FIRST CITIZENS BANCSHARES INC /DE/, S-4, 1995-09-28

FIRST CITIZENS BANCSHARES INC /DE/
S-4, 1995-09-28
STATE COMMERCIAL BANKS

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<PAGE>
As filed with the Securities and Exchange Commission on September 28, 1995

Registration No. 33-________

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-4

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
________________

FIRST CITIZENS BANCSHARES, INC.
(Exact name of registrant as specified in its charter)

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<S> <C> <C>
Delaware 6023 56-1528994
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code No.) Identification No.)
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_________________________

239 Fayetteville Street Mall
Raleigh, North Carolina 27601
(919) 755-7000
(Address, including Zip Code, and telephone number,
including area code, of registrant's principal executive offices)

_________________________

JAMES B. HYLER, JR.
Vice Chairman
First Citizens BancShares, Inc.
239 Fayetteville Street Mall
Raleigh, North Carolina 27601
(919) 755-7000
(Name, address, including Zip Code, and telephone number,
including area code, of agent for service)

Copies to:
ALEXANDER M. DONALDSON, Esq. MICHAEL S. COLO, Esq.
Ward and Smith, P.A. Poyner & Spruill, L.L.P.
Suite 2400 130 South Franklin Street
Two Hannover Square Rocky Mount, North Carolina 27804
Raleigh, North Carolina 27601 (919) 446-2341
(919) 836-1800

Approximate date of commencement of the proposed sale of the securities to
the public:
As soon as practicable after this Registration Statement becomes effective.

If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]

CALCULATION OF REGISTRATION FEE

Proposed Proposed
Title of Each Maximum Maximum Amount of
Class of Securities Amount to Offering Price Aggregate Registration
to be Registered be Registered Per Share Offering Price Fee
<S> <C> <C> <C> <C>
Class A Common Stock, 850,000 Not applicable $64,891,234 $22,376.29
$1.00 par value
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(1) In accordance with Rule 457(f), the registration fee is based upon the
average of the high and low prices of the common stock of Allied Bank
Capital, Inc. on the Nasdaq National Market on September 21, 1995.

The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to Section 8(a), may determine.

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FIRST CITIZENS BANCSHARES, INC.

Cross-Reference Sheet Pursuant to Item 501 of Regulation S-K
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Item of Form S-4 Caption in Prospectus/ Proxy Statement
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PART I - INFORMATION REQUIRED IN THE PROSPECTUS

A. INFORMATION ABOUT THE TRANSACTION

1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus . . . . . . . . . Facing Page of Registration Statement; Cross-
Reference Sheet; Outside Front Cover Page of
Prospectus/Proxy Statement

2. Inside Front and Outside Back Cover Pages of
Prospectus . . . . . . . . . . . . . . . . . . . Inside Front Cover Page of Prospectus/Proxy
Statement; Available Information; Table of
Contents

3. Risk Factors, Ratio of Earnings . . . . . . . .
to Fixed Charges and Other
Information. . . . . . . . . . . . . . . . . . . Summary; Summary -- Parties to the Merger, -- The
Merger, -- Dissenters' Rights, -- Certain Federal
Income Tax Consequences; Selected Consolidated
Financial Information; Per Share Data; Ownership
of BancShares Voting Securities by Certain
Beneficial Owners and Management

4. Terms of the Transaction . . . . . . . . . . . . The Merger; The Merger -- Background and
Reasons, -- Opinions of Financial Advisors, --
Accounting Treatment, --Certain Federal Income Tax
Consequences; Market Prices and Dividends; Capital
Stock of BancShares; Certain Differences in Rights
of Holders of Allied Stock and BancShares Common
Stock; Appendix II

5. Pro Forma Financial Information . . . . . . . . Not Applicable.

6. Material Contracts with the Company Being
Acquired . . . . . . . . . . . . . . . . . . . . The Merger -- Interest of Certain Persons and
Effect of the Merger on Employees and Benefit
Plans.

7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters . Not Applicable

8. Interest of Named Experts and Counsel . . . . . Opinions; Experts

9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities . Certain Differences in Rights of Holders of Allied
Stock and BancShares Common Stock --
Indemnification
<PAGE>

B. INFORMATION ABOUT THE REGISTRANT

10. Information with Respect to S-3 Registrants . . Not Applicable

11. Incorporation of Certain Information by Reference Incorporation of Certain Documents by Reference

12. Information with Respect to S-2 or S-3
Registrants . . . . . . . . . . . . . . . . . . Not Applicable

13. Incorporation of Certain Information by Reference Not Applicable

14. Information with Respect to Registrants Other
Than S-2 or S-3 Registrants . . . . . . . . . . Not Applicable

C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED

15. Information with Respect to S-3 Companies . . . Not Applicable

16. Information with Respect to S-2 or S-3 Companies Incorporation of Certain Documents by Reference;
Market Prices and Dividends

17. Information with Respect to Companies Other than
S-2 or S-3 Companies . . . . . . . . . . . . . . Not Applicable

D. VOTING AND MANAGEMENT INFORMATION

18. Information if Proxies, Consents or
Authorizations are to be Solicited . . . . . . . Cover Page of Prospectus/Proxy Statement;
Proposals of Shareholders; Information Concerning
the Special Meeting; Summary -- Parties to the
Merger; Appendix III; The Merger -- Dissenters'
Rights, -- Interest of Certain Persons and Effect
of the Merger on Employees and Benefit Plans;
Ownership of BancShares Voting Securities by
Certain Beneficial Owners and Management;
Information About Allied Bank Capital, Inc. --
Voting Securities and Beneficial Ownership Thereof

19. Information if Proxies, Consents or
Authorizations are not to be Solicited or in an
Exchange Offer. Not Applicable

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<PAGE>

[Letterhead of Allied Bank Capital, Inc.]

__________, 1995

To the Shareholders of
Allied Bank Capital, Inc.

A Special Meeting of Shareholders (the "Special Meeting") of Allied
Bank Capital, Inc. ("Allied") will be held on ________, ___________, 1995,
at ____ __.m., Eastern Standard time, at the _____________, __________________,
located at _________________, Sanford, North Carolina. At the Special
Meeting, the shareholders will be asked to approve an agreement pursuant to
which First Citizens BancShares, Inc. ("BancShares") will acquire Allied
(the "Merger"). Following the Merger, Allied's wholly-owned savings bank
subsidiaries, Summit Savings Bank, Inc., SSB and Peoples Savings Bank,
Inc., SSB shall be merged into First-Citizens Bank & Trust Company, a
wholly-owned banking subsidiary of BancShares. You can vote in person at
the Special Meeting or by completing and returning the enclosed proxy card,
as described below.

Upon consummation of the Merger, each Allied shareholder will be
entitled to receive for each share of Allied's common stock either
(i) $25.25 in cash, (ii) 0.531 shares of newly issued Class A common stock
of BancShares, or (iii) $25.25 in unsecured, subordinated debentures of
First-Citizens Bank & Trust Company, all subject to adjustment and
proration as described in the accompanying Prospectus/Proxy Statement.

Detailed information about the proposed Merger, Allied, and BancShares
is set forth in the Prospectus/Proxy Statement. You are urged to study the
Prospectus/Proxy Statement before casting your vote on the proposed Merger.
Your Board of Directors has received the written opinions of Legg Mason
Wood Walker, Incorporated and Friedman, Billings, Ramsey & Co., Inc. that
the terms of the proposed Merger are fair to Allied's shareholders from a
financial point of view.

Your Board of Directors believes that the proposed Merger is in the
best interests of Allied and its shareholders. Your Board unanimously
recommends that you vote "FOR" the Merger.

Your vote is important, regardless of the number of shares of Allied's
stock you own. Approval of the Merger requires the affirmative vote of the
holders of a majority of the outstanding shares of Allied's common stock
entitled to vote at the Special Meeting. Consequently, failure to vote
will have the same effect as a vote against the Merger. Therefore, on
behalf of your Board of Directors, I urge you to complete, sign and date
the enclosed proxy, and return it as soon as possible in the enclosed
postage-paid envelope.

Sincerely,

A. Harold Ausley
President and Chief Executive Officer

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ALLIED BANK CAPITAL, INC.

130 North Steele Street
Sanford, North Carolina 27330
(919) 775-7161

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ___________, 1995

Notice is hereby given that a Special Meeting of Shareholders
(the "Special Meeting") of Allied Bank Capital, Inc. ("Allied") will be
held at the _____________, __________________, located at
_________________, Sanford, North Carolina, on ________, ___________,
1995, at ____ __.m., Eastern Standard time, for the purpose of
considering and voting upon the following matters:

1. Proposed Merger. To consider and vote upon the Agreement
and Plan of Reorganization and Merger dated August 7, 1995 (the
"Agreement"), between Allied and First Citizens BancShares, Inc.
("BancShares"), pursuant to which Allied will merge with and into
BancShares (the "Merger"). Each outstanding share of Allied's
common stock will be converted into the right to receive either
(i) $25.25 in cash, (ii) 0.531 shares of newly issued Class A
common stock of BancShares, or (iii) $25.25 in unsecured,
subordinated debentures of First-Citizens Bank & Trust Company, all
subject to adjustment as provided in the Agreement. This
consideration would be paid, at the election of the shareholder,
either in cash, in shares of BancShares Class A common stock, or in
an unsecured, subordinated debenture with a maturity of either
three, five or ten years and a fixed interest rate of 7.00%, 7.25%
or 7.50%, respectively, or any combination of term and rate (or, in
the event of a proration as described in the Agreement, a
combination of (i) cash and shares of Class A common stock of
BancShares, or (ii) an unsecured, subordinated debenture with a
term of five years and a fixed interest rate of 7.25% and shares of
Class A common stock of BancShares). The Agreement is attached as
Appendix I to the Prospectus/Proxy Statement accompanying this
Notice.

2. Other Business. To transact such other business,
including, in particular, adjournment of the Special Meeting, to
allow further solicitation of proxies if necessary, as properly may
come before the Special Meeting or any adjournment thereof.

Under North Carolina law, each holder of Allied's common stock has
the right to dissent from the Merger and to demand payment of the fair
value of his or her shares in the event the Merger is approved and
consummated. The right of any such shareholder to dissent is contingent
upon strict compliance with the requirements of Sections 55-13-01
through 55-13-31 of the North Carolina General Statutes ("Article 13").
The full text of Article 13 is attached as Appendix III to the
Prospectus/Proxy Statement which accompanies this Notice and is
incorporated herein by reference.

Shareholders of record at the close of business on __________,
1995, are entitled to receive notice of and to vote at the Special
Meeting and any adjournment thereof.

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Your proxy is solicited by the Board of Directors of Allied. The
Board of Directors of Allied unanimously recommends that holders vote to
approve the Agreement.

By Order of the Board of Directors

Betty S. Merritt
Corporate Secretary

Sanford, North Carolina
__________, 1995

Please complete, date, sign, and return the enclosed proxy in the
enclosed postage-paid envelope as soon as possible, whether or not you
plan to attend the Special Meeting in person. The proxy may be revoked
at any time prior to its exercise in the manner described in the
Prospectus/Proxy Statement. Properly completed proxies will be voted in
accordance with the instructions indicated thereon, or if no
instructions are given, "FOR" approval of the Merger.

<PAGE>

Prospectus

FIRST CITIZENS BANCSHARES, INC.

Up to ______ Shares Class A Common Stock
($1.00 Par Value Per Share)

Proxy Statement

ALLIED BANK CAPITAL, INC.

Special Meeting of Shareholders to be Held on ___________, 1995

This Prospectus/Proxy Statement is being furnished by the Board of
Directors of Allied Bank Capital, Inc. ("Allied") to the holders of
common stock, par value $0.50 per share, of Allied ("Allied Stock") in
connection with the solicitation of proxies for use at a Special Meeting
of Shareholders of Allied (the "Special Meeting") to be held at ____
__.m., Eastern Standard time, on ___________, 1995, at the
_____________, __________________, Sanford, North Carolina, and at any
adjournment thereof.

This Prospectus/Proxy Statement, the accompanying Notice of Special
Meeting, the form of proxy and other materials enclosed herewith are
first being mailed to shareholders of Allied on or about __________,
1995.

At the Special Meeting, shareholders of Allied will vote upon a
proposal to approve an Agreement and Plan of Reorganization and Merger
dated August 7, 1995 (the "Agreement") between Allied and First Citizens
BancShares, Inc. ("BancShares"), pursuant to which Allied will merge
with and into BancShares (the "Merger"). Following the Merger, Allied's
wholly-owned savings bank subsidiaries, Summit Savings Bank, Inc., SSB
("Summit") and Peoples Savings Bank, Inc., SSB ("Peoples") will merge
with and into First-Citizens Bank & Trust Company ("First Citizens
Bank"), a wholly-owned banking subsidiary of BancShares. See "SUMMARY,"
"THE MERGER" and Appendix I to this Prospectus/Proxy Statement.

Upon consummation of the Merger, each outstanding share of Allied
Stock (excluding any shares held by dissenting shareholders) will be
converted into the right to receive, subject to adjustment and proration
as described below, either (i) if timely elected by the shareholder in
the manner prescribed in the Agreement, 0.531 shares of newly issued
shares of Class A common stock, $1.00 par value per share, of BancShares
("BancShares Common Stock"), (ii) cash in the amount of $25.25, or (iii)
if timely elected by the shareholder in the manner prescribed in the
Agreement, an unsecured, subordinated debenture in the principal amount
of $25.25 (the "Debentures"). Any fractional shares resulting from the
Merger will not be issued and shareholders of Allied will receive cash
in lieu of the issuance of any fractional shares of BancShares Common
Stock. The exchange ratio of one share of Allied Stock for 0.531 shares
of BancShares Common Stock (the "Exchange Ratio") will not be adjusted
unless the Market Value (as defined below) of BancShares Common Stock is
less than $45.13 per share or more than $49.88 per share. The Market
Value will mean the average of the reported daily closing prices of
BancShares Common Stock on the Nasdaq National Market during the period
of ten consecutive trading days ending on the business day immediately
preceding the date of the Special Meeting. In the event that the Market
Value is less than $45.13 per share or more than $49.88 per share, the
Exchange Ratio will be adjusted by (x) dividing $45.13 by the Market
Value (in the event the Market Value is less than $45.13) or by dividing
$49.88 by the Market Value (in the event the Market Value is greater
than $49.88), (y) multiplying the quotient by 0.531, and (z) rounding
the result to three decimal places. The Exchange Ratio and the amount
of cash or Debentures which a shareholder of Allied may elect to receive
for each share of Allied Stock shall be reduced on a per share basis to
the extent that cash dividends in an aggregate amount in excess of $0.12
per share per calendar quarter or other distributions are declared or
paid by Allied between August 7, 1995 and the effective time of the
Merger (the "Effective Time"). See "THE MERGER - Exchange of Allied
Stock."

In the event Allied shareholders elect to receive cash or
Debentures in lieu of BancShares Common Stock, or properly exercise
their dissenters' rights, for more than 60% of the outstanding shares of
Allied Stock, the Debentures will be prorated among all of the
shareholders of Allied electing to receive Debentures so that the total
number of shares paid for in Debentures and cash will not equal or
exceed 60% of the shares of Allied Stock. If after such proration of
Debentures, the aggregate number of outstanding shares of Allied Stock
held by shareholders of Allied who have elected to receive cash and
Debentures, or exercised their dissenters' rights, still exceeds 60% of
the shares of Allied Stock, the cash will be prorated among all of the
shareholders of Allied electing to receive cash so that the total number
of shares paid for in cash and Debentures will not exceed 60% of the
shares of Allied Stock. In the event Allied shareholders elect to
receive BancShares Common Stock in lieu of cash or Debentures for more
than 55% of the outstanding shares of Allied Stock, the BancShares
Common Stock will be prorated among all of Allied's shareholders
electing to

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receive BancShares Common Stock so that the total number of shares of
Allied Stock converted into shares of BancShares Common Stock shall not
exceed 55% of the shares of Allied Stock. In the event of such
proration of BancShares Common Stock, shares of Allied Stock will be
converted, at the election of the shareholder, into either cash or an
unsecured, subordinated debenture having a term of five years and a
fixed interest rate of 7.25%. See "THE MERGER - Exchange of Allied
Stock." The proration of Debentures, cash or BancShares Common Stock is
intended to preserve the tax-free status of the Merger.

Allied shareholders are entitled to their statutory dissenters'
rights in accordance with North Carolina law. See "THE MERGER -
Dissenters' Rights."

This document also constitutes the prospectus of BancShares
relating to the shares of BancShares Common Stock that are issuable to
holders of Allied Stock upon consummation of the Merger. See "CAPITAL
STOCK OF BANCSHARES" and "CERTAIN DIFFERENCES IN THE RIGHTS OF HOLDERS
OF ALLIED STOCK AND BANCSHARES COMMON STOCK."

Based on the _______ shares of Allied Stock outstanding on
__________, 1995 (the "Record Date") and assuming that 55% of the
holders of Allied Stock elect to receive BancShares Common Stock,
approximately ______ shares of BancShares Common Stock will be issuable
upon consummation of the Merger.

BancShares Common Stock and Allied Stock are traded on the Nasdaq
National Market under the symbols "FCNCA" and "ABCI," respectively. On
August 7, 1995, the last business day prior to public announcement of
the Merger, the last reported sale prices per share of BancShares Common
Stock and Allied Stock on the Nasdaq National Market were $49.00 and
$23.375, respectively. On _________, 1995, such prices were $_____ and
$_____, respectively.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "SEC") OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SEC 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 SHARES OF BANCSHARES COMMON STOCK OFFERED HEREBY ARE NOT
SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION (THE "FDIC") OR ANY OTHER GOVERNMENT AGENCY.

THE DEBENTURES OF FIRST CITIZENS BANK OFFERED HEREBY ARE THE
UNSECURED OBLIGATIONS OF FIRST CITIZENS BANK, ARE NOT SAVINGS ACCOUNTS
OR DEPOSITS OF FIRST CITIZENS BANK AND ARE NOT INSURED BY THE FDIC OR
ANY OTHER GOVERNMENTAL AGENCY.

THIS PROSPECTUS/PROXY STATEMENT INCORPORATES BY REFERENCE OTHER
DOCUMENTS WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
DOCUMENTS RELATING TO BANCSHARES OR ALLIED, INCLUDING EXHIBITS WHICH ARE
SPECIFICALLY INCORPORATED BY REFERENCE INTO THOSE DOCUMENTS, BUT
EXCLUDING EXHIBITS NOT SPECIFICALLY INCORPORATED BY REFERENCE IN THOSE
DOCUMENTS, ARE AVAILABLE TO EACH PERSON INCLUDING ANY BENEFICIAL OWNER
TO WHOM A COPY OF THIS PROSPECTUS/PROXY STATEMENT IS DELIVERED WITHOUT
CHARGE FROM BANCSHARES UPON REQUEST FROM THE CORPORATE FINANCE
DEPARTMENT, FIRST CITIZENS BANCSHARES, INC., POST OFFICE BOX 27131,
RALEIGH, NORTH CAROLINA 27611-7131, TELEPHONE (919) 755-7258; OR FROM
ALLIED FROM A. HAROLD AUSLEY, PRESIDENT, ALLIED BANK CAPITAL, INC.,
130 NORTH STEELE STREET, SANFORD, NORTH CAROLINA 27330, TELEPHONE
(919) 775-7161. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS
BEFORE THE SPECIAL MEETING, ANY SUCH REQUEST SHOULD BE MADE BY
_______________, 1995. THE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE, BUT
PERSONS REQUESTING COPIES OF EXHIBITS TO SUCH DOCUMENTS WHICH ARE
SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS WILL BE CHARGED
THE COSTS OF REPRODUCTION AND MAILING.

