,453 76,475 87,414 61,111 59,388 55,702 46,917
Ratio of net charge-offs of loans to average loans......... --% -- -- 0.01 -- -- --
</TABLE>

<PAGE>

TABLE 10
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES (1)
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF JUNE 30 AS OF DECEMBER 31
1996 1995 1995 1994 1993

% OF % OF % OF % OF
AMOUNT OF LOAN IN AMOUNT OF LOAN IN AMOUNT OF LOAN IN AMOUNT OF LOAN IN AMOUNT OF
ALLOWANCE EACH ALLOWANCE EACH ALLOWANCE EACH ALLOWANCE EACH ALLOWANCE
ALLOCATED CATEGORY ALLOCATED CATEGORY ALLOCATED CATEGORY ALLOCATED CATEGORY ALLOCATED
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural...... $ 359 15.7% 231 17.1 326 17.2 190 14.8 179
Real
estate-construction... 215 15.9 138 8.2 195 11.6 113 6.4 107
Real estate-mortgage.... 215 64.4 138 70.5 195 67.1 113 72.8 107
Installment loans to
individuals........... 359 3.4 231 3.6 326 3.5 189 5.2 179
Credit card
receivables........... 143 .6 92 .6 130 .6 76 .8 71
Unallocated portion of
reserve............... 143 -- 92 -- 130 -- 76 -- 71
Total................... $ 1,434 100.0% 922 100.0 1,302 100.0 757 100.0 714

<CAPTION>
1993 1992 1991
% OF % OF % OF
LOAN IN AMOUNT OF LOAN IN AMOUNT OF LOAN IN
EACH ALLOWANCE EACH ALLOWANCE EACH
CATEGORY ALLOCATED CATEGORY ALLOCATED CATEGORY
<S> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural...... 16.2 179 16.1 169 28.3
Real
estate-construction... 3.4 107 5.2 101 4.8
Real estate-mortgage.... 72.7 107 70.6 101 57.7
Installment loans to
individuals........... 6.5 179 7.2 169 8.5
Credit card
receivables........... 1.2 71 .9 67 .7
Unallocated portion of
reserve............... -- 71 -- 67 --
Total................... 100.0 714 100.0 674 100.0
</TABLE>

(1) The allocation of the allowance for loan losses by loan type is based on
management's on-going evaluation of the adequacy of the allowance for loan
losses as referenced above. Since the factors involved in such an evaluation
are subject to change, the allocation of the allowance to the respective
loan types is not necessarily indicative of future losses in each loan type.
Additionally, no assurances can be made that the allocation shown will be
indicative of future allocations.

<PAGE>
CAPITAL RESOURCES

Prior to 1995, Salem's primary source of equity capital was the retention
of earnings. During May of 1996, Salem's convertible subordinated notes were
called for redemption and substantially all were converted into shares of
Salem's stock which added $2.1 million of equity capital. During 1995, Salem
completed a $5 million secondary stock offering which resulted in the issuance
of 556,000 additional shares of Salem Stock. The net proceeds from the offering
were used primarily for Salem's expansion in the Wilmington market. The majority
of these shares were purchased by residents of the Wilmington market.

Dividends of $.10 and $.08 per share were paid in the six months ended June
30, 1996 and the year ended December 31, 1994, respectively. No dividends were
paid in 1995 or prior to 1994.

Banks are required to comply with the risk-based capital guidelines which
require a minimum ratio of total capital to risk-weighted assets of 8%. At least
half of the total capital is required to be "Tier 1" capital, principally
consisting of common shareholders equity, noncumulative perpetual preferred
stock, and a limited amount of cumulative perpetual preferred stock less certain
goodwill items. The remainder, "Tier 2 capital", may consist of a limited amount
of subordinated debt, certain hybrid capital instruments and other debt
securities, perpetual preferred stock, and a limited amount of the general
reserve for loan and lease losses. In addition to the risk-based capital
guidelines, regulatory agencies have adopted a minimum leverage capital ratio
under which a bank must maintain a minimum level of Tier 1 capital to average
total consolidated assets of at least 3% in the case of a bank which has the
highest regulatory examination rating and is not contemplating significant
growth or expansion. All other banks are expected to maintain a leverage capital
ratio of at least 1% to 2% above the stated minimum. See "SUPERVISION AND
REGULATION -- Regulation of CCB Bank and Salem."

Salem continues to maintain higher capital ratios than required under
regulatory guidelines. Salem's Tier 1 capital, total capital and leverage ratios
are 15.99%, 17.24% and 10.47%, respectively, at June 30, 1996.

LIQUIDITY AND INTEREST-SENSITIVITY

Liquidity is the ability to meet present and future financial obligations,
particularly the funding of loans or withdrawal of deposits. Management ensures
adequate liquidity by maintaining a significant portion of Salem's earning
assets in short-term instruments that are easily convertible to cash and by
monitoring and improving its ability to attract deposits and alternative sources
of funds in the money and capital markets.

Deposits from Salem's customers are its primary source of funding. Core
deposits, defined as deposits less than $100,000, grew 90% from June 30, 1995 to
June 30, 1996. In addition, Salem utilizes deposits greater than $100,000 as a
source of funding. During the six-months ended June 30, 1996, these deposits
averaged from 35% to 40% of total average deposits. Due to the nature of Salem's
business, individual deposit relationships are higher than those at a
traditional commercial bank. Consequently, unlike traditional commercial banks,
Salem considers deposits greater than $100,000 to be relatively stable. At June
30, 1996, time deposits in amounts of $100,000 or more totaled $51.7 million.
The following is a remaining maturity schedule of these deposits (in thousands):

<TABLE>
<CAPTION>
3 OVER 3 OVER 6
MONTHS THROUGH THROUGH
OR LESS 6 MONTHS 12 MONTHS TOTAL
<S> <C> <C> <C> <C>
Jumbo deposits............................... $31,935 18,070 1,708 $ 51,713
</TABLE>

Another source of funding was Salem's convertible subordinated notes until
their call and redemption in May of 1996. In February 1993, Salem issued $2.1
million of these notes bearing interest at 6%. Additional sources of liquidity
are short-term borrowed funds such as federal funds purchased or repurchase
agreements. In addition, Salem has the ability to access a $10 million line of
credit maintained with the Federal Home Loan Bank. Maturities of investment
securities also provide liquidity.

Management is also concerned with managing Salem's balance sheet to
maintain relatively stable net interest margins despite changes in the interest
rate environment. This objective is achieved by balancing the impact of changes
in interest rates on interest-sensitive assets and interest-sensitive
liabilities. Management monitors Salem's interest-sensitivity by means of gap
analyses prepared on a periodic basis. Table 11 sets forth Salem's gap analysis
as of June 30, 1996. In reviewing this gap analysis, it is important to note
that such an analysis represents Salem's sensitivity position as of a point in
time and can be changed significantly by management within a short period of
time.

<PAGE>
TABLE 11
INTEREST-SENSITIVITY ANALYSIS (1)
(IN THOUSANDS)

<TABLE>
<CAPTION>
3 MONTH NON-
3 MONTH TO 1 YEAR TOTAL INTEREST
SENSITIVE SENSITIVE SENSITIVE SENSITIVE TOTAL
<S> <C> <C> <C> <C> <C>
Earning assets:
Federal funds sold and other short-term investments................... $ 17,340 -- 17,340 -- 17,340
Investment securities................................................. 4,962 6,720 11,682 7,447 19,129
Loans................................................................. 104,067 3,066 107,133 6,570 113,703
Total earning assets................................................ 126,369 9,786 136,155 14,017 150,172
Interest-bearing liabilities:
Savings deposits...................................................... 39,013 -- 39,013 -- 39,013
Other time deposits................................................... 42,930 37,502 80,432 2,979 83,411
Total interest-bearing liabilities.................................. 81,943 37,502 119,445 2,979 122,424
Interest-sensitivity gap.............................................. $ 44,426 (27,716) 16,710
Cumulative gap........................................................ $ 44,426 16,710
Cumulative ratio of interest-sensitive assets to interest-sensitive
liabilities......................................................... 1.54x 1.14
Cumulative gap to total earning assets................................ 29.58% 11.13
</TABLE>

(1) Assets and liabilities that mature in one year or less and/or have interest
rates that can be adjusted during this period are considered
interest-sensitive. The interest-sensitivity position has meaning only as of
the date for which it is prepared.

Salem utilizes strategic pricing of asset and liability accounts to control
interest rate volatility. Most of Salem's loans are tied to the prime rate which
would result in greater asset sensitivity. However, most of Salem's deposits
also are of shorter-term and would reprice soon after changes in the prime rate.
While there is some lag before interest-bearing deposits reprice, Salem's
strategy is to match up the repricing periods of their interest-earning assets
and interest-bearing liabilities as much as possible. Table 12 presents a
schedule of loan maturity distribution and interest rate sensitivity at June 30,
1996 and December 31, 1995.

TABLE 12
MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996 AS OF DECEMBER 31, 1995

COMMERCIAL, COMMERCIAL,
FINANCIAL AND REAL ESTATE FINANCIAL AND REAL ESTATE
AGRICULTURAL CONSTRUCTION TOTAL AGRICULTURAL CONSTRUCTION

<S> <C> <C> <C> <C> <C>
Due in one year or less......................... $ 9,656 18,120 27,776 12,631 12,253
Due after one year through five years:
Fixed interest rates.......................... 1,076 -- 1,076 1,025 --
Floating interest rates....................... 6,612 -- 6,612 4,101 --
Due after five years:
Fixed interest rates.......................... 75 -- 75 110 --
Floating interest rates....................... 462 -- 462 440 --
Total........................................... $17,881 18,120 36,001 18,307 12,253

<CAPTION>
<S> <C>
TOTAL
Due in one year or less......................... 24,884
Due after one year through five years:
Fixed interest rates.......................... 1,025
Floating interest rates....................... 4,101
Due after five years:
Fixed interest rates.......................... 110
Floating interest rates....................... 440
Total........................................... 30,560
</TABLE>

Salem does not utilize off-balance sheet or synthetic hedge instruments such as
derivatives to control interest rate volatility.

<PAGE>
ACCOUNTING ISSUES

In March 1995, the FASB issued SFAS No. 121, "Accounting for Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and for those to be disposed of. This statement requires that
long-lived assets and certain intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying value may not be
recoverable. Adoption of SFAS No. 121 is required for fiscal years beginning
after December 15, 1995. Salem adopted this statement on January 1, 1996 without
any impact on its financial statements.

Salem adopted SFAS No. 123, "Accounting for Stock-Based Compensation" on
January 1, 1996. SFAS No. 123 establishes a fair value method of accounting for
such compensation plans. Stock-based compensation plans include all arrangements
by which employees receive shares of stock or other equity instruments of the
employer or in which an entity issues its equity instruments to acquire goods or
services from nonemployees. Under SFAS No. 123, these types of transactions must
be accounted for based on the fair value of the consideration received or the
fair value of the equity instrument issued, whichever is more reliably measured.
While SFAS No. 123 encourages all entities to adopt the fair value method of
accounting, it does allow an entity to continue to measure the compensation cost
of stock compensation plans using the intrinsic value based method of accounting
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB Opinion No. 25"). Most fixed stock option plans (the
most common type of stock compensation plan) have no intrinsic value at grant
date, and under APB Opinion No. 25 no compensation cost is recognized. Entities
electing to continue using the guidance under APB Opinion No. 25 must make pro
forma disclosures of net income and earnings per share as if the fair value
method of accounting prescribed by SFAS No. 123 had been applied. Salem intends
to continue measuring stock compensation expense under APB Opinion No. 25.

In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights, an amendment of Statement No. 65." The statement amends SFAS
No. 65 to require that the rights to service mortgage loans for others, however
those servicing rights are acquired, be recognized as separate assets,
eliminating the previously existing accounting distinction between servicing
rights acquired through purchase transactions and those acquired through loan
originations. SFAS No. 122 is required to be adopted and applied prospectively
for fiscal years beginning after December 15, 1995 to transactions involving the
sale or securitization of mortgage loans with servicing rights retained. Salem
adopted this statement on January 1, 1996 without any impact on its financial
statements.

SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities ("SFAS No. 125 ") was issued in June of 1996.
It provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities using a financial-components
approach that focuses on control of the asset or liability. SFAS No. 125
requires that an entity recognize only assets it controls and liabilities it has
incurred and should derecognize assets only when control has been surrendered
and derecognize liabilities only when they have been extinguished. Adoption of
SFAS No. 125 will impact transactions in which the transferor has some
continuing involvement with the assets transferred or with the transferee
including recourse, servicing, agreements to reacquire and options written or
held. SFAS No. 125 is effective for transfers and servicing of financial assets
and extinguishments of liabilities occurring after December 31, 1996, and is to
be applied prospectively. Earlier or retroactive application of SFAS No. 125 is
not permitted. Salem is in the process of assessing the impact of adopting SFAS
No. 125 but does not believe that it s adoption will have a material impact upon
Salem's financial condition or results of operations.

BENEFICIAL OWNERSHIP OF SALEM STOCK BY MANAGEMENT AND OTHERS

No person or entity is known to the management of Salem to beneficially own
more than 5% of the issued and outstanding shares of Salem Stock as of June 30,
1996.

<PAGE>
Set forth below is information as of June 30, 1996, regarding the
beneficial ownership of Salem Stock by Salem's directors and certain executive
officers individually, and by its directors and executive officers as a group.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENTAGE OF
NAME BENEFICIAL OWNERSHIP (1) CLASS (2)
<S> <C> <C>
John H. Bremer......................................................................... 15,260 .83
William A. Burnette.................................................................... 12,617 .69
Edward K. Crawford..................................................................... 31,360(3) 1.70
James E. Holmes, Jr.................................................................... 3,200(4) .17
Dennis G. Hatchell..................................................................... 1,500 .08
Robert B. Kline........................................................................ 22,822(5) 1.24
Mrs. C. Glenn Sawyer................................................................... 11,100(6) .60
Gordon H.T. Sheeran.................................................................... 44,816(7) 2.42
William A. Simpson..................................................................... 30,500(8) 1.66
G. Dee Smith........................................................................... 30,000 1.63
B. Rex Stephens........................................................................ 25,600(9) 1.39
John B. Talbert, Jr.................................................................... 38,000(10) 2.06
John A. Taylor......................................................................... 62,075(11) 3.37
William S. Green....................................................................... 12,516(12) .68
Norman D. Potter....................................................................... 15,540(13) .84
All directors and executive officers
as a group (16 persons).............................................................. 369,479(14) 19.57
</TABLE>

(1) Except as otherwise noted, each individual exercises sole voting and
investment power with respect to all shares shown as beneficially owned.

(2) The calculations of the percentage of class beneficially owned by each
individual and the group as a whole are based, in each case, on the
1,841,232 shares of Salem Stock issued and outstanding at June 30, 1996
plus the number of shares capable of being issued to that individual (if
any) and to the group, respectively, as a whole within 60 days upon the
exercise of stock options held by each of them (if any) and by the group,
respectively.

(3) Does not include 1,000 shares held by Mr. Crawford's spouse and with
respect to which he disclaims any beneficial ownership.

(4) Does not include 1,000 shares held by Mr. Holmes' spouse and with respect
to which he disclaims any beneficial ownership.

(5) Includes 600 shares which Mr. Kline could purchase under a presently
exercisable Salem Option.

(6) Does not include 5,100 shares held by Mrs. Sawyer's spouse and with respect
to which she disclaims any beneficial ownership.

(7) Does not include 284 shares held by or for Mr. Sheeran's spouse and with
respect to which he disclaims any beneficial ownership, and includes 13,000
shares which Mr. Sheeran could purchase under a presently exercisable Salem
Option.

(8) Does not include 4,500 shares held by Mr. Simpson's spouse and 1,000 shares
held by Mr. Simpson's spouse in a fiduciary capacity, and with respect to
which he disclaims any beneficial ownership, and does include 2,500 shares
as to which Mr. Simpson shares voting and investment power.

(9) Does not include 3,000 shares held by Mr. Stephens' spouse and 4,000 shares
over which his spouse exercises shared voting power in a fiduciary
capacity, and with respect to which he disclaims beneficial ownership, and
does include 600 shares which Mr. Stephens could purchase under a presently
exercisable Salem Option.

(10) Does not include 5,000 shares held by Mr. Talbert's spouse and with respect
to which he disclaims any beneficial ownership and does include 600 shares
which Mr. Talbert could purchase under a presently exercisable Salem
Option.

(11) Does not include 12,500 shares held by Mr. Taylor's spouse, with respect to
which he disclaims any beneficial ownership, and includes 1,800 shares held
by a company which Mr. Taylor controls and as to which he shares voting and
investment power.

(12) Includes 9,550 shares which Mr. Green could purchase under a presently
exercisable Salem Option.

(13) Includes 12,221 shares which Mr. Potter could purchase under a presently
exercisable Salem Option.

<PAGE>
(14) Includes an aggregate of 318,237 shares with respect to which directors and
executive officers exercise sole voting and investment power, 4,521 shares
with respect to which they have shared voting and investment power, and
46,721 shares which such persons could purchase under presently exercisable
options.

SALEM MANAGEMENT AND ADDITIONAL INFORMATION

DIRECTORS AND EXECUTIVE OFFICERS. The following table sets forth certain
information with respect to Salem's directors and executive officers.

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR OR EXECUTIVE
NAME AND AGE AND OTHER DIRECTORSHIPS OFFICER SINCE
<S> <C> <C>
John H. Bremer (64) Owner, J.H. Bremer Insurance 1986
William A. Burnette (56) Owner, W.A. Burnette and Associates 1993
Edward K. Crawford (63) Fund Manager, Atlantic Venture Partners; Chairman and Director,
Doxey Furniture Corp. 1986
Dennis G. Hatchell (47) President and Chief Operating Officer, Alex-Lee, Inc. 1995
James E. Holmes, Jr. (73) Chairman of the Board, Salem Trust Bank; Partner Emeritus, Alex.
Brown & Sons, Inc. 1986
Robert B. Kline (67) Chairman and President, Blair Properties, Inc.; formerly Corporate
Vice President, Owens Corning Fiberglass Corporation 1995
Mrs. C. Glenn Sawyer (71) Former Member of Winston-Salem/Forsyth County School Board 1986
Gordon H.T. Sheeran (46) Vice Chairman, President, and Chief Executive Officer, Salem Trust
Bank 1986
William A. Simpson (54) President and Chief Executive Officer, Republic Mortgage Insurance
Company; Director, Old Republic International, Inc. 1986
G. Dee Smith (66) President and Chief Executive Office, GDS MGMT, Inc.; recently
retired as Chairman of the Board, Paragon Properties, Inc. 1991
B. Rex Stephens (55) Vice President, Landmark Organization, Inc. 1995
John B. Talbert, Jr. (57) Retired President and Chief Executive Officer, Hanes Companies,
Inc. 1986
John A. Taylor (66) Chief Executive Officer, Taylor Oil Company 1995
William S. Green (43) Senior Vice President, Salem Trust Bank 1989
Norman D. Potter (39) Chief Financial Officer and Secretary, Salem Trust Bank 1989
Deborah S. Marshall (46) Senior Vice President, Salem Trust Bank 1987
</TABLE>

MANAGEMENT REMUNERATION

MANAGEMENT CASH REMUNERATION. The following table shows for the years ended
December 31, 1995, 1994 and 1993, the cash and certain other compensation paid
to or received or deferred by the executive officers of Salem, including its
Chief Executive Officer, in all capacities in which they served:

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS

RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING LTIP
PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS PAYOUTS
POSITION YEAR ($)(1) ($)(2) ($) ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C> <C>

Gordon H.T. Sheeran 1995 130,500 50,000 4,592 -- -- --
Vice Chairman, President and 1994 123,000 34,000 2,857 -- 5,000 --
Chief Executive Officer 1993 117,500 17,000 2,375 -- -- --

William S. Green 1995 80,788 21,000 2,876 -- 1,000 --
Senior Vice President 1994 76,515 12,400 254 -- 2,000 --
1993 72,530 7,200 1,348 -- 1,000 --

Norman D. Potter 1995 76,875 31,500 3,985 -- 1,000 --
Chief Financial Officer and 1994 67,500 14,200 800 -- 2,500 --
Secretary 1993 62,250 9,000 700 -- -- --

ALL
NAME AND OTHER
PRINCIPAL COMPENSATION
POSITION ($)(3)
<S> <C>
Gordon H.T. Sheeran 4,557
Vice Chairman, President and 2,855
Chief Executive Officer 1,987

William S. Green --
Senior Vice President --
--

Norman D. Potter --
Chief Financial Officer and --
Secretary --
</TABLE>

<PAGE>
(1) Consists of salary payable to the executive officers.

(2) Consists entirely of cash bonuses paid to the executive officers.

(3) Consists of insurance premiums paid by Salem for whole-life, term and
disability insurance policies maintained for the benefit of Mr. Sheeran.

During 1995, outside directors of Salem received a fee of $150 for each
meeting of the Board of Directors or a committee thereof attended. In addition,
non-employee directors are reimbursed for out-of-pocket expenses in connection
with attending meetings of the Board of Directors or committees thereof.

RETIREMENT PLAN. Salem maintains a 401(k) Plan (the "401(k) Plan") for the
benefit of its employees. Employees may participate in the 401(k) Plan upon the
later of the attainment of age 21 and 30 days of service. Subject to certain
limitations, a participant may elect to defer from 1% to 25% of his or her total
annual compensation (whether taken in cash or otherwise deferred by the
employee). Also, subject to certain limitations, Salem contributes to the
participant's 401(k) Plan account an amount equal to 3% of the first 6% of total
annual compensation deferred by the participant. Salem may also contribute
annually to the trust maintained under the 401(k) Plan for the benefit of the
401(k) Plan accounts of all participants such "profit sharing"amount, within
certain limitations, as the Board of Directors may deem advisable. Messrs.
Sheeran, Green and Potter are participants under the 401(k) Plan. Messrs.
Sheeran and Potter are trustees of the 401(k) Plan.

A participant is at all times fully vested in the accrued benefits
attributable to compensation deferred by him or her under the 401(k) Plan. The
participant is vested in increments of 20% during each of the first through
fifth years of service, and remains fully vested after the fifth year of
service, in the accrued benefits attributable to employer matching contributions
and profit sharing contributions made for the benefit of the participant's
accounts. Generally, upon a participant's retirement at age 65, he or she is
entitled to receive accrued benefits (all compensation deferred by the
participant and employer contributions and profit sharing contributions
attributable to his or her 401(k) Plan accounts, plus or minus all income,
losses, appreciation, depreciation and forfeitures, if applicable, attributed to
such accounts) under the 401(k) Plan in a lump sum or, at the request of the
participant, in substantially equal quarterly or annual installments over a
fixed period of time or by the purchase of a term certain, nontransferable
annuity. Early retirement at age 55 and after five years of service is permitted
under the 401(k) Plan, with payment of accrued benefits under the methods
described in the preceding sentence. Upon death or disability, a participant is
fully vested in his or her accrued benefits, with payment of such benefits being
made to the spouse, or other beneficiary, of the deceased participant or to the
disabled participant under the above-described methods.

STOCK OPTION PLANS. In 1986, Salem adopted its 1986 Incentive Stock Option
Plan (the "1986 Plan"), which provides for the grant of both incentive and
non-qualified stock options. A total of 159,522 shares of Salem Stock were
reserved for possible issuance pursuant to the 1986 Plan. The 1986 Plan states
that no option may be granted thereunder after January 10, 1996, and at that
date, all options available thereunder had been granted. Options for 86,640
shares of Salem Stock were exercisable at December 31, 1995, and options for
79,964 shares of Salem Stock were exercisable at June 30, 1996. All options
granted under the 1986 Plan had an option price equal to the fair market value
of a share of Salem Stock at the date of grant.

Under the 1986 Plan, with respect to the grants of incentive stock options,
the option price could not be less than the fair market value of a share of
Salem Stock at the date of grant, the price of options granted to persons who
owned ten percent (10%) of the voting power of the Salem Stock could not be less
than 110% of the fair market value on the date of grant, the aggregate fair
market value of the shares for which an optionee could be granted incentive
stock options in any calendar year could not exceed $100,000, and the expiration
of an incentive stock option could not be later than ten years after the date
the option was granted.

With respect to non-qualified stock options under the 1986 Plan, the option
price for options granted could not be less than the current fair market value
of a share of Salem Stock on the date of grant, there was no limit on the fair
market value of the shares for which an employee could be granted options, and
the expiration date of the option could not be later than eleven years after the
date of grant.

Under the 1986 Plan, non-qualified options could be granted to directors
and advisory directors of Salem, and all options outstanding become immediately
exercisable in the event of a change in control with respect to Salem.

On June 24, 1996, the shareholders of Salem approved the 1996 Stock Option
Plan (the "1996 Plan"), subject to final approval by the Banking Commission. A
maximum of 183,033 shares of Salem Stock may be issued under the 1996 Plan to

<PAGE>
eligible employees of Salem, and Salem's Board of Directors has reserved that
number of shares for issuance. The description of terms noted above as to the
1986 Plan apply to the 1996 Plan except that directors and advisory directors
are not eligible to receive options under the 1996 Plan.

To date, no options have been granted under the 1996 Plan, and pursuant to
the Merger Agreement, no options may be granted thereunder prior to the
consummation of the Merger.

The following table sets forth information with regard to grants of
incentive stock options during the year ended December 31, 1995. All such grants
were made under the 1986 Plan.

INDIVIDUAL GRANTS

<TABLE>
<CAPTION>
NUMBER OF SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS OPTIONS GRANTED TO EXERCISE BASE PRICE
NAME GRANTED(#)(1) EMPLOYEES IN 1995 ($/SH.) EXPIRATION DATE
<S> <C> <C> <C> <C>
William S. Green........................ 1,000 2.47% $9.00 January 23, 2005
Norman D. Potter........................ 1,000 2.47 9.00 January 23, 2005
</TABLE>

(1) Each option granted in 1995 will be eligible for treatment as an "incentive
stock option" under the Code if certain holding period and other
requirements are met and, absent the Merger, would have vested in equal
annual installments over a five-year period beginning January 23, 1995 (20%
of the optioned granted vested immediately upon grant). Pursuant to the
terms of the 1986 Incentive Stock Option Plan, all such options will vest at
the Effective Time.

The following table sets forth information with regard to option exercises
during the fiscal year ended December 31, 1995.

AGGREGATED OPTION EXERCISES IN 1995

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1995(#) DECEMBER 31, 1995($)(1)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Gordon H.T. Sheeran............................................... 35,000 5,000 $ 255,000 $27,500
William S. Green.................................................. 8,200 2,800 47,250 14,500
Norman D. Potter.................................................. 10,200 3,300 56,075 14,450
</TABLE>

(1) The market price of Salem's Stock at December 31, 1995 was $13.50. There is
no established trading market for Salem Stock. Rather, such shares are
traded by an informal matching of buyers and sellers. The market price
stated is based on the purchase closest to December 31, 1995 known to
management of Salem.

EMPLOYMENT AGREEMENTS

Mr. Sheeran's existing employment agreement provides that he will be
employed as President and Chief Executive Officer of Salem through December 7,
1998. His annual base salary is a minimum of $135,000 per year. He is entitled
to participate in an annual bonus program, as provided by Salem's Board of
Directors, and in any employee benefit plans or other fringe benefits adopted by
Salem for its employees. In addition, if a "change in control" occurs and Mr.
Sheeran is terminated without cause, terminated because he refuses to relocate
or his duties and responsibilities are materially altered and he resigns as a
result, for a period of 2.99 years subsequent to the change in control, Salem
must continue to provide to Mr. Sheeran his compensation and benefits (including
bonus and perquisites) until 2.99 years subsequent to such change in control and
must pay the amount of any federal excise tax imposed because of the payment of
such severance compensation.

Mr. Potter's existing employment agreement provides that he will be
employed as Salem's Chief Financial Officer until November 21, 1996. His annual
base salary is a minimum of $88,000 per year. He is entitled to participate in
an annual bonus program, as approved by Salem's Board of Directors and in any
employee benefit plans or other fringe benefits adopted by Salem for its
employees. In addition, if a "change in control" occurs and Mr. Potter is
terminated without cause, terminated because he refuses to relocate, or his
duties and responsibilities are materially altered and he resigns as a result,
for a period of two years subsequent to the change in control, Salem must
continue to provide to Mr. Potter his compensation and benefits (including bonus
and perquisites) until two years subsequent to such change in control.

<PAGE>
Mr. Green's existing employment agreement provides that he will be employed
as Salem's Senior Vice President until November 21, 1996. His annual base salary
is a minimum of $86,820 per year. Ms. Marshall's existing employment agreement
provides that she will be employed as Salem's Senior Vice President until
November 21, 1996. Her annual base salary is a minimum of $78,750 per year. In
all other respects, Mr. Green's, Mr. Potter's and Ms. Marshall's current
employment agreements are essentially the same.

OTHER TRANSACTIONS WITH MANAGEMENT

Salem has had, and expects to have in the future, lending transactions in
the ordinary course of business with many of its officers and directors and with
associates of such persons. All loans included in such transactions during 1995
were made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons and did not involve more than the normal risk of collectibility or
present other unfavorable features.

B. Rex Stephens, a director of Salem, owns 50% of a corporation that leases
a building to Salem in which Salem's Wilmington, North Carolina office is
located. The current annual rental under this annually renewable lease is
$75,486.

<PAGE>
SUPERVISION AND REGULATION

Federal and state legislation and regulation have significantly affected
the operations of banks and bank holding companies, and other types of financial
institutions, in the past several years and have increased competition among
commercial banks, savings institutions and other providers of financial
services. In addition, federal legislation has imposed new limitations on the
investment authority of, and higher insurance and examination assessments on,
financial institutions and has made other changes that may adversely affect the
future operations and competitiveness of regulated financial institutions with
other financial intermediaries. The operations of banks and their holding
companies, including Salem and CCBF and CCBF's depository institution
subsidiaries, will continue to be subject to changes in applicable statutes and
regulations from time to time. To the extent that the following information
describes statutory and regulatory provisions, it is qualified in its entirety
by reference to the particular statutory and regulatory provisions. Any change
in applicable laws or regulations may have a material effect upon CCBF, CCB Bank
and Salem. Supervision, regulation and examination of financial institutions by
regulatory agencies are intended primarily for the protection of depositors
rather than holders of the capital stock of the institutions or their holding
companies.

REGULATION OF CCBF

GENERAL. As a bank holding company registered under the BHCA, CCBF is
subject to supervision and examination by, and the regulations and reporting
requirements of the Federal Reserve. Under the BHCA, CCBF's activities and those
of its subsidiaries are limited to banking, managing or controlling banks,
furnishing services to or performing services for its subsidiaries or engaging
in any other activity which the Federal Reserve determines to be so closely
related to banking or managing or controlling banks as to be a proper incident
thereto. CCBF is also subject to regulation by the Commissioner under the Bank
Act.

The BHCA prohibits CCBF from acquiring direct or indirect control of more
than 5% of the outstanding voting stock or substantially all of the assets of
any financial institution, or merging or consolidating with another bank holding
company without prior approval of the Federal Reserve. Additionally, the BHCA
prohibits CCBF from engaging in, or acquiring ownership or control of more than
5% of the outstanding voting stock of any company engaged in a non-banking
activity unless such activity is determined by the Federal Reserve to be so
closely related to banking as to be properly incident thereto. In approving an
application by CCBF to engage in a non-banking activity, the Federal Reserve
must consider whether that activity can reasonably be expected to produce
benefits to the public, such as greater convenience, increased competition or
gains in efficiency, that outweigh possible adverse effects, such as undue
concentration of resources, decreased or unfair competition, conflicts of
interest or unsound banking practices.

Under the BHCA, Federal Reserve approval generally must be obtained before
any person may acquire control of a bank holding company. Control is presumed to
exist if, among other things, a person acquires more than 25% of any class of
voting stock of a holding company or if a person acquires more than 10% of any
class of voting stock and the holding company or controls in any manner the
election of a majority of the directors of a holding company, has registered
securities under Section 12 of the 1934 Act or the acquiror will be the largest
shareholder after the acquisition.

INTERSTATE BANKING ACT. In September of 1994, Congress passed the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Banking Act"). The Interstate Banking Act permits adequately
capitalized banks and savings institution holding companies to acquire control
of banks and savings institutions in any state. North Carolina adopted
nationwide reciprocal interstate acquisition legislation in 1994.

Such interstate acquisitions are subject to certain restrictions. States
may require the bank or savings institution being acquired to have been in
existence for a certain length of time but not in excess of five years. In
addition, no bank or savings institution may acquire more than 10% of the
insured deposits in any one state, unless the state has specifically legislated
a higher deposit cap. States are free to legislate stricter deposit caps. At
present, 18 states have deposit caps lower than 30%.

The Interstate Banking Act also provides for interstate branching. The
McFadden Act of 1927 established state lines as the ultimate barrier to
geographic expansion of a banking network by branching. The Interstate Banking
Act withdraws these barriers, effective June 1, 1997, allowing interstate
branching in all states, provided that a particular state has not specifically
prohibited interstate branching by legislation prior to such time. Unlike
interstate acquisitions, a state may prohibit interstate branching if it
specifically elects to do so by June 1, 1997. States may choose to allow
interstate branching prior to June 1, 1997 by opting-in to a group of states
that permits these transactions. These states generally allow interstate
branching via a merger of an out-of-state bank with an in-state bank, or on a de
novo basis. North Carolina has enacted legislation permitting interstate
branching transactions. It is anticipated that the Interstate Banking Act will
increase (and, in some instances, has

<PAGE>
increased) competition within the markets in which CCBF now operates, although
the extent to which such competition will increase throughout such markets and
the timing of such increase cannot be predicted.

The Interstate Banking Act also modifies the controversial safety and
soundness provisions contained in Section 39 of the Federal Deposit Insurance
Corporation Improvement Act of 1991 (the "1991 Banking Law") which required the
banking regulatory agencies to promulgate regulations governing such topics as
internal controls, loan documentation, credit underwriting, interest rate
exposure, asset growth, compensation and fees and other matters those agencies
determine to be appropriate. The Interstate Banking Act exempts bank holding
companies from these provisions and requires the agencies to prepare guidelines,
as opposed to regulations, dealing with these areas. It also gives more
discretion to the banking regulatory agencies in prescribing standards for
banks' asset quality, earnings and stock valuation.

The Interstate Banking Act also expands current exemptions from the
requirement that banks be examined on a 12-month cycle. Exempted banks will be
inspected every 18 months. Other provisions address paperwork reduction and
regulatory improvements, small business and commercial real estate loan
securitization, truth-in-lending amendments regarding high cost mortgages,
strengthening of the independence of certain financial regulatory agencies,
money laundering, flood insurance and extension of certain statutes of
limitations.

RESTRICTIONS AND CAPITAL REQUIREMENTS. There are a number of obligations
and restrictions imposed on a bank holding company and its insured depository
institution subsidiaries by law and regulatory policies that are designed to
minimize potential loss to depositors of such depository institutions and the
FDIC insurance funds in the event the depository institution becomes in danger
of default or in default. For example, under the 1991 Banking Law, to reduce the
likelihood of receivership of an insured depository institution subsidiary that
may become "undercapitalized" under the terms of any capital restoration plan
filed by such subsidiary with its appropriate federal banking agency, a bank
holding company is required to guarantee up to the lesser of (i) an amount equal
to 5% of the institution's total assets at the time the institution become
undercapitalized or (ii) the amount which is necessary (or would have been
necessary) to bring the institution into compliance with all acceptable capital
standards as of the time the institution fails to comply with such capital
restoration plan. Under a policy of the Federal Reserve with respect to bank
holding company operations, a bank holding company is required to serve as a
source of financial strength to its depository institution subsidiaries and to
commit resources to support such institutions in circumstances where it might
not do so absent such policy. Under the BHCA, the Federal Reserve also has the
authority to require a bank holding company to terminate any activity or to
relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a
bank) upon the Federal Reserve's determination that such activity or control
constitutes a serious risk to the financial soundness and stability of any
depository institution subsidiary of the bank holding company.

In addition, the "cross-guarantee" provisions of the Federal Deposit
Insurance Act (the "FDIA") require insured depository institutions under common
control to reimburse the FDIC for any loss suffered by either the Savings
Association Insurance Fund (the "SAIF") or the Bank Insurance Fund ("BIF") of
the FDIC as a result of the default of a commonly controlled insured depository
institution or for any assistance provided by the FDIC to a commonly controlled
insured depository institution in danger of default. The FDIC may decline to
enforce the cross-guarantee provisions if it determines that a waiver is in the
best interest of the SAIF or the BIF or both. The FDIC's claim is superior to
claims of shareholders of the insured depository institution or its holding
company but subordinate to claims of depositors, secured creditors and holders
of subordinated debt (other than affiliates) of the commonly controlled insured
depository institutions.

CCBF is subject to the obligations and restrictions described above, and
its depository institution subsidiaries are subject to the cross-guarantee
provisions of the FDIC. However, management of CCBF currently does not expect
that any of these provisions will have an impact on the operations of CCBF or
its subsidiaries.

Bank holding companies subject to the Federal Reserves capital adequacy
guidelines are required to comply with the Federal Reserve's risk-based capital
guidelines which require a minimum ratio of total capital to risk-weighted
assets (including certain off-balance sheet activities, such as standby letters
of credit) of 8%. At least half of the total capital is required to the "Tier I
capital," principally consisting of common shareholders' equity, noncumulative
perpetual preferred stock, and a limited amount of cumulative perpetual
preferred stock, less certain goodwill items. The remainder ("Tier II capital")
may consist of a limited amount of subordinated debt, certain hybrid capital
instruments and other debt securities, perpetual preferred stock, and a limited
amount of the general loan loss allowance. In addition to the risk-based capital
guidelines, the Federal Reserve has adopted a minimum leverage capital ratio,
under which a bank holding company must maintain a minimum ratio of Tier I
capital to average total consolidated assets of at least 3% in the case of a
bank holding company which has the highest regulatory examination rating and is
not contemplating significant growth or expansion. All other bank holding
companies are expected to maintain a leverage capital ratio of at least 1% to 2%
above the stated minimum.

<PAGE>
The following table sets forth the regulatory capital positions of CCBF and
Salem on a historical basis, and of CCBF on a pro forma combined basis, as of
June 30, 1996. (For the regulatory capital positions of CCBF's depository
institution subsidiaries as of June 30, 1996, see the discussion below).

<TABLE>
<CAPTION>
RISK-BASED CAPITAL
LEVERAGE CAPITAL TIER 1 TOTAL
AMOUNT % OF ASSETS AMOUNT % OF ASSETS AMOUNT % OF ASSETS
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CCBF
Actual......................................... $419,329 8.48 $419,329 11.75 $496,942 13.92
Minimum capital standard....................... 148,423 3.00 142,779 4.00 285,559 8.00
Excess of actual regulatory over
minimum regulatory capital standard......... $270,906 5.48 276,550 7.75 $211,383 5.92
SALEM
Actual......................................... $ 16,683 10.47 $ 16,683 15.99 $ 17,987 17.24
Minimum capital standard....................... 4,781 3.00 4,174 4.00 8,348 8.00
Excess of actual regulatory over minimum
regulatory capital standard................. $ 11,902 7.47 $ 12,509 11.99 $ 9,639 9.24
CCBF PRO FORMA COMBINED
Actual......................................... $436,012 8.54 $436,012 11.87 $514,929 14.02
Minimum capital standard....................... 153,204 3.00 146,953 4.00 293,907 8.00
Excess of actual regulatory over minimum
regulatory capital standard................. $282,808 5.54 $289,059 7.87 $221,022 6.02
</TABLE>

AFFILIATE TRANSACTIONS. Under the current federal law, transactions between
a depository institution and any affiliate are governed by Section 23A and 23B
of the Federal Reserve Act. An affiliate of a depository institution is any
company or entity that controls, is controlled by or is under common control
with the institution. In a holding company context, the parent holding company
of a depository institution and any companies which are controlled by such
parent holding company are affiliates of the depository institution. Generally,
Section 23A and 23B (i) establish certain collateral requirements for loans to
affiliates, (ii) limit the extent to which the depository institution or its
subsidiaries may engage in "covered transactions" with any one affiliate to an
amount equal to 10% of such institution's capital stock and surplus, and contain
an aggregate limit on all such transactions with all affiliates to an amount
equal to 20% of such capital stock and surplus, and (iii) require that all such
transactions be on terms substantially the same, or at least as favorable, to
the savings institution or the subsidiary as those provided to a nonaffiliate.
The term "covered transaction" includes the making of loans or other extensions
of credit to an affiliate, the purchase of assets from an affiliate, the
purchase of, or an investment in, the securities of an affiliate, the acceptance
of securities of an affiliate as collateral for a loan or extension of credit to
any person, or the issuance of a guarantee, acceptance or letter of credit on
behalf of an affiliate.

Further, current federal law in Section 22(h) of the Federal Reserve Act
places restrictions on financial institution subsidiaries of a bank holding
company with respect to loans to directors, executive officers and principal
stockholders. Under Section 22(h), loans to directors, executive officers and
stockholders who own more than 10% of a bank, and certain affiliated entities of
any of the foregoing, may not exceed, together with all other outstanding loans
to such person and affiliated entities, the bank's loan-to-one borrower limit as
established by federal law. Section 22(h) also prohibits loans above amounts
prescribed by the appropriate federal banking agency to directors, executive
officers and stockholders who own more than 10% of a bank, and their respective
affiliates, unless such loan is approved in advance by a majority of the board
of directors of the bank. Any "interested" director may not participate in the
voting. The Federal Reserve has prescribed the loan amount (which includes all
other outstanding loans to such person), as to which such prior board of
director approval is required, as being the greater of $25,000 or 5% of
unimpaired capital and unimpaired surplus (up to $500,000) of the bank. Further,
pursuant to Section 22(h), the Federal Reserve requires that loans to directors,
executive officers, and principal stockholders be made on terms substantially
the same as offered in comparable transactions to other persons and not involve
more than the normal risk of repayment or present other unfavorable features.

NORTH CAROLINA REGULATION. As a result of its ownership of a North
Carolina-chartered commercial bank, CCBF is registered under the bank holding
company laws of North Carolina. Accordingly, CCBF and its subsidiaries are
subject to regulation by the Commissioner. The Commissioner has asserted
authority to examine North Carolina bank holding companies and their affiliates
and is in the process of formulating regulations in this area. Further, as a
result of its ownership of Graham

<PAGE>
Savings, a North Carolina-chartered savings bank, CCBF also is registered under
the savings bank holding company laws of North Carolina. Thus, CCBF is also
subject to regulation and supervision by the Administrator or the North Carolina
Savings Institution Division (the "Administrator"). CCBF currently intends to
merge Graham Savings into CCB Bank on or about October 4, 1996. At such time,
CCBF will cease to be a savings bank holding company under North Carolina law
and neither CCBF nor its subsidiaries will be subject to the regulation by the
Administrator.

REGULATION OF CCB BANK AND SALEM

GENERAL. CCB Bank and Salem are each organized as North Carolina-chartered
commercial banks and are subject to various statutory requirements and to rules
and regulations promulgated and enforced by the Commission and the FDIC. Salem's
and the substantial part of CCB Bank's deposits are insured by the BIF of the
FDIC. A portion of CCB Bank's deposits are insured by the SAIF of the FDIC as a
result of the assumption of certain deposits of a thrift institution during
1993, CCBF's 1995 merger with Security Capital Bancorp (a bank and savings bank
holding company), and the 1995 merger of CCB Savings Bank of Lenoir, Inc., SSB,
a subsidiary of CCBF, into CCB Bank. CCB Bank and Salem are members of the
Federal Home Loan Bank system ("FHLBS").

CCB Bank and Salem are subject to examination by the FDIC and the
Commissioner. In addition, CCB Bank and Salem are subject to various other state
and federal laws and regulations, including state usury laws, laws relating to
fiduciaries, consumer credit and equal credit, fair credit reporting laws and
laws relating to branch banking. CCB Bank and Salem, as insured North Carolina
commercial banks, each are prohibited from engaging as a principal in activities
that are not permitted for national banks, unless (i) the FDIC determines that
the activity would pose no significant risk to the appropriate deposit insurance
fund and (ii) the bank is, and continues to be, in compliance with all
applicable capital standards. CCB Bank and Salem also are prohibited from
directly acquiring or retaining any equity investment of a type or in an amount
not permitted for national banks.

Under the Bank Act, if the capital stock of a North Carolina commercial
bank is impaired by losses or otherwise, the Commissioner is authorized to
require payment of the deficiency by assessment upon all of the bank's
shareholders, pro rata, and to the extent necessary, if any such assessment is
not paid by any shareholder, upon 30 days notice, to sell as much as is
necessary of the stock of such shareholder to make good the deficiency. CCBF is
the sole shareholder of CCB Bank.

RESTRICTIONS ON DIVIDENDS. North Carolina commercial banks, such as CCB
Bank and Salem, are subject to legal limitations on the amounts of dividends
they are permitted to pay. Prior approval of the Commissioner is required if the
total of all dividends declared by CCB Bank or Salem in any calendar year exceed
its net profits (as defined by statute) for that year combined with its retained
net profits (as defined by statute) for the preceding two calendar years, less
any required transfers to surplus. Also, under the 1991 Banking Law an insured
depository institution, such as CCB Bank or Salem, is prohibited from making
capital distributions, including the payment of dividends, if, after making such
distribution, the institution would become "undercapitalized" (as such term is
defined in the statute). Based on their current financial condition, CCB Bank
and Salem do not expect that this provision will have any impact on their
ability to pay dividends.

CAPITAL REQUIREMENTS. As North Carolina chartered, FDIC-insured commercial
banks which are not members of the Federal Reserve System, CCB Bank and Salem
each are subject to capital requirements imposed by the FDIC. Under the FDIC's
regulations, state nonmember banks that receive the highest rating during the
examination process and are not anticipating or experiencing any significant
growth are required to maintain a minimum leverage ratio of 3% of Tier I capital
to average total consolidated assets; all other banks are required to maintain a
minimum ratio of 1% or 2% above the stated minimum, with a minimum leverage
ratio of not less than 4%. The FDIC also requires CCB and Salem to have a ratio
of total capital to risk-weighted assets of at least 8%.

<PAGE>
The following table sets forth the regulatory capital positions of CCB Bank
and Salem on a historical basis, and of CCB Bank on a pro forma combined basis,
as of June 30, 1996:

<TABLE>
<CAPTION>
RISK-BASED CAPITAL
LEVERAGE CAPITAL TIER 1 TOTAL
AMOUNT % OF ASSETS AMOUNT % OF ASSETS AMOUNT % OF ASSETS
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CCB
Actual......................................... $406,378 8.35 $406,378 11.54 $453,156 12.87
Minimum capital standard....................... 145,938 3.00 140,810 4.00 281,620 8.00
Excess of actual regulatory over minimum
regulatory capital standard................. $260,440 5.35 $265,568 7.54 $171,536 4.87
SALEM
Actual......................................... $ 16,683 10.47 $ 16,683 15.99 $ 17,987 17.24
Minimum capital standard....................... 4,781 3.00 4,174 4.00 8,348 8.00
Excess of actual regulatory over minimum
regulatory capital standard................. $ 11,902 7.47 $ 12,509 11.99 $ 9,639 9.24

CCB BANK PRO FORMA COMBINED
Actual......................................... $423,061 8.42 $423,061 11.67 $471,143 13.00
Minimum capital standard....................... 150,719 3.00 144,984 4.00 289,968 8.00
Excess of actual regulatory over minimum
regulatory capital standard................. $272,342 5.42 $278,077 7.67 $181,175 5.00
</TABLE>

CCB Bank and Salem are also subject to insurance assessments imposed by the
FDIC. The FDIC administers two separate deposit insurance funds. The SAIF
maintains a fund to insure the deposits of institutions the deposits of which
were formerly insured by the Federal Savings and Loan Insurance Corporation (the
"FSLIC"), and the BIF maintains a fund to insure the deposits of institutions
the deposits of which were insured by the FDIC prior to the termination of the
FSLIC. At June 30, 1996, CCBF had approximately $4.3 billion in BIF-insured
deposits and approximately $1.4 billion (including $95 million attributable to
Graham Savings) in SAIF-insured deposits. All of Salem's deposits are
BIF-insured.

Effective January 1, 1993, the FDIC adopted a transitional risk-based
assessment schedule which became fully effective in January of 1994 and provided
for annual assessment rates ranging from .23% to .31% of an institution's
average assessment base. During 1995, the FDIC reduced BIF assessment rates for
the highest rated banks to .04%, but left unchanged the .31% rate for the
weakest banks; and, effective January 1, 1996, the FDIC again reduced BIF
assessments to a range of 0% to .27%. These recent premium reductions do not
affect the deposit premiums paid on SAIF insured deposits. The actual assessment
to be paid by each institution is based on the institution's assessment risk
classification, which is determined based on whether the institution is
considered "well capitalized," "adequately capitalized" or "under capitalized"
(as such terms have been defined in applicable federal regulations), and whether
the institution is considered by its supervisory agency to be financially sound
or to have supervisory concerns. The FDIC also is authorized to impose one or
more special assessments in any amount deemed necessary to enable repayment of
amounts borrowed by the FDIC from the United States Treasury Department.

The Balanced Budget Act of 1995, which was passed by the United States
Congress but vetoed by the President for reasons unrelated to the deposit
insurance issues, and proposals currently being considered by committees of the
United States Congress address a possible merger of the SAIF and BIF insurance
funds of the FDIC. One of the principal issues under discussion is the amount of
additional funds needed to recapitalize the SAIF prior to such a merger. These
proposals generally contemplate a one-time special assessment to be levied on
SAIF-insured deposits (including such deposits held by commercial banks), with
the amount of such an assessment possibly being as much as $.85 for each $100 in
SAIF-insured deposits held as of the assessment date. Due to the uncertainty as
to whether any such proposals will be adopted and signed into law, and the
ultimate amount and tax deductibility of any assessment that may be levied on
CCBF's subsidiaries having SAIF-insured deposits, CCBF currently is not able to
predict the impact of these proposals or such an assessment on CCBF.

<PAGE>
COMMUNITY REINVESTMENT ACT. CCB Bank and Salem are subject to the Community
Reinvestment Act of 1977, as amended ("CRA"). A purpose of the CRA is to
encourage financial institutions to help meet the credit needs of its entire
community, including the needs of low-and moderate-income neighborhoods. During
their most recent respective compliance examinations, CCB Bank received an
"outstanding" rating and Salem received a "satisfactory" rating with respect to
CRA compliance.

The federal banking regulatory agencies have issued a revision of the CRA
regulations, which became effective January 1, 1996, to implement a new
evaluation system that rates institutions based on their actual performance in
meeting community credit needs. Under the regulations, a financial institution
will first be evaluated and rated under three categories: a lending test, an
investment test and a service test. For each of these three tests, the savings
bank will be given a rating of "outstanding," "high satisfactory," "low
satisfactory," "needs to improve" or "substantial noncompliance." A set of
criteria for each rating has been developed and is included in the regulation.
If an institution disagrees with a particular rating, the institution has the
burden of rebutting the presumption by clearly establishing that the
quantitative measures do not accurately present its actual performance, or that
demographics, competitive conditions or economic or legal limitations peculiar
to its service should be considered. The ratings received under the three tests
will be used to determine the overall composite CRA rating. The composite
ratings will be the same as those that are currently given "outstanding,"
"satisfactory," "needs to improve" or "substantial noncompliance."

IMPACT OF 1991 BANKING LAW. Among other things, the 1991 Banking Law
provided increased funding for the BIF and the SAIF, and provided for expanded
regulation of depository institutions and their affiliates, including parent
holding companies.

The 1991 Banking Law provided the federal banking agencies with broad
powers to take corrective action to resolve the problems of insured depository
institutions. The extent of these powers will depend upon whether the
institutions in question are "well capitalized," adequately
capitalized,"undercapitalized," "significantly undercapitalized," or "critically
undercapitalized." Under current FDIC regulations, an institution is considered
"well capitalized" if it has (i) a total risk-based capital ratio of 10% or
greater, (ii) a Tier I risk-based capital ratio of 6% or greater, (iii) a
leverage ratio of 5% or greater and (iv) is not subject to any order or written
directive to meet and maintain a specific level for any capital measure. An
"adequately capitalized" institution is defined as one that has (i) a total
risk-based capital ratio of 8% or greater, (ii) a Tier I risk-based capital
ratio of 4% or greater and (iii) a leverage ratio of 4% or greater (or 3% or
greater in the case of an institution with the highest examination rating and
which is not experiencing or anticipating significant growth). An institution is
considered (A) "undercapitalized" if it has (i) a total risk-based capital ratio
of less than 8%, (ii) Tier I risk-based capital ratio of less than 4% or (iii) a
leverage ratio of less than 4% (or 3% in the case of an institution with the
highest examination rating and which is not experiencing or anticipating
significant growth); (B) "significantly undercapitalized" if the institution has
(i) a total risk-based capital ratio of less than 6%, or (ii) a Tier I
risk-based capital ratio of less than 3% or (iii) a leverage ratio of less than
3%, and (C) "critically undercapitalized" if the institution has a ratio of
tangible equity to total assets equal to or less than 2%.

To facilitate the early identification of problems, the 1991 Banking Law
requires the federal banking agencies to review and, under certain
circumstances, prescribe more stringent accounting and reporting requirements
than those required by generally accepted accounting principles. The FDIC issued
a final rule, effective July 2, 1993, implementing those provisions. The rule,
among other things, requires that management report on the institution's
responsibility for preparing financial statements and establishing and
maintaining an internal control structure and procedures for financial reporting
and compliance with designated laws and regulations concerning safety and
soundness, and that independent auditors attest to and report separately on
assertions in management's reports concerning compliance with such laws and
regulations, using FDIC-approved audit procedures.

The 1991 Banking Law further required the federal banking agencies to
develop regulations requiring disclosure of contingent assets and liabilities
and, to the extent feasible and practicable, supplemental disclosure of the
estimated fair market value of assets and liabilities. The 1991 Banking Law also
requires annual examinations of all insured depository institutions by the
appropriate federal banking agency, with some exceptions for small,
well-capitalized institutions and state chartered institutions examined by state
regulators. Moreover, 1991 Banking Law, as modified by the Federal Housing
Enterprises Financial Security and Soundness Act, requires the federal banking
agencies to set operational and managerial, asset quality, earnings and stock
valuation standards for insured depository institutions and depository
institution holding companies, as well as compensation standards for insured
depository institutions that prohibit excessive compensation, fees or benefits
to officers, directors, employees, and principal shareholders. In July 1992, the
federal banking agencies issued a joint

<PAGE>
advance notice of proposed rulemaking soliciting comments on all aspects of the
implementation of these standards in accordance with the 1991 Banking Law,
including whether the compensation standards should apply to depository
institution holding companies. An interagency notice of proposed rulemaking was
issued in November 1993. However, sections of the Riegle Community Development
and Regulatory Improvement Act of 1994 will affect the nature and scope of the
proposed regulations and eliminates the requirement that the regulations apply
to depository institution holding companies.

The foregoing necessarily is a general description of certain provisions of
the 1991 Banking Law, and subsequent related legislation, and does not purport
to be complete.

REGULATION OF GRAHAM SAVINGS

CCBF's savings bank subsidiary, Graham Savings, is a North
Carolina-chartered savings bank and a member of the FHLBS. Its deposits are
insured by the FDIC through the SAIF, and it is subject to examination and
regulation by the FDIC and the Administrator and to regulations governing such
matters as capital standards, mergers, establishment of branch offices,
subsidiary investments and activities, and general investment authority. In
general, except as discussed generally below, Graham Savings is subject to the
same restrictions, limitations and obligations of CCB Bank and Salem. CCBF
currently intends to merge Graham Savings into CCB Bank on or about October 4,
1996.

In addition to the FDIC-imposed capital requirements discussed above with
respect to CCB Bank and Salem, the Administrator requires that North Caroling
savings banks, such as Graham Savings, maintain a net worth of at least 5% of
total assets. At June 30, 1996, Graham Savings complied with the net worth
requirements of the FDIC and the Administrator.

The following table sets forth the FDIC regulatory capital position of
Graham Savings as of June 30, 1996.

<TABLE>
<CAPTION>
RISK-BASED CAPITAL
LEVERAGE CAPITAL TIER ONE TOTAL
AMOUNT % OF ASSETS AMOUNT % OF ASSETS AMOUNT % OF ASSETS

(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
GRAHAM SAVINGS
Actual............................................. $13,226 10.79 $13,226 18.82 $14,106 20.08
Minimum capital standard........................... 3,677 3.00 2,811 4.00 5,621 8.00
Excess of actual regulatory over minimum regulatory
capital standard................................ $ 9,549 7.79 $10,415 14.82 $ 8,485 12.08
</TABLE>

Federal Reserve regulations adopted pursuant to the Depository Institutions
Deregulation and Monetary Control Act of 1980 require savings associations and
savings banks to maintain reserves against their transaction accounts (primarily
negotiable order of withdrawal accounts). The reserve requirements are subject
to adjustment by the Federal Reserve. As of June 30, 1996, Graham Savings was in
compliance with the applicable reserve requirements of the Federal Reserve.

Graham Savings is subject to North Carolina law which requires that at
least 60% of its assets be investments that qualify under certain Internal
Revenue Service guidelines. As of June 30, 1996, Graham Savings was in
compliance with North Carolina law.

Graham Savings is also subject to the CRA. It received a "satisfactory"
rating with respect to CRA compliance in its most recent compliance examination.

The Administrator has the right to promulgate rules and regulations
necessary for the supervision and regulation of savings banks under his
jurisdiction and for the protection of the public investment in such
limitations. The Administrator conducts regular annual examinations of savings
banks as well as other state-chartered savings institutions in North Carolina.
The purpose of such examinations is to assure that institutions are being
operated in compliance with applicable North Carolina law and regulations in a
safe and sound manner. These examinations are usually conducted on a joint basis
with the FDIC. In addition, the Administrator is required to conduct an
examination of any institution when he has good reason to believe the standing
and responsibility of the institution is of doubtful character or when he
otherwise deems it prudent.

A stock savings bank may not declare or pay a cash dividend on, or
repurchase any of, its capital stock if the effect of such transaction would be
to reduce the net worth of the institution to an amount which is less than the
minimum amount required by applicable federal and state regulations or if the
effect thereof would be to cause its net worth to be reduced below the amount of
the liquidation account established in connection with conversion from mutual to
stock form. In addition, a North Carolina savings bank, such as Graham Savings,
which has been converted from mutual form for less than five years may not,
without the prior written approval of the Administrator, declare or pay a cash
dividend on its capital stock in

<PAGE>
an amount in excess of one-half of the greater of (i) its net income for the
most recent fiscal year or (ii) the average of its net income after dividends
for the most recent fiscal year end and not more than two of the immediately
preceding fiscal year ends.

Subject to limitations established by the Administrator, state savings
banks may make any loan or investment or engage in any activity which is
permitted to federally chartered savings institutions. In addition to such
lending authority, savings banks are authorized to invest funds, in excess of
loan demand, in certain statutorily permitted investments.

CAPITAL STOCK OF CCBF AND SALEM

The Salem shareholders' current rights as shareholders are governed by
Salem's Articles of Incorporation (the "Salem Articles") and Bylaws, the Bank
Act and the NCBCA. Upon consummation of the Merger, Salem's shareholders (other
than those who exercise Dissenters' Rights) will become shareholders of CCBF and
their rights will be the same as all other CCBF shareholders and will be
governed by CCBF's Restated Articles of Incorporation, as amended (the "CCBF
Articles"), CCBF's Bylaws, a Rights Agreement dated as of February 26, 1990
pertaining to the CCBF Rights (the "CCBF Rights Agreement"), and by the NCBCA.
Certain differences exist between the current rights of Salem's shareholders as
holders of Salem Stock and their rights after the Effective Time as holders of
CCBF Stock.

THE FOLLOWING IS ONLY A GENERAL SUMMARY OF CERTAIN MATERIAL DIFFERENCES IN
THE RIGHTS OF SALEM'S AND CCBF'S SHAREHOLDERS AND IS NOT INTENDED TO BE
COMPLETE. REFERENCE IS MADE TO THE ARTICLES, BYLAWS AND OTHER GOVERNING
INSTRUMENTS OF SALEM AND CCBF, TO THE BANK ACT AND THE NCBCA FOR A MORE COMPLETE
DESCRIPTION OF SUCH DIFFERENCES. SALEM'S SHAREHOLDERS ALSO SHOULD CONSULT WITH
THEIR OWN LEGAL COUNSEL WITH RESPECT TO SPECIFIC DIFFERENCES AND CHANGES IN
THEIR RIGHTS AS SHAREHOLDERS WHICH WILL RESULT FROM THE MERGER.

AUTHORIZED CAPITAL STOCK

Salem's authorized capital stock consists of 5,000,000 shares of common
stock $2.50 par value per share, of which 1,841,232 shares were issued and
outstanding at June 30, 1996.

CCBF's authorized capital stock consists of 50,000,000 shares of $5.00 par
value common stock of which 15,051,625 shares were issued and outstanding at
June 30, 1996, and 5,000,000 shares of serial preferred stock, none of which
were issued and outstanding at that date.

By amendment to the CCBF Articles which may be adopted without shareholder
approval, CCBF's Board of Directors may divide shares of its authorized serial
preferred stock into, and issue the same in, one or more classes and in one or
more series within each class, and such Board of Directors is authorized to
determine and fix the designations, relative rights, preferences and limitations
of shares in each such class and series of preferred stock so established.
Subject to the provisions of the NCBCA and the rules of the NYSE, shares of each
such class or series may be issued from time to time without shareholder
approval at such times, for such purposes and for such consideration as the CCBF
Board of Directors may deem advisable.

For use in connection with the "Rights Plan" (as described below), CCBF's
Board of Directors has established a series of preferred stock designated as its
Series A Junior Participating Preferred Stock ("Series A Preferred") consisting
of shares and having certain special rights for purposes of dividends and other
distributions, voting, dissolution and liquidation and in connection with
certain mergers of CCBF. Although 200,000 shares of preferred stock have been
designated as Series A Preferred, none have been issued.

CCBF RIGHTS PLAN

The CCBF Rights Agreement provides for a plan (the "Rights Plan") pursuant
to which one CCBF Right was distributed during 1990 to CCBF's shareholders for
each of their shares of CCBF Stock. Also under the Rights Plan, after the date
of the CCBF Rights Agreement and before the earlier of the "Distribution Date"
(as defined below) or the date of redemption or expiration of the CCBF Rights,
each new share of CCBF Stock issued (including the shares into which Salem Stock
will be converted in connection with the Merger) also has attached to it one
CCBF Right.

The CCBF Rights currently are not exercisable, but may become so in the
future on a date (the "Distribution Date") which is 20 business days after (i) a
public announcement that any person or group has become an "Acquiring Person" by
acquiring beneficial ownership of 15% or more of the outstanding CCBF Stock, or
(ii) the date of commencement by any person of, or the announcement by any
person of his intention to commence, a tender or exchange offer which would
result in

<PAGE>
his becoming an Acquiring Person. However, after the time any person becomes an
Acquiring Person, all CCBF Rights held by or transferred to such Acquiring
Person (or any associate or affiliate of such Acquiring Person) shall be void
and of no effect.

Until the Distribution Date, each CCBF Right will be evidenced by the
certificate evidencing the CCBF Stock to which it relates and may be transferred
only with such CCBF Stock, and the surrender for transfer of any CCBF Stock
certificate also will constitute the transfer of the CCBF Rights related
thereto. After the Distribution Date, separate certificates evidencing each CCBF
Right will be distributed to the record holders of the CCBF Stock to which such
CCBF Rights are attached, and each such CCBF Right may then be exercised to
purchase .01 of a share of Series A Preferred for a price of $100 (the "Purchase
Price") (all as adjusted from time to time as described in the CCBF Rights
Agreement). In the alternative (and subject to certain exceptions), after any
person becomes an Acquiring Person (i) each CCBF Right may be exercised to
purchase the number of shares of CCBF Stock equal to the result obtained by
multiplying the then current Purchase Price by the number of Series A Preferred
interests covered by the CCBF Right, and dividing that product by 50% of the
market price of a share of CCBF Stock, or, (ii) unless the Acquiring Person has
become the beneficial owner of more than 50% of the outstanding CCBF Stock,
CCBF's Board of Directors at its option may exchange one share of CCBF Stock, or
a number of shares of Series A Preferred having voting rights equivalent to one
share of CCBF Stock, for all or part of the outstanding CCBF Rights.

If CCBF is acquired in a merger or other business combination or if 50% of
its consolidated assets or earnings power is sold, each CCBF Right will entitle
the holder, other than the Acquiring Person, to purchase securities of the
surviving company having a market value equal to twice the exercise price of the
CCBF Right.

The CCBF Rights will expire on February 26, 2000 and may be redeemed by
CCBF at any time prior to the acquisition by a person or group of 15% or more of
the outstanding CCBF Stock, at a price of $.01 per CCBF Right.

SPECIAL MEETINGS OF SHAREHOLDERS

Under Salem's Bylaws, a special meeting of Salem's shareholders may be
called only by the Chairman of Salem's Board; its President, Secretary or Board
of Directors; or by any shareholder pursuant to the written request by the
holders of at least 10% of all Salem Stock entitled to be voted at such a
meeting.

CCBF's Bylaws require that a special meeting of shareholders may be called
by the Chairman, Vice Chairman, President or Board of Directors of CCBF or by
any CCBF shareholder pursuant to the written request of the holders of at least
10% of all shares of CCBF Stock entitled to be voted at such a meeting.