The date of this Prospectus/Proxy Statement is __________, 1995

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TABLE OF CONTENTS

Available Information . . . . . . . . . . . . . . . . . . .
Incorporation of Certain Documents by Reference . . . . . .
Summary . . . . . . . . . . . . . . . . . . . . . . . . . .
Parties to the Merger . . . . . . . . . . . . . .
The Merger . . . . . . . . . . . . . . . . . . . .
Effective Time . . . . . . . . . . . . . . . . . .
Consideration . . . . . . . . . . . . . . . . . .
Recommendation of Board of Directors . . . . . . .
Debentures . . . . . . . . . . . . . . . . . . . .
Opinions of Financial Advisors . . . . . . . . . .
Interest of Certain Persons in the Merger . . . .
Dissenters' Rights . . . . . . . . . . . . . . . .
Certain Income Tax Consequences . . . . . . . . .
Resales by Affiliates . . . . . . . . . . . . . .
Market Prices and Dividends . . . . . . . . . . .
Certain Differences in Rights of Shareholders . .
Business Purposes . . . . . . . . . . . . . . . .
Accounting Treatment . . . . . . . . . . . . . . .
Selected Consolidated Financial Information . . . . . . . .
Per Share Data . . . . . . . . . . . . . . . . . . . . . .
Information Concerning the Special Meeting . . . . . . . .
The Merger . . . . . . . . . . . . . . . . . . . . . . . .
Information About First Citizens BancShares, Inc. . . . . .
Ownership of BancShares Voting Securities by
Certain Beneficial Owners and Management . . . . . . . .
Information about Allied Bank Capital, Inc. . . . . . . . .
Market Prices and Dividends . . . . . . . . . . . . . . . .
Supervision, Regulation and Governmental Policy . . . . . .
Capital Stock of BancShares . . . . . . . . . . . . . . . .
Certain Differences in the Rights of Holders
of Allied Stock and BancShares Common Stock . . . . . . .
Opinions . . . . . . . . . . . . . . . . . . . . . . . . .
Experts . . . . . . . . . . . . . . . . . . . . . . . . . .
Proposals of Shareholders . . . . . . . . . . . . . . . . .

Appendices:

I. Agreement and Plan of Reorganization and Merger
II. Opinions of Legg Mason Wood Walker, Incorporated and
Friedman, Billings, Ramsey & Co., Inc.
III. Sections 55-13-01 through 55-13-31 of the North Carolina
General Statutes, concerning dissenters' rights

<PAGE>

AVAILABLE INFORMATION

This Prospectus/Proxy Statement constitutes part of the Registration
Statement on Form S-4 of BancShares, including any exhibits and amendments
thereto (the "Registration Statement"), filed with the SEC under the
Securities Act of 1933, as amended (the "Securities Act"), in connection
with the Merger described herein. This Prospectus/Proxy Statement does not
contain all of the information set forth in the Registration Statement,
certain portions of which have been omitted pursuant to the rules and
regulations of the SEC. Copies of the Registration Statement can be
obtained from the SEC at prescribed rates by addressing written requests
for such copies to the Public Reference Section of the SEC, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. In
addition, the Registration Statement may be inspected and copied at the
public reference facilities referred to above and at the Northeast regional
office located at 7 World Trade Center, Suite 1300, New York, New York
10048 and the Midwest regional office located at Citicorp Center,
Suite 1400, 500 West Madison Street, Chicago, Illinois 60661-2511.

BancShares and Allied are subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and,
in accordance therewith, file reports, proxy statements and other
information with the SEC. Such reports, proxy statements and other
information filed by BancShares and Allied may be inspected without charge
and copies may be obtained at prescribed rates from the SEC offices set
forth above.

All information contained or incorporated by reference in this
Prospectus/Proxy Statement with respect to BancShares was supplied by
BancShares, and all information contained or incorporated by reference in
this Prospectus/Proxy Statement with respect to Allied was supplied by
Allied.

No person or entity has been authorized to give any information or to
make any representation not contained in this Prospectus/Proxy Statement in
connection with the offering made hereby, and, if given or made, any such
other information or representation must not be relied upon as having been
authorized by BancShares or Allied. This Prospectus/Proxy Statement does
not constitute an offer to sell, or a solicitation of an offer to buy, any
of the securities offered hereby, or any other securities, to any person in
any jurisdiction in which such offer or solicitation is not authorized or
in which the person making such offer or solicitation is not authorized to
do so, or to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. Neither the delivery of this
Prospectus/Proxy Statement nor any sale hereunder shall under any
circumstances create any implication that there has been no change in the
affairs of BancShares or Allied since any of the dates as of which
information is furnished herein or since the date hereof.

<PAGE>

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents previously filed by BancShares with the SEC
are incorporated herein by reference in this Prospectus/Proxy Statement:
(i) BancShares' Annual Report on Form 10-K for the year ended December 31,
1994; (ii) BancShares' Quarterly Reports on Form 10-Q for the three months
ended March 31, 1995 and June 30, 1995; (iii) BancShares' Current Report on
Form 8-K dated April 25, 1995; and (iv) the description of BancShares
Common Stock contained in BancShares' Current Report on Form 8-K dated
October 21, 1986, as amended by Form 8 dated July 10, 1990. Each such
document was filed pursuant to Section 13 of the Exchange Act.

The portion of BancShares' Annual Report to Shareholders for the
fiscal year ended December 31, 1994, and included as an exhibit to
BancShares' Annual Report on Form 10-K for the year ended December 31, 1994
("1994 10-K"), captioned "Chairman's Letter" is not incorporated herein and
is not part of the Registration Statement. In addition, any information
included or incorporated by reference in the 1994 10-K in response to
Items 402(a)(8), (i), (k) or (l) of Regulation S-K of the SEC is not
incorporated herein and is not a part of the Registration Statement.

The following documents previously filed by Allied with the SEC are
incorporated herein by reference in this Prospectus/Proxy Statement: (i)
Allied's Annual Report on Form 10-K for the year ended December 31, 1994;
(ii) Allied's Quarterly Reports on Form 10-Q for the three months ended
March 31, 1995, and June 30, 1995; and (iii) Allied's Current Reports on
Form 8-K dated June 14, 1995, and August 15, 1995. Each such document was
filed pursuant to Section 13 of the Exchange Act.

The portion of Allied's Annual Report to Shareholders for the fiscal
year ended December 31, 1994, and included as an exhibit to Allied's Annual
Report on Form 10-K for the year ended December 31, 1994, captioned "Letter
to Shareholders" is not incorporated herein and is not part of the
Registration Statement. In addition, any information included or
incorporated by reference in Allied's Annual Report on Form 10-K for the
year ended December 31, 1994, in response to Items 402(a)(8), (i), (k), or
(l) of Regulation S-K of the SEC is not incorporated herein and is not part
of the Registration Statement.

In addition, all documents filed by BancShares and Allied pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date
hereof and prior to the date the Special Meeting has been finally adjourned
shall be deemed to be incorporated by reference. Any statements contained
in a document incorporated or deemed to be incorporated by reference herein
shall 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 of this Prospectus/Proxy
Statement.

ALLIED'S ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1994 AND QUARTERLY REPORT ON FORM 10-Q FOR THE THREE MONTHS
ENDED JUNE 30, 1995, ACCOMPANY THIS PROSPECTUS/PROXY STATEMENT.

<PAGE>

SUMMARY

The following is a brief summary of certain information relating to
the Merger contained elsewhere in this Prospectus/Proxy Statement. This
summary is not intended to be a summary of all material information
relating to the Merger and is qualified in its entirety by reference to
more detailed information contained elsewhere in this Prospectus/Proxy
Statement, including the Appendices hereto and in the documents
incorporated by reference in this Prospectus/Proxy Statement. A copy of
the Agreement is set forth in Appendix I to this Prospectus/Proxy Statement
and reference is made thereto for a complete description of the terms of
the Merger. Shareholders are urged to read carefully the entire
Prospectus/Proxy Statement, including the Appendices. As used in this
Prospectus/Proxy Statement, the terms "BancShares," "First Citizens Bank"
and "Allied" refer to such organizations, respectively, and, unless the
context otherwise requires, such corporations and any respective
subsidiaries.

Parties to the Merger

BancShares. BancShares is a registered bank holding company organized
under the laws of the State of Delaware and headquartered in Raleigh, North
Carolina. BancShares serves as the parent holding company for four banks
in three states: First Citizens Bank, a North Carolina-chartered bank
headquartered in Raleigh, North Carolina; Bank of Marlinton, a West
Virginia-chartered bank headquartered in Marlinton, West Virginia
("Marlinton Bank"); First-Citizens Bank & Trust Company, a Virginia-
chartered bank headquartered in Lawrenceville, Virginia ("FCB-VA"); and
Bank of White Sulphur Springs, a West Virginia-chartered bank
headquartered in White Sulphur Springs, West Virginia ("White Sulphur
Springs Bank"). At June 30, 1995, based on total assets of approximately
$6.9 billion, BancShares was the fifth largest banking organization
headquartered in North Carolina. BancShares' principal assets are its
investments in and receivables from its North Carolina commercial bank
subsidiary, First Citizens Bank. Its primary sources of income are
dividends from First Citizens Bank and interest income on funds loaned by
it to First Citizens Bank.

The principal offices of BancShares are located at First Citizens
Bank's main office, 239 Fayetteville Street, Raleigh, North Carolina 27601.
The telephone number is (919) 755-7000.

Allied. Allied is a registered bank holding company and North
Carolina corporation headquartered in Sanford, North Carolina. Allied was
organized in March 1992 for the purpose of becoming the parent holding
company of Summit. On July 7, 1992, Allied became the parent holding
company of Summit upon the acquisition of all of the common stock of Summit
issued in connection with Summit's conversion from a North Carolina-
chartered mutual savings bank to a North Carolina-chartered capital stock
savings bank. On January 28, 1994, Allied became the parent holding
company of Peoples upon the acquisition of all of the common stock of
Peoples issued in connection with Peoples' conversion from a North
Carolina-chartered mutual savings bank to a North Carolina-chartered
capital stock savings bank. Allied's principal business activities consist
of the ownership of Summit and Peoples. At June 30, 1995, Allied had total
assets of approximately $268.7 million, total deposits of approximately
$218.1 million and total shareholders' equity of approximately
$31.1 million.

The principal offices of Allied are located at Summit's main office at
130 North Steele Street, Sanford, North Carolina 27330. The telephone
number is (919) 775-7161.

<PAGE>

The Merger

Allied's Board of Directors unanimously approved the Agreement
providing for the merger of Allied with and into BancShares. Following the
Merger, Allied's wholly-owned savings bank subsidiaries, Summit and
Peoples, will merge with and into First Citizens Bank, a wholly-owned
banking subsidiary of BancShares. Upon consummation of the Merger, each of
the issued and outstanding shares of Allied Stock will be converted into,
subject to adjustment and proration, either (i) $25.25 in cash, (ii) 0.531
shares of newly issued BancShares Common Stock, or (iii) $25.25 in
Debentures.

The Agreement must be approved by the affirmative vote of a majority
of the shares of Allied Stock entitled to vote at the Special Meeting to be
held on ___________, 1995. As of _______, 1995, directors and executive
officers of Allied and their affiliates owned and were entitled to vote
approximately ___% of the outstanding shares of Allied Stock. The directors
and executive officers of Allied and their affiliates are expected to vote
their shares in favor of the Agreement and the Merger. See "INFORMATION
CONCERNING THE SPECIAL MEETING - Record Date, Voting Rights and Vote
Required." Pursuant to Section 251(f) of Delaware's General Corporation
Law, Del. Code Ann. Title 8, shareholders of BancShares are not required to
approve the Merger if (i) the Merger does not require the amendment of
BancShares' Certificate of Incorporation, (ii) the shares of BancShares
capital stock issued and outstanding immediately prior to the Effective
Time will remain issued and outstanding after the Effective Time with no
changes in rights and privileges, and (iii) the securities issued in the
Merger do not exceed 20% of the aggregate shares of capital stock of
BancShares issued and outstanding immediately prior to the Effective Time.
Because each of the preceding conditions is satisfied, shareholders of
BancShares are not required to approve the Merger.

The material conditions to the Merger are (i) approval of the
Agreement by the shareholders of Allied as described above, (ii) final
approvals of the Board of Governors of the Federal Reserve System ("Federal
Reserve"), the Administrator of the North Carolina Savings Institutions
Division (the "Administrator"), the North Carolina Commissioner of Banks
(the "NC Commissioner") and the North Carolina Banking Commission
(the "NC Commission"), and (iii) receipt by BancShares and Allied of an
opinion of the tax advisor of BancShares that the Merger qualifies as a
tax-free reorganization. The Special Meeting will be held on ___________,
1995. Applications for required approvals have been filed with the Federal
Reserve, the Administrator, the NC Commissioner and the NC Commission.
While no assurances are or can be given, BancShares and Allied believe that
all such required regulatory approvals will be obtained. The Merger must
close not less than 15 or 30 days (as determined by the Federal Reserve),
and not more than 90 days, after approval by the Federal Reserve. The
favorable opinion of the tax advisor has been received. See "--Certain
Income Tax Consequences."

If the Merger is not approved by the shareholders of Allied at the
Special Meeting or an adjournment thereof, or a necessary approval is not
obtained, Allied will not be acquired by BancShares and Allied will remain
the parent holding company of Summit and Peoples.

<PAGE>

Effective Time

Assuming satisfaction of all conditions to the consummation of the
Merger (see "THE MERGER - Conditions to Consummation of the Merger"), the
"Effective Time" of the Merger will be on the date and at the time
specified in the Certificate of Merger filed with the appropriate
governmental bodies in accordance with law. The Effective Time shall in no
event be more than 10 days following the closing date. The Agreement may
be terminated by either party if the Effective Time has not occurred prior
to the close of business on March 31, 1996, unless such date is extended by
written mutual agreement of the parties. The Effective Time currently is
anticipated to be in February 1996.

Consideration

Upon consummation of the Merger, each outstanding share of Allied
Stock (excluding any shares held by dissenting shareholders) will be
converted into the right to receive, subject to adjustment and proration as
described below, either (i) if timely elected by the shareholder in the
manner prescribed in the Agreement, 0.531 shares of newly issued BancShares
Common Stock, (ii) cash in the amount of $25.25, or (iii) if timely elected
by the shareholder in the manner prescribed in the Agreement, an unsecured,
subordinated Debenture in the principal amount of $25.25. Any fractional
shares resulting from the Merger will not be issued and shareholders of
Allied will instead receive cash in lieu of the issuance of any fractional
shares of BancShares Common Stock. The Exchange Ratio will not be adjusted
unless the Market Value is less than $45.13 per share or more than $49.88
per share. In the event that the Market Value is less than $45.13 per
share or more than $49.88 per share, the Exchange Ratio will be adjusted by
(x) dividing $45.13 by the Market Value (in the event the Market Value is
less than $45.13) or by dividing $49.88 by the Market Value (in the event
the Market Value is greater than $49.88), (y) multiplying the quotient by
0.531, and (z) rounding the result to three decimal places. The Exchange
Ratio into which each share of Allied Stock will be converted and the
amount of cash or Debentures which a shareholder of Allied may elect to
receive for each share of Allied Stock, will be reduced on a per share
basis to the extent that cash dividends in an aggregate amount in excess of
$0.12 per share per calendar quarter, or other distributions are declared
or paid by Allied between August 7, 1995, and the Effective Time. See "THE
MERGER - Exchange of Allied Stock."

In the event Allied shareholders elect to receive cash or Debentures
in lieu of BancShares Common Stock, or properly exercise their dissenters'
rights, for as much or more than 60% of the outstanding shares of Allied
Stock, the Debentures will be prorated among all of the shareholders of
Allied electing to receive Debentures so that the total number of shares
paid for in Debentures and cash will not equal or exceed 60% of the shares
of Allied Stock. If, after such proration of Debentures, the aggregate
number of shares of Allied Stock held by shareholders of the Saving Bank
who have elected to receive cash and Debentures, or properly exercise their
dissenters' rights, still exceeds 60% of the outstanding shares of Allied
Stock, the cash will be prorated among all of the shareholders of Allied
electing to receive cash so that the total number of shares paid for in
cash and Debentures will not exceed 60% of the shares of Allied Stock. In
the event Allied shareholders elect to receive BancShares Common Stock in
lieu of cash or Debentures for more than 55% of the outstanding shares of
Allied Stock, the BancShares Common Stock will be prorated among all of
Allied's shareholders electing to receive

<PAGE>

BancShares Common Stock so that the total number of shares of Allied
Stock converted into shares of BancShares Common Stock shall not exceed
55% of the shares of Allied Stock. In the event of such proration of
BancShares Common Stock, shares of Allied Stock will be converted at the
election of the shareholder into either cash or a Debenture having a
term of five years and a fixed interest rate of 7.25%. See "THE MERGER -
Exchange of Allied Stock." The proration of Debentures, cash or
BancShares Common Stock is intended to preserve the tax-free status of
the Merger.

Debentures

If the Merger is consummated and if a shareholder of Allied elects to
receive a Debenture in exchange for his or her shares of Allied Stock,
First Citizens Bank will issue an unsecured, subordinated Debenture which
shall entitle the holder to semi-annual interest payments in cash on the
principal amount of the Debenture. Each Debenture shall mature, at the
election of the shareholder, on the third, fifth or tenth anniversary of
the Effective Time. Debentures with a maturity of three years shall bear
interest at a fixed rate of 7.00% per annum, Debentures with a maturity of
five years shall bear interest at a fixed rate of 7.25% per annum, and
Debentures with a maturity of ten years shall bear interest at a fixed rate
of 7.50% per annum. Each Debenture shall be fully registered as to
principal and interest on the Debenture register maintained for that
purpose by First Citizens Bank. See "THE MERGER - Description of
Debentures." Shareholders of Allied electing to receive Debentures may
elect Debentures in any combination of term and interest rate. At June 30,
1995, the aggregate amount of outstanding long-term and short-term
indebtedness of First Citizens Bank that will be senior to the Debentures
was $321.5 million.

Recommendation of the Board of Directors of Allied

The Board of Directors of Allied believes that the Agreement and the
Merger contemplated thereby are in the best interests of Allied and its
shareholders and has unanimously approved the Agreement and the Merger
contemplated thereby. The Allied directors unanimously recommend that the
Allied shareholders vote FOR the approval of the Agreement and the Merger
contemplated thereby.

Opinions of Financial Advisors

Allied has received the opinions of Legg Mason Wood Walker,
Incorporated ("Legg Mason") and Friedman, Billings, Ramsey & Co., Inc.
("FBR"), dated ___________, 1995 and ____________, 1995, respectively, to
the effect that, as of those dates, the consideration to be received by
Allied's shareholders in exchange for their stock in the Merger is fair,
from a financial point of view, to the holders of Allied Stock. It is a
condition to the Merger that Legg Mason and FBR provide written updates of
their opinions within 10 business days preceding the closing date. In
connection with rendering the fairness opinion and providing other financial
advisory services to Allied, Allied has agreed to pay Legg Mason an
aggregate fee of approximately $1.0 million. Allied also will reimburse Legg
Mason for all reasonable out-of-pocket expenses incurred in connection with
its services provided to Allied which shall not exceed $10,000. Allied has
paid Legg Mason $100,000 of such amount with the balance of such fee
payable upon consummation of the Merger. In connection with rendering a
fairness opinion and

<PAGE>

providing other financial advisory services to Allied, Allied has agreed
to pay FBR an aggregate fee of approximately $334,000 and to reimburse
FBR for all reasonable out-of-pocket expenses incurred in connection
with its services provided to Allied. Allied has paid FBR $50,000 of
such amount with the balance of such fee payable upon consummation of
the Merger. For additional information concerning Legg Mason and FBR,
and their opinions, see "THE MERGER - Opinions of Financial Advisors"
and the opinions of such firms attached as Appendix II to the
Prospectus/Proxy Statement.