DIRECTORS

NUMBER OF DIRECTORS. The Salem Articles provide that the number of Salem's
directors shall be not less than five nor more than 25. Salem's Bylaws authorize
Salem's Board of Directors to set and change the number of directors from time
to time within the minimum and maximum numbers. Salem's directors are elected to
one-year terms, and the terms of all of Salem's directors expire each year. As
permitted by the Bank Act, Salem's shareholders authorized the creation of two
(2) additional directorships at Salem's 1996 Annual Meeting of Shareholders,
which directorships may be filled at the discretion of Salem's Board of
Directors prior to the next meeting of Salem's shareholders. CCBF's shareholders
do not have a comparable right under the CCBF Articles or the NCBCA.

Under CCBF's Bylaws, its Board of Directors consists of not less than five
nor more than 30 directors, with the actual number of directors to be determined
by the CCBF Board or CCBF's shareholders from time to time within the above
minimum and maximum numbers. CCBF's directors are elected to one-year terms, and
the terms of all CCBF's directors expire each year.

ELECTION OF DIRECTORS. Under the Bank Act and the NCBCA, Salem's
shareholders have the right to cumulate their votes in the election of
directors. Salem's directors are elected to one-year terms, and the terms of all
Salem directors expire each year.

CCBF's directors are elected to one-year terms, and the terms of all CCBF
directors expire each year. Under the CCBF Articles and By-Laws, shareholders of
CCBF have the right to cumulate their votes in the election of CCBF directors;
provided, however, under the NCBCA, because CCBF has a class of capital stock
registered under the 1934 Act, so long as such registration remains in effect
(i.e., CCBF is a "public corporation") such right is withdrawn.

<PAGE>
VACANCIES RESULTING FROM INCREASE IN NUMBER. Salem's Bylaws provide that
vacancies existing on the Board of Directors resulting from an increase in the
number of directors may be filled by Salem's shareholders at an annual or
special meeting of shareholders, except as otherwise described above under
"NUMBER OF DIRECTORS".

CCBF's Bylaws authorize the CCBF Board or the shareholders of CCBF to
appoint new directors to fill vacancies resulting from an increase (within the
above minimum and maximum numbers) by the Board of Directors in the number of
CCBF's directors.

RELEASE FROM LIABILITY. Under the Bank Act, Salem's directors are
personally liable for any knowing violation, or knowingly permitting violations
by Salem's officers, employees or agents, of the Bank Act. The Commissioner has
promulgated a rule providing that North Carolina commercial banks may not
eliminate director personal liability with regard to acts or omissions where
such elimination would be contrary to the provision of the Bank Act. The Salem
Articles generally provide that no director will have personal liability arising
out of an action for monetary damages for breach of his or her duty as a
director; provided, however, that the foregoing does not eliminate personal
liability for acts and omissions prior to the effectiveness of such limitation
in the Salem Articles, acts or omissions not made in good faith that such
director, at the time of such breach, knew or believed were in conflict with the
best interests of Salem, any liability under Section 55-32 of the Bank Act or
any successor provision, any transaction from which the director derived an
improper personal benefit or any liability specifically created under the Bank
Act.

The CCBF Articles provide that to the extent permitted by the NCBCA, CCBF's
directors shall not be personally liable for monetary damages in any action by
or in the right of CCBF or otherwise for breach of their duties as directors.

NOMINATIONS. Under the Bank Act and Salem's By-laws, at least three-fourths
of Salem's directors must be residents of North Carolina.

CCBF's Bylaws do not contain specific provisions restricting or
conditioning nominations of directors. CCBF's directors need not be North
Carolina residents.

BUSINESS COMBINATIONS AND CHANGES IN CONTROL

CHARTER PROVISIONS. In general, the NCBCA requires that any merger, share
exchange, voluntary liquidation or transfer of substantially all the assets
(other than in the ordinary course of business) of a business corporation be
approved by the corporation's shareholders by a majority of the votes entitled
to be cast on the proposed transaction. However, the CCBF Articles contain
"supermajority" provisions that, in the case of certain business combination
transactions, require a higher vote of CCBF's shareholders than otherwise would
be required by the NCBCA.

This supermajority provision ("CCBF's 85% Vote Requirement") requires that
notwithstanding the fact that no vote may be required, or that a lesser
percentage may be specified, by law or in any agreement with any securities
exchange or otherwise, certain "CCBF Business Combinations" with an "Interested
Shareholder" (as those terms are defined below) require the affirmative vote of
both (i) the holders of at least 85% of each class of outstanding shares of
capital stock entitled to vote generally in the election of directors (each
voting separately as a class), and (ii) the holders of at least a majority of
the issued and outstanding voting stock of CCBF held by persons other than the
Interested Shareholder or an affiliate or associate of the Interested
Shareholder. However, CCBF's 85% Vote Requirement will not apply in the case of
a CCBF Business Combination that has been approved by a majority of CCBF's
directors who are not affiliated with the Interested Shareholder and who become
directors before the Interested Shareholder became such (the "CCBF Continuing
Directors") or which satisfies the "CCBF Fair Price Provisions" (as described
below) also contained in the CCBF Articles.

The term "CCBF Business Combination" generally includes: (i) any merger or
consolidation of CCBF or a subsidiary with an Interested Shareholder or an
affiliate or associate of an Interested Shareholder; (ii) any sale, lease
exchange, mortgage, pledge, transfer or other disposition to or with an
Interested Shareholder or an affiliate or associated of an Interested
Shareholder of all or substantially all, or as much as 10% of, the assets or
businesses of CCBF or any subsidiary; (iii) any purchase, exchange, lease or
other acquisition by CCBF or any subsidiary of all or substantially all, or as
much as 10% of, the assets or businesses of an Interested Shareholder or an
affiliate or associate of an Interested Shareholder; (iv) the issuance or
transfer of any securities of CCBF or any subsidiary to an Interested
Shareholder or an affiliate or associate of an Interested Shareholder for
consideration having a value of more than $5 million; (v) the adoption of any
plan proposed by or on behalf of an Interested Shareholder or an affiliate or
associate of an Interested Shareholder for the liquidation or dissolution of
CCBF; (vi) any recapitalization or reclassification of securities, or any merger
or consolidation of CCBF with any of its subsidiaries, or any other transaction
(whether or not involving an Interested Shareholder) that would have the effect,
directly or indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of

<PAGE>
CCBF or any subsidiary which is directly or indirectly owned by an Interested
Shareholder or an affiliate or associate of an Interested Shareholder.

An "Interested Shareholder" for purposes of CCBF's 85% Vote Requirement
generally is any person who: (i) together with his or its affiliates,
beneficially owns, directly or indirectly, 20% or more of any class of CCBF's
outstanding voting stock, (ii) is an affiliate of CCBF and at any time within
the preceding two years beneficially owned, directly or indirectly, 20% or more
of any class of CCBF's outstanding voting stock; or (iii) is an assignee of or
has otherwise succeeded to any shares of any class of outstanding voting stock
which at any time within the preceding two years were beneficially owned by any
Interested Shareholder.

FAIR PRICE PROVISIONS. A provision of the CCBF Articles (the "CCBF Fair
Price Provisions") provides that the CCBF 85% Vote Requirement will not apply in
the case of a CCBF Business Combination if: (i) the aggregate consideration to
be received per share of CCBF Stock by CCBF's shareholders is not less than the
higher of (A) the highest price per share paid by the Interested Shareholder for
CCBF Stock within two years preceding the announcement of the CCBF Business
Combination or the date the person became an Interested Shareholder or (B) the
fair market value per share of CCBF Stock on such announcement date or on the
date the person became an Interested Shareholder; (ii) the aggregate
consideration to be received by CCBF's shareholders per share of any other class
of CCBF's voting stock other than the CCBF Stock is not less than the higher of
(A) the highest price per share paid by the Interested Shareholder for shares of
such other class of voting stock within two years preceding the announcement of
the CCBF Business Combination or the date the person became an Interested
Shareholder, (B) the highest preferential amount per share to which holders of
shares of such other class are entitled in the event of any liquidation,
dissolution or winding up of CCBF, or (C) the fair market value per share of
such other class on such announcement date or on the date the person became an
Interested Shareholder; (iii) the consideration to be received by CCBF's
shareholders is in cash or in the same form as the consideration paid by the
Interested Shareholder in acquiring shares already owned (provided, that if the
Interested Shareholder has paid varying forms of consideration, the form of
consideration paid to CCBF's shareholders in the CCBF Business Combination shall
either be cash or in the form used to acquire the largest number of shares of
such class of voting stock already owned); (iv) except as approved by the CCBF
Continuing Directors, after the Interested Shareholder has become such and prior
to consummation of the CCBF Business Combination (A) there has been no failure
to pay any regular quarterly dividend on any outstanding preferred stock or
reduction in the annual dividend rate on CCBF Stock, and (B) the Interested
Shareholder shall not have acquired beneficial ownership of any additional
shares of CCBF voting stock; (iv) after becoming an Interested Shareholder, such
person shall not have received the benefit of certain financial assistance or
tax advantages; and (v) a proxy statement in conformity with the 1934 Act and
regulations thereunder shall be mailed to all CCBF shareholders.

NORTH CAROLINA SHAREHOLDER PROTECTION ACT. The North Carolina Shareholder
Protection Act (the "Shareholder Protection Act") generally requires that,
unless certain "fair price" and procedural requirements are satisfied, an
affirmative vote of 95% of a corporation's voting shares is required to approve
certain business combination transactions with another entity that is the
beneficial owner, directly or indirectly, of more than 20% of the corporation's
voting shares or which is an affiliate of the corporation and previously has
been a 20% beneficial holder of such shares. The Shareholder Protection Act is
applicable to CCBF.

CONTROL SHARE ACQUISITION ACT. The North Carolina Control Share Acquisition
Act (the "Control Share Act") generally provides that, except as provided below,
"Control Shares" will not have any voting rights. Control Shares are shares
acquired be a person under certain circumstances which, when added to other
shares owned, would give such person effective control over one-fifth, one-third
or a majority of all voting power in the election of the corporation's
directors. However, voting rights will be restored to Control Shares by
resolution approved by the affirmative vote of the holders of a majority of the
corporation's voting stock (other than shares held by the owner of the Control
Shares, officers of the corporation, and directors of the corporation). If
voting rights are granted to Control Shares which give the holder a majority of
all voting power in the election of the corporation's directors, then the
corporation's other stockholders may require the corporation to redeem their
shares at their fair value. The Control Share Act is applicable to both Salem
and CCBF.

AMENDMENTS OF ARTICLES AND BYLAWS.

ARTICLES. Subject to certain conditions, an amendment to the CCBF Articles
may be effected if the amendment is approved by the vote of the holders of a
majority of the CCBF Stock present at the shareholders meeting at which such
amendment proposal is considered. However, unless recommended to CCBF's
shareholders by a vote of three-fourths of the CCBF Continuing Directors, the
affirmative vote of both (i) the holders of not less than 85% of CCBF's
outstanding voting stock (each voting separately as a class) and (ii) the
holders of a majority of outstanding CCBF voting stock held by persons

<PAGE>
other than an Interested Shareholder or any affiliate or associate of an
Interested Shareholder, is required to amend or repeal, or to adopt provisions
inconsistent with, the provisions of the CCBF 85% Vote Requirement and the CCBF
Fair Price Provisions.

An amendment to the Salem Articles may be effected by the vote of the
holders of a majority of the Salem Stock voting at a shareholders meeting at
which a quorum is present.

BYLAWS. Salem's Bylaws may be amended or repealed, and new Bylaws may be
adopted, by the affirmative vote of a majority of Salem's directors in office at
the time such action is submitted to a vote of the Salem Board of Directors.

CCBF's Bylaws may be amended or repealed, and new Bylaws may be adopted, by
the affirmative vote of a simple majority of CCBF's directors.

ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS

Certain of the provision of the CCBF Articles and CCBF's Bylaws discussed
above may have the effect of preventing, discouraging or delaying a change in
control of CCBF not approved by its Board of Directors, but pursuant to which
its shareholders might receive a substantial premium for their shares over
current market prices. As a result, shareholders who might desire to participate
in such a transaction may not have an opportunity to do so.

The authority of CCBF's Board of Directors to issue preferred stock with
such rights and privileges as it may deem appropriate may enable such Board to
prevent a change in control despite a shift in ownership of CCBF Stock. In
addition, such Board's power to issue additional shares of CCBF Stock, as the
case may be, may help delay or discourage a change in control by increasing the
number of shares needed to gain control.

The ability of CCBF's Board to expand the number of directors up to 30,
without shareholder approval, and to fill vacancies resulting from such an
increase, may allow the Board to prevent, for a period of time, a person or
entity owning a majority of the voting shares of CCBF from electing a majority
of the directors of CCBF's Board.

The CCBF 85% Vote Requirement is designed to make more difficult an
acquisition of CCBF by an Interested Shareholder who has accumulated a
sufficient number of shares of CCBF Stock to influence or cause a CCBF Business
Combination on terms favoring or giving preferential treatment to the Interested
Shareholder. Should such a CCBF Business Combination be proposed and not receive
the approval of CCBF Continuing Directors, absent compliance with the CCBF Fair
Price Provisions, the holders of a small minority of CCBF stock who elect to
oppose the proposed CCBF Business Combination could prevent the consummation of
such transaction.

The CCBF Fair Price Provisions are designed to discourage attempts to take
over CCBF in nonnegotiated transactions utilizing two-tier pricing tactics
(which typically involve the accumulation of a substantial block of the target
corporation's stock followed by a merger or other reorganization of the acquired
company on terms determined by the purchaser). Therefore, due to the
difficulties of complying with the requirements of such provisions, they have an
anti-takeover effect and generally may discourage attempts to obtain control of
CCBF. As a result, holders of CCBF Stock may be deprived of an opportunity to
sell their shares at a premium above the market price. In addition, the CCBF
Fair Price Provisions would give veto power to the holders of a minority of the
shares of CCBF's voting shares, and could give veto power to a minority of
CCBF's Board of Directors, with respect to a CCBF Business Combination, which a
majority of the shareholders and directors may believe to be desirable and
beneficial. In any Business Combination not receiving the requisite approval of
CCBF's shareholders or directors, requirements regarding minimum price, while
providing objective pricing criteria, could be arbitrary and not indicative of
value. The purpose of the CCBF Fair Price Provisions is to encourage potential
acquirors to engage in arm's length negotiations with CCBF before attempting to
takeover transactions in order to provide protection for CCBF and its
shareholders and to insure that all shareholders receive a fair price for their
shares. These provisions also are intended to prevent an acquiror from obtaining
an initial position and thereafter acquiring CCBF's remaining shares for a lower
price or with a less desirable form of consideration.

Similarly, CCBF's Rights Plan may have an anti-takeover effect. The Rights
Plan would enable CCBF's existing shareholders to purchase shares of Series A
Preferred at the stated Purchase Price or a number of shares of CCBF Stock at a
price equal to approximately 50% of the then current fair market value of such
stock. The effect of the Rights Plan may be to discourage an uninvited or
unfriendly attempt to acquire control of CCBF as the effect of purchases of
Series A Preferred or CCBF Stock likely would be to cause an Acquiring Person to
suffer substantial dilution of its voting power and significant deterioration in
the value of its shares.

<PAGE>
The cumulative impact of the applicability of the Shareholder Protection
Act and the Control Share Act is to render more difficult, or to discourage, a
merger, tender offer or proxy contest, or the assumption of control by the
holder of a large block of Salem's or CCBF's voting securities, and would make
more difficult any attempt to remove incumbent management, even if any one or
more of the foregoing matters may be favorable to, or in the bests interests, of
Salem's or CCBF's shareholders.

INDEMNIFICATION

The NCBCA provides for indemnification by a corporation of its officers,
directors, employees and agents, and any person who is or was serving at the
corporation's request as a director, officer, employee or agent of another
entity or enterprise or as a trustee or administrator under an employee benefit
plan, against liability and expenses, including reasonable attorneys' fees, in
any proceeding (including without limitation a proceeding brought by or on
behalf of the corporation itself) arising out of their status as such or their
activities in any of the foregoing capacities.

PERMISSIBLE INDEMNIFICATION. Under the NCBCA, a corporation may, but is not
required to, indemnify any such person against liability and expenses incurred
in any such proceeding, provided such person conducted himself or herself in
good faith and (i) in the case of conduct in his or her official capacity,
reasonably believed that his or her conduct was in the corporation's best
interests, and (ii) in all other cases, reasonably believed that his or her
conduct was at least not opposed to the corporation's best interests; and, in
the case of a criminal proceeding, where he or she had no reasonable cause to
believe his or her conduct was unlawful. However, a corporation may not
indemnify such person either in connection with a proceeding by or in the right
of the corporation in which such person was adjudged liable to the corporation,
or in connection with any other proceeding charging improper personal benefit to
such person (whether or not involving action in an official capacity) in which
such person was adjudged liable on the basis that personal benefit was
improperly received.

MANDATORY INDEMNIFICATION. Unless limited by the corporation's charter, the
NCBCA requires a corporation to indemnify a director or officer of the
corporation who is wholly successful, on the merits or otherwise, in the defense
of any proceeding to which such person was a party because he or she is or was a
director of the corporation against reasonable expenses incurred in connection
with the proceeding.

ADVANCE FOR EXPENSES. Expenses incurred by a director, officer, employee or
agent of the corporation in defending a proceeding may be paid by the
corporation in advance of the final disposition of the proceeding as authorized
by the board of directors of the specific case, or as authorized by the charter
or bylaws or by any applicable resolution or contract, upon receipt of an
undertaking by or on behalf of such person to repay amounts advanced unless it
ultimately is determined that such person is entitled to be indemnified by the
corporation against such expenses.

COURT-ORDERED INDEMNIFICATION. Unless otherwise provided in the
corporation's charter, a director or officer of the corporation who is a party
to a proceeding may apply for indemnification to the court conducting the
proceeding or to another court of competent jurisdiction. On receipt of an
application, the court, after giving any notice the court deems necessary, may
order indemnification if it determines either (i) that the director or officer
is entitled to mandatory indemnification as described above, in which case the
court also will order the corporation to pay the reasonable expenses incurred to
obtain the court-ordered indemnification, or (ii) that the director or officer
is fairly and reasonably entitled to indemnification in view of all the relevant
circumstances, whether or not such person met the requisite standard of conduct
or was adjudged liable to the corporation in connection with a proceeding by or
in the right of the corporation or on the basis that personal benefit was
improperly received in connection with any other proceeding so charging (but if
adjudged so liable, indemnification is limited to reasonable expenses incurred).

VOLUNTARY INDEMNIFICATION. In addition to and separate and apart from
"permissible" and "mandatory" indemnification described above, a corporation
may, by charter, bylaw, contract, or resolution, indemnify or agree to indemnify
any one or more of its directors, officers, employees or agents against
liability and expenses in any proceeding (including any proceeding brought by or
on behalf of the corporation itself) arising out of their status as such or
their activities in any of the foregoing capacities. However, the corporation
may not indemnify or agree to indemnify a person against liability or expenses
he may incur on account of activities which were at the time taken known or
believed by such person to be clearly in conflict with the best interests of the
corporation. Any provision in a corporation's charter or bylaws or in a contract
or resolution may include provisions for recovery from the corporation of
reasonable costs, expenses and attorney's fees in connection with the
enforcement of rights to indemnification granted therein and may further include
provisions establishing reasonable procedures for determining and enforcing such
rights.

<PAGE>
PARTIES ENTITLED TO INDEMNIFICATION. The NCBCA defines "director" to
include ex-directors and the estate or personal representative of a director.
Unless its charter provides otherwise, a corporation may indemnify and advance
expenses to an officer, employee or agent of the corporation to the same extent
as to a director and also may indemnify and advance expenses to an officer,
employee or agent who is not a director to the extent, consistent with public
policy, as may be provided in its charter or bylaws, by general or specific
action of its board of directors, or by contract.

INDEMNIFICATION BY CCBF AND SALEM. Subject to restrictions as are provided
by federal securities law, CCBF's Bylaws and Salem's By-laws provide for
indemnification of their respective directors and officers to the fullest extent
permitted by the NCBCA, and require their respective Board of Directors to take
all actions necessary and appropriate to authorize such indemnification. In
addition, CCBF and Salem each currently maintains directors' and officers'
liability insurance.

Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers or persons controlling CCBF or Salem
pursuant to the foregoing provision, CCBF and Salem have been informed that, in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the 1933 Act and, therefore, is
unenforceable.

RELEASE OF DIRECTOR LIABILITY. As discussed above (see
" -- Directors -- RELEASE FROM LIABILITY"), the CCBF Articles eliminates, to the
fullest extend permitted by the NCBCA, the personal liability of its directors
in any action by or in the right of CCBF or otherwise for monetary damages for
breach of their duties as directors. The Salem Articles generally provide that
no director will have personal liability arising out of an action for monetary
damages for breach of his or her duty as a director; provided, however, that the
foregoing does not eliminate personal liability for acts and omissions prior to
the effectiveness of such limitation in the Salem articles, acts or omissions
not made in good faith that such director, at the time of such breach, knew or
believed were in conflict with the best interests of Salem, any liability under
Section 55-32 of the Bank Act or any successor provision, any transaction from
which the director derived an improper personal benefit or any liability
specifically created under the Bank Act or any successor provision.

LEGAL MATTERS

The validity of the shares of CCBF Stock to be issued to Salem's
shareholders in connection with the Merger will be passed upon for CCBF by
Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., who serves as counsel to
CCBF and CCB Bank with respect to the Merger. Robert A. Singer, a partner in
such firm, beneficially owns, or has sole or shared voting control as a trustee
or otherwise over, a total of 5,873 shares of CCBF Stock. Certain legal matters
will be passed upon for Salem by Petree Stockton, L.L.P.

EXPERTS

The consolidated financial statements of CCBF as of December 31, 1995 and
1994 and for each of the years in the three-year period ended December 31, 1995
have been incorporated by reference herein in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.

KPMG Peat Marwick LLP's report refers to the fact that on January 1, 1994,
CCBF adopted the provisions of SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," and on January 1, 1993, CCBF adopted the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions," and SFAS No. 109, "Accounting for Income Taxes."

The financial statements of Salem as of December 31, 1995 and 1994 and for
each of the years in the three-year period ended December 31, 1995 have been
included herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.

OTHER MATTERS

Salem's Board of Directors does not intend to bring any matter before the
Special Meeting other than as specifically set forth in this Prospectus/Proxy
Statement and the accompanying Notice, and the Board knows of no other business
that properly may be brought before the Special Meeting by any other person.
However, should other matters properly be presented for action at the Special
Meeting, the Proxies representing Salem shareholders at the Special Meeting, or
their substitutes, will be authorized to vote shares of Salem Stock represented
by those appointments of proxy according to their best judgment on such matters.

<PAGE>
PROPOSALS OF SHAREHOLDERS

If for any reason the Merger is not consummated, Salem's 1997 Annual
Meeting of Shareholders likely would be held on or about June 15, 1997. In such
event, any proposal (other than nominations for directors) of a shareholder
intended to be presented at that meeting would have to have been received by
Salem at its main office in Winston-Salem, North Carolina no later than February
1, 1997 to be considered timely received for inclusion in the proxy statement
and appointment of proxy issued in connection with the meeting.

The 1997 Annual Meeting of Shareholders of CCBF will be held on or about
April 15, 1997. Any proposal (other than nominations for directors) of a CCBF
shareholder intended to be presented at that meeting would have to have been
received by CCBF at its main office in Durham, North Carolina no later than
November 15, 1996 to be considered timely received for inclusion in the proxy
statement and appointment of proxy to be issued in connection with the meeting.

<PAGE>
APPENDIX A

AMENDED AGREEMENT OF COMBINATION

BY AND AMONG

CCB FINANCIAL CORPORATION,

CENTRAL CAROLINA BANK AND TRUST COMPANY

AND

SALEM TRUST BANK

DATED AS OF JULY 1, 1996 AND
AMENDED AS OF SEPTEMBER 6, 1996

A-1

<PAGE>
TABLE OF CONTENTS

ARTICLE I

DEFINITIONS

ARTICLE II

THE MERGER AND RELATED TRANSACTIONS

<TABLE>
<CAPTION>
PAGE
<C> <S> <C>
2.1 Merger....................................................................................................... A-9
2.2 Directors of Surviving Bank.................................................................................. A-10
2.3 Time and Place of Closing.................................................................................... A-10
2.4 Effective Time............................................................................................... A-10
2.5 Subsequent Actions........................................................................................... A-10
</TABLE>

ARTICLE III

MANNER OF CONVERTING SHARES

<TABLE>
<CAPTION>
<C> <S> <C>
3.1 Conversion of Shares......................................................................................... A-10
3.2 Conversion of Options........................................................................................ A-10
3.3 Anti-Dilution Provisions..................................................................................... A-10
3.4 Shares Held by CCBF or Salem................................................................................. A-10
3.5 Fractional Share............................................................................................. A-10
3.6. Transfers.................................................................................................... A-11
3.7 Dissenting Shareholders...................................................................................... A-11
</TABLE>

ARTICLE IV

EXCHANGE OF SHARES

<TABLE>
<CAPTION>
<C> <S> <C>
4.1 Exchange Procedures.......................................................................................... A-12
4.2 Voting and Dividends......................................................................................... A-12
</TABLE>

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF SALEM

<TABLE>
<CAPTION>
<C> <S> <C>
5.1 Organization, Standing, and Authority........................................................................ A-12
5.2 Capital Stock................................................................................................ A-13
5.3 Authorization of Merger and Related Transactions............................................................. A-13
5.4 Financial Statements......................................................................................... A-13
5.5 Books and Corporate Records.................................................................................. A-14
5.6 Absence of Undisclosed Liabilities........................................................................... A-14
5.7 Tax Matters.................................................................................................. A-14
5.8 Allowance for Loan Losses.................................................................................... A-14
5.9 Properties................................................................................................... A-14
5.10 Compliance with Laws......................................................................................... A-14
5.11 Employee Benefit Plans....................................................................................... A-15
5.12 Commitments and Contracts.................................................................................... A-16
5.13 Material Contract Defaults................................................................................... A-16
5.14 Legal Proceedings............................................................................................ A-16
5.15 Absence of Certain Changes or Events......................................................................... A-16
5.16 Reports...................................................................................................... A-16
5.17 Insurance.................................................................................................... A-16
5.18 Labor........................................................................................................ A-17
5.19 Material Interests of Certain Persons........................................................................ A-17
</TABLE>

A-2

<PAGE>
<TABLE>
<CAPTION>
PAGE
<C> <S> <C>
5.20 Registration Obligations..................................................................................... A-17
5.21 Environmental Matters........................................................................................ A-17
5.22 Accounting; Tax; Regulatory Matters.......................................................................... A-18
5.23 Brokers and Finders.......................................................................................... A-18
5.24 Statements True and Correct.................................................................................. A-18
</TABLE>

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF CCBF AND CCB BANK

<TABLE>
<CAPTION>
<C> <S> <C>
6.1 Organization, Standing, and Authority........................................................................ A-18
6.2 Capital Stock................................................................................................ A-18
6.3 CCBF Subsidiaries............................................................................................ A-18
6.4 Authorization of Merger and Related Transactions............................................................. A-19
6.5 Financial Statements......................................................................................... A-19
6.6 Books and Corporate Records.................................................................................. A-19
6.7 Absence of Undisclosed Liabilities........................................................................... A-20
6.8 Tax Matters.................................................................................................. A-20
6.9 Allowance for Loan Losses.................................................................................... A-20
6.10 Compliance With Laws......................................................................................... A-20
6.11 Employee Benefit Plans....................................................................................... A-20
6.12 Material Contract Defaults................................................................................... A-21
6.13 Legal Proceedings............................................................................................ A-21
6.14 Absence of Certain Changes or Events......................................................................... A-21
6.15 Reports...................................................................................................... A-22
6.16 Insurance.................................................................................................... A-22
6.17 Labor........................................................................................................ A-22
6.18 Accounting; Tax; Regulatory Matters.......................................................................... A-22
6.19 Brokers and Finders.......................................................................................... A-22
6.20 Capital Stock Issued in Merger............................................................................... A-22
6.21 Statements True and Correct.................................................................................. A-22
</TABLE>

ARTICLE VII

CONDUCT PRIOR TO THE EFFECTIVE TIME

<TABLE>
<CAPTION>
<C> <S> <C>
7.1 Conduct of Business Prior to the Effective Time.............................................................. A-22
7.2 Forbearances................................................................................................. A-22
7.3 Access and Information; Confidentiality...................................................................... A-23
7.4 Current Information.......................................................................................... A-24
7.5 Registration Statement; Regulatory Matters................................................................... A-24
7.6 Directors' and Shareholders' Approvals....................................................................... A-24
7.7 Agreements of Affiliates..................................................................................... A-25
7.8 Delivery of Monthly Financial Statements..................................................................... A-25
7.9 Accounting Treatment; Tax-Free Reorganization................................................................ A-25
7.10 Press Releases............................................................................................... A-25
7.11 Miscellaneous Agreements and Consents........................................................................ A-25
</TABLE>

ARTICLE VIII

ADDITIONAL AGREEMENTS

<TABLE>
<CAPTION>
<C> <S> <C>
8.1 Indemnification and Insurance................................................................................ A-26
8.2 Employee Contracts and Employee Benefits..................................................................... A-26
8.3 Modification of Employee Benefits............................................................................ A-26
8.4 Due Diligence Investigations................................................................................. A-27
</TABLE>

A-3

<PAGE>

ARTICLE IX

CONDITIONS

<TABLE>
<CAPTION>
<C> <S> <C>
9.1 Conditions to Each Party's Obligation to Effect the Merger................................................... A-27
9.2 Conditions to the Obligation of Salem........................................................................ A-28
9.3 Conditions to the Obligations of CCBF and CCB Bank........................................................... A-28
9.4 Additional Conditions........................................................................................ A-29
</TABLE>

ARTICLE X

TERMINATION

<TABLE>
<CAPTION>
<C> <S> <C>
10.1 Termination.................................................................................................. A-29
10.2 Effect of Termination........................................................................................ A-30
10.3 Expenses..................................................................................................... A-30
10.4 Wrongful Termination......................................................................................... A-30
10.5 Termination Fee.............................................................................................. A-30
</TABLE>

ARTICLE XI

GENERAL PROVISIONS

<TABLE>
<CAPTION>
<C> <S> <C>
11.1 Non-Survival of Representations, Warranties and Covenants Following the Effective Time....................... A-30
11.2 Entire Agreement............................................................................................. A-30
11.3 Amendments................................................................................................... A-31
11.4 Waivers...................................................................................................... A-31
11.5 No Assignment................................................................................................ A-31
11.6 Notices...................................................................................................... A-31
11.7 Severability................................................................................................. A-32
11.8 Governing Law................................................................................................ A-32
11.9 Counterparts................................................................................................. A-32
11.10 Captions..................................................................................................... A-32
</TABLE>

APPENDIX A Plan of Merger

A-4

<PAGE>
AMENDED AGREEMENT OF COMBINATION

This AMENDED AGREEMENT OF COMBINATION (this "Agreement"), made and entered
into as of July 1, 1996 and amended as of September 6, 1996, by and among CCB
Financial Corporation, a North Carolina corporation ("CCBF"), Central Carolina
Bank and Trust Company, a North Carolina commercial bank ("CCB Bank"), and Salem
Trust Bank, a North Carolina commercial bank ("Salem").

W I T N E S S E T H:

WHEREAS, CCBF is a registered bank holding company under the Bank Holding
Company Act of 1956, as amended (the "BHCA"); and

WHEREAS, at the Effective Time, Salem will merge with and into CCB Bank
(the "Merger") with CCB Bank as the surviving bank (the "Surviving Bank"); and

WHEREAS, the Boards of Directors of CCBF and CCB Bank and the Board of
Directors of Salem resolved that the Merger and the other transactions described
herein are in the best interests of the parties and their respective
shareholders and adopted the initial Agreement and authorized the execution
thereof; and

WHEREAS, the Boards of Directors of CCBF and CCB Bank and the Board of
Directors of Salem have approved the Agreement as hereby amended and authorized
the execution hereof; and

WHEREAS, the shareholder of CCB Bank and the shareholders of Salem shall
consider and act upon resolutions to approve and adopt this Agreement and to
authorize the execution and delivery of such other agreements and other
documents as are necessary to consummate the Merger and such other transactions;
and

WHEREAS, CCBF, CCB Bank and Salem desire to provide for certain
undertakings, conditions, representations, warranties and covenants in
connection with the transactions contemplated by this Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereby agree as follows:

ARTICLE I

DEFINITIONS

"Action" shall mean any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any federal, state, local or foreign
government, governmental, regulatory or administrative authority, agency or
commission, or any court, or tribunal, or judicial or arbitral body.

"Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated
under the 1934 Act.

"Agreement" shall mean this Amended Agreement of Combination.

"Allowance" shall have the meaning set forth in Section 5.8 of this
Agreement.

"Articles of Merger" shall have the meaning set forth in Section 2.6 of
this Agreement.

"Authorizations" shall have the meaning set forth in Section 5.1 of this
Agreement.

"Bank Act" shall mean Chapter 53 of the North Carolina General Statutes.

"BHCA" shall have the meaning set forth in the preamble to this Agreement.

"Carson Medlin" shall have the meaning set forth in Section 5.23 of this
Agreement.