Interest of Certain Persons in the Merger

Following the Effective Time, BancShares' Board of Directors will
appoint one member of Allied's Board of Directors to serve as a director of
BancShares until the next annual meeting of shareholders of BancShares at
which time he will be nominated for election as a director of BancShares.
Such director also will be appointed to serve as a director of First
Citizens Bank. As of August 7, 1995, certain employees and directors of
Allied held options to acquire 563,164 shares of Allied Stock. Such
options, to the extent not exercised prior to the Effective Time, will give
rise to, by virtue of the Merger, the right to receive $25.25 in cash
(subject to adjustment), less the exercise price, for each outstanding
option. The Agreement also contains provisions concerning other benefits
to be provided to employees and directors of Allied, including the
continued employment of certain of Allied's employees, employee benefits
after the Merger, assumption of certain Allied benefit plans and
agreements, and the payment of advisory directors' fees to those directors
who have been invited to serve on a local advisory board of First Citizens
Bank. See "THE MERGER - Interest of Certain Persons and the Effect of the
Merger on Employees and Benefit Plans."

Dissenters' Rights

Under North Carolina law, shareholders of Allied will have dissenters'
rights in connection with the Merger. Any shareholder who desires to
assert dissenters' rights must, among other things, (i) give to Allied, and
Allied must actually receive, before the vote on the Merger is taken,
written notice of his or her intent to demand payment for his or her shares
if the Merger is consummated, and (ii) not vote his or her shares in favor
of the Merger. Assuming shareholder approval and consummation of the
Merger, shareholders who properly exercise their dissenters' rights will be
entitled to the fair value of their shares in accordance with
Sections 55-13-01 through 55-13-31 of the North Carolina General Statutes,
a copy of which is attached to this Prospectus/Proxy Statement as
Appendix III. Failure to exercise dissenters' rights properly will result
in the loss of such rights. See "THE MERGER - Dissenters' Rights."

Certain Income Tax Consequences

BancShares and Allied have received an opinion from KPMG Peat
Marwick LLP, tax advisors to BancShares, to the effect that the Merger will
constitute a tax-free reorganization under Section 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended (the "Code"), and that the
shareholders of Allied will not recognize gain or loss for federal income
tax purposes to the extent such shareholders exchange shares of Allied
Stock for shares of BancShares Common Stock. Cash or Debentures received
by a shareholder of Allied generally will be treated as a

<PAGE>

dividend or a sale or exchange of a capital asset. See "THE MERGER -
Certain Income Tax Consequences."

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

Resales by Affiliates

As a condition to BancShares' obligation to consummate the Merger,
affiliates of Allied must have entered into agreements that they will not
sell any shares of BancShares Common Stock received upon consummation of
the Merger except in compliance with Rule 145 of the Securities Act or
otherwise in compliance with the Securities Act and the rules and
regulations promulgated thereunder. See "THE MERGER - Restrictions on
Resales by Affiliates."

Market Prices and Dividends

BancShares Common Stock is traded in the over-the-counter market and
the shares are quoted on the Nasdaq National Market. On _________, 1995,
the last reported sales price on the Nasdaq National Market for BancShares
Common Stock was $_____. BancShares has paid cash dividends since 1935.
Although BancShares currently intends to continue paying quarterly cash
dividends on the BancShares Common Stock, there can be no assurance that
BancShares' dividend policy will remain unchanged after completion of the
Merger. The declaration and payment of dividends thereafter will depend
upon business conditions, operating results, capital and reserve
requirements, and the Board of Directors' consideration of other relevant
factors.

Allied Stock is traded in the over-the-counter market and the shares
are quoted on the Nasdaq National Market. On _________, 1995, the last
reported sale price on the Nasdaq National Market for Allied Stock was
$____. Allied paid its first cash dividend in 1994 and has continued to
pay quarterly cash dividends since that time. There can be no assurance
that, in the absence of the consummation of the Merger, dividends would
continue to be paid in the future. The declaration, payment and amount of
any such future dividends would depend upon business conditions, operating
results, capital, reserve requirements, regulatory authorization and
Allied's Board of Directors' consideration of other relevant factors.
Pursuant to the provisions of the Agreement, if Allied pays cash dividends
in an aggregate amount in excess of $0.12 per share per calendar quarter
between August 7, 1995 and the Effective Time, the consideration to be paid
to shareholders of Allied will be reduced on a per share basis by the
excess amount of such cash dividend. See "MARKET PRICES AND DIVIDENDS."

<PAGE>

The following table sets forth the market value of the Allied Stock
(on an historical and equivalent per share basis) and the market value of
the BancShares Common Stock (on an historical basis) as of August 7, 1995,
the business date preceding public announcement of the Merger.

At August 7, 1995
<S> <C>

BancShares Common Stock(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $49.00

Allied Stock(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.375

Equivalent pro forma Allied Stock (giving effect to Merger only)(2) . . . . . . . . . . . . . . . . . $26.02
</TABLE>

______________________

1 The closing prices for BancShares Common Stock and Allied Stock
are the closing prices on the Nasdaq National Market on the indicated date.

2 Equivalent pro forma amount is calculated by multiplying the
closing price of the BancShares Common Stock by the Exchange Ratio.

Certain Differences in Rights of Shareholders

Upon completion of the Merger, shareholders of Allied who receive
BancShares Common Stock in exchange for their Allied Stock will become
shareholders of BancShares and their rights as such will be governed by
Delaware law and BancShares' Certificate of Incorporation and Bylaws. The
rights of the shareholders of BancShares are different in some respects
from the rights of the shareholders of Allied. See "CAPITAL STOCK OF
BANCSHARES" and "CERTAIN DIFFERENCES IN THE RIGHTS OF HOLDERS OF ALLIED
STOCK AND BANCSHARES COMMON STOCK."

Business Purposes

The Merger will give the former customers of Allied access to a wider
range of services and products due to the stronger financial
resources of BancShares. First Citizens Bank will succeed to all of the
assets and liabilities of Summit and Peoples and the combined resources of
Summit, Peoples and First Citizens Bank will enable First Citizens Bank to
maintain and expand its business in the market areas currently served by
Summit and Peoples.

Accounting Treatment

BancShares will account for the Merger as a purchase for accounting
and financial reporting purposes.

<PAGE>

SELECTED CONSOLIDATED FINANCIAL INFORMATION

BancShares

The following table sets forth selected consolidated financial data
and other operating information of BancShares at the dates and for the
periods indicated. The selected consolidated financial data in the table
for the years ended December 31, 1994, 1993, 1992, 1991 and 1990, are
derived from, and should be read in conjunction with, BancShares'
consolidated financial statements, related notes and other financial
information incorporated herein by reference. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE." The selected consolidated financial data
presented for the six months ended June 30, 1995, and 1994, are derived
from, and should be read in conjunction with, BancShares' unaudited
consolidated financial statements, related notes and other financial
information incorporated herein by reference. Management believes such
unaudited consolidated financial statements include all adjustments (which
consist only of normal recurring accruals) necessary for a fair
presentation of such results for such interim periods. Results for the six
months ended June 30, 1995, are not necessarily indicative of results that
may be expected for any other interim period or for the full year.

Six Months
Ended June 30, Years Ended December 31,
(Unaudited)
1995 1994 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands except per share data)
SUMMARY OF OPERATIONS
Interest income . . . . . . . $222,503 $180,548 $ 376,005 $ 364,881 $ 390,380 $ 421,844 $ 361,824
Interest expense . . . . . . 101,838 70,233 148,126 137,934 170,558 245,684 208,874
Net interest income . . . . . 120,665 110,315 227,879 226,947 219,822 176,160 152,950
Provision for loan losses . . 1,994 141 2,786 15,245 17,506 15,626 9,623
Net interest income after
provision for loan losses . 118,671 110,174 225,093 211,702 202,316 160,534 143,327
Other income . . . . . . . . 44,712 40,891 83,325 85,737 74,303 70,270 58,753
Other expense . . . . . . . . 125,239 113,777 230,582 213,213 199,199 187,596 159,923

Income before income taxes . 38,144 37,288 77,836 84,226 77,420 43,208 42,157
Income taxes . . . . . . . . 13,342 12,933 26,867 28,641 25,657 14,027 13,757

Net income . . . . . . . . . $ 24,802 $ 24,355 $ 50,969 $ 55,585 $ 51,763 $ 29,181 $ 28,400

PER SHARE OF BANCSHARES COMMON
STOCK
Net income . . . . . . . . . $2.45 $2.49 $5.13 $5.73 $5.45 $3.12 $3.05
Cash dividends . . . . . . . 0.40 0.35 0.725 0.625 0.525 0.425 0.40

SELECTED AVERAGE BALANCES
Total assets . . . . . . . . $6,515,649 $6,049,983$6,098,944 $5,576,179 $5,308,165 $5,084,615 $4,000,874
Investment securities . . . . 1,437,231 1,679,583 1,599,565 1,522,715 1,522,571 1,597,060 1,079,501
Loans . . . . . . . . . . . . 4,339,395 3,665,751 3,800,318 3,401,093 3,173,285 2,866,834 2,385,291
Interest-earning assets . . . 5,890,106 5,410,997 5,476,690 5,002,144 4,762,846 4,557,240 3,531,263
Deposits . . . . . . . . . . 5,696,864 5,289,396 5,335,057 4,894,319 4,684,982 4,491,509 3,458,603
Long-term obligations . . . . 28,672 58,719 52,499 29,318 18,245 29,960 27,436
Interest-bearing liabilities 5,155,267 4,820,077 4,838,749 4,445,120 4,299,143 4,156,635 3,115,562
Shareholders' equity . . . . $ 471,050 $ 400,331 $ 416,983 $ 362,733 $ 307,818 $ 264,512 $ 240,858
Shares outstanding . . . . . 10,498,296 9,799,295 9,944,927 9,701,389 9,494,118 9,360,904 9,317,100

RATIOS (AVERAGES)
Rate of return on total
assets . . . . . . . . . . . 0.77% 0.81% 0.84% 1.00% 0.98% 0.57% 0.71%
Rate of return on
shareholders' equity . . . . 10.62 12.27 12.22 15.32 16.82 11.03 11.79
Dividend payout ratio . . . . 16.95 14.06 14.13 10.91 9.63 13.62 13.11
Loans to deposits . . . . . . 76.17 69.30 71.23 69.49 67.73 63.83 68.97
Shareholders' equity to
total assets . . . . . . . . 7.23 6.62 6.84 6.51 5.80 5.20 6.02
Time certificates of $100,000
or more to total deposits . 7.42 6.61 6.41 5.81 6.36 7.88 6.36
</TABLE>

<PAGE>

Allied

The following table sets forth selected consolidated financial data
and other operating information of Allied at the dates and for the periods
indicated. The selected consolidated financial data in the table for the
years ended December 31, 1994 and 1993 and September 30, 1992, 1991 and
1990, are derived from, and should be read in conjunction with, Allied's
consolidated financial statements, related notes and other information
incorporated herein by reference. See "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE." The selected consolidated financial data presented for the
six months ended June 30, 1995 and 1994 are derived from, and should be
read in conjunction with, Allied's unaudited consolidated financial
statements, related notes and other financial information incorporated
herein by reference. Management believes such unaudited consolidated
financial statements include all adjustments (which consist only of normal
recurring accruals) necessary for a fair presentation of such results for
such interim periods. Results for the six months ended June 30, 1995 are
not necessarily indicative of results that may be expected for any other
interim period or for the full year period.

Six Months
Ended June 30, Years ended
(Unaudited) December 31, Years Ended September 30,
1995 1994 1994 1993 1992 1991 1990
(Dollars in Thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income . . . . . . . $ 10,391 $ 8,142 $ 17,474 $ 11,007 $ 12,200 $ 13,969 $ 14,792

Interest expense . . . . . . 5,229 3,750 7,988 5,359 7,555 9,963 11,410
Net interest income before
provision for loan losses . 5,162 4,392 9,486 5,648 4,645 4,006 3,382

Provision for loan losses . . 58 43 70 150 138 -- 10
Net interest income . . . . . 5,104 4,349 9,416 5,498 4,507 4,006 3,372
Other operating income . . . 1,107 1,009 2,034 830 890 792 898
Other operating expense . . . 3,850 3,436 7,230 4,006 3,609 3,467 3,500
Income before income taxes,
cumulative effect on prior
years of a change in an
accounting principle, and
extraordinary credit . . . 2,361 1,922
4,220 2,322 1,788 1,331 770

Income taxes . . . . . . . . 754 575 1,301 873 640 420 237
Income before cumulative
effect on prior years of a
change in accounting
principle and extraordinary
credit . . . . . . . . . . 1,607 1,347
2,919 1,449 1,148 911 533

Cumulative effect at
January 1, 1993 of change in
accounting for income
taxes . . . . . . . . . . . 250
Extraordinary credit, net of
applicable income taxes . . 55 107 13
Net income . . . . . . . . . $ 1,607 $ 1,347 $ 2,919 $ 1,754 $ 1,148 $ 1,018 $ 546

PER SHARE DATA(1)
Net income . . . . . . . . . $ 0.65 $ 0.61 $ 1.27 $ 1.07 $ 0.20(2) $ -- $ --

Book value . . . . . . . . . $ 13.80 $ 12.47 $12.98 $13.66 $12.21 $ -- $ --

SELECTED RATIOS
Return on average assets . . 1.20% 1.16% 1.21% 1.21% 0.79% 0.68% 0.35%
Return on average equity . . 10.65% 10.21% 10.59% 8.50% 9.33% 11.00% 6.51%
Interest rate spread . . . . 3.54% 3.56% 3.67% 3.53% 2.96% 2.47% 2.08%
Net interest margin . . . . . 4.04% 3.98% 4.12% 4.06% 3.33% 2.79% 2.30%
Percent of average assets:
Other income . . . . . . . 0.83% 0.87% 0.84% 0.57% 0.61% 0.53% 0.58%
Other expense . . . . . . . 2.89% 2.97% 3.00% 2.76% 2.47% 2.31% 2.26%

SELECTED PERIOD END BALANCES
Total assets . . . . . . . . $ 268,654 $ 247,586 $ 257,979 $ 148,055 $ 143,665 $ 147,027 $ 152,381
Loans receivable, net . . . . 211,024 195,753 203,157 123,627 105,414 102,446 105,365
Mortgage-backed securities . 9,800 7,325 9,778 6,285 12,949 16,599 10,452
Investment securities . . . . 21,175 23,089 32,816 11,547 18,090 21,870 30,088
Deposits . . . . . . . . . . 218,079 203,911 210,227 121,838 121,723 134,228 140,596
Borrowings . . . . . . . . . 11,132 6,732 10,732 3,500 - - -
Shareholders' equity . . . . 31,129 28,019 29,180 21,521 19,226 9,839 8,821
Total regulatory capital . . 32,413 29,292 30,444 22,373 19,924 10,442 9,413
SELECTED OTHER DATA
Equity to end-of-period
assets . . . . . . . . . . 11.59% 11.32% 11.31% 14.53% 13.37% 6.68% 5.67%
Non-performing assets to total
assets at end of period . . 0.22% 0.41% 0.21% 0.46% 0.77% 0.71% 0.66%
Allowance for loan losses to
non-performing assets . . . 219.85% 126.48% 231.93% 125.11% 64.08% 63.64% 84.23%
Net charge-offs to average
loans outstanding . . . . . 0.04% 0.03% 0.03% 0.02% 0.09% 0.18% 0.17%
</TABLE>
_______________

(1) On July 7, 1992, Summit completed its conversion from mutual
to stock form and Allied completed its initial public offering
of Allied Stock.

(2) For the period of July 7, 1992 to September 30, 1992.

<PAGE>

PER SHARE DATA

The following unaudited consolidated financial information
reflects certain per share data relating to (i) net income, book value,
and cash dividends declared per common share for both BancShares and
Allied on a historical basis, (ii) net income, book value, and cash
dividends declared per common share on a pro forma basis for BancShares
after giving effect to the Merger, and (iii) net income, book value, and
cash dividends declared per common share on a pro forma equivalent basis
for Allied assuming that the Merger had been effected for the periods
presented and had been accounted for as a purchase and that 55% of
Allied's shareholders elected to receive shares of BancShares Common
Stock in consideration of the Merger. The data presented should be read
in conjunction with and have been derived from historical consolidated
financial statements of BancShares and Allied and the related notes
thereto incorporated herein by reference.

As of or for As of or for
Year Ended Six Months Ended
December 31, 1994 June 30, 1995
<S> <C> <C>
Per Common Share:

Net Income:
BancShares - Historical . . . . . . . . . . . . . . . . . . . $ 5.13 $ 2.36
Allied - Historical . . . . . . . . . . . . . . . . . . . . . 1.27 .65
BancShares/Allied Pro Forma Combined(1). . . . . . . . . . . . 4.79 2.23
Allied Pro Forma Equivalent(1) . . . . . . . . . . . . . . . . 2.55 1.19
Book Value:
BancShares - Historical . . . . . . . . . . . . . . . . . . . $44.11 $46.06

Allied - Historical . . . . . . . . . . . . . . . . . . . . . 12.98 13.80
BancShares/Allied Pro Forma Combined(1). . . . . . . . . . . . 44.48 46.27
Allied Pro Forma Equivalent(1) . . . . . . . . . . . . . . . . 23.62 24.57
Cash Dividends:
BancShares - Historical . . . . . . . . . . . . . . . . . . . $ .725 $ .40
Allied - Historical(2) . . . . . . . . . . . . . . . . . . . . . .10 .22
BancShares/Allied Pro Forma Combined . . . . . . . . . . . . . .70 .43

Allied Pro Forma Equivalent . . . . . . . . . . . . . . . . . .37 .23
</TABLE>

(1) Pro Forma Combined Net Income and Book Value per share include
pro forma adjustments relating to amortization of goodwill created
from the Merger and the exercise of Allied options prior to the
Effective Time.

(2) Pursuant to the provisions of the Agreement, if Allied pays a
cash dividend in an aggregate amount in excess of $0.12 per
share per calendar quarter between August 7, 1995 and the
Effective Time, the cash paid in excess of such limitation will
reduce the consideration to be paid to Allied shareholders by
BancShares in the Merger. Allied does not intend to declare or
pay cash dividends on Allied Stock in excess of such limitation
unless the Agreement is terminated.

<PAGE>

INFORMATION CONCERNING THE SPECIAL MEETING

This Prospectus/Proxy Statement is being furnished to shareholders of
Allied as of the Record Date and is accompanied by a form of proxy which is
solicited by the Board of Directors of Allied for use at the Special
Meeting to be held on _______________, 1995 and at any adjournment thereof.
At the Special Meeting, shareholders will vote on a proposal to approve the
Agreement and Merger. Proxies will be voted on such other matters as may
properly come before the Special Meeting, or any adjournment thereof, in
the best judgment of a majority of the proxyholders named therein. Allied
is not aware of any other matters which may properly come before the
Special Meeting.

HOLDERS OF ALLIED STOCK ARE REQUESTED TO COMPLETE, DATE, AND SIGN THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID
ENVELOPE.

Record Date, Voting Rights and Vote Required

Only the holders of Allied Stock on the Record Date are entitled to
receive notice of and to vote at the Special Meeting and at any adjournment
thereof. On the Record Date, there were ______________ shares of Allied
Stock outstanding which were held by approximately _________ holders of
record. Each share of Allied Stock outstanding on the Record Date is
entitled to one vote on the proposal regarding the Merger.

Approval of the Agreement and the Merger will require the affirmative
vote of a majority of the shares of Allied Stock entitled to vote at the
Special Meeting. Failure of a holder of Allied Stock to vote such shares,
abstentions, and broker non-votes will have the same effect as a vote
"AGAINST" the Agreement and the Merger. As of the Record Date, the
directors and executive officers of Allied and their affiliates owned a
total of ______________ shares, or _____%, of Allied Stock, all of which
are expected to be voted in favor of the Agreement and the Merger.
Information as to the nature of such persons' beneficial ownership is
included in the section of this Prospectus/Proxy Statement entitled
"INFORMATION ABOUT ALLIED BANK CAPITAL, INC. - Voting, Securities and
Beneficial Ownership Thereof."

Voting and Revocation of Proxies

The shares of Allied Stock represented by properly executed proxies
received at or prior to the Special Meeting will be voted as directed by
the shareholders, unless revoked as described below. If no instructions
are given, such proxies will be voted "FOR" the proposal to approve the
Agreement and the Merger. Such vote will constitute a waiver of the
shareholder's right to dissent. If any other matters are properly
presented at the Special Meeting and may be properly voted on, the proxies
solicited hereby will be voted on such matters in accordance with the best
judgment of a majority of the proxyholders named therein. However, in such
event, voting authority will only be exercised to the extent permissible
under applicable federal securities laws. Management is not aware of any
other business to be presented at the Special Meeting. This proxy is being
solicited for the Special Meeting and any adjournments of the Special
Meeting and will not be used for any other meeting.

<PAGE>

The presence of a shareholder at the Special Meeting will not
automatically revoke such shareholder's proxy. A shareholder may, however,
revoke a proxy at any time prior to its exercise (1) by filing a written
notice of revocation with, or by delivering a duly executed proxy bearing a
later date to, the President of Allied at Allied's main office prior to the
Special Meeting, or (2) by attending the Special Meeting and voting in
person. A proxy will not be revoked by the death or incapacity of the
shareholder executing it unless, before the shares are voted, notice of
such death or incapacity is filed with the President of Allied or other
person authorized to tabulate votes.

Solicitation of Proxies

The cost of soliciting proxies will be deemed to be incurred and shall
be paid 50% by Allied and 50% by BancShares, but such amount shall not
exceed $20,000 for Allied. In addition to the use of the mails, proxies
may be solicited personally or by telephone or facsimile by the directors,
officers and employees of Allied who will not be specially compensated for
such solicitation activities. Allied will make arrangements with brokerage
firms and other custodians, nominees, and fiduciaries, if any, for the
forwarding of solicitation materials to the beneficial owners of Allied
Stock held of record by such persons. Any such brokers, custodians,
nominees and fiduciaries will be reimbursed for the out-of-pocket expenses
incurred by them for such services.

Recommendation

The Board of Directors of Allied has unanimously approved the
Agreement and the Merger contemplated thereby and believes that the Merger
is fair to, and in the best interests of, Allied and its shareholders.
Allied's Board of Directors, therefore, unanimously recommends that the
holders of Allied Stock vote "FOR" approval of the Agreement and the Merger
contemplated thereby. In making its recommendation, the Board of Directors
of Allied has considered, among other things, the opinions of Legg Mason
and of FBR that BancShares' proposal is fair to Allied's shareholders from
a financial point of view. See "THE MERGER - Opinions of Financial
Advisors" and " - Background and Reasons."

THE MERGER

The following information describes material aspects of the
Merger. This description does not purport to be complete and is qualified
in its entirety by reference to the Agreement, which is incorporated by
reference herein and is attached hereto as Appendix I.

Background and Reasons

Summit and Peoples were organized, and for most of their existence
have operated, as traditional thrift institutions. Summit's origins are in
Sanford, Lee County, North Carolina, as a state-chartered mutual building
and loan association. Peoples' origins are in Wilmington, New Hanover
County, North Carolina, also as a state-chartered mutual building and loan
association. Over the years, Summit has expanded by branching into other
communities, including Wake and Chatham Counties, North Carolina, and
Peoples has expanded by branching into new communities, such as Pender
County, North Carolina. The Sanford market, however, has

<PAGE>

remained the location of Summit's largest branches and its largest
market share in any of the Summit market areas, and the Wilmington
market has remained the strength of the Peoples franchise.

Like other thrifts, the core of Summit's and Peoples' business has
consisted of attracting deposits from the general public and originating
loans to finance the acquisition, construction, or improvement of
residential properties located in the respective market areas served by
Summit and Peoples. Summit and Peoples have worked over a number of years
to diversify their activities by expanding their commercial and consumer
lending and improving their array of deposit products and non-deposit
investment services. While the Board of Directors and management of Allied
believe that Summit and Peoples have been more successful than many of
their peers in such diversification, they also recognize that the basic
business and identity of each remains closely tied to its roots as a
traditional thrift institution.

In recent years, the Board of Directors and management of Allied have
recognized that the increased competition from commercial banks and other
financial institutions has changed fundamentally the environment in which
traditional thrifts have operated and threatens the market shares held by
thrifts for their traditional services. Wake County supports sixteen
commercial banks and Chatham and Lee Counties support eleven and six
commercial banks, respectively. The Wilmington, New Hanover County market
supports twelve commercial banks, while Pender County supports four
commercial banking franchises. Competition with these commercial banks,
with other financial institutions and with other providers of financial
services, such as credit unions, is keen, making it extremely difficult for
Summit and Peoples, despite their diversification efforts and
accomplishments, to meaningfully expand into the commercial banking
business or make significant market share gains in any one market area.

The Riegle-Neal Interstate Banking and Branching Efficiency Act (the
"Interstate Banking Act"), enacted by Congress in September 1994, also has
raised new questions about the future nature and structure of the financial
services industry and the options open to local institutions offering
limited lines of financial services and products. In addition, current
proposals to recapitalize the Savings Association Insurance Fund ("SAIF")
and the current disparity between SAIF and Bank Insurance Fund ("BIF")
premiums, in addition to the uncertainty currently surrounding such issues,
are anticipated to result in additional competitive advantages to
commercial banks that will further harm the thrift industry as a whole.

The Board of Directors and management of Allied have assessed
continuously the foregoing and other developments and their significance to
Allied and its shareholders. Allied's strategy thus far has been to remain
an independent company, at least so long as independence best serves the
long term interests of Allied and its shareholders. The Board of Directors
of Allied has reassessed this strategy from time to time, recognizing that,
over the past several years, large commercial bank holding companies have
acquired a substantial number of thrift institutions and commercial banks
in North Carolina and that a market for such acquisitions still exists.
The Board of Directors of Allied also has received and considered
expressions of interest in potential acquisition transactions from other
financial institutions. At the same time, the Board of Directors has been
cognizant of changes in Allied's operating environment, including rising
interest rates and shrinking interest margins, causing the Board of
Directors and management to

<PAGE>

project slower growth in earnings and a decline in the estimated fair
value of financial assets compared to their carrying values over the
next few years.

In light of these occurrences and conditions, the Board of Directors,
early in 1995, decided to undertake a comprehensive study of Allied's
future and the strategic options available to Allied. Initially, the Board
of Directors employed Legg Mason to provide business and financial advice
regarding the strategic future of Allied. With the assistance of Legg
Mason, the Board of Directors reviewed the economic and competitive
conditions in the market areas of Summit and Peoples, changes in the
residential mortgage industry, the trend of consolidation among federally-
insured depository institutions, the potential effects of the effectiveness
of the Interstate Banking Act and the advent of interstate banking, and the
effects that rising interest rates and cyclical trends could have on bank
and thrift stock prices in coming years. The Board of Directors also
analyzed the history and market performance of Allied Stock since it
converted to a stock institution in 1992. Since the third quarter of 1992,
Allied Stock had been traded actively in comparison to stocks of other
North Carolina thrift institutions, and the market price had increased
steadily. The Board of Directors concluded that the market price of Allied
Stock included a premium that reflected a belief among purchasers of Allied
Stock and other participants in the securities market that Allied was an
attractive candidate for takeover. The Board of Directors further
concluded that, if Allied were not acquired within a reasonable period of
time, the takeover premium was likely to erode which, when coupled with the
projections for slower earnings growth and a decline in the estimated fair
value of financial assets compared to their carrying value, likely would
cause the market price of Allied Stock to decline, thereby reducing the
value of the Allied Stock held by Allied shareholders.

The Board of Directors considered several options for the future of
Allied, including: (i) remaining independent and seeking to generate growth
and added profits by expanding and diversifying Allied's financial services
and product offerings, (ii) expanding through establishment of new
branches, (iii) expanding by acquiring smaller savings institutions,
commercial banks or branches, (iv) merging with an institution of nearly
equal size, and (v) being acquired by a larger bank or thrift holding
company. The Board reviewed each option and concluded, in light of current
business conditions, Allied's particular circumstances and prospects, and
the risks and expense of expanding its products, services, and/or branch
network on an independent basis, that the best interests of Allied and its
shareholders would be served by exploring closely the possibility of
combining with another institution in a sale-of-control transaction in the
near term.

Accordingly, the Board of Directors decided to survey the most likely
obtainable terms and conditions on which Allied could combine with a larger
in-state or out-of-state bank or thrift holding company. Legg Mason, on
behalf of Allied, communicated directly with the financial institutions it
considered to be the most likely potential acquirors of Allied to invite
acquisition proposals. Four companies submitted proposals or expressions
of interest in response to Legg Mason's communications, each of which were
subject to the completion of due diligence examinations and further
discussions between the parties. One of the proposals was submitted by
BancShares. In an effort to secure as much information and input as
possible to assist the Board of Directors in making its decision, the Board
of Directors determined, in June 1995, that it would be in the best
interests of Allied and its shareholders to seek the assistance of an
additional financial advisor. As a result, the Board of Directors engaged
FBR to work in conjunction with Legg Mason in determining the best course
for Allied to take to maximize
19

<PAGE>

shareholder value. With the advice of Legg Mason and FBR, Allied
proceeded to enter into further discussions with three of the companies,
the fourth having submitted a proposal that was deemed to be well below
the range of consideration. Each of the companies conducted a due
diligence examination of Allied and its subsidiaries and met with the
Mergers and Acquisitions Committee appointed by the Chairman of Allied's
Board of Directors.

Following the due diligence examinations and the meetings with the
Mergers and Acquisitions Committee, Allied requested that final proposals
be submitted by each company to Allied. One company withdrew its proposal
at this time, and each of the remaining two companies submitted a final
proposal. The Board of Directors reviewed each of the final proposals and
met with Legg Mason, FBR, and Allied's attorneys to discuss and review the
final proposals. Each of Legg Mason and FBR presented a detailed analysis
of each of the final proposals to the Board of Directors and each concluded
separately that the consideration offered by BancShares represented a
greater value to the shareholders of Allied than the consideration offered
by the other proposal. In addition, Legg Mason and FBR each advised the
Board of Directors that, in their opinions, BancShares' proposal was fair
to Allied's shareholders from a financial point of view.

As a result of the foregoing process, the Board of Directors concluded
that it had achieved the best value for Allied's shareholders under the
circumstances. On the basis of the foregoing conclusion, the independent
judgment of the members of the Board of Directors of Allied, and the advice
of Legg Mason and FBR that the BancShares proposal represented a greater
value than the other proposal and was fair to Allied's shareholders from a
financial point of view, the Board of Directors concluded that BancShares'
offer was in the best interests of Allied and its shareholders.
Accordingly, for all of the reasons discussed above, on July 31, 1995,
Allied's Board of Directors accepted BancShares' offer and authorized
execution of the Agreement.

Opinions of Financial Advisors

Opinion of Legg Mason.

Allied retained Legg Mason to act as its financial advisor
in February 1995. Legg Mason is a nationally
recognized investment banking firm regularly engaged in the valuation of
businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities and private placements.
Legg Mason is familiar with Allied, having served as financial advisor and
stand-by underwriter to Allied in connection with its conversion from
mutual-to-stock form in 1992 and in connection with its acquisition of a
mutual savings bank in a merger conversion in 1994. Legg Mason also
follows Allied from a research perspective. Allied selected Legg Mason to
act as its financial advisor based upon its qualifications, expertise and
reputation, as well as Legg Mason's prior investment banking relationship
and familiarity with Allied.

On July 31, 1995, at the meeting at which the Allied Board of
Directors agreed in principle to merge with BancShares, Legg Mason rendered
an oral opinion to the Allied Board

<PAGE>

that, as of such date, the consideration to be received by the
shareholders of Allied from BancShares was fair, from a financial point
of view, to such shareholders. On _______ ___, 1995, Legg Mason
delivered a written opinion to the Allied Board of Directors that, as of
such date, the consideration to be received by the shareholders of
Allied was fair, from a financial point of view, to such shareholders.
The full text of Legg Mason's opinion, which sets forth the assumptions
made, matters considered and limitations on the reviews undertaken, is
attached hereto as Appendix II and is incorporated herein by reference,
and should be read in its entirety in connection with this
Prospectus/Proxy Statement. The following summary of Legg Mason s
opinion is qualified in its entirety by reference to the full text of
the opinion.

In arriving at its opinion, Legg Mason (i) reviewed the Agreement,
certain publicly available business and financial information for Allied
and BancShares and certain other financial statements, data, reports and
analyses for Allied and BancShares prepared by their respective
managements, including the 1995 budget of Allied and BancShares; (ii)
discussed the current operations, financial condition and prospects of
Allied and BancShares with the managements of Allied and BancShares; (iii)
reviewed the reported market prices and historical trading activity of
Allied Stock and BancShares Common Stock and compared certain financial
and stock market information for Allied and BancShares with similar
information for certain other financial institutions, the securities of
which are publicly-traded; (iv) reviewed the financial terms of certain
recent business combinations involving financial institutions that Legg
Mason deemed comparable in whole or in part; and (v) performed such other
studies and analyses as Legg Mason considered appropriate.

Legg Mason relied without independent verification upon the accuracy
and completeness of all the financial and other information reviewed by it
for purposes of its opinion. In that regard, Legg Mason assumed that the
financial forecasts were reasonably prepared on a basis reflecting the best
currently available judgments and estimates of the managements of Allied
and BancShares. Legg Mason did not make or obtain an independent
evaluation or appraisal of the assets or liabilities of Allied or
BancShares nor was it furnished with any such evaluation or appraisal.

The following is a summary of the financial analyses performed by Legg
Mason in connection with its opinion:

Comparison of Selected Publicly Traded Companies. Using publicly
available information, Legg Mason compared selected financial and market
information for Allied and two peer groups of savings banks. The first peer
group ("Regional Peer Group") consisted of all publicly-traded savings
banks located in the Southeastern states of Alabama, Georgia, Kentucky,
North Carolina, South Carolina, Tennessee, Virginia, and West Virginia with
assets of less than $1 billion. Companies that had agreed to merge with
another institution were excluded from the peer group. The second peer
group ("Target Peer Group") consisted of selected companies within the
Regional Peer Group that were located in North Carolina, South Carolina and
Virginia, and had assets of less than $500 million. The Target Peer Group
included Cooperative Bancshares, Inc., KS Bancorp, Inc., First SB of Moore
County, United Federal Savings Bank, Community Financial Corp., CSB
Financial Corporation, Fidelity Financial Bancshares, Coastal Financial
Corp. and First Southeast Financial Corp. Since Allied's market price
began to increase in early

<PAGE>

1994, and such increase was believed to be due to takeover speculation,
Legg Mason used Allied's market price of $15.38 on February 10, 1994 for
comparative purposes. As of February 10, 1994 for Allied and September
26, 1995 for the Regional Peer Group and Target Peer Group, the
relative multiples implied by the market price of Allied Stock and the
median market price of the common stock of the Regional Peer Group and
the Target Peer Group, respectively, to such selected financial data
was: (i) to latest twelve months ("LTM") earnings, 12.1x for Allied and
12.7x and 13.0x for the Regional Peer Group and the Target Peer Group,
respectively, and (ii) to book value, 118% for Allied and 110% and 109%
for the Regional Peer Group and the Target Peer Group, respectively.
Financial comparison as of June 30, 1995 showed that: (i) return on
average assets ("ROA") for the latest twelve months was 1.23% for Allied
and 0.99% and 1.02% for the Regional Peer Group and the Target Peer
Group, respectively; (ii) return on average equity ("ROE") for the
latest twelve months was 10.76% for Allied and 8.93% and 8.53% for the
Regional Peer Group and the Target Peer Group, respectively; and (iii)
the equity/assets ratio for the most recent quarter ended was 11.59% for
Allied and 9.40% and 12.98% for the Regional Peer Group and the Target
Peer Group, respectively.

Using publicly available information, Legg Mason also compared
selected financial and market information for BancShares and a group of 22
publicly-traded commercial banks located in the Southeastern states of
Alabama, Georgia, Kentucky, North Carolina, South Carolina, Tennessee,
Virginia and West Virginia with assets between $1 billion and $10 billion
("Bank Peer Group"). Companies that had agreed to merge with another
institution were excluded from the peer group. As of September 26, 1995, the
relative multiples implied by the market price of BancShares Common Stock
and the median market price of the common stock of the Bank Peer Group to
such selected financial data was: (i) to LTM earnings, 10.6x for BancShares
and 13.1x for the Bank Peer Group, and (ii) to book value, 115% for
BancShares and 168% for the Bank Peer Group. The financial comparison
for the most recent quarter showed that: (i) ROA for the latest twelve
months was 0.81% for BancShares and 1.18% for the Bank Peer Group; (ii)
ROE for the latest twelve months was 11.35% for
BancShares and 14.24% for the Bank Peer Group, and (iii) the equity/asset ratio
for the most recent quarter ended was 7.12% for BancShares and 8.33% for
the Bank Peer Group. Legg Mason advised the Allied Board that, in its
opinion, the market prices for banks in the Bank Peer Group generally
included some premium reflecting the potential for takeover, while the
market price for BancShares may not have been so affected to the same
extent due to the existence of a controlling shareholder.

Comparison of Selected Transactions. Legg Mason reviewed a group of
34 transactions announced since the beginning of 1993 involving
acquisitions of savings banks with assets between $100 million and $1
billion in the Southeast ("Regional Transaction Group"). Legg Mason also
analyzed a subgroup of ten transactions within the Regional Transaction
Group that were deemed comparable to the Merger ("Target Transaction
Group"). Such transactions included: First Union Corporation/RS Financial
Corporation, Centura Banks/First Southern Bancorp, Bank South Corporation /
Gwinnett Bancshares, Union Planters Corporation/BNF Bancorp, Security
Capital Corporation/First FS & LA, Union Planters Corporation/Liberty
Bancshares, First Union Corporation/American Bancshares, Southern National
Corporation/Regency Bancshares, United Carolina Bancshares/Home FSB-Eastern
NC and BB&T Financial Corporation/Citizens Savings Bank. Legg Mason
calculated, as of the respective dates of announcement of such
transactions, the multiple of LTM earnings and book value, as well as

<PAGE>

the core deposit premium, implied by the consideration to be received by
the shareholders of the acquired company in each such transaction. Legg
Mason also computed the median of these multiples of LTM earnings and
book value and the median core deposit premium for the Regional
Transaction Group and Target Transaction Group. The analysis yielded a
range of transaction values as a multiple of LTM earnings of 6.3x to
28.9x, with a median of 14.8x, for the Regional Transaction Group, a
range of 10.5x to 19.9x, with a median of 14.8x, for the Target
Transaction Group, compared to 19.6x for the Merger. The range of
transaction values as a multiple of book value was .71x to 2.19x, with a
median of 1.55x, for the Regional Transaction Group, a range of 1.22x to
1.99x, with a median of 1.65x, for the Target Transaction Group,
compared to 1.86x for the Merger. The range of core deposit premiums
was 0.17% to 16.11%, with a median of 6.18%, for the Regional
Transaction Group, a range of 3.09% to 13.77%, with a median of 9.41%,
for the Target Transaction Group, compared to 11.31% for the Merger. The
offer price used for the Merger in the preceding analysis was $25.67 per
share, derived from the market value of BancShares Common Stock of
$49.00 on July 27, 1995 and assuming that 55% of Allied's shareholders
elected BancShares Common Stock and 45% elected cash or subordinated
debentures at $25.25 per Allied share.