"CCBF" shall have the meaning set forth in the preamble to this Agreement.

"CCB Bank" shall have the meaning set forth in the preamble to this
Agreement.

"CCBF Common Stock" shall have the meaning set forth in Section 3.1 of this
Agreement.

"CCBF Financial Statements" shall mean (i) the audited consolidated balance
sheets of CCBF as of December 31, 1995 and 1994 and the related audited
consolidated statements of income, shareholders' equity and cash flows
(including related notes, schedules, if any, and independent auditors' reports)
for each of the years ended December 31, 1995, 1994 and 1993,

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as have been Previously Disclosed and (ii) CCBF's unaudited consolidated balance
sheet (including related notes and schedules, if any) as of March 31, 1996 and
the related unaudited consolidated statements of income, shareholders' equity
and cash flows for the three-month period ended March 31, 1996 as have been
Previously Disclosed and, with respect to interim quarterly periods ended
subsequent to March 31, 1996 as will be provided to Salem prior to the Effective
Time.

"CCBF Rights" shall have the meaning set forth in Section 3.1 of this
Agreement.

"CCBF Rights Plan" shall have the meaning set forth in Section 3.1 of this
Agreement.

"CCBF Stock Price" shall mean the closing sales price of CCBF Common Stock
on the NYSE on the trading day, or the average closing sales price of CCBF
Common Stock on the NYSE over the number of consecutive trading days, specified
in the context in which the defined term is used.

"CCBF Subsidiaries" shall mean any or all of CCB Bank, Graham Savings Bank,
Inc., SSB, and Central Carolina Bank -- Georgia, all of which are subsidiaries
of CCBF, and CCB Investment and Insurance Service Corporation, Southland
Associates, Inc., and CCBDE, Inc., all of which are subsidiaries of CCB Bank.

"CERCLA" shall have the meaning set forth in Section 5.21(e) of this
Agreement.

"Closing" shall have the meaning set forth in Section 2.3 of this
Agreement.

"Closing Date" shall have the meaning set forth in Section 2.3 of this
Agreement.

"Commission" shall mean the North Carolina Banking Commission.

"Commissioner" shall mean the North Carolina Commissioner of Banks.

"Costs" shall have the meaning set forth in Section 10.3 of this Agreement.

"Due Diligence Period" shall have the meaning set forth in Section 8.4 of
this Agreement.

"D&O Insurance" shall have the meaning set forth in Section 8.1(c) of this
Agreement.

"Effective Time" shall mean the time and date specified pursuant to Section
2.4 hereof as the effective time of the Merger.

"Employee Benefit Plan" shall mean any (i) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (ii) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (iii) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan, (iv)
Employee Welfare Benefit Plan or material fringe benefit plan or program, or (v)
stock option, stock purchase, stock appreciation, stock or cash bonus, or
similar plan or arrangement.

"Employee Pension Benefit Plan" shall have the meaning set forth in ERISA
Section 3(2).

"Employee Welfare Benefit Plan" shall have the meaning set forth in ERISA
Section 3(1).

"Environmental Agency" shall have the meaning set forth in Section 5.21(f)
of this Agreement.

"Environmental Law" shall have the meaning set forth in Section 5.21(d) of
this Agreement.

"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.

"Exchange Agent" shall have the meaning set forth in Section 3.6 of this
Agreement.

"Exchange Ratio" shall have the meaning set forth in Section 3.1 of this
Agreement.

"FDIC" shall mean the Federal Deposit Insurance Corporation, or any
successor thereto.

"FDIA" shall mean the Federal Deposit Insurance Act, as amended.

"Federal Reserve" shall mean the Federal Reserve Bank of Richmond acting
under delegated authority from the Federal Reserve Board, or any successor
thereto.

"Federal Reserve Board" shall mean the Board of Governors of the Federal
Reserve System, or any successor thereto.

"Fiduciary" shall have the meaning set forth in ERISA Section 3(21).

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"GAAP" shall mean generally accepted accounting principles in effect in the
United States from time to time, as applied by the entity in respect of which
the term is used consistently with its past practices.

"Hazardous Materials" shall have the meaning set forth in Section 5.21(e)
of this Agreement.

"HSR Act" shall have the meaning set forth in Section 5.3(c).

"IRS" shall mean the Internal Revenue Service.

"Indemnifiable Losses" shall mean any and all Actions, judgments, orders,
decrees, rulings, damages, penalties, fines, costs, amounts paid in settlement
or compromise, Liabilities, expenses, fees (including attorneys' fees awarded to
third parties), court costs, and reasonable attorneys', expert witnesses',
consultants', and accountants' fees and expenses incurred by an Indemnified
Party as a result or by reason of the Indemnifying Party's breach of its
obligations under this Agreement or violation of law, except to the extent that
such otherwise Indemnifiable Losses arise as a result or by reason of the
Indemnified Party's breach of its obligations under this Agreement or its
violation of law.

"Indemnified Party" shall mean any Person entitled to indemnification under
this Agreement.

"Indemnifying Party" shall mean any Person required to provide
indemnification under this Agreement.

"Knowledge," when used in the phrase "to the knowledge" or a similar
phrase, shall mean the knowledge of the senior executive officers (including,
without limitation, the senior executive officers responsible for Tax matters)
of CCBF or Salem, as applicable, after reasonable inquiry of the other executive
officers and the directors of CCBF or Salem, as applicable, and, with respect to
CCBF, the Persons responsible for the day-to-day operations of the CCBF
Subsidiaries.

"Liabilities" shall mean any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent or matured or unmatured,
including without limitation, those arising under Law and those arising under
any contract, agreement, arrangement, commitment, undertaking or Action.

"Law" shall mean any federal, state, local or foreign statute, law,
ordinance, regulation, rule, code or order, including, without limitation, the
Bank Act, the FDIA and the NCBCA.

"Lien" shall mean any lien, claim, encumbrance, security interest,
assessment, mortgage, deed of trust, equity or other similar or like charge.

"Material Adverse Event" shall mean any event, matter, item, circumstance
(other than as a result of changes (a) in banking or other financial institution
Laws of general applicability or interpretations thereof by the courts or
Regulatory Authorities, (b) in GAAP, or (c) Laws generally), Action or Liability
that in and of itself, or when combined with all similar events, matters, item,
circumstances, Actions or Liabilities reasonably could be expected to have, now
or in the future, a material adverse effect on the business, financial
condition, operations, results of operations or prospects of CCBF and the CCBF
Subsidiaries, taken as a consolidated whole (unless otherwise indicated herein),
or Salem, as the case may be, or which, with respect to either CCBF or Salem,
would be reasonably likely to deprive the other of the material benefits
reasonably anticipated by it to be derived from the consummation of the Merger.

"Merger" shall have the meaning set forth in the preamble to this
Agreement.

"Multiemployer Plan" shall have the meaning set forth in ERISA Section
3(37).

"NASD" shall mean the National Association of Securities Dealers, Inc.

"NCBCA" shall mean the North Carolina Business Corporation Act.

"NMS" shall mean the Nasdaq National Market of The Nasdaq Stock Market,
Inc.

"NYSE" shall mean the New York Stock Exchange.

"1933 Act" shall mean the Securities Act of 1933, as amended.

"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.

"Ordinary Course of Business" shall mean the ordinary course of business of
the entity respecting which this term is used, conducted in the same manner as
theretofore conducted during the two year period preceding the date of this
Agreement and consistent with the entity's past policies, practices, and methods
(including with respect to quantity and frequency) in effect during such two
year period.

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"OMC" shall have the meaning set forth in Section 5.23 of this Agreement.

"PBGC" shall mean the Pension Benefit Guaranty Corporation.

"PCBs" shall have the meaning set forth in Section 5.21(b) of this
Agreement.

"Person" shall mean an individual, a partnership, a corporation, a
commercial bank, an industrial bank, a savings association, a savings bank, a
limited liability company, an association, a joint stock company, a trust, a
business trust, a joint venture, an unincorporated organization, or a
governmental entity (or any department, agency, or political subdivision
thereof).

"Plan of Merger" shall have the meaning set forth in Section 2.4 of this
Agreement.

"Previously Disclosed" shall mean, as to Salem, all information disclosed
in a letter delivered by Salem to CCBF, and, as to CCBF, all information
disclosed in a letter delivered by CCBF to Salem, in each case making such
disclosure specifically referring to this Agreement and arranged in sections,
subsection, and items corresponding to the Sections, subsections and items of
this Agreement applicable thereto, which letters were delivered at or before
5:00 o'clock, p.m., on July 16, 1996. Information shall be deemed Previously
Disclosed for the purpose of a given Section, subsection or item only to the
extent a specific reference thereto is made in connection with disclosure of
such information at the time of such delivery.

"Prohibited Transaction" shall have the meaning set forth in ERISA Section
406 and Tax Code Section 4975.

"Proxy Statement" shall have the meaning set forth in Section 7.5 of this
Agreement.

"RCRA" shall have the meaning set forth in Section 5.21(e) of this
Agreement.

"Regulatory Agreement" shall have the meaning set forth in Section 5.10(b)
of this Agreement.

"Regulatory Approvals" shall have the meaning set forth in Section 2.4 of
this Agreement.

"Regulatory Authorities" shall have the meaning set forth in Section
5.10(b) of this Agreement.

"Reportable Event" shall have the meaning set forth in ERISA Section 4043.

"Rights" shall mean warrants, options, rights (whether stock appreciation
rights, conversion rights, exchange rights, profit participation rights, or
otherwise), convertible securities and other arrangements or commitments which
obligate a Person to issue, otherwise cause to become outstanding, sell,
transfer, pledge, or otherwise dispose of any of its capital stock or other
ownership interests, or any voting rights thereof or therein.

"Salem" shall have the meaning set forth in the preamble to this Agreement.

"Salem Benefit Plans" shall have the meaning set forth in Section 5.11(a)
of this Agreement.

"Salem Common Stock" shall have the meaning set forth in Section 3.1 of
this Agreement.

"Salem Dissenting Shareholders" shall have the meaning set forth in Section
3.7 of this Agreement.

"Salem Financial Statements" shall mean (i) the audited balance sheets of
Salem as of December 31, 1995 and 1994 and the related audited statements of
income, stockholders' equity and cash flows (including related notes, schedules,
if any, and independent auditors' reports) for each of the years ended December
31, 1995, 1994 and 1993, as have been Previously Disclosed, and (ii) Salem's
unaudited consolidated balance sheet (including related notes and schedules, if
any) as of March 31, 1996 and the related unaudited consolidated statements of
income, stockholders' equity and cash flows for the three-month period ended
March 31, 1996 as have been Previously Disclosed and, with respect to interim
quarterly periods ended subsequent to March 31, 1996 as will be provided to CCBF
prior to the Effective Time.

"Salem Options Plans" shall mean Salem's 1996 Stock Option Plan, the 1986
Incentive Stock Option Plan, as amended in June of 1995, and all stock option
plans and other plans providing for options to acquire Salem Common Stock
adopted or assumed by Salem.

"Salem Retirement Plan" shall mean Salem's 401(k) defined contribution
retirement plan.

"Salem Stock Options" shall mean all options outstanding as of May 7, 1996
under any Salem Options Plan.

"SEC" shall mean the United States Securities and Exchange Commission.

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"SEC Document" shall mean any registration statement, document, report,
notice or other filing filed by CCBF or Salem, as applicable, with the SEC or
the FDIC pursuant to the 1933 Act or the 1934 Act.

"Securities Laws" shall have the meaning set forth in Section 5.3(c) of
this Agreement.

"Shareholders' Meeting" shall have the meaning set forth in Section 7.6 of
this Agreement.

"Significant Contract" shall mean (a) any note, bond, mortgage or other
instrument which evidences or secures indebtedness of such Person (other than a
deposit) with a balance outstanding of $25,000 or more, which cannot be redeemed
or prepaid at the option of such Person for an amount which, when added to the
outstanding principal balance, would be less than $25,000, (b) any agreement,
arrangement, commitment, contract or other instrument, except a lease of real or
personal property, to which such Person is a party or by which they are bound,
if (i) such agreement, arrangement, commitment, contract or instrument was not
made in the Ordinary Course of Business by such Person, or (ii) the performance
or nonperformance of such agreement, arrangement, commitment, contract or
instrument could either (X) increase the Liabilities or decrease the assets of
the Person, or (Y) decrease the income or increase the expenses of such Person,
in each case by $25,000 or more over the remaining term of the obligation,
exclusive of all optional renewal periods and extensions of the term; provided,
however, that any such agreement, arrangement, commitment, contract or other
instrument shall not be deemed to be a Significant Contract in the event such
Person has the contractual right to terminate the agreement, arrangement,
commitment, contract or other instrument in question on 30 days' notice or less,
without incurring a penalty or premium in excess of $25,000. It is understood
that Significant Contracts do not include loans or commitments to fund loans or
to extend credit. When this defined term is used with respect to CCBF and its
Subsidiaries, the dollar amount of $25,000 shall be deemed to be $750,000.

"Significant Lease" shall mean (a) any lease of real or personal property,
or any sublease of real property, by such Person, as lessee, pursuant to which
such Person reasonably anticipates the payment of aggregate rent, Taxes,
insurance, utilities (if applicable) and other charges in excess of $25,000 over
the remaining term of the lease, exclusive of all optional renewal periods and
optional extensions of the term (provided, however, that any such lease shall
not be deemed a Significant Lease in the event that such Person has the
contractual right to terminate the lease in question on 30 days' notice or less,
without incurring a penalty or premium in excess of $25,000); or (b) any lease
of real or personal property, or any sublease of real property, by such Person,
as lessor, pursuant to which such Person reasonably anticipates the collection
of aggregate rent in excess of $25,000 over the remaining term of the lease,
exclusive of all optional renewal periods and extensions of the term (provided,
however, that any such lease shall not be deemed a Significant Lease in the
event that such Person has the contractual right to terminate the lease in
question on 30 days' notice or less, without incurring a penalty or premium in
excess of $25,000). When this defined term is used with respect to CCBF and its
Subsidiaries, the dollar amount of $25,000 shall be deemed to be $750,000.

"Surviving Bank" shall have the meaning set forth in the preamble to this
Agreement.

"Tax" or "Taxes" shall mean any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, withholding, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including taxes
under Tax Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security, unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax or taxes of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.

"Tax Code" shall mean the Internal Revenue Code of 1986, as amended.

"Tax Return" shall mean any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.

Other terms used herein are defined elsewhere in this Agreement.

ARTICLE II

THE MERGER AND RELATED TRANSACTIONS

2.1 MERGER. Subject to the terms and conditions of this Agreement, at the
Effective Time Salem shall be merged with and into CCB Bank in accordance with
the provisions of the Bank Act and Article 11 of the NCBCA and with the effect
provided in Section 53-13 of the Bank Act and Section 55-11-06 of the NCBCA. The
separate corporate existence of Salem shall thereupon cease, and CCB Bank shall
be the Surviving Bank.

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2.2 DIRECTORS OF SURVIVING BANK. At the Effective Time, the members of the
Board of Directors of CCB Bank shall continue in office as the directors of CCB
Bank.

2.3 TIME AND PLACE OF CLOSING. The closing of the Merger, and the other
transactions contemplated hereby (the "Closing") will take place at the
principal offices of CCBF in Durham, North Carolina at 11:00 o'clock, a.m., on
the date that the Effective Time occurs, or at such other prior time, and at
such place, as may be mutually agreed upon by CCBF and Salem (the "Closing
Date").

2.4 EFFECTIVE TIME. The Merger shall become effective on the date and at
the time (the "Effective Time") on which Articles of Merger containing a Plan of
Merger in substantially the form of Appendix A hereto (the "Plan of Merger") and
the other provisions required by, and executed in accordance with, Section 53-12
of the Bank Act and Section 55-11-05 of the NCBCA (the "Articles of Merger")
shall have been accepted for filing by the Secretary of State of the State of
North Carolina (or such later date and time as may be specified in the Articles
of Merger). Unless otherwise mutually agreed upon by CCBF and Salem, subject to
the terms and conditions hereof, the Effective Time shall occur on the first
business day following the last to occur of (i) the date that is 30 days after
the date of the later to occur of the order of the FDIC approving the Merger
pursuant to the FDIA, (ii) the effective date of the last required order,
approval, or exemption of the FDIC, the Commission, the Commissioner, or any
other federal or state regulatory agency approving or exempting the Merger (the
"Regulatory Approvals"), (iii) the expiration of all required waiting periods
after the filing of notices with, or the receipt of Regulatory Approvals from,
all federal or state regulatory agencies required for consummation of the
Merger, and (iv) the later of the dates on which the shareholder of CCB Bank and
the shareholders of Salem approve this Agreement and the transactions
contemplated hereby, to the extent such approvals are required under the Bank
Act, the NCBCA, other North Carolina Laws or the rules, regulations or bylaws of
the NASD or the NYSE.

2.5 SUBSEQUENT ACTIONS. If, at any time after the Effective Time, CCBF
shall consider or be advised that any corporate or regulatory filings,
regulatory approvals, deeds, bills of sale, assignments, assurances or any other
actions or things are necessary or desirable to vest, perfect or confirm of
record, or otherwise, in the Surviving Bank its right, title or interest in, to
or under any of the rights, properties or assets of either CCB Bank or Salem
acquired or to be acquired by the Surviving Bank as a result of, or in
connection with, the Merger, or otherwise to carry out this Agreement, the
officers and directors of the Surviving Bank shall be authorized to execute and
deliver, and file, if required in the name and on behalf of each of CCB Bank and
Salem or otherwise, all such corporate or regulatory filings, deeds, bills of
sale, assignments and assurances and to take and do, in the name and on behalf
of each of CCB Bank and Salem or otherwise, all such other actions and things as
may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets in the
Surviving Bank, or otherwise to carry out this Agreement.

ARTICLE III

MANNER OF CONVERTING SHARES

3.1 CONVERSION OF SHARES. Subject to the provisions of this Article III, at
the Effective Time, by virtue of the Merger and without any action on the part
of the holders thereof, each of the shares of common stock, $2.50 par value per
share, of Salem (the "Salem Common Stock") issued and outstanding immediately
prior to the Effective Time (excluding shares held by CCBF, Salem, any CCBF
Subsidiary or any Salem Subsidiary, in each case other than in a fiduciary
capacity or as a result of debts previously contracted, and excluding shares
held by Salem Dissenting Shareholders) shall be converted into and become the
right to receive .41 of a share of the common stock, $5.00 par value per share,
of CCBF (the "CCBF Common Stock") and the right to receive .41 of a preferred
share purchase right (a "CCBF Rights") as described in CCBF's Shareholder Rights
Plan, adopted February 26, 1990 (the "CCBF Rights Plan") (the "Exchange Ratio").
Each of the shares of CCBF Common Stock (and the attached CCBF Rights) and any
shares of any CCBF Subsidiary outstanding immediately prior to the Effective
Time shall continue to be issued and outstanding, and shall not be converted,
exchanged or altered in any manner as a result of the Merger.

3.2. CONVERSION OF OPTIONS. At the Effective Time, all Rights with respect
to Salem Stock Options granted under Salem Options Plans, whether or not then
exercisable, shall be converted into and become Rights with respect to CCBF
Common Stock, and CCBF shall assume all obligations of Salem with respect to
each Salem Stock Option, in accordance with the terms of the respective Salem
Options Plan under which it was issued and the stock option agreement by which
it may be evidenced. From and after the Effective Time, (i) each Salem Stock
Option shall be assumed by CCBF in accordance with the foregoing, except that
each such Salem Stock Option may be exercised solely for shares of CCBF Common
Stock (which shall have attached thereto CCBF Rights), (ii) the number of shares
of CCBF Common Stock (with attached CCBF Rights)

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subject to each Salem Stock Option shall be equal to the number of shares of
Salem Common Stock subject to such Salem Stock Option immediately prior to the
Effective Time multiplied by the Exchange Ratio, and (iii) the per share
exercise price under each such Stock Option shall be adjusted by dividing the
per share exercise price under each such option by the Exchange Ratio and
rounding down to the nearest cent; provided, however, that the number of shares
of CCBF Common Stock (with attached CCBF Rights) subject to each Salem Stock
Option and the per share exercise price shall be subject to further adjustment
as appropriate to reflect any stock split, stock dividend, recapitalization or
other similar transaction declared or effected by CCBF subsequent to the
Effective Time. It is intended that the foregoing adjustments and assumption
shall be undertaken in a manner that will constitute a "modification" within the
meaning of, and that is otherwise consistent with, Tax Code Section 424(a) as to
any stock option which is an "incentive stock option" (as defined in Section 422
of the Tax Code).

3.3 ANTI-DILUTION PROVISIONS. Except for the issuance of Salem Common Stock
pursuant to the exercise of Salem Stock Options, in the event that Salem changes
the number of shares of Salem Common Stock issued and outstanding between the
date hereof and the Effective Time, the Exchange Ratio shall be proportionately
adjusted.

3.4 SHARES HELD BY CCBF OR SALEM. Each of the shares of Salem Common Stock
held by CCBF or any CCBF Subsidiary or Salem, other than shares held by CCBF or
any CCBF Subsidiary or Salem in a fiduciary capacity or as a result of debts
previously contracted, shall be canceled and retired at the Effective Time and
no consideration shall be issued in exchange therefor.

3.5 FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement, each holder of shares of Salem Common Stock converted pursuant to the
Merger or of Salem Stock Options, who would otherwise have been entitled to
receive a fraction of a share of CCBF Common Stock and an attached CCBF Right
(after taking into account the aggregate of all certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount
equal to such fractional part of a share of the CCBF Common Stock multiplied by
the market value of one share of CCBF Common Stock at the Effective Time, in the
case of shares of Salem Common Stock converted pursuant to the Merger, or as of
the date of exercise, in the case of Salem Stock Options. The market value of
one share of CCBF Common Stock at the Effective Time or the date of exercise, as
the case may be, shall be the CCBF Stock Price on the last trading day preceding
the Effective Time or the date of exercise, as the case may be. No such holder
will be entitled to dividends, voting rights or any other rights as a
shareholder in respect of any fractional share.

3.6 TRANSFERS. At the Effective Time, the stock transfer books of Salem
shall be closed as to holders of Salem Common Stock immediately prior to the
Effective Time and no transfer of Salem Common Stock by any such holder shall
thereafter be made or recognized. If, after the Effective Time, certificates are
properly presented in accordance with Article IV of this Agreement to the
Registrar and Transfer Company, acting as the exchange agent for CCBF Common
Stock (the "Exchange Agent"), such certificates shall be canceled and exchanged
for certificates representing the number of whole shares of CCBF Common Stock,
and a check representing the amount of cash for fractional shares, if any, into
which the Salem Common Stock represented thereby was converted in the Merger.
Any other provision of this Agreement notwithstanding, none of CCBF, Salem, the
Exchange Agent or any Affiliate of the foregoing shall be liable to a holder of
Salem Common Stock for any amount paid or property delivered in good faith to a
public official pursuant to any applicable abandoned property, escheat, or
similar Law.

3.7 DISSENTING SHAREHOLDERS. Notwithstanding any other provision of this
Agreement, shares of Salem Common Stock held by holders who did not vote in
favor of the Merger and who otherwise perfect dissenters' rights under Section
55-13-01 ET SEQ. of the NCBCA ("Salem Dissenting Shareholders") shall not be
converted into or become shares of CCBF Common Stock, but such shares of Salem
Common Stock shall represent only the right to receive the "fair value" of such
shares as provided in the NCBCA. If any such holder shall have failed to perfect
or shall have effectively withdrawn or lost such dissenters' rights, such shares
of Salem Common Stock shall thereupon be deemed to have been converted and
become shares of CCBF Common Stock in accordance with the Exchange Ratio as of
the Effective Time without any interest thereon. Salem shall give CCBF prompt
notice of any purported exercise of dissenters' rights and CCBF shall have the
right to direct in all negotiations and proceedings with respect to any such
demands. Salem shall not, except with the prior written consent of CCBF,
voluntarily make any payment with respect to, or settle or offer or agree to
settle, any such demand for payment.

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ARTICLE IV

EXCHANGE OF SHARES

4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time, CCBF shall
cause the Exchange Agent to mail appropriate transmittal materials (which shall
specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of Salem Common Stock shall pass,
only upon proper delivery of such certificates to the Exchange Agent) to the
former shareholders of Salem. After the Effective Time, each holder of shares of
Salem Common Stock issued and outstanding at the Effective Time (other than
shares to be canceled pursuant to Sections 3.4 or 3.7 of this Agreement) shall
surrender the certificate or certificates theretofore representing such shares,
together with such transmittal materials properly executed, to the Exchange
Agent and promptly upon surrender shall receive in exchange therefor the
consideration provided in Section 3.1 of this Agreement, together with all
declared but unpaid dividends in respect of such shares. The certificate or
certificates of Salem Common Stock so surrendered shall be duly endorsed as the
Exchange Agent may require. To the extent provided by Section 3.5 of this
Agreement, each holder of shares of Salem Common Stock issued and outstanding at
the Effective Time also shall receive, upon surrender of the certificate or
certificates representing such shares, cash in lieu of any fractional shares of
CCBF Common Stock of which such holder would otherwise be entitled. CCBF shall
not be obligated to deliver the consideration to which any former holder of
Salem Common Stock is entitled as a result of the Merger until such holder
surrenders his certificate or certificates representing shares of Salem Common
Stock for exchange as provided in this Article IV. In addition, certificates
surrendered for exchange by any person constituting an "affiliate" of Salem for
purposes of Rule 145(c) under the 1933 Act shall not be exchanged for
certificates representing whole shares of CCBF Common Stock until CCBF has
received a written agreement from such person as provided in Section 7.7. In the
event any certificate shall have been lost, stolen or destroyed, upon receipt of
appropriate evidence as to such loss, theft or destruction and to ownership of
such certificate by the person claiming such certificate to be lost, stolen or
destroyed and the receipt by the Exchange Agent of appropriate and customary
indemnification, the Exchange Agent will issue in exchange for such lost, stolen
or destroyed certificate shares of CCBF Common Stock (with attached CCBF Rights)
and a check representing cash in lieu of fractional shares and/or declared but
unpaid dividends deliverable in respect thereof. Each certificate surrendered as
provided herein shall be properly endorsed and otherwise in proper form for
transfer and the person requesting such exchange shall affix any requisite stock
transfer tax stamps to the certificate surrendered, shall provide funds for
their purchase or for any transfer or other Taxes required by reason of the
delivery of such certificate or check or shall establish to the satisfaction of
the Exchange Agent that such Taxes have been paid or are not payable.

4.2 VOTING AND DIVIDENDS. Former shareholders of record of Salem shall be
entitled to vote after the Effective Time, at any meeting of shareholders of
CCBF, the number of whole shares of CCBF Common Stock into which their
respective shares of Salem Common Stock are converted, regardless of whether
such holders have exchanged their certificates representing Salem Common Stock
for certificates representing CCBF Common Stock in accordance with the
provisions of this Agreement. Until surrendered for exchange in accordance with
the provisions of Section 4.1 of this Agreement, each certificate theretofore
representing shares of Salem Common Stock (other than shares to be canceled
pursuant to Section 3.4 or 3.7 of this Agreement) shall from and after the
Effective Time represent for all purposes only the right to receive shares of
CCBF Common Stock (with attached CCBF Rights), and cash in lieu of fractional
shares as set forth in this Agreement. Whenever a dividend or other distribution
is declared by CCBF on the CCBF Common Stock, the record date for which is at or
after the Effective Time, the declaration shall include dividends or other
distributions on all shares issuable pursuant to this Agreement, but beginning
on the 91st day after the date on which the Effective Time shall occur, no
dividend or other distribution payable to the holders of record of CCBF Common
Stock at or as of any time after the Effective Time shall be paid to the holder
of any certificate representing shares of Salem Common Stock issued and
outstanding at the Effective Time until such holder physically surrenders such
certificate for exchange as provided in Section 4.1 of this Agreement, promptly
after which time all such dividends or distributions shall be paid (without
interest).

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF SALEM

Salem represents and warrants to CCBF and CCB Bank as follows:

5.1 ORGANIZATION, STANDING, AND AUTHORITY. Salem is a commercial bank duly
organized, validly existing and in good standing under the Laws of the State of
North Carolina, and is duly qualified to do business and in good standing in all
jurisdictions (whether federal, state, local or foreign) where both its
ownership or leasing of property or the conduct of its business requires it to
be so qualified and the failure to do so would constitute a Material Adverse
Event. Salem has all

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requisite corporate power and authority to carry on its business as now
conducted and to own, lease and operate its assets, properties and business, and
to execute, deliver and perform its obligations under this Agreement. Except as
Previously Disclosed, Salem has in effect all federal, state, local and foreign
governmental, regulatory and other authorizations, permits and licenses
(collectively, "Authorizations") necessary for it to own or lease its properties
and assets and to carry on its business as now conducted.

5.2 CAPITAL STOCK.

(a) The authorized capital stock of Salem consists of 5,000,000 shares of
Salem Common Stock, of which 1,841,232 shares were issued and outstanding on May
31, 1996. All of the issued and outstanding shares of Salem Common Stock are
duly and validly issued and outstanding and are fully paid and nonassessable,
except as otherwise provided in Section 53-42 of the Bank Act. None of the
outstanding shares of Salem Common Stock has been issued in violation of any
preemptive Rights. Except as contemplated by this Agreement and except for the
Salem Stock Options, there are no other shares of capital stock or other equity
securities of Salem outstanding and no Rights relating to the capital stock of
Salem. There are outstanding Salem Stock Options to acquire 126,622 shares of
Salem Common Stock.

(b) The Salem Common Stock is not subject to any restrictions as to
transfer thereof (exclusive of restrictions respecting shares of Salem Common
Stock held by its directors, officers or other "affiliates" imposed in
accordance with the Securities Laws). To the Knowledge of Salem and except as
Previously Disclosed, as of the date hereof, no Person is a beneficial owner of,
or has a Right to own beneficially, five percent (5%) or more of the Salem
Common Stock. For purposes of this Section 5.2, the term "beneficial owner"
shall have the meaning provided in Rule 13d-3 of the rules and regulations of
the SEC as in effect on the date hereof, except that the terms shall not include
ownership of any of the Salem Common Stock held by Salem as trustee or in some
other fiduciary or custodial capacity.

5.3. AUTHORIZATION OF MERGER AND RELATED TRANSACTIONS.

(a) The execution and delivery of this Agreement by Salem and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
Salem, subject to the approval of its shareholders to the extent required by
applicable Law. This Agreement, subject to requisite shareholder approvals and
Regulatory Approvals, represents a valid and legally binding obligation of Salem
enforceable against Salem in accordance with its terms.

(b) Neither the execution and delivery of this Agreement by Salem, nor the
consummation by Salem of the transactions contemplated hereby, nor compliance by
Salem with any of the provisions hereof will (i) conflict with or result in a
breach of any provision of the respective Articles of Incorporation or Bylaws of
Salem, (ii) constitute or result in a breach of any term, condition or provision
of, or constitute a default under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
Lien upon, any property or assets of Salem or pursuant to any Significant
Contract or Significant Lease, or (iii) subject to receipt of all requisite
shareholder approvals and Regulatory Approvals, violate any Law applicable to
Salem or any of its properties or assets.

(c) Other than (i) in connection or compliance with the provisions of
applicable state securities Laws, the 1933 Act, the 1934 Act, and the rules and
regulations of the SEC, and the FDIC and any state securities or "Blue Sky"
administrators promulgated thereunder (collectively, the "Securities Laws"),
(ii) consents, authorizations, approvals or exemptions required from the Federal
Reserve Board, the Federal Reserve, the FDIC, the Commission, or the
Commissioner, and (iii) notices to or filings with the IRS or the PBGC with
respect to any employee benefit plans, or under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), no notice to, filing with,
authorization of, exemption by, or consent or approval of any public body or
authority is necessary for the consummation by Salem of the Merger and the other
transactions contemplated in this Agreement.

5.4 FINANCIAL STATEMENTS. Salem (i) has delivered (or will deliver, when
issued) to CCBF copies of the Salem Financial Statements. The Salem Financial
Statements (as of the dates thereof and for the periods covered thereby) (i) are
or will be in accordance with the books and records of Salem, which are or will
be complete and accurate in all material respects and which have been or will
have been maintained in accordance with good business practices, (ii) present or
will present fairly in all material respects the financial position and the
results of operations, changes in stockholders' equity and cash flows of Salem
as of the dates and for the periods indicated, in accordance with GAAP, subject
in the case of interim financial statements to normal recurring year-end
adjustments, and (iii) with respect to the Salem Financial Statements as of and
for the years ended December 31, 1995, December 31, 1994 and December 31, 1993,
have been audited by independent certified public accountants.

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5.5 BOOKS AND CORPORATE RECORDS.

(a) Except as Previously Disclosed, the books of account of Salem have been
maintained in substantial compliance with all applicable legal and accounting
requirements and in such manner as to reflect accurately its items of income and
expense and all of its assets, Liabilities and stockholders' equity. To the
Knowledge of Salem, Salem has filed all material reports and returns, including
Tax Returns, required by any Law to be filed and has duly paid or accrued on its
books of account all Taxes and charges due pursuant to such reports and returns,
or assessed against it, including, without limitation, all such reports,
statements and assessments which Salem is required to have filed or paid
pursuant to all Laws, none of which reports, returns, statements or assessments
has been the subject of any material objection by the Regulatory Authority with
which filed.

(b) The minute books of Salem accurately reflect in all material respects
the corporate actions which its shareholders and Board of Directors, and all
committees thereof, have taken during the time periods covered by such minute
books. Such minute books have been or will be made available to CCBF and its
representatives.

5.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as Previously Disclosed or
set forth in the Salem Financial Statements, since December 31, 1992, Salem has
not incurred or paid any Liability which could constitute a Material Adverse
Event.

5.7 TAX MATTERS.

(a) Except as Previously Disclosed, all Tax Returns required to be filed by
or on behalf of Salem have been timely filed, or requests for extensions have
been timely filed and granted and have not expired, for periods ending on or
before December 31, 1995, and all such Tax Returns filed are complete and
accurate in all material respects. Except as Previously Disclosed, all Taxes due
under such Tax Returns have been paid. Except as Previously Disclosed, there is
no audit examination, deficiency or refund litigation or matter in controversy
with respect to any material amount of Taxes. All Taxes due from Salem with
respect to completed and settled examinations or concluded Tax litigation have
been paid.

(b) Except as Previously Disclosed, Salem has not executed an extension or
waiver of any statute of limitations on the assessment or collection of any Tax
due that is currently in effect.

(c) In the opinion of Salem's management, adequate provision for any Taxes
due or to become due from Salem for any period or periods through and including
March 31, 1996, has been made and is reflected on the March 31, 1996 financial
statements of Salem included in the Salem Financial Statements.

(d) Deferred Taxes of Salem have been provided for in the Salem Financial
Statements in accordance with GAAP, subject in the case of interim financial
statements to normal recurring year-end adjustments.

5.8 ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses (the
"Allowance") shown on the statements of financial condition of Salem as of March
31, 1996 included in the Salem Financial Statements was, and the Allowance shown
on the statements of financial condition of Salem as of dates subsequent to the
execution of this Agreement included in the Salem Financial Statements will be,
in each case as of the dates thereof, in the opinion of management of Salem,
adequate to provide for losses relating to or inherent in the loan portfolios of
Salem.

5.9 PROPERTIES. Except as Previously Disclosed, Salem has good and
marketable title to all its material properties and assets, whether tangible or
intangible, real, personal or mixed, including, but not limited to, all material
properties and assets reflected in the balance sheet of Salem as of March 31,
1996 included in the Salem Financial Statements or reflected in the notes
thereto, and all properties and assets purchased by Salem since such date,
except for such properties and assets which have been sold or otherwise disposed
of in the Ordinary Course of Business, are in each case free and clear of all
Liens, except for (a) Liens Previously Disclosed, (b) zoning ordinances,
easements of record, permits and other restrictions or limitations on the use of
real property which do not materially detract from the value of, or impair the
use of, such property by Salem in the operation of its business, (c) Liens for
current Taxes on property not yet due, and (d) Liens which do not materially
affect the operation of the business of Salem. Salem has Previously Disclosed
all material properties and assets which have been purchased or disposed of by
Salem since March 31, 1996. Salem has Previously Disclosed all business
locations of Salem, including whether such locations are owned or leased and a
statement of when such locations were first occupied by Salem.

5.10 COMPLIANCE WITH LAWS.

(a) To the Knowledge of Salem and except as Previously Disclosed, Salem is
in compliance in all material respects with all Laws and licensing requirements
applicable to its business or to its employees conducting its business, with any
Regulatory Agreements and with its internal policies and procedures.

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(b) Except as Previously Disclosed, Salem has not received any notification
or communication from, or consented to or entered into any memorandum, agreement
or order with, any agency or department of any federal, state or local
government, including the Federal Reserve Board, the Federal Reserve, the FDIC,
the SEC, the Commission or the Commissioner, or the staffs thereof
(collectively, the "Regulatory Authorities"), (i) asserting that Salem is not in
substantial compliance with any of the Laws which such Regulatory Authority has
promulgated or enforces, or the internal policies and procedures of such
company, (ii) threatening to revoke any Authorization, (iii) requiring or
threatening to require Salem, or indicating that Salem may be required, to enter
into a cease and desist order, agreement or memorandum of understanding or any
other agreement restricting or limiting or purporting to restrict or limit in
any manner the operations of Salem, including, without limitation, any
restriction on the payment of dividends, or (iv) directing, restricting or
limiting, or purporting to direct, restrict or limit in any manner the
operations of Salem, including, without limitation, any restriction on the
payment of dividends (any such notification, communication, memorandum,
agreement or order described in this sentence herein referred to as a
"Regulatory Agreement"). True and correct copies of all Regulatory Agreements,
if any, have been or will be delivered to CCBF by Salem.

5.11 EMPLOYEE BENEFIT PLANS.

(a) Salem has Previously Disclosed to CCBF, and will deliver to CCBF true
and complete copies of, the Salem Options Plans, the Salem Retirement Plan, and
all material pension, retirement, profit-sharing, long term incentive
compensation, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus or other material incentive plans, all other
material written employee programs, arrangements or agreements, whether arrived
at through collective bargaining or otherwise, all material medical (including
post-retirement medical), vision, dental or other health plans, all life
insurance plans and all other material employee benefit plans or fringe benefit
plans, including, without limitation, all Employee Benefit Plans, currently
adopted, maintained by, sponsored in whole or in part by, or contributed to by
Salem or any Affiliate thereof for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors or other beneficiaries
and under which employees, retirees, dependents, spouses, directors, independent
contractors or other beneficiaries are eligible to participate (collectively,
the "Salem Benefit Plans"). Any of the Salem Benefit Plans which is an Employee
Pension Benefit Plan is referred to herein as an "Salem ERISA Plan."

(b) Each such Salem Benefit Plan (and each related trust, insurance
contract, or fund) complies in form and in operation in all respects with the
applicable material requirements of ERISA and the Tax Code.

(c) All required reports and descriptions (including Form 5500 Annual
Reports, Summary Annual Reports, and Summary Plan Descriptions) have been filed
or distributed appropriately with respect to each such Salem Benefit Plan. The
requirements of Part 6 of Subtitle B of Title I of ERISA and of Tax Code Section
4980B have been met with respect to each such Salem Benefit Plan which is an
Employee Welfare Benefit Plan and which is subject to such requirements.

(d) All contributions (including all employer contributions and employee
salary reduction contributions) which are due have been paid to each such Salem
Benefit Plan which is an Salem ERISA Plan and all contributions for any period
ending at or before the Effective Time which are not yet due have been paid to
each such Salem ERISA Plan or accrued by Salem in the Ordinary Course of
Business. All premiums or other payments for all periods ending on or before the
Effective Time have been paid with respect to each such Salem Benefit Plan which
is an Employee Welfare Benefit Plan.

(e) Each such Salem Benefit Plan which is a Salem ERISA Plan and which is
intended to be a "qualified plan" meets the requirements of a "qualified plan"
under Tax Code Section 401(a) and, except as Previously Disclosed, has received,
since December 31, 1989, a favorable determination letter from the IRS.

(f) With respect to each Salem Benefit Plan that Salem maintains or ever
has maintained or to which any of them contributes, ever has contributed, or
ever has been required to contribute:

(i) No such Salem Benefit Plan which is a Salem ERISA Plan has been
the subject of a Reportable Event as to which notices would be required to
be filed with the PBGC. No proceeding by the PBGC to terminate any such
Salem ERISA Plan has been instituted or, to the Knowledge of Salem,
threatened.

(ii) There have been no Prohibited Transactions with respect to any
such Salem Benefit Plan. No Fiduciary has any Liability for breach of
fiduciary duty or any other failure to act or comply in connection with the
administration or investment of the assets of any such Salem Benefit Plan.
No Action with respect to the administration or the investment of the
assets of any such Salem Benefit Plan (other than routine claims for
benefits) is pending or, to the Knowledge of Salem, threatened.

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(g) Salem does not contribute to, ever has contributed to, or ever has been
required to contribute to any Multiemployer Plan or has any Liability (including
withdrawal Liability) under any Multiemployer Plan.

(h) Except as Previously Disclosed, Salem does not maintain any defined
benefit plans. Salem has not incurred, and to the Knowledge of Salem, Salem has
no reason to expect that it will incur any Liability to the PBGC (other than
PBGC premium payments) or otherwise under Title IV of ERISA (including any
withdrawal liability) or under the Tax Code with respect to any such Salem
Benefit Plan which is a Salem ERISA Plan and that is maintained or ever has been
maintained by Salem.

5.12 COMMITMENTS AND CONTRACTS. Except as Previously Disclosed, Salem is
not a party or subject to any of the following (whether written or oral, express
or implied):

(a) any employment contract or understanding (including any understandings
or obligations with respect to severance or termination pay Liabilities or
fringe benefits) with any present or former officer, director, employee,
including in any such Person's capacity as a consultant;

(b) any labor contract or agreement with any labor union;

(c) any contract, agreement or arrangement which limits the ability of
Salem to compete in any line of business or which involves any restriction of
the geographic area in which Salem may carry on its business (other than as may
be required by law or applicable Regulatory Authorities), or which would
restrict in any way the ability of the Surviving Bank to so compete; or

(d) any Significant Contract or Significant Lease.

5.13 MATERIAL CONTRACT DEFAULTS. Salem is not and has not received any
notice or has any Knowledge that any other party is, in default in any respect
under any Significant Contract or Significant Lease to which Salem is a party or
by which Salem or the assets, business or operations thereof may be bound or
affected or under which it or its assets, business or operations receives
benefits, except for those defaults which would not constitute, individually or
in the aggregate, a Material Adverse Event and there has not occurred any event
that with the lapse of time or the giving of notice or both would constitute
such a default.

5.14 LEGAL PROCEEDINGS. Except as Previously Disclosed, there are no
Actions instituted or pending or, to the Knowledge of Salem, threatened against
Salem, or against any property, asset, interest or right of Salem, that if
decided adversely to Salem, individually or in the aggregate, could constitute a
Material Adverse Event or that might reasonably be expected to threaten or
significantly impede the consummation of the transactions contemplated by this
Agreement. Salem is not subject to any judgment, order, writ, injunction, decree
or ruling, that, individually or in the aggregate, could constitute a Material
Adverse Event or that might reasonably be expected to threaten or significantly
impede the consummation of the transactions contemplated by this Agreement.

5.15 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1992, except
as Previously Disclosed, Salem has not (A) failed to operate in the Ordinary
Course of Business, (B) suffered any change that could constitute a Material
Adverse Event, (C) incurred any material Liabilities or engaged in any material
transaction or entered into any material agreement outside of the Ordinary
Course of Business, (D) increased the salaries, compensation or general benefits
payable to its employees other than in the Ordinary Course of Business, (E)
suffered any loss, destruction or damage to any of its properties or assets that
could constitute a Material Adverse Event, or (F) made a material acquisition or
disposition of any assets or entered into any Significant Contract or
Significant Lease other than in the Ordinary Course of Business.

5.16 REPORTS. Since December 31, 1992, Salem has filed all reports and
statements, together with all amendments required to be made with respect
thereto, that it was required to file with Regulatory Authorities. A copy of
each such report or document has been delivered or will be made available to
CCBF. As of their respective dates, each such report or document complied in all
material respects with all of the Laws enforced or promulgated by the respective
Regulatory Authority and no such report contained any information that was false
or misleading with respect to any material fact or omitted to state any material
fact necessary in order to make the statements therein not misleading.

5.17 INSURANCE. Salem is presently insured, and during each of the past
five (5) calendar years has been insured, for reasonable amounts against such
risks as companies engaged in a similar business would, in accordance with good
business practice, customarily be insured. The policies of fire, theft,
liability and other insurance maintained with respect to the assets or
businesses of Salem provide adequate coverage against loss, and the fidelity
bonds in effect as to which Salem is a named insured are sufficient for their
purpose.

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5.18 LABOR. No work stoppage involving Salem is pending or, to the
Knowledge of Salem, threatened. Salem is not involved in, or, to the Knowledge
of Salem, threatened with or affected by, any labor dispute or labor Action,
that could constitute a Material Adverse Event. Salem has, to the Knowledge of
Salem, complied in all material respects with all Laws relating to the
employment of labor, including, without limitation, any provisions thereof
relating to wages, and no person has, to the Knowledge of Salem, asserted that
Salem has Liabilities for any arrears or wages or any Taxes or penalties for
failure to comply with any of the foregoing. Except as Previously Disclosed,
there is no material Action by any Person pending or, to the Knowledge of Salem,
threatened, against Salem (or any of the employees thereof), involving
employment discrimination, sexual harassment, wrongful discharge or similar
claims. Employees of Salem are not represented by any labor union, and, to the
Knowledge of Salem, no labor union is attempting to organize employees of Salem.

5.19 MATERIAL INTERESTS OF CERTAIN PERSONS. Except as Previously Disclosed,
no officer or director of Salem, or any "associate" (as such term is defined in
Rule 14a-1 under the 1934 Act) of any such officer or director, has any material
interest in any Significant Contract or Significant Lease or any property (real
or personal), tangible or intangible, used in or pertaining to the business of
Salem.

5.20 REGISTRATION OBLIGATION. Except as Previously Disclosed, Salem is not
under any obligation, contingent or otherwise, which will survive the Merger by
reason of any agreement to register any of its securities or Rights relating
thereto under the 1933 Act.

5.21 ENVIRONMENTAL MATTERS.

(a) Except as Previously Disclosed, neither Salem nor any properties owned
or operated by Salem has been or is in violation of or liable under any
Environmental Law. There are no Actions or notices (including, without
limitation, notices, demand letter or requests for information from any
Environmental Agency) instituted, pending or threatened relating to any
Liability respecting any properties owned or operated by Salem under any
Environmental Law.

(b) Except as Previously Disclosed, (i) no Hazardous Materials have been
generated, treated, stored or disposed of at, or transported to or from, any
properties owned or operated by Salem at any time, except in compliance with the
Environmental Laws, (ii) no friable asbestos containing material is in use, or
is or has been stored or disposed of on or upon any properties owned or operated
by Salem, (iii) no polychlorinated biphenyls ("PCBs") are located on or in any
properties owned or operated by Salem in any form or device, including, without
limitation, in the form of electrical transformers, fluorescent light fixtures
with ballasts, or cooling oils, except in compliance with the Environmental
Laws, and (iv) no underground storage tanks are located on any properties owned
or operated by Salem or were located on any properties owned or operated by
Salem and subsequently removed or filled except in compliance with all
Environmental Laws.

(c) The representations in Sections 5.21(a) and (b) shall also apply to any
properties in which Salem has a security interest; provided, however, that such
representations and warranties are to the Knowledge of Salem.

(d) "Environmental Law" means any Law, license, permit, authorization,
approval, consent, judgment, decree, injunction or agreement with any
Environmental Agency relating to (i) the protection, preservation or restoration
of the environment (including, without limitation, air, water vapor, surface
water, groundwater, drinking water supply, surface soil, subsurface soil, plant
and animal life or any other natural resource), and/or (ii) the use, storage,
recycling, disposal of any substance presently listed, defined, designated or
classified as hazardous, toxic, radioactive or dangerous, or otherwise
regulated, whether by type or by quantity, including any material containing any
such substance as a component.

(e) "Hazardous Materials" means solid waste (as that term is defined under
the Resource Conservation and Recovery Act, 42 U.S.C.A. (section mark)6901 ET
SEQ. ("RCRA"), and the regulations adopted pursuant to RCRA), hazardous waste
(as that term is defined under RCRA, and the regulations adopted pursuant to
RCRA), hazardous substances (as that term is defined in the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C.A.
(section mark)9601 ET SEQ. ("CERCLA"), and the regulations adopted pursuant to
CERCLA), and other pollutants, including, without limitation, any solid, liquid,
gaseous or thermal irritant or contaminant, such as smoke, vapor, soot, fumes,
acids, alkalis or chemicals.

(f) "Environmental Agency" means the United States Environmental Protection
Agency, the North Carolina Department of Environment, Health and Natural
Resources or any other federal, state or local agency responsible for regulating
or enforcing Laws, relating to (i) the protection, preservation or restoration
of the environment (including, without limitation, air, water vapor, surface
water, groundwater, drinking water supply, surface soil, subsurface soil, plan
and animal life or any other natural resource), and/or (ii) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of any substance presently listed,
defined, designated or classified as hazardous,

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toxic, radioactive or dangerous, or otherwise regulated, whether by type or by
quantity, including any material containing any such substance as a component.

5.22 ACCOUNTING; TAX; REGULATORY MATTERS. To its Knowledge, Salem has not
taken or agreed to take any action nor does Salem have any Knowledge of any fact
or circumstance that would (i) prevent (or, together with other events, would be
reasonably likely to prevent) the Merger from qualifying, (A) if CCBF elects
pooling-of-interests accounting treatment for the Merger, for
pooling-of-interests accounting treatment or (B) as a Tax-free reorganization
within the meaning of Tax Code Section 368, or (ii) significantly impede or
delay receipt of any Regulatory Approval.

5.23 BROKERS AND FINDERS. Except for Orr Management Company ("OMC") and The
Carson Medlin Company ("Carson Medlin"), neither Salem nor any of its respective
officers, directors or employees has employed any broker or finder or incurred
any Liability for any financial advisory fees, brokerage fees, commissions or
finders' fees, and no broker or finder has acted directly or indirectly for
Salem in connection with this Agreement or the transactions contemplated hereby.

5.24 STATEMENTS TRUE AND CORRECT. The representations and warranties of
Salem in this Agreement and the information which is deemed to be Previously
Disclosed by Salem for the purpose of this Agreement are true and accurate in
all material respects.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF CCBF AND CCB BANK

CCBF and CCB Bank jointly and severally represent and warrant to Salem as
follows:

6.1 ORGANIZATION, STANDING AND AUTHORITY. CCBF is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
North Carolina, and is duly qualified to do business and in good standing in all
jurisdictions (whether federal, state, local or foreign) where both its
ownership or leasing of property or the conduct of its business requires it to
be so qualified and the failure to do so would constitute a Material Adverse
Event. CCBF has all requisite corporate power and authority to carry on its
business as now conducted and to own, lease and operate its assets, properties
and business, and to execute, deliver and perform its obligations under this
Agreement. CCBF is duly registered as a bank holding company under the BHCA.
Except as Previously Disclosed, CCBF has in effect all Authorizations necessary
for it to own or lease its properties and assets and to carry on its business as
now conducted.

6.2 CAPITAL STOCK.

(a) The authorized capital stock of CCBF consists of (i) 50,000,000 shares
of CCBF Common Stock, of which 15,069,324 shares were issued and outstanding as
of May 31, 1996, and (ii) 5,000,000 shares of serial preferred stock, none of
which were issued and outstanding on such date. All of the issued and
outstanding shares of CCBF Common Stock are duly and validly issued and
outstanding and are fully paid and nonassessable. None of the outstanding shares
of CCBF Common Stock has been issued in violation of any preemptive Rights.
Except as Previously Disclosed or set forth herein, there are no other shares of
capital stock or other equity securities of CCBF outstanding or Rights relating
to the capital stock of CCBF.

(b) The CCBF Common Stock is duly registered under the 1934 Act. The CCBF
Common Stock is not subject to any restrictions as to the transfer thereof
(exclusive of restrictions respecting CCBF Common Stock held by its directors,
officers or other Affiliates in accordance with the Securities Laws). To the
Knowledge of CCBF and except as Previously Disclosed, as of the date hereof, no
Person is a beneficial owner of, or has a Right to own beneficially, five
percent (5%) or more of the CCBF Common Stock. For purposes of this Section 6.2,
the term "beneficial owner"shall have the meaning provided in Rule 13d-3 of the
rules and regulations of the SEC as in effect on the date hereof except that the
term shall not include ownership of any of the CCBF Common Stock held by CCBF or
any CCBF Subsidiary as trustee or in some other fiduciary or custodial capacity.

6.3. CCBF SUBSIDIARIES.

(a) Each of CCBF's Subsidiaries (i) is duly organized, validly existing and
in good standing under the Laws of the state of its incorporation, (ii) is duly
qualified to do business and is in good standing in all jurisdictions (whether
federal, state, local or foreign) where both its ownership or leasing of
property or the conduct of its business requires it to be so qualified and the
failure to do so would constitute a Material Adverse Event, and (iii) has all
requisite corporate power and authority to, and, except as Previously Disclosed,
has in effect all Authorizations necessary for it to, carry on its business as
now

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conducted and to own, lease and operate its assets, properties and business.
Other than the CCBF Subsidiaries, CCBF neither owns nor controls five percent
(5%) or more of the outstanding equity securities, either directly or
indirectly, of any Person.

(b) CCBF is the direct, record and beneficial owner of 100% of the
outstanding shares of the capital stock of each of the CCBF Subsidiaries which
are its direct subsidiaries, and CCB Bank is the direct, record and beneficial
owner of 100% of the outstanding shares of capital stock of each of the CCBF
Subsidiaries which are its direct subsidiaries. All of the shares of capital
stock of each of the CCBF Subsidiaries are fully paid and nonassessable (except,
with respect to CCB Bank, as otherwise provided under Section 53-42 of the Bank
Act) and are owned by CCBF or CCB Bank free and clear of any Lien. No equity
securities of any CCBF Subsidiary are or may become required to be issued (other
than to CCBF or CCB Bank) under any Rights.

6.4 AUTHORIZATION OF MERGER AND RELATED TRANSACTIONS.

(a) The execution and delivery of this Agreement by CCBF and CCB Bank and
the consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of CCBF and CCB Bank, subject to (a) ratification by the Boards of
Directors of CCBF and CCB Bank of the actions of their respective Executive
Committees in adopting this Agreement, and (b) the approval of the shareholder
of CCB Bank to the extent required by applicable Law. This Agreement, subject to
requisite director and shareholder approvals and Regulatory Approvals,
represents a valid and legally binding obligation of CCBF and CCB Bank,
enforceable against CCBF and CCB Bank in accordance with its terms.

(b) Neither the execution and delivery of this Agreement by CCBF or CCB
Bank, nor the consummation by CCBF or CCB Bank of the transactions contemplated
hereby to which they are a party, nor compliance by CCBF with any of the
provisions hereof will (i) conflict with or result in a breach of any provision
of CCBF's Amended and Restated Articles of Incorporation or Bylaws or CCB Bank's
Articles of Incorporation or Bylaws, or (ii) constitute or result in a breach of
any term, condition or provision of, or constitute a default under, or give rise
to any right of termination, cancellation or acceleration with respect to, or
result in the creation of any Lien upon, any property or assets of any of CCBF
or any CCBF Subsidiary or pursuant to any Significant Contract or Significant
Lease, or (iii) subject to receipt of all requisite shareholder approvals and
Regulatory Approvals, violate any Law applicable to CCBF or any CCBF Subsidiary
or any of their properties or assets.

(c) Other than (i) in connection or compliance with the provisions of
applicable Securities Laws and the rules and regulations of the NASD or the
NYSE, as applicable, (ii) consents, authorizations, approvals or exemptions
required from the Federal Reserve Board, the Federal Reserve, the FDIC, the
Commission or the Commissioner and (iii) notices to or filings with the IRS or
the PBGC with respect to any employee benefit plans, or under the HSR Act, no
notice to, filing with, authorization of, exemption by, or consent or approval
of any public body or authority is necessary for the consummation by CCBF and
CCB Bank of the Merger, and the other transactions contemplated in this
Agreement.

6.5 FINANCIAL STATEMENTS. CCBF (i) has delivered (or will deliver, when
issued) the CCBF Financial Statements to Salem. Except as Previously Disclosed,
the CCBF Financial Statements (as of the dates thereof and for the periods
covered thereby) (i) are or will be in accordance with the books and records of
CCBF and the CCBF Subsidiaries, which are or will be complete and accurate in
all material respects and which have been or will have been maintained in
accordance with good business practices, (ii) present or will present fairly in
all material respects the consolidated financial position and the consolidated
results of operations, changes in shareholders' equity and cash flows of CCBF
and the CCBF Subsidiaries as of the dates and for the periods indicated, in
accordance with GAAP, subject in the case of interim financial statements to
normal recurring year-end adjustments, and (iii) with respect to the CCBF
Financial Statements as of and for the years ended December 31, 1995, December
31, 1994 and December 31, 1993, have been audited by independent certified
public accountants.

6.6 BOOKS AND RECORDS.

(a) The books of account of CCBF and the CCBF Subsidiaries have been
maintained in substantial compliance with all applicable legal and accounting
requirements and in such manner as to reflect accurately their respective items
of income and expense and all of their respective assets, Liabilities and
shareholders' equity. To the Knowledge of CCBF, CCBF and the CCBF Subsidiaries
have filed all material reports and returns, including Tax Returns, required by
any Law to be filed and have duly paid or accrued on their books of account all
Taxes and charges due pursuant to such reports and returns, or assessed against
them, including, without limitation, all such reports, statements and
assessments which CCBF or any CCBF Subsidiary is required to have filed or paid
pursuant to all holding company, state commercial bank and state savings bank
Laws, none of which reports, returns, statements or assessments has been the
subject of any material objection by the the NASD, the NYSE, or any Regulatory
Authority with which filed.

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(b) The minute books of CCBF and CCB Bank accurately reflect in all
material respects the approval, adoption or ratification of all corporate
actions requiring shareholder or director approval which their respective
shareholders or Boards of Directors, and all committees thereof, have taken
during the time periods covered by such minute books, except for such actions
that the failure to be so reflected, approved, adopted or ratified would not
constitute a Material Adverse Event.

6.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except as Previously Disclosed or
reflected in any SEC Document filed by CCBF since December 31, 1992 and prior to
the date hereof, neither CCBF nor any CCBF Subsidiary has any Liabilities that
could constitute, individually or in the aggregate, a Material Adverse Event.
Except as Previously Disclosed or reflected in any SEC Document filed by CCBF
since December 31, 1992 and prior to the date hereof, since December 31, 1992,
neither CCBF nor any CCBF Subsidiary has incurred or paid any Liability that
could constitute a Material Adverse Event.

6.8 TAX MATTERS.

(a) Except as Previously Disclosed, all Tax Returns required to be filed by
or on behalf of CCBF have been timely filed, or requests for extensions have
been timely filed and granted and have not expired, for periods ending on or
before December 31, 1995, and all such Tax Returns filed are complete and
accurate in all material respects. Except as Previously Disclosed or reflected
on any SEC Document filed by CCBF since December 31, 1992 and prior to the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any material amount of Taxes. All Taxes due from
CCBF with respect to completed and settled examinations or concluded Tax
litigation have been paid.

(b) Except as Previously Disclosed, CCBF has not executed an extension or
waiver of any statute of limitations on the assessment or collection of any Tax
due that is currently in effect.

(c) In the opinion of CCBF's management, adequate provision for any Taxes
due or to become due from CCBF for any period or periods through and including
March 31, 1996, has been made and is reflected on the March 31, 1996 financial
statements of CCBF included in the CCBF Financial Statements.

6.9 ALLOWANCE FOR LOAN LOSSES. The Allowance shown on the balance sheet of
CCBF as of March 31, 1996 included in the CCBF Financial Statements was, and the
Allowance shown on the balance sheets as of dates subsequent to the execution of
this Agreement included in the CCBF Financial Statements will be, in each case
as of the dates thereof, in the opinion of management of CCBF, adequate to
provide for losses relating to or inherent in the loan portfolios of CCBF.

6.10 COMPLIANCE WITH LAWS.

(a) To the Knowledge of CCBF and except as Previously Disclosed, each of
CCBF and the CCBF Subsidiaries is in compliance in all material respects with
all Laws and licensing requirements applicable to its business or to its
employees conducting its business, with any Regulatory Agreement (substituting
CCBF and the CCBF Subsidiaries for Salem within the definition of such term) and
with its internal policies and procedures.

(b) Except as Previously Disclosed, neither CCBF nor any CCBF Subsidiary
has received, consented to or entered into any Regulatory Agreement
(substituting CCBF and the CCBF Subsidiaries for Salem within the definition of
such term). True and complete copies of all such Regulatory Agreements, if any,
have been or will be delivered to Salem by CCBF.

6.11 EMPLOYEE BENEFIT PLANS.

(a) CCBF has Previously Disclosed to Salem, and will deliver to Salem true
and complete copies of all material pension, retirement, profit-sharing,
deferred compensation, stock option, employee stock ownership, severance pay,
vacation, bonus or other material incentive plans, all other material written
employee programs, arrangements or agreements, whether arrived at through
collective bargaining or otherwise, all material medical (including
post-retirement medical), vision, dental or other health plans, all life
insurance plans and all other material employee benefit plans or fringe benefit
plans, including, without limitation, all Employee Benefit Plans currently
adopted, maintained by, sponsored in whole or in part by or contributed to by
CCBF or any CCBF Subsidiary or any Affiliate thereof for the benefit of
employees, retirees, dependents, spouses, directors, independent contractors or
other beneficiaries and under which employees, retirees, dependents, spouses,
directors, independent contractors or other beneficiaries are eligible to
participate (collectively, the "CCBF Benefit Plans"). Any of the CCBF Benefit
Plans which is an Employee Pension Benefit Plan is referred to herein as an
"CCBF ERISA Plan."

(b) Each such CCBF Benefit Plan (and each related trust, insurance
contract, or fund) complies in form and in operation in all material respects
with the applicable material requirements of ERISA and the Tax Code.

(c) All required reports and descriptions (including Form 5500 Annual
Reports, Summary Annual Reports, PBGC-1's, and Summary Plan Descriptions) have
been filed or distributed appropriately with respect to each such CCBF Benefit
Plan.

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The requirements of Part 6 of Subtitle B of Title I of ERISA and of Tax Code
Section 4980B have been met with respect to each such CCBF Benefit Plan which is
an Employee Welfare Benefit Plan and which is subject to such requirements.

(d) All contributions (including all employer contributions and employee
salary reduction contributions) which are due have been paid to each such CCBF
Benefit Plan which is a CCBF ERISA Plan and all contributions for any period
ending at or before the Effective Time which are not yet due have been paid to
each such CCBF ERISA Plan or accrued by CCBF and the CCBF Subsidiaries in the
Ordinary Course of Business. All premiums or other payments for all periods
ending on or before the Effective Time have been paid with respect to each such
CCBF Benefit Plan which is an Employee Welfare Benefit Plan.

(e) Each such CCBF Benefit Plan which is a CCBF ERISA Plan and which is
intended to be a "qualified plan" meets the requirements of a "qualified plan"
under Tax Code Section 401(a) and, except as Previously Disclosed, has received,
since December 31, 1989, a favorable determination letter from the IRS.

(f) With respect to each CCBF Benefit Plan that CCBF or any CCBF Subsidiary
maintains or ever has maintained or to which any of them contributes, ever has
contributed, or ever has been required to contribute:

(i) No such CCBF Benefit Plan which is a CCBF ERISA Plan has been the
subject of a Reportable Event as to which notices would be required to be
filed with the PBGC. No proceeding by the PBGC to terminate any such CCBF
ERISA Plan has been instituted or, to the Knowledge of CCBF, threatened.

(ii) There have been no Prohibited Transactions with respect to any
such CCBF Benefit Plan. No Fiduciary has any Liability for breach of
fiduciary duty or any other failure to act or comply in connection with the
administration or investment of the assets of any such CCBF Benefit Plan.
No action, suit, proceeding, hearing, or investigation with respect to the
administration or the investment of the assets of any such CCBF Benefit
Plan (other than routine claims for benefits) is pending or, to the
knowledge of CCBF, threatened.

(g) Neither CCBF nor any CCBF Subsidiary contributes to, ever has
contributed to, or ever has been required to contribute to any Multiemployer
Plan or has any Liability (including withdrawal Liability) under any
Multiemployer Plan.

(h) Except as Previously Disclosed, neither CCBF nor any CCBF Subsidiary
maintains any defined benefit plans. Neither CCBF nor any CCBF Subsidiary has
incurred, and to the Knowledge of CCBF, neither CCBF or any CCBF Subsidiary has
any reason to expect that any of them will incur, any Liability to the PBGC
(other than PBGC premium payments) or otherwise under Title IV of ERISA
(including any withdrawal Liability) or under the Tax Code with respect to any
such CCBF Benefit Plan which is a CCBF ERISA Plan and that is maintained or ever
has been maintained by CCBF or any CCBF Subsidiary.

6.12 MATERIAL CONTRACT DEFAULTS. CCBF is not and has not received any
notice or has any Knowledge that any other party is, in default in any respect
under any Significant Contract or Significant Lease to which CCBF is a party or
by which CCBF or the assets, business or operations thereof may be bound or
affected or under which it or its assets, business or operations receives
benefits, except for those defaults which would not constitute, individually or
in the aggregate, a Material Adverse Event and there has not occurred any event
that with the lapse of time or the giving of notice or both would constitute
such a default.