Discounted Cash Flow Analysis. Using discounted cash flow analysis,
Legg Mason estimated the present value of the future dividend streams that
Allied could produce over a five year period under various circumstances.
Legg Mason then estimated the terminal value of Allied's common equity at
the end of five years by applying a range of 10x to 20x Allied's terminal
year earnings. In arriving at terminal year earnings, Legg Mason used
Allied's projection for 1995 and assumed five percent growth in EPS
thereafter. The dividend streams and terminal values were then discounted
to present values using discount ranges from 12% to 16%, which reflect
different assumptions regarding the required rate of return of holders or
prospective buyers of Allied Stock. The foregoing analysis indicated a
range of present values of Allied from $9.93 per share to $21.42 per share.

Analysis at Various Prices for BancShares. Under the Agreement, the
Exchange Ratio for those Allied shareholders receiving BancShares Common
Stock is fixed at .531 shares of BancShares Common Stock for each share of
Allied Stock if the market value of BancShares Common Stock is between
$45.13 per share and $49.88 per share . If the market value of BancShares
Common Stock is below $45.13 per share or above $49.88 per share then the
Exchange Ratio will become floating to preserve a fixed minimum stock
consideration of approximately $24.00 per share and a fixed maximum stock
consideration of approximately $26.50 per share. Assuming that 55% of
Allied's shareholders elect to receive BancShares Common Stock, the minimum
and maximum Merger consideration would be $24.54 per share and $25.93 per
share, respectively. Using these minimum and maximum per share Merger
consideration amounts, the range of transaction values as a multiple of
Allied's LTM earnings is 18.7x to 19.8x, as a multiple of book value is
1.78x to 1.88x and as a premium to core deposits is 10.01% to 11.62%.

The summary set forth above does not purport to be a complete
description of the analyses performed by Legg Mason in this regard. The
preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description.
Selecting portions of the analysis or of the summary set forth above,
without considering the analysis as a whole, could create an incomplete
view of the processes underlying Legg Mason's opinion.

<PAGE>

In arriving at its fairness determination, Legg Mason considered the
results of all such analyses. No company or transaction used in the
above analysis as a comparison is identical to Allied or BancShares or
the contemplated transaction. The analyses were prepared solely for
purposes of Legg Mason's providing its opinion to the Allied Board as to
the fairness of the Merger consideration to Allied shareholders and do
not purport to be appraisals or necessarily reflect the prices at which
businesses or securities actually may be sold. Analyses based upon
forecasts of future results are not necessarily indicative of actual
future results, which may be significantly more or less favorable than
suggested by such analyses.

As described above, Legg Mason's opinion was one of many factors taken
into consideration by the Allied Board in making its determination to
approve the Merger. Legg Mason's opinion is directed only to the fairness,
from a financial point of view, of the Merger consideration and does not
address any other aspect of the Merger.

In the ordinary course of its business, Legg Mason trades the equity
securities of Allied for its own account and the accounts of customers,
and, accordingly, may at any time hold a long or short position in such
securities.

Pursuant to the terms of an engagement letter dated February 8, 1995,
Allied has paid Legg Mason an initial fee of $25,000 and a fairness opinion
fee of $75,000. In addition, Allied has agreed to pay Legg Mason a
transaction fee, due upon consummation of the Merger, of approximately $1.0
million, based on an incentive formula set forth in Legg Mason's engagement
letter, less the $75,000 fairness opinion fee already paid to Legg Mason.
The incentive formula is based upon the aggregate consideration to be
received by the Allied shareholders and option holders pursuant to
the Agreement. Whether or not the Merger is consummated, Allied also
has agreed to indemnify Legg Mason and certain related persons against
certain liabilities relating to or arising out of its engagement.

Opinion of FBR.

Pursuant to an engagement letter dated July 10, 1995 (the "Engagement
Letter") between Allied and FBR, Allied retained FBR as an additional
financial advisor to act in concert with Legg Mason and to render its opinion
with respect to the fairness, from a financial point of view, of the
consideration to be received by the shareholders of Allied from BancShares
in the Merger. FBR, as part of its institutional brokerage, research and
investment banking business, is regularly engaged in the valuation of
securities and the evaluation of transactions in connection with initial
and secondary offerings, mutual-to-stock conversion of thrift institutions,
mergers and acquisitions of commercial banks, thrifts and their holding
companies, as well as business valuations for other corporate purposes for
financial institutions and real estate-related companies. As a specialist
in the valuation of securities of financial institutions, FBR has
experience in, and knowledge of, North Carolina and the surrounding
regional markets for thrift and bank securities and institutions operating
in North Carolina and the surrounding regional areas. Allied engaged the
services of FBR based upon its qualifications, expertise and reputation.

At the July 31, 1995 meeting of the Allied Board of Directors, FBR
delivered its oral opinion, subsequently confirmed in writing as of the
date of this Prospectus/Proxy Statement, that the consideration to be
received by the shareholders of Allied from BancShares in the Merger was
fair, from a financial point of view, as of such dates. FBR's opinion is
directed only to the fairness, from a financial point of view, to Allied's
shareholders of the consideration to be

<PAGE>

received by them in the Merger and does not address Allied's underlying
business decision to effect the Merger. No limitations were imposed by
Allied on FBR with respect to the investigation made or procedures
followed in rendering its opinion. THE FULL TEXT OF FBR'S WRITTEN
OPINION TO THE ALLIED BOARD OF DIRECTORS, DATED THE DATE OF THIS
PROSPECTUS/PROXY STATEMENT, IS ATTACHED HERETO AS APPENDIX II AND IS
INCORPORATED HEREIN BY REFERENCE AND SHOULD BE READ CAREFULLY AND IN ITS
ENTIRETY IN CONNECTION WITH THIS PROSPECTUS/PROXY STATEMENT. THE
FOLLOWING SUMMARY OF FBR'S OPINION IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF THE OPINION. FBR'S OPINION IS ADDRESSED
TO THE ALLIED BOARD OF DIRECTORS ONLY AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY ALLIED SHAREHOLDER AS TO HOW SUCH SHAREHOLDER
SHOULD VOTE WITH RESPECT TO THE MERGER. IN FURNISHING ITS OPINION, FBR
DID NOT ADMIT THAT IT IS AN EXPERT WITHIN THE MEANING OF THE TERM
"EXPERT" AS USED IN THE SECURITIES ACT AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER.

In connection with rendering its opinion, FBR, among other things, (i)
reviewed Allied's Annual Reports to Shareholders and Annual Reports on Form
10-K filed with the SEC for fiscal years ended December 31, 1992, 1993 and
1994, (ii) reviewed BancShares' Annual Reports to Shareholders and Annual
Reports on Form 10-K filed with the SEC for fiscal years ended December 31,
1992, 1993 and 1994, (iii) reviewed the Quarterly Reports on Form 10-Q for
the fiscal quarters ended March 31, 1995 and June 30, 1995, filed with the
SEC by Allied and BancShares, (iv) discussed the past and current
operations, financial condition and prospects of Allied and BancShares with
the managements of Allied and BancShares, (v) reviewed the reported market
prices and trading activity for Allied Stock and BancShares Common Stock
and compared them with those of certain publicly-traded financial
institutions (or their holding companies) which FBR deemed to be reasonably
comparable to Allied and BancShares, respectively, (vi) compared the
results of operations and financial condition of Allied and BancShares with
those of certain publicly-traded financial institutions (or their holding
companies) which FBR deemed to be reasonably comparable to Allied and
BancShares, respectively, (vii) reviewed the financial terms, to the extent
publicly available, of certain acquisition transactions which FBR deemed to
be reasonably comparable, (viii) reviewed an executed copy of the
Agreement, and (ix) performed such other analyses and reviewed and analyzed
such other information as FBR deemed appropriate.

In rendering its opinion, FBR did not assume responsibility for
independently verifying, and did not independently verify, any financial
or other information concerning Allied and BancShares furnished to it by
Allied and BancShares or the publicly-available financial and other
information regarding Allied, BancShares and other financial institutions
(or their holding companies). FBR has assumed that all such information is
accurate and complete. FBR has further relied on the assurances of
management of Allied and BancShares that they are not aware of any facts
that would make such financial or other information relating to such
entities inaccurate or misleading. With respect to financial forecasts for
Allied and BancShares provided to FBR by their respective managements, FBR
has assumed, for purposes of its opinion, that the forecasts have been
reasonably prepared on bases reflecting the best available estimates and
judgments of their respective managements at the time of preparation as to
the future financial

<PAGE>

performance of Allied and BancShares and that they provide a reasonable
basis upon which FBR can form its opinion. FBR has assumed that there
has been no material change in Allied's or BancShares' assets, financial
condition, result of operations, business or prospects since June 30,
1995. FBR did not undertake an independent appraisal of the assets or
liabilities of Allied or BancShares nor was FBR furnished with any such
appraisals. FBR is not an expert in the evaluation of allowances for
loan losses and did not review any individual credit files of Allied or
BancShares. FBR's conclusions and opinion were necessarily based upon
economic, market and other conditions as they existed on, and the
information made available to FBR as of, the date of its opinion. FBR
expressed no opinion on matters of a legal, regulatory, tax or
accounting nature related to the Merger as set forth in the Agreement.

The preparation of a fairness opinion is a complex project and is not
necessarily susceptible to partial or summary description. No single
analytical methodology used by FBR was critical to its overall conclusions,
as each analytical technique has inherent strengths and weaknesses. The
nature of available information may further affect the value of any
particular methodology or technique. FBR's conclusions are based upon all
the analyses and factors that it considered, taken as a whole, and also on
the application of FBR's experience and judgment. FBR's conclusions
involve significant elements of subjective judgment and qualitative
analysis. No single technique was assigned any special value, merit or
weight. Accordingly, FBR believes that its analyses must be considered as
a whole and that to focus upon specific portions of such analyses and
factors would create an incomplete and misleading view of the process
underlying the preparation of its opinion. In preparing its analyses FBR
made numerous assumptions with respect to industry performance, general
business and economic conditions and other matters, many of which are
beyond FBR's control and are inherently imprecise.

The following is a brief summary of the analyses performed by FBR in
connection with its opinion:

Comparison of Selected Completed Transactions. FBR reviewed 33
completed acquisition transactions announced after January 1, 1994 and
completed prior to July 27, 1995 involving Southeastern thrift institutions
(the "Completed Transaction Group"). FBR calculated, as of the respective
dates of announcement of such transactions, the multiple of last twelve
months ("LTM") earnings and book value, as well as the core deposit
premium, implied by the aggregate consideration to be received by the
shareholders and stock option holders of each acquired institution in each
such transaction. FBR also computed the average and median of these
multiples of LTM earnings and book value and the average and median core
deposit premium resulting in these transactions. The analysis yielded a
range of transaction values as a multiple of LTM earnings of 8.87x to
33.33x, with an average of 17.11x and a median of 14.72x, for the Completed
Transaction Group, compared to a 20.63x for Allied in the Merger. The
range of transaction values as a multiple of book value was 1.11x to 2.54x,
with an average of 1.65x and a median of 1.66x, for the Completed
Transaction Group, compared to 2.13x for Allied in the Merger. The range
of core deposit premiums was 2.76% to 14.33%, with an average of 7.97% and
a median of 7.73%, for the Completed Transaction Group, compared to 13.91%
for Allied in the Merger. The offer price used for Allied in the Merger in
the preceding analysis was $25.67 per share, derived from the market value
of BancShares Common Stock of $49.00 as of July 27, 1995 and assuming that
55% of Allied's shareholders elected BancShares Common Stock

<PAGE>

and 45% elected cash at $25.25 per share, with an aggregate cash value
to be received for unexercised Allied stock options of $8,364,349 based
upon the cash-out of the options for the difference between $25.25 and a
weighted average exercise price of $10.43 on a per share basis (the
"Allied Merger Valuation Assumption").

Comparison of Selected National Pending Transactions. FBR reviewed 41
acquisition transactions pending as of July 27, 1995 on a nationwide basis
involving thrift institutions with assets in excess of $50 million (the
"National Pending Transaction Group"). FBR calculated, as of the
respective dates of announcement of such transactions, the multiple of LTM
earnings and book value, as well as the core deposit premium, implied by
the aggregate consideration to be received by the shareholders and stock
option holders of each target institution in each such transaction. FBR
also computed the average and median of these multiples of LTM earnings and
book value and the average and median core deposit premium resulting in
these transactions. The analysis yielded a range of transaction values as
a multiple of LTM earnings of 8.49x to 31.16x, with an average of 16.51x
and a median of 15.68x, for the National Pending Transaction Group,
compared to 20.63x for Allied in the Merger. The range of transaction
values as a multiple of book value was 0.82x to 2.30x, with an average of
1.51x and a median of 1.51x, for the National Pending Transaction Group,
compared to 2.13x for Allied in the Merger. The range of core deposit
premiums was 0.18% to 22.54%, with an average of 6.47% and a median of
6.03%, for the National Pending Transaction Group, compared to 13.91% for
Allied in the Merger. The Allied Merger Valuation Assumption was utilized
in the preceding analysis.

Comparison of Selected Southeastern Pending Transactions. FBR
reviewed 14 acquisition transactions pending as of July 27, 1995 involving
Southeastern thrift institutions with assets in excess of $50 million (the
"Southeastern Pending Transaction Group"). FBR calculated, as of the
respective dates of announcement of such transactions, the multiple of LTM
earnings and book value, as well as the core deposit premium, implied by
the aggregate consideration to be received by the shareholders and stock
option holders of each target institution in each such transaction. FBR
also computed the average and median of these multiples of LTM earnings and
book value and the average and median core deposit premium resulting in
these transactions. The analysis yielded a range of transaction values as
a multiple of LTM earnings of 8.87x to 21.38x, with an average of 14.20x
and a median of 15.97x, for the Southeastern Pending Transaction Group,
compared to 20.63x for Allied in the Merger. The range of transaction
values as a multiple of book value was 1.03x to 2.09x, with an average of
1.65x and a median of 1.64x, for the Southeastern Pending Transaction
Group, compared to 2.13x for Allied in the Merger. The range of core
deposit premiums was 0.18% to 22.54%, with an average of 8.58% and a median
of 7.04%, for the Southeastern Pending Transaction Group, compared to
13.91% for Allied in the Merger. The Allied Merger Valuation Assumption
was utilized in the preceding analysis.

Analysis at Various Prices for BancShares. Under the Agreement, the
value of the cash component to be paid by BancShares is constant at $25.25
per share. However, the Exchange Ratio for BancShares Common Stock to be
received by Allied's shareholders in the transaction fluctuates if the
market value of the BancShares Common Stock at the time the Exchange Ratio
is fixed is less than $45.13 (but not less than $42.00) or greater than
$49.88 per share. Assuming a market value of BancShares Common Stock of
less than $45.13 at the time the Exchange Ratio is fixed (with Allied
shareholders electing to receive 40% of the consideration in stock
currency) in calculating the minimum consideration, and assuming a market
value of BancShares Common

<PAGE>

Stock of more than $49.88 at the time the Exchange Ratio is fixed (with
Allied shareholders receiving 55% of the consideration in stock
currency) in calculating the maximum consideration, the aggregate value
of the consideration to be received in the Merger by the shareholders
and option holders of Allied will be a minimum of $64,189,288 and a
maximum of $66,883,974. Using these minimum and maximum consideration
amounts, the range of transaction values as a multiple of Allied's LTM
earnings is 19.98x to 20.81x and as a multiple of book value is 2.06x to
2.15x and as a premium to core deposits is 12.94% to 14.17%.

BancShares Comparable Bank Analysis. FBR compared certain valuation
ratios and profitability, operations, credit quality and capital ratios,
for BancShares with the average ratios (excluding in each case the low and
high ratio) for Bank South Corporation (GA), Carolina First Corporation
(SC), Centura Banks, Inc. (NC), CCB Financial Corporation (NC), Central
Fidelity Banks, Inc. (VA), First American Corporation (TN), First American
Bancorp (GA), F & M National Corporation (VA), First Tennessee National
Corp. (TN), First Virginia Banks, Inc. (VA), Jefferson Bankshares, Inc.
(VA), One Valley Bancorp of WV, Inc. (WV), Signet Banking Corporation (VA),
and United Carolina Bancshares (NC) (the "Comparable Banks"), using market
data as of July 27, 1995, and publicly reported financial data as of March
31, 1995 and for the 12 months ended as of that date. Among the valuation
ratios considered were (a) the ratio of market price to LTM earnings per
share, which was 9.48x for BancShares and averaged 12.39x for the
Comparable Banks, (b) the ratio of market price to estimated 1995 earnings
per share, which was 9.80x for BancShares and averaged 11.39x for the
Comparable Banks, (c) the ratio of market price to March 31, 1995 book
value, which was 1.09x for BancShares and averaged 1.67x for the Comparable
Banks, and (d) the ratio of market price to March 31, 1995 tangible book
value, which was 1.24x for BancShares and averaged 1.88x for the Comparable
Banks. The figures used for estimated 1995 earnings per share were based
on earnings estimates for BancShares as provided by BancShares management
and for the Comparable Banks as published by First Call, a publication that
collates earnings estimates for financial institutions and other companies.
Among the profitability, operations, credit quality and capital ratios
compared by FBR were (i) return on average assets for the 12 months ended
March 31, 1995 which was 0.81% for BancShares and averaged 1.15% for the
Comparable Banks, (ii) return on average common equity for the 12 months
ended March 31, 1995, which was 11.35% for BancShares and averaged 13.08%
for the Comparable Banks, (iii) net interest margin for the 12 months ended
March 31, 1995, which was 4.23% for BancShares and averaged 4.77% for the
Comparable Banks, (iv) the ratio of non-interest expense to average assets
for the 12 months ended March 31, 1995, which was 3.94% for BancShares and
averaged 3.69% for the Comparable Banks, (v) the ratio of non-performing
loans to total loans at March 31, 1995, which was 0.46% for BancShares and
averaged 0.54% for the Comparable Banks, (vi) the ratio of loan loss
reserves to non-performing loans at March 31, 1995, which was 370.36% for
BancShares and averaged 338.74% for the Comparable Banks, (vii) the ratio
of tangible common equity to tangible common assets at March 31, 1995,
which was 6.45% for BancShares and averaged 8.06% for the Comparable Banks,
and (viii) the risk-based capital ratio at March 31, 1995, which was 11.02%
for BancShares and averaged 13.62% for the Comparable Banks.

In the ordinary course of business, FBR trades the equities securities
of Allied for its own account and the accounts of its customers, and,
accordingly, may at any time hold a long or short position in such
securities.

<PAGE>

Pursuant to the Engagement Letter, Allied has paid FBR $50,000. In
addition, Allied has agreed to pay FBR for its services as a financial
advisor an additional fee of 1/2 of one percent of the aggregate
consideration to be received by Allied's shareholders and option holders
pursuant to the Agreement which amounts to approximately $334,000. This
additional fee is contingent upon consummation of the Merger. Allied also
has agreed to indemnify FBR and certain related persons against certain
liabilities, including but not limited to, liabilities under the federal
securities laws, and to pay its legal and other out-of-pocket expenses.