6.13 LEGAL PROCEEDINGS. Except as Previously Disclosed, there are no
Actions, instituted or pending or, to the Knowledge of CCBF, threatened against
CCBF or any CCBF Subsidiary, or against any property, asset, interest or right
of any of them, that, individually or in the aggregate, could constitute a
Material Adverse Event or that might reasonably be expected to threaten or
significantly impede the consummation of the transactions contemplated by this
Agreement. Neither CCBF nor any CCBF Subsidiary is subject to any judgment,
order, writ, injunction, decree, or ruling that, individually or in the
aggregate, might reasonably be expected to threaten or significantly impede the
consummation of the transactions contemplated by this Agreement.

6.14 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1992, except
(i) as disclosed in any SEC Document filed by CCBF since December 31, 1992 and
prior to the date hereof or (ii) as Previously Disclosed, neither CCBF nor any
CCBF Subsidiary has (A) failed to operate in the Ordinary Course of Business,
(B) suffered any change that could constitute a Material Adverse Event, (C)
incurred any material Liabilities or engaged in any material transaction or
entered into any material agreement outside of the Ordinary Course of Business,
(D) increased the salaries, compensation or general benefits payable to its
employees other than in the Ordinary Course of Business, (E) suffered a material
loss, destruction or damage to any of its properties or assets, that could
constitute a Material Adverse Event, or (F) made a material acquisition or
disposition of any assets.

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6.15 REPORTS. Since December 31, 1992, CCBF has filed all reports and
statements, together with all amendments required to be made with respect
thereto, that it was required to file with Regulatory Authorities. A copy of
each such report or document will be made available to Salem upon request. As of
their respective dates, each such report or document complied in all material
respects with all of the Laws enforced or promulgated by the respective
Regulatory Authority and no such report contained any information that was false
or misleading with respect to any material fact or omitted to state any material
fact necessary in order to make the statements therein not misleading.

6.16 INSURANCE. CCBF is presently insured, and during each of the past five
(5) calendar years has been insured, for reasonable amounts against such risks
as companies engaged in a similar business would, in accordance with good
business practice, customarily be insured. The policies of fire, theft,
liability and other insurance maintained with respect to the assets or
businesses of CCBF provide adequate coverage against loss, and the fidelity
bonds in effect as to which CCBF is a named insured are sufficient for their
purpose.

6.17 LABOR. No work stoppage involving CCBF is pending or, to the Knowledge
of CCBF, threatened. CCBF is not involved in, or, to the Knowledge of CCBF,
threatened with or affected by, any labor dispute or labor Action, that could
constitute a Material Adverse Event. CCBF has, to the Knowledge of CCBF,
complied in all material respects with all Laws relating to the employment of
labor, including, without limitation, any provisions thereof relating to wages,
and no person has, to the Knowledge of CCBF, asserted that CCBF has Liabilities
for any arrears or wages or any Taxes or penalties for failure to comply with
any of the foregoing. Except as Previously Disclosed, there is no material
Action by any Person pending or, to the Knowledge of CCBF, threatened, against
CCBF (or any of the employees thereof), involving employment discrimination,
sexual harassment, wrongful discharge or similar claims. Employees of CCBF are
not represented by any labor union, and, to the Knowledge of CCBF, no labor
union is attempting to organize employees of CCBF.

6.18 ACCOUNTING; TAX; REGULATORY MATTERS. Neither CCBF nor any CCBF
Subsidiary has taken or agreed to take any action or has any Knowledge of any
fact or circumstance that would (i) prevent the Merger from qualifying (A) if
CCBF elects pooling-of-interest accounting treatment for the Merger, for
pooling-of-interests accounting treatment or (B) as a Tax-free reorganization
within the meaning of Tax Code Section 368, or (ii) significantly impede or
delay receipt of any Regulatory Approval.

6.19 BROKERS AND FINDERS. Neither CCBF nor any CCBF Subsidiary nor any of
their respective officers, directors or employees has employed any broker or
finder on a fee basis or incurred any Liability for any financial advisory fees,
brokerage fees, commissions or finder's fees in connection with this Agreement
or the transactions contemplated hereby.

6.20 CAPITAL STOCK ISSUED IN MERGER. At the Effective Time, CCBF Common
Stock (and the attached CCBF Rights) issued pursuant to the Merger will be duly
authorized, validly issued, fully paid (except as provided in the CCBF Rights
Plan) and nonassessable and not subject to preemptive Rights, or any Rights
(other than the CCBF Rights), created by CCBF or any CCBF Subsidiary, and such
CCBF Common Stock will be qualified for quotation on the NMS or, if the CCBF
Common Stock shall then be listed on the NYSE, will be approved for listing on
the NYSE.

6.21 STATEMENTS TRUE AND CORRECT. The representations and warranties of
CCBF and CCB Bank in this Agreement and the information which is deemed to be
Previously Disclosed by CCBF for the purposes of this Agreement are true and
accurate in all material respects.

ARTICLE VII

CONDUCT PRIOR TO THE EFFECTIVE TIME

7.1 CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME. During the period from
July 1, 1996 to the Effective Time, each of CCBF and Salem shall, and CCBF shall
cause each of the CCBF Subsidiaries to, (i) conduct its business in the Ordinary
Course of Business, (ii) use its best efforts to maintain and preserve intact
its business organization, employees and advantageous business relationships and
retain the services of its officers and key employees, and (iii) except as
required by Law, take no action which would adversely affect or delay the
ability of CCBF, CCB Bank, or Salem to obtain any Regulatory Approval or to
perform its covenants and agreements under this Agreement or the agreements
referenced or contemplated herein.

7.2 FORBEARANCES. During the period from July 1, 1996 to the Effective
Time, except as Previously Disclosed by Salem that it intends to take such
action, and except as required by Law, Salem shall not without the prior written
consent of CCBF:

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(a) other than in the Ordinary Course of Business, incur any indebtedness
for borrowed money (it being understood and agreed that incurrence of
indebtedness in the Ordinary Course of Business shall include, without
limitation, the creation of deposit liabilities, purchases of federal funds, and
sales of certificates of deposits), or assume, guarantee, endorse or otherwise
as an accommodation become responsible for the obligations of any other Person;

(b) adjust, split, combine or reclassify any of its capital stock or sell,
grant or issue any shares of its capital stock or any Rights with respect to its
capital stock; provided, however, that Salem may issue shares of Salem Common
Stock pursuant to the exercise of Salem Stock Options;

(c) make, declare or pay any dividend or make any other distribution on, or
directly or indirectly redeem, purchase or otherwise acquire any shares of its
capital stock;

(d) sell, transfer, impose or suffer the imposition of a Lien, or otherwise
dispose of any of its properties or assets to any Person other than CCBF, a CCBF
Subsidiary or Salem, or cancel, release or assign any indebtedness to any such
prohibited Person or any claims held by any such prohibited Person, except in
the Ordinary Course of Business;

(e) except as Previously Disclosed by Salem to CCBF or in the Ordinary
Course of Business, make any material investment either by purchase of stock or
securities, contributions to capital, property transfers, or purchase of any
property or assets of any Person;

(f) enter into or terminate, or (except as otherwise provided in Section
8.2) make any change in, any Significant Contract or Significant Lease, other
than renewals of contracts and leases without material adverse changes of terms;

(g) increase in any manner the compensation or fringe benefits of any of
its employees or pay any pension or retirement allowance not required by any
existing plan or agreement to any such employees, or become a party to, amend
(except as otherwise provided in Section 8.2) or commit itself to any pension,
retirement, profit-sharing or welfare benefit plan or agreement or employment
agreement with or for the benefit of any employee, other than in the Ordinary
Course of Business (it being understood that payment of bonuses to certain Salem
employees respecting Salem's financial performance for the year ended December
31, 1996 in accordance with Salem's existing policies for the payment of such
bonuses shall be deemed to have been made in the Ordinary Course-of Business);

(h) solicit, encourage or authorize any Person to solicit from any third
party any inquiries or proposals relating to the disposition of business or
assets by, or the acquisition of the voting securities of, or the merger of, to
or with any Person other than as provided by this Agreement, or provide any
Person with information or assistance or negotiate with any Person in
furtherance of such inquiries or to obtain such a proposal (and Salem shall
promptly notify CCBF of all of the relevant details relating to all inquiries
and proposals which it may receive relating to any of such matters);

(i) settle any Action against it involving money damages, except in the
Ordinary Course of Business or pursuant to agreements Previously Disclosed to
CCBF;

(j) make any loan or extend credit, or commit to make a loan or extend
credit, in an amount in excess of $250,000 without prior consultation with CCBF;

(k) take any action that would prevent or impede the Merger from qualifying
(i) if CCBF elects pooling-in-interests accounting treatment for the Merger, for
pooling-of-interests accounting treatment or (ii) as a Tax-free reorganization
within the meaning of Tax Code Section 368;

(l) amend its Articles of Incorporation or Bylaws; or

(m) agree to, or make any commitment to, take any of the actions prohibited
by this Section 7.2.

7.3. ACCESS AND INFORMATION; CONFIDENTIALITY.

(a) During the Due Diligence Period and thereafter, CCBF (and each CCBF
Subsidiary) and Salem shall each afford to the other party, and to the other
party's accountants, counsel, financial advisors and other representatives, full
access during normal business hours, to all of their respective properties,
books, contracts, commitments and records and, during such period, each shall
furnish promptly to the other party (i) a copy of each SEC Document filed by it,
and (ii) all other information concerning its business, properties and personnel
as such other party may reasonably request, including, without limitation,
reports of condition (including call reports) filed with any Regulatory
Authority.

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(b) Each party hereto shall, and shall cause its Affiliates, advisors and
representatives to, (i) hold confidential all information obtained in connection
with any transaction contemplated hereby with respect to the other party which
is not otherwise public knowledge, (ii) in the event of the termination of this
Agreement return all documents (including copies thereof) obtained hereunder
from the other party, and (iii) use its best efforts to cause all information
obtained pursuant to this Agreement or in connection with the negotiation hereof
to be treated as confidential and not use, or knowingly permit others to use,
any such information unless such information becomes generally available to the
public through no fault of such party. Each party hereto acknowledges and agrees
that a breach of any of their respective obligations under this Section 7.3(b)
would cause the other irreparable harm for which there is no adequate remedy at
law, and that, accordingly, each is entitled to injunctive and other equitable
relief for the enforcement thereof, in addition to damages or any other relief
available at law, and to recover its reasonable attorneys' fees and expenses
incurred in such enforcement.

7.4 CURRENT INFORMATION. During the period from the July 1, 1996 to the
Effective Time, each of CCBF and Salem shall, and each shall cause its
representatives to, confer on a regular and request basis with representatives
of the other. Each of CCBF and Salem shall promptly notify the other of (i) any
material change in its business, operations or prospects, (ii) any Actions or
hearings (or communications indicating that the same may be contemplated) of any
Regulatory Authority or Environmental Agency, (iii) the institution or the
threat of material Action involving such party, or (iv) any event or condition
that might be reasonably expected to cause any of such party's representations
or warranties set forth herein not to be true and correct in all material
respects as of the Effective Time; and in each case shall keep the other fully
informed with respect thereto.

7.5 REGISTRATION STATEMENT; REGULATORY MATTERS.

(a) None of the information supplied or to be supplied by CCBF or Salem for
inclusion in the registration statement on Form S-4, or other appropriate form,
to be filed by CCBF with the SEC under the 1933 Act for the registration of the
offering of the shares of CCBF Common Stock (including the shares to be issued
upon exercise of Salem Stock Options) and CCBF Rights to be issued in Merger
(the "Registration Statement"), the proxy statement to be used by Salem to
solicit any required approval of its shareholders as contemplated by this
Agreement (the "Proxy Statement") or any other document to be filed with any
Regulatory Authority in connection with the transactions contemplated hereby
will contain when filed, or, in the case of the Proxy Statement, when it is
first mailed to the shareholders of Salem, any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which such
statements are made, not misleading, or, in the case of the Registration
Statement, when it becomes effective under the 1933 Act, be false or misleading
with respect to any material fact, or omit to state any material fact necessary
in order to make the statements therein not misleading, or, in the case of the
Proxy Statement or any amendment thereof or supplement thereto, at the time of
the Shareholders' Meeting, including any adjournments thereof, be false or
misleading with respect to any material fact or omit to state any material fact
necessary to correct any statement or remedy any omission in any earlier
communication with respect to the solicitation of any proxy for the
Shareholders' Meeting.

(b) CCBF shall (i) with the assistance of Salem, prepare and file with the
SEC as soon as practicable the Registration Statement and the Proxy Statement,
(ii) use its best efforts to cause the Registration Statement to become
effective under the 1933 Act, and (iii) take any action required to be taken
under any applicable state securities or "Blue Sky" Laws in connection
therewith. Salem shall furnish CCBF with all information concerning Salem and
the holders of Salem Common Stock as CCBF may reasonably request in connection
with the foregoing. If required by Law, Salem shall file the Proxy Statement
with the FDIC and use its best efforts to cause the FDIC to approve the Proxy
Statement for use in connection with the Shareholders' Meeting.

(c) CCBF, CCB Bank and Salem shall cooperate and use their respective best
efforts (i) as soon as practicable to prepare all documentation, to effect all
filings and to obtain all Regulatory Approvals and all other permits, consents,
approvals and authorizations of all third parties, Regulatory Authorities and
other governmental authorities necessary to consummate the Merger and the other
transactions contemplated by this Agreement, and (ii) to cause the Merger and
the other transactions contemplated by this Agreement to be consummated as soon
as reasonably practicable. Each of CCBF, CCB Bank and Salem shall advise one
another concerning all filings to be made by it and all other consents,
approvals and authorizations required to be obtained by it, and shall promptly
furnish the other or others with copies of all such filings and all
correspondence, orders and other communications in connection with all such
filings, consents, approvals and authorizations and all Regulatory Approvals.

7.6 DIRECTORS' AND SHAREHOLDERS' APPROVALS. Salem shall cause a duly called
and noticed meeting of its shareholders to be held as soon as practicable for
the purpose of voting upon the Merger (including the Plan of Merger), and
related matters (the "Shareholders' Meeting"). CCBF shall cause a duly called
and noticed meeting of its directors and CCB Bank shall

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cause duly called and noticed meetings of its directors and shareholder, to be
held on July 16, 1996 for the purposes of (a) the Boards of Directors of CCBF
and CCB Bank voting upon ratification of their respective Executive Committee's
adoption of this Agreement, and (b) the shareholder of CCB Bank voting upon the
Merger and related matters (including the Plan of Merger). In connection with
the Shareholders' Meeting, CCBF and Salem shall prepare the Proxy Statement and
mail it to Salem's shareholders. The Board of Directors of Salem shall submit
for approval of Salem's shareholders the matters to be voted upon at the
Shareholders' Meeting, and shall, subject to its fiduciary obligations,
recommend approval of such matters and use its best efforts (including, without
limitation, soliciting proxies for such approvals) to obtain such shareholder
approval.

7.7 AGREEMENTS OF AFFILIATES. Salem shall, within thirty (30) days after
July 1, 1996, deliver to CCBF a letter identifying all Persons whom Salem
believes will be, at the time the Merger is submitted to a vote of the
shareholders of Salem, "affiliates" of Salem for purposes of Rule 145 under the
1933 Act. Salem shall use its best efforts to cause each Person who is
identified as an "affiliate" in the letter referred to above to deliver to CCBF
at least 30 days prior to the Effective Time a written agreement providing that
each such Person will not offer, sell, pledge, transfer or otherwise dispose of
any shares of CCBF Common Stock except in compliance with the applicable
provisions of the 1933 Act and the rules and regulations of the SEC thereunder
until such time as financial results covering at least 30 days of combined
operations of CCBF and Salem shall have been published, and will otherwise
comply with the holding period requirements set forth in SEC Accounting Series
Release Nos. 130 and 135 and in SEC Staff Accounting Bulletin No. 65 (or
successor Releases and Bulletins). Prior to the Effective Time, Salem shall
amend and supplement such letter and use its best efforts to cause each
additional Person who is identified as an "affiliate"to execute a written
agreement as set forth in this Section 7.7.

7.8 DELIVERY OF MONTHLY FINANCIAL STATEMENTS. Within fifteen (15) days
after the end of each calendar month occurring after July 1, 1996 and prior to
the Effective Time, CCBF and Salem shall each deliver to the other its unaudited
monthly consolidated (if applicable) financial statements normally generated by
it for such month, in each case certified by its Chief Financial Officer. Such
financial statements shall fairly present in all material respects the financial
condition and results of operations of CCBF and the CCBF Subsidiaries or Salem,
as applicable, on a consolidated (if applicable) basis on the dates and for the
periods indicated in accordance with GAAP, subject to normal and recurring
year-end audit adjustments and accruals.

7.9 ACCOUNTING TREATMENT; TAX-FREE REORGANIZATION. Each of CCBF, CCB Bank
and Salem undertakes and agrees to use its best efforts to cause the Merger to
qualify for pooling-of-interests accounting treatment (if CCBF elects the
pooling-of-interests accounting treatment for the Merger) and as a Tax-free
reorganization under Tax Code Section 368.

7.10 PRESS RELEASES. CCBF and Salem shall promptly consult with each other
as to the form and substance, and prior to the release or issuance, of any press
release or other public disclosure materially related to this Agreement, the
Merger or any other transaction contemplated hereby. CCBF and Salem agree not to
release or issue any such press release or other public disclosure without the
approval of the other unless required by law.

7.11 MISCELLANEOUS AGREEMENTS AND CONSENTS. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use its best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement as expeditiously as reasonably practicable, including, without
limitation, using its best efforts to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the parties
to consummate the transactions contemplated hereby. CCBF and Salem shall use,
and shall cause each of the CCBF Subsidiaries to use, their best efforts to
obtain all Regulatory Approvals and all other consents, approvals and
authorizations of third parties, including the NASD, NYSE and Regulatory
Authorities, necessary or, in the reasonable opinion of CCBF and Salem,
desirable for the consummation of the transactions contemplated by this
Agreement. After the Effective Time, CCBF shall cause appropriate documents to
be delivered to holders of Salem Stock Options to reflect the options to acquire
CCBF Stock into which such Salem Stock Options were converted. CCBF shall
reserve shares of CCBF Stock sufficient to issue the requisite number of shares
of CCBF Stock upon exercise of the former Salem Stock Options and shall take
appropriate action to cause such shares to be offered in a registered offering.

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ARTICLE VIII

ADDITIONAL AGREEMENTS

8.1 INDEMNIFICATION AND INSURANCE.

(a) CCBF agrees to indemnify, defend and hold harmless Salem and each of
the present and former officers, directors, employees and agents of Salem from
and against all Indemnifiable Losses attributable to CCBF or CCB Bank. Salem
agrees to indemnify, defend and hold harmless CCBF and each of the present and
former officers, directors, employees and agents of CCBF and the CCBF
Subsidiaries from and against all Indemnifiable Losses attributable to Salem.

(b) In addition to the provisions of Section 8.1(a), after the Effective
Time, CCBF and the Surviving Bank shall jointly and severally indemnify, defend
and hold harmless the present and former officers, directors, employees and
agents of Salem from and against all Indemnifiable Losses arising from or
related to matters occurring at or prior to the Effective Time and, further, to
indemnify such present and former officers, directors, employees and agents of
Salem to the full extent then permitted under the Bank Act and NCBCA, including
provisions relating to advances of expenses incurred in the defense of any
action or suit.

(c) CCBF shall maintain a policy or policies of directors' and officers'
liability insurance (the "D&O Insurance") covering Persons who are currently
covered by Salem's existing D&O Insurance, or shall otherwise continue D&O
Insurance coverage for such Persons for a period of at least three (3) years
after the Effective Time, which coverage shall have terms at least as favorable
as those of Salem's existing D&O Insurance in effect on the date hereof.

(d) If CCBF or the Surviving Bank or any of their respective successors or
assigns (i) shall consolidate with or merge into any other Person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) shall transfer all or substantially all of its properties and
assets to any Person, then and in each such case, proper provision shall be made
so that such successors and assigns shall assume the obligations set forth in
this Section 8.1.

8.2 EMPLOYEE CONTRACTS AND EMPLOYEE BENEFITS. Following the Effective Time,
CCBF and the Surviving Bank each and together will continue to honor, and will
assume and perform in accordance with their terms, all Previously Disclosed
employment, severance, deferred compensation, split dollar insurance, salary
continuation, consulting and other compensation contracts between Salem and any
current or former director, officer or employee thereof (including, but not
limited to, the Salem Options Plans), and all provisions for vested benefits or
other vested amounts earned or accrued through the Effective Time under any
Salem Benefit Plan; provided, however, that CCBF and the Surviving Bank need not
honor, in connection with the Merger, those provisions of those certain
employment agreements between Salem and certain of the employees of Salem
relating to benefits payable upon a "change in control" of Salem which have been
Previously Disclosed, to the extent such provisions have been waived by such
employees to facilitate, and solely in connection with, the consummation of the
Merger; provided further, however, that any Salem employee who receives a bonus
from Salem as described in Section 7.2(g) shall not be entitled to receive any
bonus payment from CCBF or CCB Bank for the calendar year for which such
employee received a bonus from Salem. The employment agreements between certain
Salem's senior executive officers and Salem may be amended and restated
effective as of the Effective Time in the forms mutually agreed upon by CCBF,
Salem and such senior executive officers.

8.3 MODIFICATION OF EMPLOYEE BENEFITS. Except as otherwise provided in
Section 8.2 or this Section 8.3, the Salem Benefit Plans will be reviewed and
appropriate amendments, consolidations or terminations will be made thereto at
or after the Effective Time; provided, however, that the employees of Salem (i)
shall be eligible to receive group hospitalization, medical, life, disability
and similar benefits on the same basis and under the same terms available to the
present employees of CCBF and the CCBF Subsidiaries, (ii) in the event a Salem
Benefit Plan is terminated, shall become fully vested, with each participating
Salem employee having the right or option either to receive the benefits to
which he or she is entitled as a result of such termination or to have such
benefits "rolled" into the appropriate CCBF Benefit Plan, on the same basis and
applying the eligibility standards as would apply to the employees of CCBF and
the CCBF Subsidiaries as if such employee's prior service to Salem had been
performed on behalf of CCBF and the CCBF Subsidiaries for qualification,
participation and vesting, but not for funding, purposes, and (iii) in the event
a Salem Benefit Plan is merged into a CCBF Benefit Plan, shall be entitled to
participate in such CCBF Benefit Plan on the same basis and applying the same
eligibility standards as would apply to employees of CCBF and the CCBF
Subsidiaries. CCBF and Salem agree that the overall level of benefits offered or
provided to the employees of Salem under the CCBF Benefit Plans will be no less
than that offered or provided to the present employees of CCBF and the CCBF
Subsidiaries, and that for purposes of qualification and vesting (but not for
purposes of calculating the amount of benefits), the employees of Salem shall
receive credit for their periods of service to Salem.

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For purposes of item (i) above, CCBF shall cause the relevant CCBF Benefit
Plans (A) to waive any pre-existing condition limitations for conditions covered
under the applicable Salem Benefit Plans, (B) to honor any deductible and out-
of-pocket expenses incurred by the employees and their beneficiaries under the
Salem Benefit Plans during the portion of 1996 preceding the Effective Time, and
(C) with respect to any Salem Benefit Plan providing group term life insurance,
to waive any medical certification for Salem employees up to the amount of term
life insurance coverage such employees had under such Salem Benefit Plan at the
Effective Time.

8.4 DUE DILIGENCE INVESTIGATIONS. Beginning July 1, 1996 and continuing
until 5:00 o'clock, p.m., on July 16, 1996 (the "Due Diligence Period"), CCBF
(and its representatives and advisors) conducted such investigations, reviews
and analyses (including environmental assessments and studies) of the business,
operations, assets, personnel and other relevant characteristics of Salem, and
Salem (and its representatives and advisors) conducted like investigations,
reviews and analyses of CCBF and the CCBF Subsidiaries, in each case to the
degree they deemed advisable and in a reasonable manner, taking into
consideration employee morale and the need to conduct undisrupted business
operations. No investigation made pursuant to this Section 8.4 or otherwise
shall affect any representation or warranty in this Agreement of any party
hereto or any condition to the obligations of the parties hereto.

ARTICLE IX

CONDITIONS

9.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each of CCBF, CCB Bank and Salem to effect the Merger
and the other transactions contemplated hereby shall be subject to the
fulfillment or waiver at or prior to the Effective Time of the following
conditions:

(a) The shareholder of CCB Bank and the shareholders of Salem shall have
approved all matters relating to this Agreement and the Merger required to be
approved by such shareholders by the votes required under the Bank Act and the
NCBCA.

(b) The Merger and the other transactions contemplated hereby shall have
received all Regulatory Approvals, including all required approvals by the
Federal Reserve Board, Federal Reserve, the FDIC, the Commission, the
Commissioner, the NASD, the NYSE and any other Regulatory Authority whose
approval is required for consummation of the transactions contemplated hereby,
and no such Regulatory Approvals or other required approval shall have imposed
any condition or requirement which would so materially adversely impact the
economic benefits of the transactions contemplated by this Agreement as to
render inadvisable in the reasonable opinion of the Board of Directors of either
CCBF or Salem the consummation of the Merger.

(c) The Registration Statement shall have been declared effective by the
SEC and CCBF shall have received all state securities or "Blue Sky" law permits
or other authorizations, or confirmations as to the availability of an exemption
from registration requirements, as may be necessary to issue CCBF Common Stock
and CCBF Rights pursuant to the terms of this Agreement. Neither the
Registration Statement nor any such permit, authorization or confirmation shall
be subject to any stop order, threatened stop order, rescission or withdrawal by
the SEC or any state securities or "Blue Sky" authority with competent
jurisdiction.

(d) If required by Law, the Proxy Statement shall have been approved by the
FDIC for use in connection with the Shareholders' Meeting.

(e) Neither CCBF, CCB Bank nor Salem shall be subject to any Action which
enjoins or prohibits the consummation of the Merger or which would constitute a
Material Adverse Event as to CCBF or Salem. No Action shall be pending or
threatened which seeks to restrain or prohibit the Merger or to obtain any
substantial monetary or other relief in connection with this Agreement unless in
the reasonable opinion of counsel to the party wishing to proceed (which opinion
shall be satisfactory in substance to the other party in its reasonable
judgment), such Action is likely to be resolved in such a way as to not deprive
any party hereto of any of the material benefits to be derived from the
consummation of the Merger or in such a way which would not constitute a
Material Adverse Event as to the party subject thereto.

(f) The aggregate number of shares of Salem Common Stock with respect to
which dissenter's rights have been perfected under Section 55-13-01 ET SEQ. of
the NCBCA shall not (i) exceed 9.90% of the total number of outstanding shares
of Salem Common Stock, and (ii) if CCBF elects pooling-of-interests accounting
treatment for the Merger, total an amount which, when added to all other shares
of CCBF Common Stock and Salem Common Stock deemed to have been repurchased

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or otherwise "tainted" for pooling-of-interests accounting treatment purposes,
would result in the Merger not qualifying for pooling-of-interests accounting
treatment.

(g) The shares of CCBF Common Stock issuable pursuant to the Merger shall
have been approved for listing on the NYSE.

(h) CCBF and Salem shall have received an opinion of KPMG Peat Marwick LLP,
satisfactory in form and substance to each of CCBF and Salem, to the effect that
the Merger will constitute a Tax-free reorganization within the meaning of Tax
Code Section 368 and that (i) no gain or loss will be recognized by a
shareholder of Salem to the extent that such shareholder receives CCBF Common
Stock (and attached CCBF Rights) in exchange for such shareholder's Salem Common
Stock in the Merger, except that gain or loss will be recognized on the receipt
of cash, if any, received in lieu of fractional shares; any cash received by a
shareholder of Salem in lieu of a fractional share will be treated as received
in exchange for such fractional share and not as a dividend, and any gain or
loss recognized as a result of the receipt of such cash will be capital gain or
loss equal to the difference between the cash received and the portion of the
shareholder's basis in Salem Common Stock allocable to such fractional share
interest; (ii) the tax basis of the shares of CCBF Common Stock received by each
shareholder of Salem will equal the tax basis of such shareholder's shares of
Salem Common Stock (reduced by any amount allocable to fractional share
interests for which cash is received) exchanged in the Merger; and (iii) the
holding period for the shares of CCBF Common Stock received by each shareholder
of Salem will include the holding period for the shares of Salem Common Stock of
such shareholder exchanged in the Merger.

9.2 CONDITIONS TO THE OBLIGATION OF SALEM. The obligation of Salem to
effect the Merger and the other transactions contemplated hereby shall be
subject to the fulfillment or waiver at or prior to the Effective Time of the
following additional conditions:

(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
CCBF and CCB Bank set forth in Article VI hereof shall be true and correct in
all material respects as of the date of this Agreement and as of the Effective
Time (as though made on and as of the Effective Time except to the extent such
representations and warranties are by their express provisions made as of a
specified date) and Salem shall have received a certificate signed by the Chief
Executive Officer and the Senior Vice-President/Controller of CCBF to that
effect.

(b) PERFORMANCE OF OBLIGATIONS. CCBF and CCB Bank shall have performed in
all material respects all obligations and covenants required to be performed by
them under this Agreement prior to the Effective Time, and Salem shall have
received a certificate signed by the Chief Executive Officer and the Senior Vice
President/Controller of CCBF to that effect.

(c) LEGAL OPINION. Salem shall have received from Brooks, Pierce, McLendon,
Humphrey & Leonard, L.L.P., counsel to CCBF and CCB Bank, an opinion as to such
matters as Salem and its counsel may reasonably request. In rendering the
foregoing opinion, such counsel may rely as to questions of fact and of good
standing upon the representation and warranties of CCBF and CCB Bank contained
in this Agreement or upon the certificate of appropriate officers of CCBF and
CCB Bank and of public officials.

(d) FAIRNESS OPINION. Salem shall have received an opinion from Carson
Medlin that the Merger is fair, from a financial point of view, to Salem's
shareholders.

9.3 CONDITIONS TO THE OBLIGATIONS OF CCBF AND CCB BANK. The obligations of
CCBF and CCB Bank to effect the Merger and the other transactions contemplated
hereby shall be subject to the fulfillment at or prior to the Effective Time of
the following additional conditions:

(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Salem set forth in Article V hereof shall be true and correct in all material
respects as of the date of this Agreement and as of the Effective Time (as
though made on and as of the Effective Time except to the extent such
representations and warranties are by their express provisions made as of a
specified date) and CCBF and CCB Bank shall have received a certificate signed
by the Chief Executive Officer and the Chief Financial Officer of Salem to that
effect.

(b) PERFORMANCE OF OBLIGATIONS. Salem shall have performed in all material
respects all obligations and covenants required to be performed by it under this
Agreement prior to the Effective Time, and CCBF and CCB Bank shall have received
a certificate signed by the Chief Executive Officer and the Chief Financial
Officer of Salem to that effect.

(c) LEGAL OPINION. CCBF and CCB Bank shall have received from Petree
Stockton, L.L.P., counsel to Salem, an opinion as to such matters as CCBF and
its counsel may reasonably request. In rendering the foregoing opinion, such
counsel may

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rely as to questions of fact and of good standing upon the representation and
warranties of Salem contained in this Agreement or upon the certificate of
appropriate officers of Salem and of public officials.

(d) AFFILIATES LETTERS. Salem shall have delivered to CCBF the written
agreements of its "affiliates" described in Section 7.7.

(e) POOLING OF INTERESTS OPINION. If CCBF elects pooling-of-interests
accounting treatment for the Merger, CCBF shall have received an opinion of KPMG
Peat Marwick LLP, satisfactory in form and substance to CCBF, that the Merger
will qualify for pooling-of-interests accounting treatment; provided, however,
that if KPMG Peat Marwick LLP shall be unable to provide such opinion, the
provisions of Section 9.4 shall control.

9.4 ADDITIONAL CONDITIONS. In the event KMPG Peat Marwick LLP shall be
unable to provide the pooling-of-interests accounting treatment opinion in the
circumstances referenced in Section 9.3(e), then the condition to the
obligations of CCBF and CCB Bank set forth in Section 9.3(e) shall be deemed
waived, but the following additional conditions shall then become operative:

(a) CCBF, CCB Bank and Salem shall have received re-confirmation of all
Regulatory Approvals referenced in Section 9.1(b), and, if necessary, shall have
filed all amended applications with such Regulatory Authorities;

(b) Such post-effective amendments to the Registration Statement as are
required by the SEC or the Laws or are deemed appropriate by CCBF to reflect the
waiver of Section 9.3(e) and the use of the purchase method of accounting for
the Merger shall have been filed with the SEC and all other applicable
Regulatory Authorities, and such amendments shall have been declared or become
effective;

(c) If required by any Regulatory Authority or the Laws or deemed
appropriate by CCBF, a further Special Meeting of Salem's shareholders shall
have been duly called to approve this Agreement and the Merger and the Proxy
Statement, as amended pursuant to Section 9.4(b), shall have been distributed to
Salem's shareholders to re-solicit such approval; and

(d) Salem's shareholders shall have approved this Agreement and the Merger
as set forth in such amended Proxy Statement.