General Description of the Terms of the Agreement

At the Effective Time, holders of Allied Stock will receive, subject
to adjustment and proration (as described below), for each share
of Allied Stock either (i) if timely elected by the shareholder in the
manner prescribed in the Agreement, 0.531 shares of newly issued
BancShares Common Stock, (ii) cash in the amount of $25.25, or (iii) if
timely elected by the shareholder in the manner prescribed in the
Agreement, a Debenture in the principal amount of $25.25. In the
event of a proration of cash, Debentures or BancShares Common Stock,
shareholders may receive a combination of either cash and
BancShares Common Stock or a Debenture and BancShares Common Stock (as
described below). At the Effective Time, Allied will merge with and into
BancShares. Following the Merger, Allied's wholly-owned savings bank
subsidiaries, Summit and Peoples, will merge with and into First Citizens
Bank, a wholly-owned banking subsidiary of BancShares.

The Agreement provides that, whether or not the transactions
contemplated thereby are consummated, each party will pay its own costs and
expenses incurred in connection with the Agreement and the transactions
contemplated thereby; provided, however, that costs incurred in connection
with the preparation, printing and mailing of this Prospectus/Proxy
Statement shall be paid 50% by Allied and 50% by BancShares, but such
amount shall not exceed $20,000 for Allied.

Description of Debentures

If the Merger is approved and becomes effective and if any shareholder
of Allied elects to receive a Debenture in exchange for his or her shares
of Allied Stock, First Citizens Bank will issue unsecured, subordinated
Debentures which shall entitle the holder to semi-annual interest payments
in cash on the principal amount of the Debenture. Each Debenture shall
mature, at the option of the shareholder, on the third, fifth or tenth
anniversary of the Effective Time. Debentures with a maturity of three
years shall bear interest at a fixed rate of 7.00% per annum, Debentures
with a maturity of five years shall bear interest at a fixed rate of 7.25%
per annum and Debentures with a maturity of ten years shall bear interest
at a fixed rate of 7.50% per annum. Interest shall begin accruing at the
Effective Time, with the first interest payment being payable on March 1,
1996 (assuming the Merger has been consummated prior to that date) and the
next interest payment being payable on September 1, 1996. Subsequent
interest payments shall be payable on the anniversaries of the foregoing
interest payment dates. Interest shall cease to accrue on and after the
maturity date of the Debenture. Principal shall be paid at maturity upon
surrender of the Debenture. In the case of each shareholder whose shares
of Allied Stock are converted into the right to receive a Debenture, the
shareholder shall have the option of electing to receive Debentures in any
combination of term and interest rate. If, however, a

<PAGE>

shareholder elects a Debenture with only one term and interest rate,
only one Debenture shall be issued for all such Allied Stock of the
shareholder and the principal or "face" amount of that Debenture shall
be an amount (rounded to the next higher whole dollar) equal to the
number of shares of Allied Stock multiplied by $25.25. If the
shareholder elects to receive Debentures with a combination of terms and
interest rates, one Debenture shall be issued for each term and interest
rate elected and the aggregate principal or "face" amount of such
Debentures shall be an amount (rounded to the next higher whole dollar)
equal to the number of shares of Allied Stock so elected multiplied by
$25.25. Registered owners of the Debentures on the tenth day prior to
each such interest payment date shall be entitled to receive interest on
the Debentures.

The Debentures will be fully registered as to principal and interest
on the Debenture register maintained for that purpose by First Citizens
Bank. The Debentures are nonnegotiable and nontransferable and are not
redeemable prior to maturity; provided, however, (i) upon the death of the
registered owner thereof, the Debentures owned by the decedent shall be
transferable by the representative of the estate of the decedent upon
receipt of such documentation as may be required by First Citizens Bank,
or, at the option of such representative, such Debenture shall be redeemed
by First Citizens Bank for the principal amount thereof plus accrued
interest to the redemption date, and (ii) the Debentures may be transferred
to any member of an Allied shareholder's immediate family (i.e., spouses
and their children) or to an inter vivos trust for the benefit of any
member of such family. Permitted transfers of the Debentures shall be
effected only by delivering the same to First Citizens Bank for transfer on
the Debenture register maintained by First Citizens Bank together with such
documentation as First Citizens Bank may require.

The Debentures provide that if a default in either the payment of any
installment of interest or in the payment of principal of any Debenture
upon surrender at maturity shall continue for a period of 30 days after
written notice has been received by First Citizens Bank, the registered
owner may at any time (unless the default has been remedied or waived), by
written notice to First Citizens Bank, declare the unpaid principal and all
interest accrued on the Debenture to be immediately due and payable without
presentment or any other demand or notice of any kind.

The Debentures will be unsecured obligations of First Citizens Bank
and will not be eligible as collateral for loans made by First Citizens
Bank. The Debentures will not be deposits of First Citizens Bank and will
not be insured by the FDIC or any other governmental agency.

At June 30, 1995, the aggregate amount of outstanding long-term and
short-term indebtedness of First Citizens Bank that will be senior to the
Debentures was $312.5 million.

Exchange of Allied Stock

At the Effective Time, each shareholder of Allied Stock will have the
option, exercisable in writing, to exchange each share of Allied Stock
outstanding immediately prior to the Effective Time for (i) if timely
elected, 0.531 shares of BancShares Common Stock, (ii) cash in the amount
of $25.25, or (iii) if timely elected, a Debenture in the principal amount
of $25.25, in each case subject to adjustment and proration as
described below. In the event Allied shareholders elect to receive cash
or Debentures in lieu of BancShares Common Stock, or properly exercise
their dissenters'

<PAGE>

rights, for more than 60% of the outstanding shares of Allied Stock, the
Debentures will be prorated among all of the shareholders of Allied
electing to receive Debentures so that the total number of shares
receiving cash and Debentures will not exceed 60% of the outstanding
shares of Allied Stock. If after such proration of Debentures, the
aggregate number of outstanding shares of Allied Stock held by
shareholders of Allied who have elected to receive cash and Debentures,
or exercise their dissenters' rights, still exceeds 60% of the shares of
Allied Stock, the cash will be prorated among all of the shareholders of
Allied electing to receive cash so that the total number of shares paid
for in cash and Debentures will not exceed 60% of the shares of Allied
Stock. In the event Allied shareholders elect to receive BancShares
Common Stock in lieu of cash or Debentures for more than 55% of the
outstanding shares of Allied Stock, the BancShares Common Stock will be
prorated among all of Allied shareholders electing to receive BancShares
Common Stock so that the total number of shares of Allied Stock
converted into shares of BancShares Common Stock shall not exceed 55% of
the shares of Allied Stock. In the event of such proration of
BancShares Common Stock, shares of Allied Stock will be converted at the
election of the Allied shareholder into either cash or a Debenture
having a term of five years and a fixed interest rate of 7.25% per
annum. In the event of a proration of cash, Debentures or BancShares
Common Stock, Allied shareholders may receive a combination of cash and
BancShares Common Stock or a Debenture and BancShares Common Stock. The
proration of Debentures, cash or BancShares Common Stock is intended to
preserve the tax-free status of the Merger.

The Exchange Ratio will not be adjusted unless the Market Value is
less than $45.13 per share or more than $49.88 per share. In the event
that the Market Value is less than $45.13 per share or more than $49.88
per share, the Exchange Ratio will be adjusted by (x) dividing $45.13
by the Market Value (in the event the Market Value is less than $45.13)
or by dividing $49.88 by the Market Value (in the event the Market Value
is greater than $49.88), (y) multiplying the quotient by 0.531, and
(z) rounding the result to three decimal places. The Exchange
Ratio and the amount of cash or Debentures which a shareholder of Allied
may elect to receive for each of his or her shares of Allied Stock will
be reduced on a per share basis to the extent that any cash dividends in
an aggregate amount in excess of $0.12 per share per calendar quarter or
other distributions are declared or paid by Allied between August 7, 1995
and the Effective Time. Allied does not intend to declare or pay any cash
dividends or make other distributions on Allied Stock in excess of such
limitation unless the Agreement is terminated.

No fractional shares of BancShares Common Stock will be issued in
connection with the Merger. In the event the exchange of shares of Allied
Stock results in the creation of fractional shares, in lieu of the issuance
of fractional shares of BancShares Common Stock, BancShares will deliver
cash to its transfer agent in an amount equal to the aggregate market value
of all such fractional shares; and in such event the transfer agent shall
divide such cash among and remit it, without interest, to the former
shareholders of Allied in accordance with their respective interests.

The market price of BancShares Common Stock following the completion
of the Merger will depend on the results of operations and the financial
condition of BancShares, the general level of interest rates, the
perception of the banking industry generally, and other relevant factors
that may affect the price of BancShares Common Stock and that may affect
the securities markets generally. Accordingly, BancShares Common Stock
could trade at prices higher or lower than those trading prices that were
considered by the Board of Directors of Allied in approving the Merger.

<PAGE>

Exchange of Allied Stock Certificates

Within 10 days following approval of the Agreement by Allied
shareholders, Allied will mail to all holders of Allied Stock a form which
the shareholder may use to notify BancShares of an election to receive
either newly issued shares of BancShares Common Stock, cash or a Debenture
(the "Notice of Election"). The Notice of Election will specify a date
(the "Election Date"), which shall not be less than 15 or more than 30 days
following the mailing of such form, by which the Notice of Election must be
received by BancShares. Any shareholder who does not deliver a Notice of
Election to BancShares or who delivers one after the close of business on
the Election Date shall be deemed to have elected to receive cash for his
or her Allied Stock, and at the Effective Time all such shares of Allied
Stock will be converted into cash, subject to adjustment and proration as
described above. See "- Exchange of Allied Stock."

As promptly as practicable following the Effective Time, BancShares
will mail to each holder of record of Allied Stock a letter of instruction
and transmittal materials (the "Transmittal Letter") regarding the
procedures to be followed in the exchange of certificates representing
shares of Allied Stock for cash, a Debenture or a certificate representing
shares of BancShares Common Stock. When the Transmittal Letter is
received, holders of Allied Stock should follow the instructions contained
therein. Allied shareholders should not forward any certificates
representing shares of Allied Stock except in accordance with the
Transmittal Letter.

Upon surrender of certificates representing shares of Allied Stock to
First Citizens Bank, as the transfer agent for BancShares (the "Transfer
Agent"), after the Effective Time, each holder of Allied Stock will receive
cash, a certificate representing the number of shares of BancShares Common
Stock (if a proper Notice of Election was filed), or a Debenture (if a
proper Notice of Election was filed) to which such holder is entitled, or a
combination of cash and BancShares Common Stock or a Debenture and
BancShares Common Stock if the cash, Debentures or BancShares Common Stock
are prorated. Each holder of Allied Stock entitled to receive a fraction
of a share of BancShares Common Stock shall receive cash in the amount
provided in the Agreement. Following the Effective Time, there shall be no
further transfers of Allied Stock on the stock transfer books of Allied or
the registration of any transfer of an Allied stock certificate by any
holder thereof.

A certificate for BancShares Common Stock or a Debenture will be
issued only in the name in which the certificate for Allied Stock
surrendered for exchange is registered. BancShares will issue a single
certificate for shares of BancShares Common Stock and a single Debenture to
which an Allied shareholder is entitled. In no event will the Transfer
Agent, BancShares or any party to the Merger be liable to any person for
any BancShares Common Stock or dividends thereon, Debentures and interest
thereon or cash delivered in good faith to a public official pursuant to
any applicable abandoned property, escheat or similar law.

After the Effective Time and until surrender of Allied Stock to the
Transfer Agent, each certificate that represented outstanding Allied Stock
immediately prior to the Effective Time will be deemed to evidence (i) the
right to receive the number of shares of BancShares Common Stock into which
the shares represented by such certificates have been exchanged and cash in
lieu of fractional shares into which such shares would have converted, if a
Notice of Election was properly filed, (ii) the right to receive cash,
(iii) the right to receive a Debenture into which the

<PAGE>

shares represented by such certificates have been exchanged, if a Notice
of Election was properly filed, or (iv) in the event of a proration, a
combination of either cash and BancShares Common Stock or a Debenture
and BancShares Common Stock. No shareholder will, however, receive the
dividends or other distributions on BancShares Common Stock, interest on
a Debenture or cash payments in lieu of BancShares Common Stock or in
lieu of fractional shares until the surrender for exchange of his or her
certificates representing shares of Allied Stock. Upon surrender of
certificates representing Allied Stock, each shareholder will receive
cash, the number of shares of BancShares Common Stock or a Debenture to
which he or she is entitled (or a combination of cash and BancShares
Common Stock or a Debenture and BancShares Common Stock in the event of
proration) and cash in lieu of any fractional share, plus any dividends
on BancShares Common Stock which are payable to holders as of any
record date following the Effective Time or interest on the Debenture
which is payable to holders of Debentures as of any interest payment date
following the Effective Time. No interest will be payable with respect to
cash to be paid for Allied Stock, cash to be paid in lieu of fractional
shares, if any, withheld dividends or other distributions or cash payments
in respect of BancShares Common Stock or interest in respect of the
Debentures payable after the Effective Time.

Conditions to Consummation

The respective obligations of BancShares and Allied to consummate the
Merger are subject to the satisfaction of certain conditions, including,
without limitation, (i) the approval of the Boards of Directors of
BancShares and Allied; (ii) the approval of the shareholders of Allied;
(iii) the receipt of all necessary regulatory approvals and expiration of
all notice periods and waiting periods required after the granting of any
such approval, without the imposition of any condition contained in any
such approval which, in the reasonable opinion of BancShares, is materially
disadvantageous or burdensome or would so adversely impact the business or
economic benefits of the Agreement as to render consummation of the Merger
inadvisable; (iv) the receipt of an opinion, in form and substance
satisfactory to Allied and BancShares, substantially to the effect that
(A) the Merger will constitute a tax-free reorganization under Section 368
of the Code, (B) the shareholders of Allied will not recognize any gain or
loss to the extent that such shareholders exchange shares of Allied Stock
solely for shares of BancShares Common Stock, (C) dividend income or gain,
if any, will be recognized by a shareholder of Allied who receives shares
of BancShares Common Stock and either cash or Debentures in exchange for
his or her Allied Stock, limited to an amount not in excess of the cash or
the fair market value of the Debentures received, (D) the basis of the
BancShares Common Stock received by the shareholder in the Merger will be
the same basis as his or her Allied Stock surrendered in exchange therefor,
decreased by the amount of cash or the fair market value of the Debenture
received, if any, and increased by the amount of dividend income or gain
recognized, if any, in the exchange, (E) if Allied Stock is a capital asset
in the hands of the shareholder at the Effective Time, then the holding
period of the BancShares Common Stock received by the shareholder in the
Merger will include the holding period of Allied Stock surrendered in
exchange therefor, (F) cash or Debentures received by a shareholder will be
treated as a distribution in redemption of his or her Allied Stock, and
(G) a shareholder who receives cash in lieu of a fractional share of
BancShares Common Stock will recognize gain or loss equal to any difference
between the amount of cash received and the shareholder's basis in the
fractional share interest; (v) the absence of any order, decree, or
injunction of any court or governmental agency which enjoins or prohibits

<PAGE>

consummation of the transactions contemplated by the Agreement or either
party from consummating the transactions contemplated by the Agreement, any
pending or threatened investigation of the Merger by the United States
Department of Justice ("DOJ") or any actual or threatened litigation under
federal antitrust laws relating to the Merger, any suit, action, or
proceeding, pending or threatened before any court or governmental agency,
in which it is sought to restrain or prohibit the parties from consummating
the Merger, or any other suit, claim or proceeding, pending or threatened,
against any of the parties or any of their respective officers or directors
which shall reasonably be considered by any of the parties to be materially
burdensome in relation to the proposed Merger or materially adverse in
relation to the financial condition, results of operations, prospects, or
businesses of any of the parties and which has not been dismissed or
terminated within 90 days of the institution thereof; (vi) the accuracy of
the representations and warranties of BancShares and Allied set forth in
the Agreement as of the Effective Time as if made on and as of such date;
(vii) the performance in all material respects of all obligations,
covenants and agreements imposed on BancShares and Allied by the Agreement;
(viii) the absence of a material adverse change in the consolidated
financial condition, results of operations or business of BancShares or
Allied or any condition or circumstance which, with the lapse of time or
otherwise, may cause, create or result in such material adverse change;
(ix) the compliance in all material respects with all federal and state
laws and regulations applicable to the Merger, in which the violation of or
failure to comply with any such law or regulation could have a material
adverse effect on the consolidated financial condition, results of
operations or businesses of Allied or BancShares; (x) receipt of all
required consents to the assignment to BancShares of Allied's rights and
obligations under any personal property leases material to the business of
Allied and any real property leases; (xi) effectiveness of the Registration
Statement under the Securities Act and the absence of issuance, or threat
of issuance, of a stop order suspending such effectiveness, and BancShares'
satisfaction of all actions required by applicable state securities laws to
cause the issuance of BancShares Common Stock in the Merger to be duly
qualified or registered under such laws or to be exempt therefrom;
(xii) receipt by BancShares of written agreements from each of the
affiliates of Allied regarding restrictions on resales by such affiliates;
(xiii) execution and delivery of a Certificate of Merger to effect the
Merger; (xiv) receipt of certain opinions of counsel and certificates from
officers of Allied and BancShares; and (xv) BancShares will have satisfied
all requirements for the BancShares Common Stock to be issued in the Merger
to be listed on the Nasdaq National Market as of the Effective Time. In
addition, Allied's shareholders shall not have (a) filed valid Notices of
Election to receive cash or Debentures in lieu of BancShares Stock and
(b) properly exercised dissenters rights for more than 60% of the
outstanding shares of Allied Stock; provided, however, that in the event
that the holders of more than 60% of the outstanding shares of Allied Stock
elect to exchange their shares for cash or Debentures or exercise
dissenters' rights, all of the shareholders of Allied Stock electing to
receive Debentures shall be prorated to the extent necessary to preserve
the non-taxable status of the Merger such that the total number of shares
receiving cash and Debentures, either through filing a valid Notice of
Election or dissenters' rights, will not exceed 60% of the outstanding
shares of Allied Stock; provided, further, if after such proration of
Debentures, the aggregate number of outstanding shares of Allied Stock held
by shareholders of Allied who have elected to receive cash and Debentures,
or exercise their dissenters' rights, still exceeds 60% of the outstanding
shares of Allied Stock, the cash will be prorated among all of the
shareholders of Allied electing to receive cash so that the total number of
shares paid for in cash and Debentures will not exceed 60% of the shares of
Allied Stock. In addition, Allied shareholders shall have not have filed
valid Notices of Election to receive

<PAGE>

BancShares Common Stock in lieu of cash or Debentures for more than 55%
of the outstanding shares of Allied Stock; provided, further, that in
the event the holders of more than 55% of the outstanding shares of
Allied Stock elect to exchange their shares for BancShares Common Stock,
all of the shareholders of Allied Stock electing to receive BancShares
Common Stock will be prorated so that the total number of shares of
Allied Stock converted into shares of BancShares Common Stock shall not
exceed 55% of Allied Stock. In the event of such proration of
BancShares Common Stock, shares of Allied Stock will be converted, at
the shareholder's election, into either cash or a Debenture having a
term of five years and a fixed interest rate of 7.25%.