Except as provided herein to the contrary, the conditions set forth in
Section 9.1, 9.2 and 9.3 shall remain in force and effect in the circumstances
described in this Section 9.4.

ARTICLE X

TERMINATION

10.1 TERMINATION. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement, the Merger, and the other
transactions contemplated hereby by the shareholder of CCB Bank or the
shareholders of Salem, or each entity's shareholders, this Agreement may be
terminated and such transactions abandoned at any time prior to the Effective
Time:

(a) by mutual consent of the Boards of Directors of CCBF and CCB Bank and
the Board of Directors of Salem;

(b) upon notice to the other party or parties, by the Boards of Directors
of CCBF and CCB Bank or the Board of Directors of Salem (provided that the
terminating party or parties are not then in material breach of any
representation, warranty, covenant or other agreement contained herein) if the
Effective Time shall not have occurred on or before March 31, 1997; provided,
however, that should the circumstances described in Section 9.4 occur, such date
shall be extended until June 30, 1997;

(c) upon notice to the other party or parties, by the Boards of Directors
of CCBF and CCB Bank or the Board of Directors of Salem if any Regulatory
Authority has denied approval of the Merger or any Regulatory Approval (or any
condition to the receipt of a Regulatory Approval) or an order, judgment or
decree from any Regulatory Authority or any court having competent jurisdiction
has imposed any condition or requirement which would so substantially and
adversely impact the economic or business benefits of the Merger to CCBF and CCB
Bank or to Salem and its shareholders, as applicable, as to render inadvisable
in the reasonable opinion, exercised in good faith, of the Boards of Directors
of CCBF and CCB Bank or the Board of Directors of Salem, as applicable, the
consummation of the Merger, and such denial or imposition has become final and
nonappealable;

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(d) upon notice to the other party or parties, by the Boards of Directors
of CCBF and CCB Bank or the Board of Directors of Salem in the event of a
material breach by the other party or parties of any representation, warranty,
covenant or other agreement contained herein, which breach is not cured after 30
days' written notice thereof is given to the party or parties committing such
breach;

(e) upon notice to the other party or parties, by the Boards of Directors
of CCBF and CCB Bank or the Board of Directors of Salem if there has occurred an
Action to restrain or prohibit the Merger, an Action by a shareholder of CCBF or
Salem seeking to restrain the Merger or an Action by a shareholder of CCBF or
Salem to obtain material money damages should such transactions be consummated
(unless counsel for the party wishing to proceed with the Merger renders an
opinion that such Action is likely to be resolved in a way which would not
deprive any party of the material benefits of the Merger or in a way which would
not result in substantial money damages to one or more directors of such party
which would not be covered by D&O Insurance);

(f) upon notice to the other party or parties, by the Boards of Directors
of CCBF and CCB Bank or the Board of Directors of Salem if there has occurred a
declaration of war by the United States of America or a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States of America or the State of North Carolina; or

(g) upon notice to the other party or parties, by the Boards of Director of
CCBF and CCB Bank or the Board of Directors of Salem if the CCBF Stock Price for
the sixty (60) trading days preceding the scheduled Closing Date shall be less
than $46.78 or greater than $57.18.

10.2 EFFECT OF TERMINATION. In the event of the termination and abandonment
of this Agreement pursuant to Section 10.1, this Agreement shall become void and
have no effect, except that (i) the provisions of Section 7.3(b), Section
8.1(a), Section 10.3 and Section 10.4 (insofar as it applies to a termination
under Section 10.1(d)) shall survive any such termination and abandonment, and
(ii) no party shall be relieved or released from any Liability arising out of a
willful or grossly negligent breach of any provision of this Agreement.

10.3 EXPENSES. Unless this Agreement is terminated as described in Section
10.4, each party hereto shall bear its own expenses incident to preparing,
entering into and carrying out this Agreement and the transactions contemplated
thereby, including filing fees, and consultant, financial advisor, legal,
accounting and investment banking fees and expenses (the "Costs").

10.4 WRONGFUL TERMINATION. Notwithstanding the provisions of Sections 10.2
and 10.3, and except as otherwise provided in Section 10.5, if the Merger fails
to be consummated because of the wrongful termination of this Agreement or a
willful or grossly negligent breach by CCBF or CCB Bank (considered for purposes
of this Section 10.4 to be one party), or by Salem of any representation,
warranty, covenant, undertaking, term, agreement or restriction contained
herein, then the party or parties wrongfully terminating or breaching this
Agreement shall (i) reimburse the other party for all of such other party's
Costs, and (ii) pay the other party $1,000,000 as liquidated damages in full
compensation of all other harm suffered by such party as a result hereof. A
termination of this Agreement under the provisions of Section 10.1, other than a
termination under Section 10.1(d), shall not cause application of this Section
10.4.

10.5 TERMINATION FEE. If (a) this Agreement is terminated because Salem has
entered theretofore into a letter of intent or an agreement with a Person other
than CCBF or CCB Bank that provides for such Person to acquire Salem, merge with
or into Salem, or purchase all or substantially all of the assets of Salem or
(b) prior to termination of this Agreement Salem engages in negotiations
relating to any such transaction and a letter of intent or agreement with
respect thereto is entered into within twelve (12) months following the
termination of this Agreement, and CCBF has not consented in writing to such
negotiations by Salem pursuant to Section 7.2(h) hereof, then Salem shall pay to
CCBF a termination fee of $1,000,000.

ARTICLE XI

GENERAL PROVISIONS

11.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS FOLLOWING
THE EFFECTIVE TIME. Except for Articles III and IV and Sections 7.11, 8.1, 8.2
and 8.3, none of the respective representations, warranties, obligations,
covenants and agreements of the parties hereto shall survive the Effective Time.

11.2 ENTIRE AGREEMENT. Except as otherwise expressly provided herein, this
Agreement contains the entire agreement between the parties hereto with respect
to the transactions contemplated hereunder and thereunder, and such agreements

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supersede all prior arrangements or understandings with respect thereto, written
or oral. The terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors. Other
than the provisions of Article III and Sections 7.11, 8.1, 8.2 and 8.3, nothing
in this Agreement, expressed or implied, is intended to confer upon any Person,
other than CCBF, the CCBF Subsidiaries, Salem, and the Surviving Bank and their
respective successors, any rights, remedies, or Liabilities under or by reason
of this Agreement.

11.3 AMENDMENTS. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of CCBF, CCB Bank and Salem upon
the approval of the Board of Directors of each of CCBF, CCB Bank and Salem;
provided, however, that the provisions hereof relating to the manner or basis in
which shares of Salem Common Stock will be exchanged for CCBF Common Stock shall
not be amended after the Shareholders' Meeting or the meeting of CCB Bank's
shareholder without any requisite approval of the holders of the Salem Common
Stock entitled to vote thereon and the approval of CCB Bank's shareholder.

11.4 WAIVERS. Prior to or at the Effective Time, each of CCBF, CCB Bank and
Salem shall have the right to waive any default in the performance of any term
of this Agreement by the other, to waive or extend the time for the compliance
or fulfillment by the other of any and all of the other's obligations under this
Agreement and to waive any or all of the conditions precedent to its obligations
under this Agreement, except any condition which, if not satisfied, would result
in the violation of any Law.

11.5 NO ASSIGNMENT. None of the parties hereto may assign any of its rights
or delegate any of its obligations under this Agreement to any other Person. Any
such purported assignment or delegation that is made without the prior written
consent of the other parties to this Agreement shall be void and of no effect.

11.6 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, or by registered or certified mail, postage prepaid, to
the Persons at the addresses set forth below (or at such other address as may be
provided hereunder):

If to CCBF or CCB Bank:

Ernest C. Roessler
Vice-Chairman, President and Chief Executive Officer
CCB Financial Corporation
Post Office Box 931
Durham, North Carolina 27702
Telecopy: (919) 683-7254

With a required copy to:

Robert A. Singer
Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P.
2000 Renaissance Plaza
Post Office Box 26000
Greensboro, North Carolina 27420-6000
Telecopy: (910) 378-1001

If to Salem:

Gordon H.T. Sheeran
President and Chief Executive Officer
2140 Country Club Road
Winston-Salem, North Carolina 27104
Telecopy: (910) 723-9102

With a required copy to:

Elizabeth L. Moore
Petree Stockton, L.L.P.
3500 One First Union Center
301 South College Street
Charlotte, North Carolina 28202-6001
Telecopy: (704) 338-5125

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or to such other Person as any party shall specify by notice in writing to each
of the other party. All such notices or other communications shall be deemed to
have been delivered (i) upon receipt when delivery is made by hand, (ii) on the
third business day after deposit in the United States mail when delivery is made
by registered or certified mail, and (iii) upon transmission, when evidenced by
a sender transmission completed confirmation, when made by facsimile
transmission.

11.7 SEVERABILITY. If any term, provision, covenant or restriction
contained in this Agreement is held by a Regulatory Authority or court of
competent jurisdiction to be invalid, void, unenforceable or against public or
regulatory policy, the remainder of the terms, provisions, covenants and
restrictions contained in this Agreement shall remain in full force and effect
and shall in no way be effected, impaired or invalidated.

11.8 GOVERNING LAW. This Agreement shall in all respects be governed by and
construed in accordance with the Laws of the State of North Carolina.

11.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original, but all
of which together shall constitute one and the same instrument.

11.10 CAPTIONS. The captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.

IN WITNESS WHEREOF, CCBF, CCB Bank and Salem have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of
September 6, 1996.

CCB FINANCIAL CORPORATION

By: /s/ ERNEST C. ROESSLER
ERNEST C. ROESSLER, VICE-CHAIRMAN,
PRESIDENT
AND CHIEF EXECUTIVE OFFICER

CENTRAL CAROLINA BANK AND TRUST COMPANY

By: /s/ ERNEST C. ROESSLER
ERNEST C. ROESSLER, VICE-CHAIRMAN,
PRESIDENT
AND CHIEF EXECUTIVE OFFICER

SALEM TRUST BANK

By: /s/ GORDON H.T. SHEERAN
GORDON H.T. SHEERAN, PRESIDENT
AND CHIEF EXECUTIVE OFFICER

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APPENDIX A
PLAN OF MERGER
OF
SALEM TRUST BANK
WITH AND INTO
CENTRAL CAROLINA BANK AND TRUST COMPANY

I. CORPORATIONS PARTICIPATING IN THE MERGER.

Salem Trust Bank, a North Carolina commercial bank ("Salem" or the "Merging
Bank"), shall merge with and into Central Carolina Bank and Trust Company, a
North Carolina commercial bank ("CCB Bank" or the "Surviving Bank"), pursuant to
the provisions of, and with the effect provided under, Section 55-11-06 and
Section 53-13 of the North Carolina General Statutes.

II. NAME OF SURVIVING CORPORATION.

Upon the effectiveness of the merger (the "Effective Time"), the name of
the Surviving Bank shall be "Central Carolina Bank and Trust Company."

III. TERMS AND CONDITIONS OF THE MERGER.

1. Subject to the terms and conditions of the Amended Agreement of
Combination, dated as of July 1, 1996 and amended as of September 6, 1996, by
and among CCB Financial Corporation ("CCBF"), CCB Bank and Salem (the "Agreement
of Combination"), and except insofar as the same may be continued by law or in
order to carry out the purposes of this Plan of Merger and the Agreement of
Combination, and except as continued in and merged into the Surviving Bank, the
separate existence of the Merging Bank shall cease as of the Effective Time. The
Surviving Bank, upon the merger and without any order or other action on the
part of any court of otherwise, shall hold and enjoy all rights of property,
franchises and interest, including appointments, designations and nominations,
and all other rights and interests as trustee, executor, administrator,
registrar of stocks and bonds, guardian of estates, assignee and receiver, and
in every other fiduciary capacity, in the same manner and to the same extent as
such rights, franchises and interests were held or enjoyed by the Merging Bank
at the time of the merger. The Surviving Bank shall be responsible and liable
for all liabilities of every kind and description of the Merging Bank, existing
immediately prior to the Effective Time, to the extent provided by law.

2. The Articles of Incorporation of CCB Bank in effect immediately prior to
the Effective Time shall continue in full force and effect until amended in
accordance with applicable laws.

3. The Bylaws of CCB Bank in effect immediately prior to the Effective Time
shall continue in full force and effect until amended in accordance with
applicable laws.

IV. EFFECTIVENESS OF THE MERGER.

The merger shall be effective on the date and at the time set forth in the
Articles of Merger setting forth, among other things, this Plan of Merger, that
are filed with, and accepted for filing by, the Secretary of State of North
Carolina as required under Section 55-11-05 of the North Carolina General
Statutes.

V. CONVERSION AND EXCHANGE OF SHARES.

As of the Effective Time, the outstanding shares of the corporation and
commercial banks participating in the merger will be converted and exchanged as
follows:

1. Any of the shares of common stock of CCBF ("CCBF Common Stock")
outstanding immediately prior to the Effective Time shall continue to be issued
and outstanding, and shall not be converted, exchanged or altered in any manner
as a result of the Merger.

2. Each of the shares of common stock of Salem ("Salem Common Stock")
outstanding immediately prior to the Effective Time (excluding shares held,
other than in a fiduciary capacity or as a result of debts previously
contracted, by CCBF, CCB Bank or Salem or any of their subsidiaries and shares
held by shareholders of Salem who have perfected dissenters' rights under
Article 13 of Chapter 55 of the North Carolina General Statutes) shall be
converted into and exchanged for .41 of a share of the common stock of CCBF and
.41 of a preferred share purchased right as described in CCBF's Shareholder
Rights Plan, adopted February 26, 1990 (a "CCBF Right")(the "Exchange Ratio").

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3. Any shares of any of the subsidiaries of CCBF, CCB Bank or the Merging
Bank outstanding immediately prior to the Effective Time shall continue to be
issued and outstanding, and shall not be converted, exchanged or altered in any
manner as a result of the merger.

4. As of the Effective Time, all rights with respect to options to purchase
shares of Salem Common Stock granted by Salem (the "Salem Stock Options")
pursuant to stock option plans or other plans or agreements of Salem (the "Salem
Option Plans"), which are outstanding as of the Effective Time in compliance
with the Agreement of Combination, whether or not then exercisable, shall be
converted into and become rights with respect to CCBF Common Stock (with
attached CCBF Rights), and CCBF shall assume all obligations of Salem with
respect to each Salem Stock Option, in accordance with the terms of the
respective Salem Option Plan under which it was issued and the stock option
agreement by which it may be evidenced. From and after the Effective Time, (i)
each Salem Stock Option assumed by CCBF may be exercised solely for shares of
the CCBF Common Stock (with attached CCBF Rights), (ii) the number of shares of
the CCBF Common Stock (with attached CCBF Rights) subject to each Salem Stock
Option shall be equal to the number of shares of Salem Common Stock subject to
such Salem Stock Option immediately prior to the Effective Time multiplied by
the Exchange Ratio, and (iii) the per share exercise price under each such Salem
Stock Option shall be adjusted by dividing the per share exercise price under
each such option by the Exchange Ratio and rounding to the nearest cent;
PROVIDED, HOWEVER, that the number of shares of CCBF Common Stock (with attached
CCBF Rights) subject to each Salem Stock Option and the per share exercise price
shall be subject to further adjustment as appropriate to reflect any stock
split, stock dividend, recapitalization or other similar transaction subsequent
to the Effective Time.

5. Each holder of shares of Salem Common Stock converted pursuant to the
merger or of Salem Stock Options, who would otherwise have been entitled to
receive a fraction of a share of the CCBF Common Stock and a fraction of a CCBF
Right (after taking into account the aggregate of all certificates delivered or
all Salem Stock Options held by such holder), shall receive, in lieu thereof,
cash (without interest) in an amount equal to such fractional part of a share of
the CCBF Common Stock multiplied by the market value of one share of the CCBF
Common Stock as of the Effective Time, in the case of shares of Salem Common
Stock converted pursuant to the merger, or the date of exercise, in the case of
Salem Stock Options. The market value of one share of the CCBF Common Stock at
the Effective Time or the date of exercise, as the case may be, shall be the
closing sales price of the CCBF Common Stock on the National Market System of
The Nasdaq Stock Market, Inc. or the New York Stock Exchange (if the CCBF Common
Stock shall be listed thereon as of such time) on the last trading day preceding
the Effective Time or the date of exercise, as the case may be. No such holder
will be entitled to dividends, voting rights or any other rights as a
shareholder in respect of any fractional share.

6. From and after the Effective Time, each holder of any of the shares of
Salem Common Stock to be converted as above provided shall be entitled, upon
presentation and surrender to CCBF of the certificates representing such shares,
to receive in exchange therefor certificates representing the number of whole
shares of the CCBF Common Stock (with attached CCBF Rights), and a check
representing the amount of cash for fractional shares, if any, into which such
shares shall have been converted. The surrendered shares of Salem Common Stock
shall be canceled. Until so surrendered, each outstanding certificate which
prior to the Effective Time represented Salem Common Stock shall be deemed for
all corporate purposes to evidence ownership of the number of shares of the CCBF
Common Stock (with attached CCBF Rights) into which the same shall have been
converted; PROVIDED, HOWEVER, beginning on the 91st day after the date on which
the Effective Time shall occur, no dividend or other distribution payable to the
holders or record of the CCBF Common Stock at or as of any time after the
Effective Time shall be paid to the holder of any certificate representing
shares of Salem Common Stock issued and outstanding as of the Effective Time
until such holder physically surrenders such certificate for exchange, promptly
after which time all such dividends or distributions shall be paid (without
interest). In the event any certificate representing shares to be converted
pursuant to the merger shall have been lost, stolen or destroyed, upon receipt
of appropriate indemnification therefor, certificates representing the CCBF
Common Stock (with attached CCBF Rights) will be issued in exchange therefor as
described above along with a check representing cash in lieu of fractional
shares, if any, and/or declared but unpaid dividends deliverable in respect
thereof.

7. Shares of Salem Common Stock held by holders who did not vote in favor
of the merger and who otherwise perfect dissenters' rights under Article 13 of
Chapter 55 of the North Carolina General Statutes shall not be converted into or
become shares of the CCBF Common Stock, but such shares of Salem Common Stock
shall represent only the right to receive the "fair value" of such shares as
provided in such Article 13. If any such holder shall have failed to perfect or
shall have effectively withdrawn or lost such dissenters' rights, such shares of
Salem Common Stock shall thereupon be deemed to have been converted and become
shares of the CCBF Common Stock, and cash in lieu of fractional shares, in
accordance with the Exchange Ratio as of the Effective Time without any interest
thereon.

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8. Shares of Salem Common Stock held immediately prior to the Effective
Time by CCBF, CCB Bank or Salem or any of their subsidiaries, other than in a
fiduciary capacity or as a result of debts previously contracted, shall be
canceled as of the Effective Time.

VI. ABANDONMENT.

This Plan of Merger may be terminated and the merger abandoned at any time
prior to the Effective Time upon termination of the Agreement of Combination by
CCBF and CCB Bank, by Salem or by all three such parties in accordance with the
terms thereof.

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<PAGE>
APPENDIX B

EXERPT FROM NORTH CAROLINA BUSINESS CORPORATION ACT

ARTICLE 13.

DISSENTERS' RIGHTS.

PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES.

(SECTION MARK)55.13.01. DEFINITIONS.

In this Article:

(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.

(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and
in the manner required by G.S. 55-13-20 through 55-13-28.

(3) "Fair value", with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion would
be inequitable.

(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable
under all the circumstances, giving due consideration to the rate currently
paid by the corporation on its principal bank loans, if any, but not less
than the rate provided in G.S. 24.1.

(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation.

(6) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholder.

(7) "Shareholder" means the record shareholder or the beneficial
shareholder.

(SECTION MARK)55-13-02. RIGHT TO DISSENT.

(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:

(1) Consummation of a plan of merger to which the corporation is a
part unless (i) approval by the shareholders of that corporation is not
required under G.S. 55-11-03(g) or (ii) such shares are then redeemable by
the corporation at a price not greater than the cash to be received in
exchange for such shares;

(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;

(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than in the usual and regular
course of business, including a sale in dissolution, but not including a
sale pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;

(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it (i)
alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional share so created is to be acquired for cash under
G.S. 55-6-04; or (vi) changes the corporation into a nonprofit corporation
or cooperative organization;

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(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that avowing or nonvoting shareholders are entitled
to dissent and obtain payment for their shares.

(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property, unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.

(SECTION MARK)55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.

(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.

(b) A beneficial shareholder may assert dissenters' rights as to shares
hold on his behalf only if:

(1) He submits to the corporation the record shareholder's written
consent to the dissent no later than the time the beneficial shareholder
asserts dissenters' rights; and

(2) He does so with respect to all shares of which he is the
beneficial shareholder.

PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS.

(SECTION MARK)55-13-20. NOTICE OF DISSENTERS' RIGHTS.

(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.

(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.

(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.

(SECTION MARK)55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.

(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:

(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated, and

(2) Must not vote his shares in favor of the proposed action.

(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.

(SECTION MARK)55-13-22. DISSENTERS' NOTICE.

(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.

(b) The dissenters' notice must be sent no later than 10 days after the
corporate action was taken, and must:

(1) State where the payment demand must be sent and where and when
certificates for certified shares must be deposited;

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(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;

(3) Supply a form for demanding payment;

(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and

(5) Be accompanied by a copy of this Article.

(SECTION MARK)55-13-23. DUTY TO DEMAND PAYMENT.

(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.

(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.

(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his share under this Article.

(SECTION MARK)55-13-24. SHARE RESTRICTIONS.

(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.

(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.

(SECTION MARK)55-13-25. OFFER OF PAYMENT.

(a) As soon as the proposed corporate action is taken, or upon receipt of a
payment demand, the corporation shall offer to pay each dissenter who complied
with G.S. 55-13-23 the amount the corporation estimates to be the fair value of
his shares, plus interest accrued to the date of payment, and shall pay this
amount to each dissenter who agrees in writing to accept it in full satisfaction
of his demand.

(b) The offer of payment must be accompanied by:

(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
offer of payment, an income statement for that year, a statement of cash
flows for that year, and the latest available interim financial statements,
if any;

(2) A statement of the corporation's estimate of the fair value of the
shares;

(3) An explanation of how the interest was calculated;

(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and

(5) A copy of this Article.

(SECTION MARK)55-13-26. FAILURE TO TAKE ACTION.

(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.

(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.

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(SECTION MARK)55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S
OFFER OR FAILURE TO PERFORM.

(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate or reject the corporation's offer under G.S. 55-13-25 and demand
payment of the fair value of his shares and interest due, if:

(1) The dissenter believes that the amount offered under G.S. 55-13-25
is less than the fair value of his shares or that the interest due is
incorrectly calculated;

(2) The corporation fails to make payment to a dissenter who accepts
the corporation's offer under G.S. 55-13-25 within 30 days after the
dissenter's acceptance; or

(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.

(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing (i) under
subdivision (a)(1) within 30 days after the corporation offered a payment for
his shares or (ii) under subdivisions (a)(2) and (a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.

PART 3. JUDICIAL APPRAISAL OF SHARES.

(SECTION MARK)55-13-30. COURT ACTION.

(a) If a demand for payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the date of his payment
demand under G.S. 55-13-28 and petition the court to determine the fair value of
the shares and accrued interest. Upon service upon it of the petition filed with
the court, the corporation shall pay to the dissenter the amount offered by the
corporation under G.S. 55-13-25.

(a1) If the dissenter does not commence the proceeding within the 60-day
period, the dissenter shall have an additional 30 days to either (i) accept in
writing the amount offered by the corporation under G.S. 55-13-25, upon which
the corporation shall pay such amount to the dissenter in full satisfaction of
his demand, or (ii) withdraw his demand for payment and resume the status of a
nondissenting shareholder. A dissenter who takes no action within such 30-day
period shall be deemed to have withdrawn his dissent and demand for payment.

(b) Reserved for future codification purposes.

(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in action against their shares and all parties must be served with
a copy of the petition. Nonresidents may be served by registered or certified
mail or by publication as provided by law.

(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decision on the question
of fair value. The appraisers have the powers described in the order appointing
them, or in any amendment to it. The parties are entitled to the same discovery
rights as parties in other civil proceedings. However, in a proceeding by a
dissenter in a public corporation, there is no right to a trial by jury.

(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.

(SECTION MARK)55-13-31. COURT COSTS AND COUNSEL FEES.

(a) The court is an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.

(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:

(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or

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(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.

(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.

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APPENDIX C

July 15, 1996

Board of Directors
Salem Trust Bank
2140 Country Club Road
Winston-Salem, NC 27104

Members of the Board:

You have requested our opinion as to the fairness, from a financial point
of view, of the consideration to be received by the unaffiliated shareholders of
Salem Trust Bank ("Salem") under the terms of a certain Agreement of Combination
dated July 1, 1996 (the "Agreement") pursuant to which Salem will merge with and
into Central Carolina Bank and Trust Company, a wholly owned subsidiary of CCB
Financial Corporation ("CCFB") ("Merger"). Under the terms of the Agreement,
each Salem share outstanding shall be converted into and become the right to
receive .41 of a share of the common stock of CCBF (the "Exchange Ratio") and
the right to receive .41 of a preferred share purchase right as described in
CCBF's Shareholder Rights Plan, as subject to adjustment pursuant to the
Agreement. In addition, all rights with respect to each option to acquire Salem
common shares outstanding as of May 7, 1996 under the Salem Options Plan shall
be converted into and become rights with respect to a number of shares of CCBF
common stock equal to the product of (i) the number of Salem shares covered by
such Salem stock option and (ii) the Exchange Ratio; and the exercise price per
share of the resulting CCBF stock options shall be an amount computed by
dividing (i) the exercise price per share of the original Salem stock option by
(ii) the Exchange Ratio. The foregoing summary of the Merger is qualified in its
entirety by reference to the Agreement.

The Carson Medlin Company is a National Association of Securities Dealers,
Inc. (NASD) member investment banking firm which specializes in the securities
of southeastern United States financial institutions. As part of our investment
banking activities, we are regularly engaged in the valuation of southeastern
United States financial institutions and transactions relating to their
securities. We regularly publish our research on independent community banks
regarding their financial and stock price performance. We are familiar with the
commercial banking industry in North Carolina and the major commercial banks
operating in that market. We have been retained by Salem to render our opinion
hereunder, for which we will receive compensation.

In reaching our opinion, we have analyzed the respective financial
positions, both current and historical, of CCBF and Salem. We have reviewed: (i)
the Agreement; (ii) the annual reports to shareholders of CCBF, including
audited financial statements for the five years ended December 31, 1995; (iii)
audited financial statements of Salem for the five years ended December 31,
1995; (iv) Bank Call Reports for Salem for the five years ended December 31,
1995 and the three months ended March 31, 1996; (v) the unaudited interim
financial statements of CCBF for the three months ended March 31, 1996; and,
(vi) certain financial and operating information with respect to the business,
operations and prospects of CCBF and Salem. We also (a) held discussions with
members of the senior management of CCBF and Salem regarding historical and
current business operations, financial condition and future prospects of their
respective companies; (b) reviewed the historical market prices and trading
activity for the common stocks of CCBF and Salem and compared them with those of
certain publicly traded companies which we deemed to be relevant; (c) compared
the results of operations of CCBF and Salem with those of certain banking
companies which we deemed to be relevant; (d) compared with the proposed
financial terms of the Merger with the financial terms, to the extent publicly
available, of certain other recent business combinations of commercial banking
organizations; (e) analyzed the pro forma financial impact of the Merger on
CCBF; and (f) conducted such other studies, analyses, inquiries and examinations
as we deemed appropriate.

We have relied upon and assumed without independent verification the
accuracy and completeness of all information provided to us. We have not
performed or considered any independent appraisal or evaluation of the assets of
CCBF and Salem. The opinion we express herein in necessarily based upon market,
economic and other relevant considerations as they exist and can be evaluated as
of the date of this letter.

Based upon the foregoing, it is our opinion that the consideration provided
for in the Agreement is fair, from a financial point of view, to the
unaffiliated shareholders of Salem Trust Bank.

Very truly yours,
/s/ The Carson Medlin Company
THE CARSON MEDLIN COMPANY

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INDEX TO SALEM

FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
<S> <C>
Independent Auditors' Report........................................................................................... F-3
Balance Sheets as of December 31, 1995 and 1994...................................................................... F-4
Statements of Income for the Years Ended December 31, 1995, 1994 and 1993............................................ F-5
Statements of Stockholders' Equity for the Years Ended December 31, 1995, 1994 and 1993.............................. F-6
Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993........................................ F-7
Notes to Financial Statements........................................................................................ F-8

Unaudited Financial Statements
Balance Sheets as of June 30, 1996 and 1995.......................................................................... F-16
Statements of Income for the Six Months Ended June 30, 1996 and 1995................................................. F-17
Statements of Stockholders' Equity for the Six Months Ended June 30, 1996 and 1995................................... F-18
Statements of Cash Flows for the Six Months Ended June 30, 1996 and 1995............................................. F-19
Notes to Financial Statements........................................................................................ F-20
</TABLE>

F-1

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SALEM TRUST BANK

FINANCIAL STATEMENTS

DECEMBER 31, 1995 AND 1994

(WITH INDEPENDENT AUDITORS' REPORT THEREON)

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<PAGE>
INDEPENDENT AUDITORS' REPORT

THE BOARD OF DIRECTORS
Salem Trust Bank:

We have audited the accompanying balance sheets of Salem Trust Bank as of
December 31, 1995 and 1994 and the related statements of income, stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1995. These financial statements are the responsibility of the
Bank's management. Our responsibility is to express an opinion on these
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 financial statements referred to above present fairly,
in all material respects, the financial position of Salem Trust Bank at December
31, 1995 and 1994, and the results of its operations and its cash flows for each
of the years in the three-year period ended December 31, 1995, in conformity
with generally accepted accounting principles.

KPMG PEAT MARWICK LLP

GREENSBORO, NORTH CAROLINA
JANUARY 9, 1996

F-3

<PAGE>
SALEM TRUST BANK

BALANCE SHEETS

DECEMBER 31, 1995 AND 1994

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
ASSETS
Cash and due from banks (note 2)............................................................... $ 6,145,430 5,068,419
Interest-bearing bank time deposits............................................................ -- 100,000
Federal funds sold............................................................................. 22,665,000 11,725,000
Investment securities held to maturity (estimated fair value of $17,159,975 and $4,905,440 at
December 31, 1995 and 1994, respectively) (note 3)........................................... 17,174,175 4,951,023
Loans (note 4)................................................................................. 106,230,918 66,965,991
Less allowance for loan losses (note 4)........................................................ (1,301,767) (757,054)
Loans, net................................................................................... 104,929,151 66,208,937
Federal Home Loan Bank Stock, at cost.......................................................... 294,900 268,800
Premises and equipment, net (note 5)........................................................... 1,890,350 1,696,001
Accrued interest receivable.................................................................... 715,989 408,395
Other assets................................................................................... 276,147 118,214
Total assets................................................................................. $154,091,142 90,544,789
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand:
Noninterest-bearing....................................................................... $ 16,473,398 10,052,631
Interest-bearing.......................................................................... 8,353,221 8,075,157
Savings...................................................................................... 32,073,996 23,759,066
Time, $100,000 or more....................................................................... 48,243,566 25,688,134
Other time................................................................................... 31,306,415 11,741,491
Total deposits............................................................................ 136,450,596 79,316,479
Federal funds purchased........................................................................ -- 500,000
Convertible subordinated notes (note 6)........................................................ 2,118,000 2,133,000
Accrued interest payable....................................................................... 1,444,019 507,981
Accrued and other liabilities.................................................................. 470,081 506,138
Total liabilities......................................................................... 140,482,696 82,963,598
Stockholders' equity (note 8):
Preferred stock, $25.00 par value; authorized 60,000 shares.................................. -- --
Common stock, $2.50 par value; authorized 5,000,000 shares; issued 1,597,132 shares in 1995
and 1,039,676 shares in 1994.............................................................. 3,992,830 2,599,190
Additional paid-in capital................................................................... 6,345,290 2,756,005
Retained earnings............................................................................ 3,270,326 2,225,996
Total stockholders' equity................................................................ 13,608,446 7,581,191
Commitments (note 11)
Total liabilities and stockholders' equity................................................ $154,091,142 90,544,789
</TABLE>

See accompanying notes to financial statements.