It also is a condition to consummation that Allied will have received
(i) the opinions of Legg Mason and FBR dated as of a date prior to this
Prospectus/Proxy Statement, to the effect that the terms of the Merger are
fair from a financial point of view to Allied and its shareholders and
(ii) a letter from each of Legg Mason and FBR dated as of a date within 10
business days preceding the closing date, to the effect that it remains the
opinions of Legg Mason and FBR that the terms of the Merger are fair from a
financial point of view to Allied and its shareholders. See "- Opinions of
Financial Advisors."

Either Allied or BancShares may waive in writing certain of the
conditions imposed with respect to its or their respective obligations to
consummation of the Merger upon a determination by the waiving party that
such waiver would not adversely affect the interests of the waiving party
or its shareholders. The requirements that the Merger be approved by
Allied's shareholders, that all required regulatory approvals be received
and that all notice periods and waiting periods required after such
regulatory approvals be expired cannot be waived.

Termination

The Agreement may be terminated at any time prior to the Effective
Time by the mutual consent of the parties. Any party, upon written notice
to the other party, may elect to terminate the Agreement if (i) the
conditions precedent to the obligations of such party to consummate the
transactions contemplated by the Agreement have not been satisfied or
waived by March 31, 1996; (ii) the shareholder approval required to
consummate the Merger is not obtained, or (iii) if the Merger shall not
have become effective by March 31, 1996 (unless such date is extended by
the mutual agreement of the parties). In addition, BancShares, upon
written notice to Allied, may elect to terminate the Agreement if the
average of the reported closing prices of BancShares Common Stock on the
Nasdaq National Market for the ten consecutive trading days ending 30 days
prior to the date of the Special Meeting is less than $42.00. Either party
may elect to terminate the Agreement (x) if the other party shall have
failed to perform or violates any obligation, covenant or agreement
contained in the Agreement, or (y) if the other party determines that any
representation or warranty contained in the Agreement shall have been false
or misleading in any material respect; provided, however, that the other
party may not terminate the Agreement if such breach, default or violation
has been cured by the earlier of 30 days after the date on which written
notice of such breach, default or violation is given to the party
committing such breach, default or violation. In addition, BancShares may
terminate the Agreement if the sum of environmental expenses or liabilities
on certain real property previously disclosed to BancShares that BancShares
and First Citizens Bank could incur or for which either

<PAGE>

of them could become responsible or liable for on account of any and all
remediation, corrective action or monetary damages equals or exceeds
$250,000.

If either party to the Agreement breaches the Agreement by willfully
or intentionally failing to perform or violating its obligations,
agreements or covenants contained in the Agreement, such party shall be
obligated to pay all costs and expenses incurred or to be incurred by the
other party, including, without limitation, all accounting fees, legal
fees, filing fees, printing costs, mailing costs and travel expenses,
together with other damages recoverable at law or in equity.

Amendment

The Agreement may be amended or supplemented in writing by mutual
agreement of BancShares and Allied, provided that such amendment or
supplement must be approved by their respective Boards of Directors and
provided further that no amendment or supplement executed after approval of
the Agreement by Allied's shareholders may change the Exchange Ratio or the
amount of cash or Debentures into which each share of Allied Stock may be
converted.

Conduct of Allied's Business Prior to the Effective Time

Under the terms of the Agreement, from the date of the Agreement until
consummation or termination thereof, Allied may not, without the prior
written consent of BancShares, among other things: (i) carry on its
business other than in the regular and usual course in substantially the
same manner as it was conducted prior to the date of the Agreement;
(ii) declare or pay any dividend or other distribution in respect of its
capital stock, except as to cash dividends in an aggregate amount not in
excess of $0.12 per share per calendar quarter; (iii) make any change in
its capital stock, create any other or additional capital stock, or issue,
sell, purchase, redeem, retire, reclassify, combine or split any shares of
its capital stock or enter into any agreement or understanding with respect
to such action; (iv) grant or issue any options, warrants, calls, puts or
other rights of any kind relating to the purchase, redemption or conversion
of shares of its capital stock or enter into any agreement or understanding
with respect to such action; (v) amend its Articles of Incorporation or
Bylaws or the Certificates of Incorporation or Bylaws of Summit and
Peoples; (vi) mortgage, pledge or impose, or suffer the imposition, on any
of its assets of any lien or encumbrance or to permit such lien to remain
to exist (other than in the ordinary course of business consistent with its
past practices in connection with securing public funds deposits,
repurchase agreements or other similar operating matters); (vii) waive,
release or compromise any material rights other than in the ordinary course
of business, except in good faith for fair value in money or money's worth,
nor waive, release or compromise any rights against or with respect to its
officers, directors or shareholders or their associates; (viii) acquire, or
merge with, or acquire any branch or all or any significant part of the
assets of, another person or entity or open any new branch office or enter
into any contract or agreement relating to any such transaction;
(ix) increase the compensation or benefits of, or pay any bonus or other
special or additional compensation to any of its directors, officers,
employees or consultants, except for specific exceptions relating to the
Peoples' MBO program, the Summit Independent Director Retirement Plan (the
"Summit DRP"), the Peoples' Independent Director Retirement Plan (the
"Peoples DRP") and the Summit annual bonus plan described in the Agreement
and for reasonable and customary increases in annual salary and annual
employee bonuses based on fiscal year 1995

<PAGE>

based on merit and effected at such times and in such manner and amounts
as to be consistent with past compensation policies and practices; (x)
enter into any contract or agreement for the employment or compensation
of any director, officer, employee or consultant which is not
immediately terminable by Allied or its subsidiaries without cost or
other liability for no more than 30 days' notice, enter into or become
bound by any new or additional profit-sharing, bonus, incentive, change
of control or "golden parachute," stock option, stock purchase, pension,
retirement, insurance (hospitalization, life or other), paid leave (sick
leave, vacation leave or other) or similar contract agreement,
understanding, plan or arrangement (whether formal or informal) with
respect to or which provides for benefits for any of its current or
former directors, officers, employees or consultants or enter into or
become bound by any contract with any labor or trade union or
association or any collective bargaining group; (xi) solicit, encourage
or attempt to initiate or procure discussions, negotiations or offers
with or from any person or entity relating to a merger or other
acquisition of Allied or the purchase or acquisition of Allied Stock,
Summit, Peoples, any branch office of Summit or Peoples or all or any
significant part of Allied or its subsidiaries' assets, provide
assistance to any person in connection with any such offer, disclose to
any such person or entity any information not customarily disclosed to
the public concerning Allied and its subsidiaries or their respective
businesses, sell or transfer any branch office of either Summit or
Peoples or all or any significant part of Allied's or its subsidiaries'
assets to any person or enter into any contract or agreement to take any
action in furtherance of any such transaction; (xii) enter into any
contract, agreement or understanding (a) with governmental or regulatory
authorities, (b) pursuant to which Allied or either of its subsidiaries
would assume, guarantee, endorse or otherwise become liable for the
debt, liability or obligation of any other person or entity, (c) which
is entered into other than in the ordinary course of its business, (d)
with respect to any charitable contribution, or (e) which, in the case
of any one contract, agreement or understanding and whether or not in
the ordinary course of its business, obligates Allied or one of its
subsidiaries to make expenditures of more than $10,000 (other than
contracts, agreements or understandings entered into in the ordinary
course of Summit's or Peoples' lending operations); (xiii) except as may
be required by governmental or other regulatory authority or as shall be
required by applicable law or regulation, change in any material respect
the nature of Allied's business or the manner in which it conducts its
business, discontinue any material portion or line of its business, or
change in any material respect its lending, investment, asset-liability
management or other material banking or business policies; (xiv)
generally change its accounting methods, practices or procedures or its
depreciation or amortization policies, schedules or rates, except as
required by generally accepted accounting principles or governmental
regulations; (xv) sell or lease or enter into a contract, agreement or
option to sell, lease or dispose of any real estate, any equipment, or
any other fixed or capital asset having a value on its books or a fair
market value, whichever is greater, of more than $50,000 for any
individual item or asset, or more than $100,000 in the aggregate for all
assets or items; (xvi) purchase or lease, or enter into a contract,
agreement or option relating to the purchase, lease or acquisition of
any real property, any equipment or other acquisition of any other fixed
asset having a purchase price or involving aggregate lease payments in
excess of $50,000 for any individual item or asset or more than $100,000
in the aggregate for all items or assets; (xvii) enter into a purchase
commitment for supplies or services which calls for prices or fees of
goods or fees for services materially higher than current market prices
or which obligates Allied or its subsidiaries for a period longer than
12 months; (xviii) sell, purchase or repurchase or enter into a
contract, agreement or option to do so with respect to any loan or other
receivable or participation in any loan or other receivable except in
the ordinary course of business; (xix) sell or dispose of or enter into
a contract,

<PAGE>

agreement or option to sell or dispose of any other asset whether
tangible or intangible of Allied including without limitation any
trademark, trade name, copyright, service mark or intellectual property
right or license, or assign its right to or otherwise give permission or
consent to use or do business under Allied's or its subsidiaries'
corporate names or any names similar thereto or release, transfer or
waive any license or right granted to it by any other person to use any
trademark, trade name, copyright, service mark or intellectual property
right; (xx) enter into any note, loan agreement or arrangement
pertaining to its borrowing money, or assume, guarantee, endorse or
otherwise become responsible or liable for the obligation of another
entity or incur any other liability or obligation (absolute or
contingent), except in the ordinary course of business; or (xxi) change
its current deposit policy, including pricing and acceptance, and take
no actions designed to decrease materially the level of deposits as of
the date of the Agreement.

Regulatory Considerations

The Merger is subject to certain regulatory approvals, as set forth
below. To the extent that the following information describes statutes and
regulations, it is qualified in its entirety by reference to such statutes
and regulations and the regulations promulgated under such statutes.

The Merger is subject to approval by the Federal Reserve under the
Bank Holding Company Act of 1956, as amended ("BHC Act"), which permits a
bank holding company, such as BancShares, to merge with a savings bank
holding company, such as Allied, if the Federal Reserve has approved of the
transaction based upon its review of the financial and managerial resources
and future prospects of the existing and proposed institutions and the
convenience and needs of the community to be served. See "SUPERVISION,
REGULATION AND GOVERNMENTAL POLICY - Bank Holding Company Regulation."
This consideration includes an evaluation by the Federal Reserve as to
whether the Merger would result in a monopoly or otherwise would
substantially lessen competition or impair the financial and managerial
resources and future prospects of BancShares or Allied. In addition, the
Federal Reserve must take into account the records of BancShares and Allied
in meeting the credit needs of the entire community, including low- and
moderate-income neighborhoods, served by such institutions.

The Merger also is subject to approval by the Administrator. The
Administrator may approve the Merger only after determining that BancShares
is qualified by character, experience and financial responsibility to
control Allied in a legal and responsible manner. In making this
determination, the Administrator must consider BancShares' financial and
managerial resources, and the organizational structure and future prospects
and plans of BancShares and Allied. The Administrator also must consider
whether the business and activities of BancShares, or its officers and
directors or any other person controlling, controlled by, or associated
with BancShares by having a common controlling person, would create a
material deterioration of confidence in the safety, soundness, and
financial integrity of Allied.

The Merger also is subject to approval by the NC Commissioner and the
NC Commission.

The merger of Allied with and into BancShares is subject to review by
the DOJ which may challenge the Merger on antitrust grounds.

<PAGE>

Applications for required approvals have been filed with the Federal
Reserve, the NC Commissioner, the NC Commission and the Administrator and
are pending. While no assurances of obtaining such required approvals are
or can be given, BancShares and Allied believe that all such required
regulatory approvals will be obtained.

If any condition is imposed which, in the reasonable opinion of
BancShares is materially disadvantageous or burdensome or adversely affects
the anticipated economic or business benefits of the Agreement to
BancShares as to render consummation of the Merger inadvisable, the
Agreement permits BancShares to terminate the Agreement. See "- Conditions
to Consummation."

BancShares and Allied are not aware of any other governmental
approvals or actions that are 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
or taken. There can be no assurance that any such approval or action, if
needed, could be obtained, would not delay consummation of the Merger or
would not be conditioned in a manner that would cause BancShares to abandon
the Merger.

Interest of Certain Persons and Effect of the Merger on Employees and
Benefit Plans

Employees and Benefit Plans. Provided they remain employed by Allied
or one of its subsidiaries at the Effective Time, the Agreement provides
that, subject to the availability of suitable positions, First Citizens
Bank will make a good faith effort to offer employment commencing at the
Effective Time to each employee of Allied or one of its subsidiaries
through state-wide job posting for open positions. Any employment offered
by First Citizens Bank shall be in such position, at such location and for
such compensation as First Citizens Bank shall determine in its sole
discretion. In the case of any employee of Allied or one of its
subsidiaries who accepts employment with First Citizens Bank, such
employment shall be "at will" and First Citizens Bank will have the right
to terminate any such employees in accordance with First Citizens Bank's
employment policies and practices. Any employee of Allied or one of its
subsidiaries who becomes an employee of First Citizens Bank will be
eligible to receive all employee benefits and to participate in all benefit
plans provided by BancShares or First Citizens Bank on the same basis and
subject to the same eligibility and vesting requirements, and to the same
conditions, restrictions and limitations, as generally are in effect and
applicable to newly hired employees of First Citizens Bank. Employees will
be given credit for his or her full years of service with Allied and its
subsidiaries for purposes of (i) entitlement to vacation and sick leave and
for participation in all welfare, insurance and other fringe benefit plans
of First Citizens Bank, and (ii) eligibility for participation and vesting
in BancShares' 401(k) savings plan and its defined benefit pension plan
(the "Pension Plan"); provided, however, that employees will not be
entitled to or be given credit for past service with Allied or its
subsidiaries for purposes of calculating or determining accrued benefits
under the Pension Plan. Employees of Allied or its subsidiaries will be
able to participate under the health insurance coverage of First Citizens
Bank without regard to pre-existing condition requirements under First
Citizens Bank's health insurance plan, to the extent any such condition
existing at the Effective Time would have been covered under the health
insurance plans of Allied or its subsidiaries.

<PAGE>

After the Effective Time, First Citizens Bank will grant to all
employees of Allied or its subsidiaries who accept employment with First
Citizens Bank a pro rata amount of sick leave and vacation leave, in
accordance with the standard policy of First Citizens Bank, for the period
of time between the Effective Time and the end of the calendar year during
which the Effective Time occurs. Each such employee will be permitted to
carry over any accrued unused sick leave and vacation leave to the extent
that such carryover is consistent with and does not exceed the limitations
imposed by First Citizens Bank's personnel policy then in effect.

Allied will be permitted to pay severance compensation to any employee
of Allied or one of its subsidiaries at the Effective Time who is not
placed through First Citizens Bank's state-wide job posting for open
positions and not offered employment with First Citizens Bank following the
Merger. The amount of such compensation shall equal the amount of such
employee's accrued but unused vacation leave, plus an amount equal to
(i) three month's salary or normal wages (at the person's then current
salary or wage rate) in the case of employees who have total continuous,
full years of service with Allied or one of its subsidiaries of less than
five years, or (ii) four month's salary or wages (at the person's then
current salary or wage rate) in the case of employees who have total
continuous, full years of service with Allied or one of its subsidiaries of
five years or more. The person must remain an employee of Allied or one of
its subsidiaries at the Effective Time in order to be eligible for
consideration for such severance compensation, which will be paid by Allied
at the Effective Time. No severance compensation will be paid to any
employee of Allied or one of its subsidiaries who is a party to a written
employment or change-in-control agreement with Allied or one of its
subsidiaries.

Treatment of Allied Compensation and Benefit Plans and Agreements.
Upon consummation of the Merger, BancShares will assume the existing
obligations of Allied related to any deferred directors' fee plans, with
pro rata adjustments to be made for the cessation or adjustment of amounts
deferred by each individual director, if applicable, as allowed under the
plan.

At the Effective Time, BancShares will assume the existing obligations
of Summit and Peoples under the Summit DRP and the Peoples DRP. All
directors currently participating in such plans will be fully vested at the
Effective Time regardless of years of service. In addition, BancShares
will permit the Summit DRP to be amended at or prior to the Effective Time
to increase the retirement fee payable thereunder from $12,000 to $14,400
with a further cost of living increase in such amount every two years
thereafter based upon the percentage increase in the Consumer Price Index.
BancShares will permit (i) the Peoples MBO program to continue for calendar
1995 as currently written and (ii) the Summit annual bonus plan to be paid;
provided, however, that amounts paid under each program for 1995 may not
exceed $100,000.

BancShares will not assume the 1994 Allied Bank Capital, Inc.
Management Recognition Plan and, therefore, at the Effective Time, such
plan will cease to exist. However, outstanding stock awards under such
plan will become fully vested.

BancShares will assume at the Effective Time, the existing qualified
defined contribution plans of Summit and Peoples and will merge such plans
(or cause such plans to be merged) with the qualified defined contribution
plan maintained for employees of BancShares and/or First

<PAGE>

Citizens Bank, and fully vest affected participants thereunder. In the
alternative, BancShares may permit Summit or Peoples to terminate such
plans prior to the Effective Time.

BancShares will assume at the Effective Time, the existing qualified
defined benefit plans of the subsidiaries of Allied, and will provide for
the prompt termination of such plans following consummation of the Merger.
Summit and Peoples may commence termination proceedings with respect to
their defined benefit plans prior to consummation of the Merger.

In addition, as a result of the Merger, First Citizens Bank will
assume the obligations of Summit and Peoples under certain existing
employment or change in control agreements between Summit and A. Harold
Ausley and Del F. Jones, officers of Summit, and between Peoples and Donald
F. Pelling, Richard B. Bennett, Jesse L. Thomas, Joey D. Marlowe, and Betty
V. Norris, officers of Peoples (collectively the "Employment Agreements").
The Employment Agreements generally provide for payments to each of the
covered officers in the event of a "change in control," as that term is
defined therein, of Summit or Peoples, as applicable, followed within 24
months by (i) a termination of such officer's employment for reasons other
than "cause," as defined in the Employment Agreements, (ii) an assignment
to duties or responsibilities inconsistent with the officer's current
position, (iii) a reduction in annual base salary below that which is in
effect at the Effective Time, (iv) a termination of the officer's insurance
or other employee benefits, or (v) a transfer of the officer an
unreasonable distance from his or her current principal office. Upon the
occurrence of any such event, the covered officers would be entitled to
payments in amounts ranging from one and one-half to three times, as
applicable, such officer's "base amount," as such term is defined in the
Employment Agreements and, if any of the covered officers are not retained
by First Citizens Bank following the Merger, such persons would be entitled
to receive the payments provided for therein.

BancShares has agreed to assume Allied's obligations under
Supplemental Income Agreements by and between Allied and A. Harold Ausley
and Del F. Jones. A termination of employment pursuant to each executive's
existing employment agreement with Summit shall be considered to be the
equivalent of termination for reasons other than death or attainment of age
65, and, therefore, shall entitle Mr. Ausley and Mr. Jones to receive
annual benefit payments thereunder. In addition, BancShares will assume
Peoples' obligations to pay benefits to Donald F. Pelling under the
Deferred Compensation and Income Continuation Agreement entered into by and
between Peoples and Mr. Pelling pursuant to which Mr. Pelling is entitled
to receive monthly benefit payments.