F-4

<PAGE>
SALEM TRUST BANK

STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Interest and fee income:
Loans............................................................................... $8,145,130 4,620,315 3,872,257
Federal funds sold.................................................................. 901,426 371,475 195,002
Securities.......................................................................... 266,770 319,484 318,690
Other............................................................................... 23,771 8,870 71,156
Total interest income............................................................ 9,337,097 5,320,144 4,457,105
Interest expense:
Demand.............................................................................. 131,512 109,370 99,485
Savings............................................................................. 973,952 565,702 561,437
Time, $100,000 or more.............................................................. 2,247,552 1,011,201 868,041
Other time.......................................................................... 1,083,961 580,795 671,292
Long-term debt...................................................................... 127,746 128,095 106,702
Other............................................................................... 6,571 2,037 --
Total interest expense........................................................... 4,571,294 2,397,200 2,306,957
Net interest income.............................................................. 4,765,803 2,922,944 2,150,148
Provision for loan losses (note 4).................................................... 545,124 50,000 --
Net interest income after provision for loan losses.............................. 4,220,679 2,872,944 2,150,148
Other income:
Mortgage operations................................................................. 323,055 239,759 194,683
Trust and investment fees........................................................... 470,882 315,225 130,735
Service charges and fees on deposit accounts........................................ 99,745 78,097 94,752
Other............................................................................... 34,596 12,581 13,965
Total other income............................................................... 928,278 645,662 434,135
Other operating expenses:
Salaries and benefits............................................................... 2,061,280 1,311,669 1,034,077
Furniture and equipment............................................................. 176,970 136,683 122,871
FDIC insurance...................................................................... 87,882 169,564 171,270
Occupancy........................................................................... 176,007 91,631 88,013
Other............................................................................... 882,028 500,074 460,064
Total other operating expenses................................................... 3,384,167 2,209,621 1,876,295
Income before income taxes....................................................... 1,764,790 1,308,985 707,988
Income tax expense (note 7)........................................................... 720,460 506,099 250,428
Net income....................................................................... $1,044,330 802,886 457,560
Earnings per share:
Primary............................................................................. $ .72 .76 .44
Fully diluted....................................................................... $ .67 .70 .42
</TABLE>

See accompanying notes to financial statements.

F-5

<PAGE>
SALEM TRUST BANK

STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
<S> <C> <C> <C> <C>
Balance at December 31, 1992........................................... $2,599,190 2,756,005 1,048,725 6,403,920
Net income for 1993.................................................... -- -- 457,560 457,560
Balance at December 31, 1993........................................... 2,599,190 2,756,005 1,506,285 6,861,480
Net income for 1994.................................................... -- -- 802,886 802,886
Cash dividends ($.08 per share)........................................ -- -- (83,175) (83,175)
Balance at December 31, 1994........................................... 2,599,190 2,756,005 2,225,996 7,581,191
Net income for 1995.................................................... -- -- 1,044,330 1,044,330
Common stock issued:
Stock offering....................................................... 1,388,890 3,576,835 -- 4,965,725
Stock options exercised.............................................. 1,000 1,200 -- 2,200
Convertible subordinated notes....................................... 3,750 11,250 -- 15,000
Balance at December 31, 1995........................................... $3,992,830 6,345,290 3,270,326 13,608,446
</TABLE>

See accompanying notes to financial statements.

F-6

<PAGE>
SALEM TRUST BANK

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net income..................................................................... $ 1,044,330 802,886 457,560
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Depreciation and amortization............................................... 157,054 132,848 104,929
Accretion of premiums and discounts, net.................................... (128,073) (83,722) 36,815
Provision for loan losses................................................... 545,124 50,000 --
Deferred tax benefit........................................................ (167,700) -- --
Increase in deferred costs on loan originations............................. (41,682) (4,021) (6,309)
Purchases and originations of loans for sale................................ (63,597,000) (73,541,000) (7,442,700)
Proceeds from sale of loans................................................. 63,189,759 71,186,580 6,977,700
Increase (decrease) in accrued interest receivable.......................... (307,594) (47,820) 41,870
Increase in other assets.................................................... (991) (21,363) (29,184)
Increase (decrease) in accrued interest payable............................. 936,038 (71,784) 62,676
(Decrease) increase in accrued and other liabilities........................ (36,057) 329,374 51,356
Net cash provided by (used in) operating activities....................... 1,593,208 (1,268,022) 254,713
Cash flows from investing activities:
Increase in loans.............................................................. (38,816,415) (4,167,303) (1,475,973)
Maturities of interest-bearing bank time deposits.............................. 100,000 2,000,000 1,999,915
Purchase of interest-bearing bank time deposits................................ -- -- (2,000,000)
Purchases of stock in the Federal Home Loan Bank............................... (26,100) -- --
Purchases of securities held to maturity....................................... (29,765,079) (6,381,125) (8,298,800)
Maturities of securities held to maturity...................................... 17,670,000 8,530,000 10,000,000
Redemption of investment in mutual fund........................................ -- 1,000,000 --
Purchases of equipment......................................................... (340,645) (39,425) (178,295)
Net cash (used in) provided by investing activities....................... (51,178,239) 942,147 46,847
Cash flows from financing activities:
Increase (decrease) in total deposits.......................................... 57,134,117 1,001,246 (726,684)
(Decrease) increase in federal funds purchased................................. (500,000) 500,000 --
Proceeds from stock options exercised.......................................... 2,200 -- --
Proceeds from issuance of common stock......................................... 4,965,725 -- --
Proceeds from issuance of long-term debt....................................... -- -- 2,133,000
Cash dividends................................................................. -- (83,175) --
Net cash provided by financing activities................................. 61,602,042 1,418,071 1,406,316
Net increase in cash and cash equivalents........................................ 12,017,011 1,092,196 1,707,876
Cash and cash equivalents at beginning of year................................... 16,793,419 15,701,223 13,993,347
Cash and cash equivalents at end of year......................................... $ 28,810,430 16,793,419 15,701,223
Supplemental disclosures of cash flow information:
Cash paid during the year for interest......................................... $ 3,635,256 2,468,984 2,244,281
Income taxes paid during the year.............................................. 1,011,800 241,200 217,845
Noncash transactions:
Conversion of convertible subordinated notes to common stock.............. 15,000 -- --
</TABLE>

See accompanying notes to financial statements.

F-7

<PAGE>
SALEM TRUST BANK

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1995 AND 1994

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Salem Trust Bank (the Bank) was incorporated January 9, 1986 and began
operations March 3, 1986. The Bank is engaged in general commercial and retail
banking in both Forsyth County and New Hanover County, North Carolina and
operates under the banking laws of North Carolina and the rules and regulations
of the Federal Deposit Insurance Corporation. The Bank undergoes periodic
examinations by those regulatory authorities. The Bank is headquartered in
Winston-Salem, North Carolina. In March 1995, the Bank opened a full-service
banking operation in Wilmington, North Carolina.

In May, 1995, the Bank completed a secondary stock offering to support the
growth of the Wilmington operation. The Bank sold 555,556 shares of common stock
with a par value of $2.50 for $9.00 per share. Total proceeds of $4,999,765 were
reduced by issuance expenses of $34,040. The net proceeds were credited to
common stock and additional paid in capital.

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities at the date
of the financial statements and the amounts of income and expenses during the
reported period. Actual results could differ from those estimates.

The following is a description of the significant accounting and reporting
policies the Bank follows in preparing and presenting its financial statements.

(a) INVESTMENT SECURITIES

Effective January 1, 1994, the Bank adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" which prescribes the accounting and reporting
for investments in equity securities that have readily determinable fair
values and for all investments in debt securities. Securities that the Bank
has the positive intent and ability to hold to maturity are classified as
held to maturity and reported at amortized cost. Securities held for
current resale are classified as trading securities and reported at fair
value, with unrealized gains and losses included in income. Securities not
classified as held to maturity or trading securities are classified as
available for sale and reported at fair value, with unrealized gains and
losses net of the related tax effect excluded from income and reported as a
separate component of stockholders' equity. The classification of
securities as held to maturity, trading or available for sale is determined
at the date of purchase.

Realized gains or losses on the sale of securities are recognized on
the specific identification method. Premiums and discounts are amortized to
interest income over the life of the security using a method approximating
a level yield method.

(b) FEDERAL HOME LOAN BANK STOCK

As a member of the Federal Home Loan Bank of Atlanta (the "FHLB"), the
Bank is required to maintain an investment in the stock of the FHLB. This
stock is carried at cost since it has no quoted market value.

The Bank uses the allowance method in providing for loan losses.
Accordingly, all loan losses are charged to the allowance for loan losses
and all recoveries are credited to the allowance.

Effective January 1, 1995, the Bank adopted SFAS No. 114, "Accounting
by Creditors for Impairment of a Loan" and SFAS No. 118 "Accounting for
Creditors for Impairment of a Loan -- Income Recognition and Disclosures."
Under the new standard, the 1995 allowance for loan losses related to loans
that are determined to be impaired in accordance with SFAS No. 114 is based
on discounted cash flows using the loan's initial effective interest rate
or the fair value of the collateral for certain collateral dependent loans.
The Bank previously measured loan impairment in a manner generally
comparable to the methods prescribed in SFAS No. 114. Accordingly, no
additional reserves for credit losses were required as a result of adoption
of SFAS No. 114.

F-8

<PAGE>
SALEM TRUST BANK

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
The provision for loan losses charged to operating expense is based on
factors which, in management's judgment, deserve current recognition in
estimating possible loan losses. Such factors considered by management
include growth and composition of the loan portfolio, the amounts and
timing of future cash flows expected to be received on impaired loans, the
relationship of the allowance for loan losses to outstanding loans, and
economic conditions. While management uses the best information available
to make evaluations, future adjustments may be necessary if economic and
other conditions differ substantially from the assumptions used.

In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Bank's allowance for loan
losses. Such agencies may require the Bank to recognize changes to the
allowance based on their judgments about information available at the time
of their examination.

Interest income is recorded as earned on an accrual basis. Recognition
of interest income on loans, including a loan impaired under SFAS No. 114,
is discontinued when, in management's opinion, collectibility of interest
is doubtful.

(d) LOANS HELD FOR SALE

The Bank originates and purchases residential mortgage loans with the
intent to sell. These loans are carried at the lower of cost or market.

(e) PREMISES AND EQUIPMENT

Premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line method over
the estimated useful lives of the respective assets.

(f) INCOME TAXES

Income taxes are accounted for under the asset and liability method.
The objective of the asset and liability method is to establish deferred
tax assets and liabilities for the temporary differences between the
financial reporting basis and the income tax basis of the Bank's assets and
liabilities at enacted tax rates expected to be in effect when such amounts
are realized or settled.

(g) CASH AND CASH EQUIVALENTS

For purposes of the statements of cash flows, cash and cash
equivalents include cash and due from banks in addition to federal funds
sold. Generally, federal funds are sold for one-day periods.

(h) LOAN ORIGINATION FEES

The Bank defers certain costs directly associated with originating new
loans net of certain loan fees collected associated with such originations.
Net deferred costs per loan are amortized to interest income over the
actual life of the loan using a method approximating a level yield method.

(i) EARNINGS PER SHARE

Primary earnings per share is based on the weighted average number of
common shares and common stock equivalents outstanding during the year
(1,447,400 shares in 1995, 1,050,534 shares in 1994 and 1,049,896 in 1993).
Fully diluted earnings per share is computed based on the weighted average
number of common shares outstanding, common stock equivalents and common
shares issuable upon full conversion of the convertible subordinated notes
(1,684,659 shares in 1995, 1,267,064 in 1994 and 1,236,647 in 1993).

(j) RECLASSIFICATIONS

Certain amounts in the 1994 and 1993 financial statements have been
reclassified to conform with the presentation adopted in 1995. These
reclassifications did not change net income or retained earnings as
previously reported.

F-9

<PAGE>
SALEM TRUST BANK

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

(2) CASH AND DUE FROM BANKS

The Bank is required to maintain certain daily reserve and clearing
balances on hand in accordance with Federal Reserve Board requirements. The
reserve and clearing balances maintained in accordance with such requirements as
of December 31, 1995 and 1994, was approximately $432,000 and $338,000,
respectively.

(3) INVESTMENT SECURITIES

Investment securities held to maturity consist of the following:

<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
December 31, 1995:
U.S. treasury securities............................................... $ 499,522 2,978 -- 502,500
Obligations of U.S. government agencies................................ 16,650,069 1,047 (18,638) 16,632,478
State, county and municipal obligations................................ 24,584 413 -- 24,997
$17,174,175 4,438 (18,638) 17,159,975
December 31, 1994:
U.S. treasury securities............................................... $ 1,476,349 -- (10,529) 1,465,820
Obligations of U.S. government agencies................................ 2,975,161 -- (34,016) 2,941,145
State, county and municipal obligations................................ 499,513 -- (1,038) 498,475
$ 4,951,023 -- (45,583) 4,905,440
</TABLE>

The maturity distribution of debt securities at December 31, 1995 is as
follows:

<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
<S> <C> <C>
Held to maturity due:
In one year or less............................................................................ $17,149,591 17,134,978
After one year through five years.............................................................. 24,584 24,997
Totals.................................................................................... $17,174,175 17,159,975
</TABLE>

There were no sales of investment securities during 1995, 1994 or 1993.

Investments with an amortized cost of approximately $2,992,515 were pledged
to secure public deposits at December 31, 1995.

(4) LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans at December 31, 1995 and 1994 are summarized as follows:

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Commercial..................................................................................... $ 15,008,078 9,873,835
Consumer....................................................................................... 16,771,516 9,884,099
Real estate.................................................................................... 71,093,783 44,299,439
Mortgage loans held for sale................................................................... 3,226,661 2,819,420
Deferred origination costs, net................................................................ 130,880 89,198
$106,230,918 66,965,991
</TABLE>

The Bank purchases single family, residential first mortgage loans from
third parties (see note 11) in addition to originating them through its mortgage
division.

F-10

<PAGE>
SALEM TRUST BANK

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

(4) LOANS AND ALLOWANCE FOR LOAN LOSSES -- Continued
Directors, officers and their related interests were indebted to the Bank
in the aggregate amount of $5,505,383 and $3,014,980 at December 31, 1995 and
1994, respectively. During 1995, directors, officers and their related interests
borrowed $3,060,368 and repaid $569,965. In the opinion of management, these
loans do not involve more than the normal risk of collectibility, and are made
substantially on the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with other borrowers.

The Bank's loan portfolio principally consists of loans in Forsyth County,
North Carolina to professionals in the medical, legal and accounting fields and
their related interests and loans in New Hanover County, North Carolina to
individuals and small businesses. These loans are mainly retail, commercial and
commercial real estate type loans for which repayment is dependent on the
current real estate market and general economic conditions.

The allowance for loan losses for 1995, 1994 and 1993 is summarized as
follows:

<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Balance at beginning of year.............................................................. $ 757,054 713,978 713,978
Provision charged to operations........................................................... 545,124 50,000 --
Charge-offs............................................................................... (411) (9,711) --
Recoveries................................................................................ -- 2,787 --
Balance at end of year.................................................................... $1,301,767 757,054 713,978
</TABLE>

(5) PREMISES AND EQUIPMENT

Premises and equipment at December 31, 1995 and 1994 are summarized as
follows:

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Land............................................................................................... $ 430,000 430,000
Building........................................................................................... 1,226,372 1,226,372
Furniture, fixtures and equipment.................................................................. 960,961 648,261
2,617,333 2,304,633
Less accumulated depreciation...................................................................... 726,983 608,632
Premises and equipment, net........................................................................ $1,890,350 1,696,001
</TABLE>

The Bank leases office space in Wilmington, North Carolina. Rent expense
related to these leases approximated $58,000 in 1995.

(6) CONVERTIBLE SUBORDINATED NOTES

In February 1993, the Bank issued $2,133,000 of convertible subordinated
notes with a 6% fixed interest rate. Interest is payable semiannually in arrears
in June and December to registered holders. The notes mature in February 2003
and are callable, at the Bank's option, in whole or in part, at any time or from
time to time after December 31, 1995 at par. Each note is convertible at the
option of the holder into common stock at a conversion price of $10 per share
and the notes are not subject to any mandatory redemption or sinking fund
requirement prior to maturity. In 1995, $15,000 of the convertible subordinated
notes were converted into 1,500 shares of common stock at a conversion price of
$10 per share.

F-11

<PAGE>
SALEM TRUST BANK

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

(7) INCOME TAXES

Components of income tax expense for 1995, 1994 and 1993 are as follows:

<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Current:
Federal................................................................................... $735,270 425,000 207,046
State..................................................................................... 152,890 81,099 31,382
888,160 506,099 238,428
Deferred:
Federal................................................................................... (134,474) -- 12,000
State..................................................................................... (33,226) -- --
(167,700) -- 12,000
Total.................................................................................. $720,460 506,099 250,428
</TABLE>

The actual income tax expense for 1995, 1994 and 1993 differs from the
"expected" income tax expense (computed at the statutory rate of 34%) as shown
below:

<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Income tax expense at Federal rate.......................................................... $600,029 445,055 240,716
Increase in income taxes resulting from:
State income taxes, net of Federal benefit................................................ 78,978 53,525 20,712
Other, net................................................................................ 41,453 7,519 (11,000)
$720,460 506,099 250,428
</TABLE>

The tax effects of temporary differences are presented below:

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred tax assets:
Loan loss reserves................................................................................... $393,100 156,000
Other................................................................................................ -- 1,000
Total gross deferred tax asset.................................................................... 393,100 157,000
Less valuation allowance.......................................................................... -- --
Net deferred tax asset............................................................................ 393,100 157,000
Deferred tax liabilities:
Depreciable basis of fixed assets.................................................................... 130,100 120,000
Deferred loan fees................................................................................... 91,000 26,600
Other................................................................................................ 4,300 10,400
Total gross deferred tax liability................................................................... 225,400 157,000
Net deferred tax asset............................................................................... $167,700 --
</TABLE>

(8) STOCK OPTIONS

The Bank has reserved 159,522 shares of its common stock for possible
issuance pursuant to the 1986 Incentive Stock Option Plan (the Plan), as amended
on June 29, 1995. Under the terms of the Plan, stock options are periodically
granted to key personnel at a price not less than the fair market value of the
shares at the date of grant. The options generally vest over five years from the
date of grant. The exercise period for incentive stock options granted under the
Plan is determined to be a period no longer than ten years from the date the
options are granted.

Also, under the Plan, non-qualified stock options for 6,820 shares of the
shares reserved have been granted to an executive officer at $5.50 per share
exercisable for a period of eleven years.

F-12

<PAGE>
SALEM TRUST BANK

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

(8) STOCK OPTIONS -- Continued
Changes in the number of shares under the above mentioned stock option
plans are as follows:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OPTION PRICE
<S> <C> <C>
Outstanding at December 31, 1993................................................................... 74,900 $5.50-$8.44
Granted.......................................................................................... 23,600 $8.00-$8.63
Forfeited........................................................................................ (4,500) $8.38
Outstanding at December 31, 1994................................................................... 94,000 $5.50-$8.63
Granted.......................................................................................... 58,000 $9.00
Exercised........................................................................................ (400) $5.50
Outstanding at December 31, 1995................................................................... 151,600 $5.50-$9.00
Exercisable at December 31, 1995................................................................... 86,640 $5.50-$9.00
</TABLE>

(9) BENEFIT PLAN

The Bank has a defined contribution retirement plan which qualifies under
Section 401(k) of the Internal Revenue Code. The plan allows eligible employees
to contribute a fixed percentage of their compensation, with the Bank matching a
portion of each employee's contribution. The Bank's matching contributions were
approximately $60,000 in 1995 and $14,000 in 1994 and 1993.

(10) REGULATORY MATTERS

The Bank, as a North Carolina banking corporation, may pay dividends only
out of undivided profits as determined pursuant to North Carolina General
statutes. However, regulatory authorities may limit payment of dividends by any
bank when it is determined that such limitation is in the public interest and is
necessary to ensure financial soundness of the Bank.

Current Federal regulations require that the Bank maintain a minimum ratio
of total capital to "risk weighted" assets of 8.0%, with at least 4.0% being in
the form of tier I capital, as defined in the regulations. As of December 31,
1995, the Bank was in compliance with each of these requirements.

(11) COMMITMENTS

Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since some of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained if
deemed necessary by the Bank upon extension of credit is based on management's
credit evaluation of the counterparty. Collateral obtained varies but may
include real estate, stock, bonds, and certificates of deposit. Undisbursed
commitments under outstanding lines of credit aggregated approximately
$23,820,000 at December 31, 1995.

The Bank had standby letters of credit of approximately $487,500
outstanding at December 31, 1995.

During 1994, the Bank entered into an agreement to purchase single family,
residential first mortgage loans on a short term basis from originating
corporations. All such purchased loans have been presold to secondary market
investors prior to their purchase by the Bank. Generally, secondary market
investors will purchase these loans from the Bank within a 30 to 60 day period.
Mortgage loans purchased by the Bank are classified as held for sale (see note
4). The agreement specifies that purchases outstanding at any one time shall not
exceed $2,500,000. At December 31, 1995, the Bank had $1,837,111 outstanding
under the agreement.

F-13

<PAGE>
SALEM TRUST BANK

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

(12) FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires a company to disclose the fair value of its financial instruments,
whether or not recognized in the balance sheet, where it is practical to
estimate that value.

The fair value estimates are made at a specific point in time based on
relevant market information about the financial instrument. These estimates do
not reflect any premium or discount that could result from offering for sale at
one time the Bank's entire holding of a particular financial instrument. In
cases where quoted market prices are not available, fair value estimates are
based on judgments regarding current economic conditions, risk characteristics
of various financial instruments, and other factors. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates. In addition, the tax
ramifications related to the realization of the unrealized gains and losses can
have a significant effect on fair value estimates and have not been considered
in the estimates. Finally, the fair value estimates presented herein are based
on pertinent information available to management as December 31, 1995. Such
amounts have not been comprehensively revalued for purposes of these financial
statements since that date and, therefore, current estimates of fair value may
differ significantly from the amounts presented herein.

The following methods and assumptions were used by the Bank in estimating
its fair value disclosures for financial instruments:

CASH AND CASH EQUIVALENTS

The carrying amounts reported in the balance sheet for cash and cash
equivalents approximate those assets' fair values.

INVESTMENT SECURITIES

Fair values were based on quoted market prices, where available. If quoted
market prices were not available, fair values were based on quoted market prices
of comparable instruments.

LOANS RECEIVABLE

The carrying values, reduced by estimated inherent credit losses, of
variable-rate loans and other loans with short-term characteristics were
considered fair values. For other loans, the fair values were calculated using
discounted cash flow analyses, using interest rates currently being offered for
loans with similar terms and credit quality.

DEPOSIT ACCOUNTS

The fair value of deposits with no stated maturity, such as demand deposits
and savings deposits, was, by definition, equal to the amount payable on demand
as of December 31, 1995. The fair value of certificates of deposit was estimated
using discounted cash flow analyses, using interest rates currently offered for
deposits of similar remaining maturities.

CONVERTIBLE SUBORDINATED DEBT

The fair value of the convertible subordinated debt was estimated using
interest rates currently offered for similar debt.

F-14

<PAGE>
SALEM TRUST BANK

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

(12) FAIR VALUE OF FINANCIAL INSTRUMENTS -- Continued
The estimated fair values of financial instruments are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1995
CARRYING ESTIMATED
VALUE FAIR VALUE
<S> <C> <C>
(IN THOUSANDS)
FINANCIAL ASSETS:
Cash and cash equivalents........................................................................... $ 28,810 28,810
Investment securities held to maturity.............................................................. 17,174 17,160
Loans receivable, net of allowance for loan losses.................................................. 104,929 105,323
Stock in the FHLB................................................................................... 295 295
FINANCIAL LIABILITIES:
Deposit accounts.................................................................................... $136,451 136,690
Convertible subordinated note....................................................................... 2,118 2,262
</TABLE>

At December 31, 1995, the Bank had outstanding commitments to originate new
loans and to extend credit. These off-balance sheet financial instruments were
exercisable at the market rate prevailing at the date the underlying transaction
will be completed and, therefore, they were deemed to have no current fair
market value.

FAS 107 excludes certain financial instruments and all non-financial
instruments from its disclosure requirements. The disclosures also do not
include premises and equipment and certain intangible assets, such as customer
relationships. Accordingly, the aggregate fair value amounts presented above do
not represent the underlying value of the Bank.

F-15

<PAGE>
SALEM TRUST BANK

BALANCE SHEETS

(IN THOUSANDS)

<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
JUNE 30, DECEMBER 31, JUNE 30,
1996 1995 1995
<S> <C> <C> <C>
ASSETS:
Cash and due from banks.............................................................. $ 5,622 6,145 6,591
Federal funds sold................................................................... 17,340 22,665 12,685
Investment securities:
Available for sale................................................................. 2,462 295 295
Held to maturity (market values of $16,594, $17,160 and $2,995).................... 16,667 17,174 2,983
Loans (notes 2 and 4)................................................................ 113,703 106,231 91,898
Less allowance for loan losses (note 3)............................................ 1,434 1,302 922
Loans, net...................................................................... 112,269 104,929 90,976
Premises and equipment............................................................... 1,860 1,890 1,811
Other assets......................................................................... 1,344 993 627
Total assets.................................................................. $ 157,564 154,091 115,968
LIABILITIES:
Deposits:
Noninterest bearing................................................................ $ 17,010 16,473 12,142
Interest-bearing................................................................... 122,424 119,978 82,304
Total deposits.................................................................. 139,434 136,451 94,446
Short-term borrowed funds............................................................ -- -- 5,500
Long-term debt (note 5).............................................................. -- 2,118 2,133
Other liabilities.................................................................... 1,447 1,914 944
Total liabilities............................................................. 140,881 140,483 103,023
STOCKHOLDERS' EQUITY:
Preferred stock, $25.00 par value; authorized 60,000 shares.......................... -- -- --
Common stock, $2.50 par value; authorized 5,000,000 shares; 1,841,232 1,597,132, and
1,595,232 shares issued............................................................ 4,603 3,993 3,988
Additional paid-in capital........................................................... 8,063 6,345 6,339
Retained earnings.................................................................... 4,017 3,270 2,618
Total stockholders' equity.................................................... 16,683 13,608 12,945
Total liabilities and stockholders' equity.................................... $ 157,564 154,091 115,968
</TABLE>

See accompanying notes to financial statements.

F-16

<PAGE>
SALEM TRUST BANK

STATEMENTS OF INCOME

(UNAUDITED, DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1996 1995
<S> <C> <C>
INTEREST INCOME:
Loans................................................................................................ $5,111 3,644
Investment securities................................................................................ 489 107
Other................................................................................................ 548 251
Total interest income............................................................................. 6,148 4,002
INTEREST EXPENSE:
Deposits............................................................................................... 3,071 1,722
Long-term debt and other borrowings.................................................................... 41 64
Total interest expense............................................................................ 3,112 1,786
NET INTEREST INCOME.................................................................................... 3,036 2,216
Provision for loan losses (note 3)..................................................................... 132 165
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES.................................................... 2,904 2,051
OTHER INCOME:
Service charges on deposit accounts.................................................................... 69 31
Non-deposit fees and commissions....................................................................... 127 147
Other.................................................................................................. 426 137
Total other income................................................................................ 622 315
OTHER EXPENSES:
Personnel expense...................................................................................... 1,250 983
Net occupancy expense.................................................................................. 123 95
Equipment expense...................................................................................... 96 79
FDIC insurance......................................................................................... 17 101
Other operating expenses............................................................................... 561 374
Total other expenses.............................................................................. 2,047 1,632
INCOME BEFORE INCOME TAXES............................................................................. 1,479 734
Income taxes........................................................................................... 571 342
NET INCOME............................................................................................. $ 908 392
INCOME PER SHARE:
Primary.............................................................................................. $ .54 .34
Fully diluted........................................................................................ .51 .32
WEIGHTED AVERAGE SHARES OUTSTANDING:
Primary.............................................................................................. 1,694,409 1,137,896
Fully diluted........................................................................................ 1,831,878 1,351,196
</TABLE>

See accompanying notes to financial statements.

F-17

<PAGE>
SALEM TRUST BANK

STATEMENTS OF STOCKHOLDERS' EQUITY

(UNAUDITED, IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
<S> <C> <C> <C> <C>
Balance December 31, 1994.................................................... $2,599 2,756 2,226 7,581
Net income................................................................... -- -- 392 392
Stock offering............................................................... 1,389 3,583 -- 4,972
Balance June 30, 1995........................................................ $3,988 6,339 2,618 12,945
Balance December 31, 1995.................................................... $3,993 6,345 3,270 13,608
Net income................................................................... -- -- 908 908
Stock options exercised...................................................... 80 130 -- 210
Cash dividends ($.10 per share).............................................. -- -- (161) (161)
Conversion of subordinated notes............................................. 530 1,588 -- 2,118
Balance June 30, 1996........................................................ $4,603 8,063 4,017 16,683
</TABLE>

See accompanying notes to financial statements.

F-18

<PAGE>
SALEM TRUST BANK

STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED, IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES:
Net income.............................................................................................. $ 908 392
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation.......................................................................................... 76 64
Provision for loan and lease losses................................................................... 132 165
Increase in deferred costs on loan originations....................................................... (11) (24)
Purchases and originations of loans for sale.......................................................... (16,681) (28,210)
Proceeds from sale of loans........................................................................... 18,930 29,157
Increase in other assets.............................................................................. (351) (100)
Decrease in other liabilities......................................................................... (467) (71)
NET CASH PROVIDED BY OPERATING ACTIVITIES.......................................................... 2,536 1,373
INVESTING ACTIVITIES:
Maturities of interest-bearing deposits................................................................. -- 100
Proceeds from maturities of investment securities held to maturity...................................... 14,255 3,468
Purchases of investment securities held to maturity..................................................... (13,748) (1,500)
Purchases of investment securities available for sale................................................... (2,167) (26)
Net originations of loans and leases receivable......................................................... (9,710) (25,855)
Purchases of premises and equipment..................................................................... (46) (179)
NET CASH USED BY INVESTING ACTIVITIES.............................................................. (11,416) (23,992)
FINANCING ACTIVITIES:
Net increase in deposit accounts........................................................................ 2,983 15,130
Net decrease in short-term borrowed funds............................................................... -- 5,000
Exercise of stock options............................................................................... 210 --
Proceeds from issuance of common stock.................................................................. -- 4,972
Cash dividends.......................................................................................... (161) --
NET CASH PROVIDED BY FINANCING ACTIVITIES.......................................................... 3,032 25,102
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................................................... (5,848) 2,483
Cash and cash equivalents at January 1.................................................................. 28,810 16,793
CASH AND CASH EQUIVALENTS AT JUNE 30.................................................................... $22,962 19,276
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid during the period......................................................................... $ 3,477 1,745
Income taxes paid during the period..................................................................... 568 470
NONCASH TRANSACTIONS:
Conversion of convertible subordinated notes to common stock............................................ $ 2,118 --
</TABLE>

See accompanying notes to financial statements.

F-19

<PAGE>
SALEM TRUST BANK

NOTES TO FINANCIAL STATEMENTS

AS OF JUNE 30, 1996 AND 1995

(1) MANAGEMENT OPINION

The financial statements of Salem Trust Bank ("Salem") as of June 30, 1996
and 1995 are unaudited. In the opinion of management, all adjustments (none of
which were other than normal accruals) necessary for a fair presentation of the
financial position and results of operations for the periods presented have been
included.

(2) LOANS AND LEASE FINANCING

A summary of loans and lease financing at June 30, 1996 and 1995 follows
(in thousands):

<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Commercial, financial and agricultural.......................................... $ 17,881 15,745
Real estate-construction........................................................ 18,120 7,476
Real estate-mortgage............................................................ 73,194 64,804
Installment loans to individuals................................................ 3,853 3,303
Credit card receivables......................................................... 655 570
Total loans and lease financing............................................... $113,703 91,898
</TABLE>

Loans held for sale totaled $978,000 and $1,872,000 at June 30, 1996 and
1995, respectively, and are reported at the lower of aggregate cost or market.

At June 30, 1996 and 1995, Salem had no impaired loans.

(3) ALLOWANCE FOR LOAN LOSSES

Following is a summary of the allowance for loan losses for the six months
ended June 30, 1996 and 1995 (in thousands):

<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Balance at beginning of year.......................................................... $1,302 757
Provision charged to operations....................................................... 132 165
Balance at end of period.............................................................. $1,434 922
</TABLE>

(4) NONPERFORMING ASSETS

As of June 30, 1996, Salem had no nonperforming assets. Nonperforming
assets at June 30, 1995 were comprised of $5,000 of restructured loans.

(5) SUBORDINATED NOTES

In May 1996, Salem called its convertible subordinated notes which bore
interest at 6.00%. Substantially all subordinated notes were converted into
shares of Salem's $2.50 par value common stock.

(6) CONTINGENCIES

Certain legal claims have arisen in the normal course of business, which,
in the opinion of management and counsel, will have no material adverse effect
on the financial position of the Corporation or its subsidiaries.

(7) ACCOUNTING ISSUES

F-20

<PAGE>
SALEM TRUST BANK

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

(7) ACCOUNTING ISSUES -- Continued
equity instruments to acquire goods or services from nonemployees. Under SFAS
No. 123, these types of transactions must be accounted for based on the fair
value of the consideration received or the fair value of the equity instrument
issued, whichever is more reliably measured. While SFAS No. 123 encourages all
entities to adopt the fair value method of accounting, it does allow an entity
to continue to measure the compensation cost of stock compensation plans using
the intrinsic value based method of accounting prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB Opinion No. 25"). Salem intends to continue measuring stock compensation
expense under APB Opinion No. 25.

F-21