Directors. Following the Effective Time, BancShares' Board of
Directors shall appoint one member of Allied's Board of Directors who will
be chosen in BancShares' sole discretion to serve as a director of
BancShares until the next meeting of shareholders at which members of
BancShares' Board of Directors are elected. Thereafter, such person shall
be nominated and recommended for election as a director of BancShares for a
one-year term at such meeting and at each of the next three consecutive
meetings at which directors are elected. During the period he serves as a
BancShares director, BancShares' Board of Directors also will appoint such
person to serve as a director of First Citizens Bank. Such service as a
director of BancShares or First Citizens Bank shall be subject to
reasonable and customary review, regulatory approval, qualification under
BancShares' and First Citizens Bank's bylaws and, in the case of
BancShares, to election by BancShares' shareholders. For his services as
a director of BancShares and First Citizens Bank, such person,

<PAGE>

provided he remains as a director of BancShares and First Citizens Bank,
and further provided he is not or does not serve as a director or
advisory director of another financial institution or financial
institution holding company, will be compensated until the end of such
person's fourth elected one-year term at the fee schedule in effect on
March 31, 1995 for directors of Allied and its subsidiaries.
Thereafter, if such person continues to serve as a director of
BancShares and First Citizens Bank, he will be compensated in accordance
with BancShares' and First Citizens Bank's then current standard fee
schedule. The current fee schedule for directors of BancShares provides
for an annual retainer of $10,000 and a fee of $500 for each Board meeting
attended. The current fee schedule for advisory directors of First Citizens
Bank provides for annual compensation in an amount equal to $500.

At the Effective Time, each of the directors of Allied (other than the
director who is appointed to BancShares' Board of Directors and directors
who do not desire to serve, and excluding A. Harold Ausley and Donald F.
Pelling), and each of Royce N. Angel and R. Allen Rippy (both of whom are
directors of Peoples), shall be appointed to serve for a term of four years
following the Effective Time as a member of a local Advisory Board for one
of First Citizens Bank's banking offices in the former geographic market of
Summit or Peoples. Such directors, provided they remain directors of First
Citizens Bank and provided further that they do not serve as directors or
advisory directors of another financial institution or financial
institution holding company, shall be compensated for their services as
Advisory Board members at the fee schedule in effect on March 31, 1995 for
directors of Allied and its subsidiaries for a period of four years from
the Effective Time. Subsequent to the fourth year after the Effective
Time, each person's continued service as an advisory director will be at
First Citizens Bank's pleasure and will be subject to First Citizens Bank's
normal policies and procedures regarding the appointment and service of
advisory directors, and each person who continues to serve as an advisory
director will receive fees for such service in accordance with First
Citizens Bank's then current fee schedule for advisory directors as
described above. The fee schedule in effect on March 31, 1995, for directors
of Allied and its subsidiaries provided for annual compensation in amounts
ranging from $22,900 to $30,600.

Indemnification of Directors and Officers. After the Effective Time,
without releasing any insurance carrier and after exhaustion of all
applicable director and liability insurance coverage for Allied or its
subsidiaries and their respective officers and directors, BancShares will
indemnify, hold harmless and defend directors and officers of Allied and
its subsidiaries at the Effective Time, to the same extent as BancShares'
indemnifies its directors and officers, from and against any claims,
disputes, suits, proceedings, losses, costs, liabilities and expenses of
every kind and nature arising out of, or resulting from any act or failure
to act by such office or director in the ordinary scope of his or her
duties brought against any such director or officer by reason of the fact
that he or she was a director or officer of Allied or one of its
subsidiaries or any action brought in connection with the Merger.

The Bylaws of BancShares provide that officers and directors of
BancShares shall be indemnified by BancShares to the greatest extent
permitted by law. Delaware's General Corporation Law (the "General
Corporation Law") contains provisions prescribing the extent to which
directors and officers shall or may be indemnified. The General
Corporation Law permits a corporation, with certain exceptions, to
indemnify a current or former officer or director against liability if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. A corporation may not indemnify a director in
connection with a proceeding by or in the right of the corporation in which
such director was adjudged liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application

<PAGE>

that, despite the adjudication of liability, but in view of all the
circumstances of the case, such director is fairly and reasonably
entitled to indemnity for such expenses which the court shall deem
proper. The General Corporation Law requires the corporation to
indemnify an officer or director in the defense of any proceeding to
which he was a party against expenses actually and reasonably incurred
to the extent that he is successful on the merits or otherwise in his
defense. Indemnification under the General Corporation Law (unless
ordered by a court) shall be made by the corporation only upon a
determination that indemnification of the director or officer was proper
under the circumstances because he met the applicable standard of
conduct set forth in the General Corporation Law. Such determination
may be made by (i) the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such proceeding, (ii) if
such a quorum is not obtainable, or even if obtainable if a quorum of
disinterested directors so directs, by independent legal counsel in a
written opinion, or (iii) by the shareholders of the corporation.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling
BancShares pursuant to the foregoing provisions, BancShares has been
informed that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is therefore
unenforceable.

Options. At August 7, 1995, certain employees and directors of Allied
and its subsidiaries held options under existing Allied option plans to
acquire up to 563,164 shares of Allied Stock. At the Effective Time,
Allied will trigger or cause to be triggered for the benefit of such
participating employees or directors, as the case may be, all options under
such plans which are outstanding and unexercised at the Effective Time.
Such options will be converted, by virtue of the Merger, into the
right to receive $25.25 in cash (or such lesser amount as may result
from the adjustments described herein), less the exercise price, for
each outstanding option. Allied will deliver payment to option holders on
account of the trigger of such options immediately prior to the Effective Time.

Restrictions on Resales by Affiliates

The directors and executive officers of Allied and any shareholder
owning 5% or more of Allied Stock are deemed to be "affiliates" of Allied.
Any sale or other disposition by such affiliates of shares of BancShares
Common Stock received by them pursuant to the Merger may be made only in
compliance with an exemption from the registration requirements of the
Securities Act and the restrictions set forth below.

The respective obligations of BancShares and Allied to consummate the
Merger are subject to the condition that each affiliate of Allied must
execute and deliver to BancShares an agreement to the effect that each such
person will not dispose of any shares of BancShares Common Stock to be
received pursuant to the Merger in violation of the Securities Act or the
applicable rules and regulations of the SEC. The stock certificates
representing shares of BancShares Common Stock issued to persons deemed to
be affiliates of Allied will bear a legend summarizing the restrictions,
and BancShares will instruct its transfer agent to impose stop orders with
respect to such certificates.

<PAGE>

This Prospectus/Proxy Statement may not be used by any such affiliate
of Allied for the resale of any shares of BancShares Common Stock received
pursuant to the Merger.

Certain Income Tax Consequences

The following is a summary discussion of the material federal income
tax consequences of the Merger to shareholders of Allied. This 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. 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. Allied shareholders are urged,
therefore, to consult their own tax advisors as to the specific tax
consequences to them of the Merger and the exchange of their Allied Stock
for shares of BancShares Common Stock, cash or Debentures, or a combination
of BancShares Common Stock and cash or BancShares Common Stock and
Debentures, 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.

BancShares and Allied have received an opinion dated September 25, 1995,
of KPMG Peat Marwick LLP, tax advisors to BancShares, which
reaches certain conclusions with respect to certain federal and
North Carolina income tax consequences of the Merger (the "Tax Opinion").
It is a condition to consummation of the Merger that the Tax Opinion
be confirmed as of the Effective Time. 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 the Registration Statement. See "AVAILABLE INFORMATION."
However, such an 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 the North Carolina Department
of Revenue (the "Department of Revenue"), or official status of
any kind. There can be no assurance that the IRS or the Department
of Revenue 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 opinion 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 provides in substance that the federal income tax
consequences of the Merger will be as follows:

(i) Provided the Merger qualifies as a statutory merger
under North Carolina and Delaware law, then the
Merger will constitute a tax-free reorganization
within the meaning of Section 368(a)(1)(A) of the
Code;

(ii) No gain or loss will be recognized by BancShares,
First Citizens Bank, Allied, Summit or Peoples by
reason of the Merger;

<PAGE>

(iii) No gain or loss will be recognized by the
shareholders of Allied upon receipt of solely
BancShares Common Stock (including any fractional
share interests to which they may be entitled) in
exchange for their holdings of Allied Stock. Allied
shareholders who receive cash or Debentures may
recognize income or gain up to the amount of cash or
the fair market value of the Debentures received in
exchange for Allied Stock pursuant to the Agreement.
Whether the receipt of cash or Debentures is
accorded dividend or capital gain treatment may
depend on the number of shares of BancShares Common
Stock received by the Allied shareholder after the
exchange and whether the receipt of cash or
Debentures meets one of the four tests under Section
302 of the Code. Due to the exchange procedures,
despite an election by an Allied shareholder to
receive only BancShares Common Stock, he or she may
receive cash or Debentures, which could result in
the recognition of income or gain. Loss, if any,
will not be recognized by a shareholder who receives
BancShares Common Stock and cash or Debentures in
exchange for his or her Allied Stock pursuant to the
Agreement;

(iv) The tax basis in the BancShares Common Stock
received by a shareholder (including any fractional
share interests to which they may be entitled) will
be the same as the tax basis in Allied Stock
surrendered in exchange therefor, decreased by the
amount of cash or the fair market value of the
Debentures received, if any, and increased by the
amount of dividend income or gain recognized, if
any, in the exchange;

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

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

(vii) The receipt of solely cash by a Allied shareholder
who elects to receive cash for his or her Allied
Stock, or who exercises his or her statutory
dissenter's rights, will be treated as having been
received by the shareholder as a distribution in
redemption of his or her stock. If the redemption
meets one of the four tests set forth in Section 302
of the Code, it will result in capital gain or loss
measured by the difference, if any, between the
amount of cash received for such stock and the
shareholder's basis in the stock. If the redemption
does not meet one

<PAGE>

of the four tests of Section 302, such distribution
will be treated as a dividend pursuant to Section
301 of the Code; and,

(viii) Gain or loss will be recognized by a shareholder of
Allied who receives solely Debentures measured by
the difference between (a) the total principal
payments of the Debenture received and (b) the
shareholder's basis in Allied Stock surrendered in
exchange therefor. In calculating the amount of
income realized on receipt of the Debentures, the
fair market value of the Debentures must be
recognized in the year of receipt, notwithstanding
the fact that the Debentures may be paid over a
number of years. The distribution of the Debentures
could be treated as a redemption of the Allied
Stock. If the redemption meets one of the four tests
set forth in Section 302 of the Code, it will result
in capital gain or loss measured by the difference,
if any, between the fair market value of the
Debentures received for such stock and the
shareholder's basis in the stock. If the redemption
does not meet one of the four tests of Section 302,
such distribution will be treated as a dividend
pursuant to Section 301 of the Code.

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.

Accounting Treatment

BancShares will account for the Merger as a purchase for accounting
and financial reporting purposes.

Dissenters' Rights

The Merger will give rise to Dissenters' Rights under Article 13 of
the North Carolina Business Corporation Act ("Article 13"). Pursuant to
Article 13, any shareholder of Allied who objects to the Merger may
exercise Dissenters' Rights and become entitled to be paid the fair value
of his shares of Allied Stock if the Merger is consummated. The following
is only a summary of the Dissenters' Rights of Allied's shareholders. A
complete copy of Article 13 is attached hereto as Appendix III and
incorporated by reference into this Prospectus/Proxy Statement. Any
shareholder who intends to exercise Dissenters' Rights should review the
text of Article 13 carefully and comply exactly with its requirements, and
also should consult with his or her attorney. Except as provided below, no
further notices will be given to shareholders by Allied regarding the
existence of Dissenters' Rights or any time periods within which those
rights must be exercised.

Article 13 provides in detail for shareholders' Dissenters' Rights and
the procedure for exercising those rights that must be followed by a
dissenting shareholder. In summary, that procedure is described below.

Any shareholder who desires to assert Dissenters' Rights must (i) give
to Allied, and Allied must actually receive, before the vote on the Merger
is taken, written notice of his intent

<PAGE>

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 both requirements will mean that the shareholder will not be
entitled to assert Dissenters' Rights and obtain payment for his shares
under Article 13. 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 Agreement is approved by Allied's shareholders at the Special
Meeting (or at any adjournments thereof), then, within 10 days of the date
the Merger is consummated, Allied must send a written notice (by registered
or certified mail, return receipt requested) to each shareholder who has
taken the actions described above and is entitled to exercise Dissenters'
Rights. That notice will:

(a) State where the dissenting shareholder's payment demand must be
sent, and where and when share certificates must be deposited;

(b) Supply a form for demanding payment;

(c) Set a date by which Allied 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,

(d) Be accompanied by a copy of Article 13.

A shareholder who has been sent the dissenters' notice must demand
payment and must deposit his share certificates by the date set forth in
and 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 cancelled or modified by consummation of the Merger.

As soon as the Merger is consummated or upon receipt of a payment
demand, Allied will offer to pay each dissenter who timely demanded payment
and deposited his share certificates, the amount Allied estimates to be the
fair value of his shares, plus interest accrued to the date of payment, and
will pay this amount to each dissenter who agrees in writing to accept it
in full satisfaction of his demand. Allied's offer of payment will be
accompanied by:

(a) Certain of Allied's most recent available financial
statements;

(b) A statement of Allied's estimate of the fair value
of the shares;

(d) A statement of the dissenter's right to demand
payment if dissatisfied with Allied's offer; and,

<PAGE>

(e) A copy of Article 13.

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

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

If a dissenter has taken all required actions and his demand for
payment remains unsettled, the dissenter 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, Allied must pay to the
dissenter the amount originally offered by Allied. If the dissenter 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 Allied, upon
which acceptance Allied 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 dissenter 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 dissenters whose
demands remain unsettled parties to the proceeding. Each dissenter 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
Allied. 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 III for a more complete description thereof.

For a discussion of certain tax consequences applicable to
shareholders who exercise Dissenters' Rights, see " - Certain Income Tax
Consequences."

<PAGE>

INFORMATION ABOUT FIRST CITIZENS BANCSHARES, INC.

BancShares

BancShares was incorporated under the laws of Delaware on August 7,
1986, to become the successor to First Citizens Bank Corporation ("FCC"), a
North Carolina corporation that was the bank holding company of First
Citizens Bank, its commercial banking subsidiary. On October 21, 1986, FCC
was merged into BancShares, and BancShares became the sole shareholder of
First Citizens Bank. BancShares' principal assets are its investments in
and the receivables from its subsidiary, First Citizens Bank. Its primary
sources of income are dividends from First Citizens Bank and interest
income on funds loaned by it to First Citizens Bank. At June 30, 1995,
based on total assets of $6.9 billion, BancShares was the fifth largest
banking organization headquartered in North Carolina. The pro forma
combined assets of BancShares and Allied would have been approximately $7.2
billion as of June 30, 1995.

First Citizens Bank

First Citizens Bank was chartered on March 4, 1893, as the Bank of
Smithfield, Smithfield, North Carolina and through a series of mergers and
name changes, it later became First Citizens Bank. First Citizens Bank
provides a wide range of banking services designed to meet the needs of
both consumers and commercial entities of North Carolina. These services,
offered at most of its branches, include, among others, normal taking of
deposits, cashing checks, and providing for individual commercial cash
needs; numerous checking and savings plans, including fixed-rate
certificates of deposits of varying terms, insured money market savings,
NOW checking, master note and repurchase agreements, and fixed-and
variable-rate IRAs; commercial and consumer lending; commercial leasing;
corporate cash and management services; a full service trust department;
and other activities incidental to commercial banking. The deposits of
First Citizens Bank are insured either by the BIF or the SAIF of the FDIC
up to the maximum amount permitted by law.

First Citizens Bank's business strategy historically has emphasized
maintaining liquidity and superior credit quality. At June 30, 1995, First
Citizens Bank's loans-to-deposits ratio was approximately 74.3% and its
nonperforming assets totaled $20 million, or 0.3% of total assets.

At June 30, 1995, based on total deposits, First Citizens Bank was the
fifth largest commercial bank in North Carolina. Also at that date, First
Citizens Bank operated 295 offices in 173 cities in North Carolina.

Marlinton Bank and White Sulphur Springs Bank

On September 1, 1994 and June 1, 1995, BancShares consummated its
acquisitions of Marlinton Bank and White Sulphur Springs Bank,
respectively, which enabled BancShares to establish a limited presence in
West Virginia, where, prior to such acquisitions, it had none. At June 30,
1995, Marlinton Bank had two branches located in Pocahontas County, West
Virginia and had total assets of $57.5 million and total deposits of $47.6
million. Marlinton Bank is a community-oriented financial institution
offering primarily lending and deposit banking services to the community it
serves. The deposits of Marlinton Bank are insured by the BIF of the FDIC
up to the maximum amount permitted by law. The principal office of
Marlinton Bank is located

<PAGE>

at 201 Eighth Street, Marlinton, West Virginia 24954, and its telephone
number is (304) 799-4306. At June 30, 1995, White Sulphur Springs Bank
had two branches located in Greenbrier County, West Virginia and had
total assets of $70 million and total deposits of $59.2 million. White
Sulphur Springs Bank also is a community-oriented financial institution
offering primarily lending and deposit banking services to the community
it serves. The deposits of White Sulphur Springs Bank are insured by
the BIF of the FDIC up to the maximum amount permitted by law. The
principal office of White Sulphur Springs Bank is located at 1 East Main
Street, White Sulphur Springs, West Virginia 24986, and its telephone
number is (304) 536-1400.

FCB-VA

On February 2, 1995, BancShares consummated its acquisition of Pace
American Bank (now FCB-VA) which enabled BancShares to establish a limited
presence in Virginia where, prior to such acquisition, it had none. At
June 30, 1995, FCB-VA had total assets of $239.7 million and total deposits
of $201 million. FCB-VA provides commercial and consumer banking services
to customers throughout south-central Virginia. On June 30, 1995, FCB-VA
had 13 offices. On August 17, 1995, FCB-VA acquired a fourteenth branch in
Clifton Forge, Virginia. The deposits of FCB-VA are insured by the BIF of
the FDIC up to the maximum amount permitted by law. The principal office
of FCB-VA is located at 112 East Hicks Street, Lawrenceville, Virginia
23868, and its telephone number is (804) 848-4115. FCB-VA is expected to be
merged into First Citizens Bank during 1996 under the Interstate Banking
Act.

Address and Additional Information

The principal offices of BancShares and First Citizens Bank are
located at 239 Fayetteville Street, Raleigh, North Carolina 27601. Their
telephone number is (919) 755-7000.

Additional information with respect to BancShares and First Citizens
Bank is included in BancShares' annual report on Form 10-K for the year
ended December 31, 1994, which is incorporated herein by reference, and in
BancShares' 1994 Annual Report, selected portions of which are incorporated
herein by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."

<PAGE>

OWNERSHIP OF BANCSHARES VOTING SECURITIES BY
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of July 31, 1995, the shareholders identified in the following
table beneficially owned more than 5% of one or both classes of the voting
securities of BancShares:

Beneficial Ownership Combined
Class A and
Class A Common Class B Common Class B Common
Name and Address and Percentage and Percentage Percentage of
of Beneficial Owner of Class of Class Total Votes*
<S> <C> <C> <C>

Claire Holding Bristow 50,995(1) 100,812(1) 4.47%
Columbia, SC (.57%) (5.70%)

George H. Broadrick 1,265,048(2) 325,916(2) 17.40%
Charlotte, NC (14.17%) (18.42%)

Hope Holding Connell 39,569(3) 109,197(3) 4.80%
Raleigh, NC (.44%) (6.17%)

Elizabeth C. Holding 51,153(4) 100,885(4) 4.47%
Washington, DC (.57%) (5.70%)

Frank B. Holding 2,579,413(5) 632,577(5) 34.11%
Smithfield, NC (28.89%) (35.75%)

Frank B. Holding, Jr. 55,475(6) 105,943(6) 4.70%
Raleigh, NC (.62%) (5.99%)

Lewis R. Holding 1,199,137(7) 327,094(7) 17.28%
Lyford Cay, Bahamas (13.43%) (18.49%)

Olivia B. Holding 48,656(8) 104,015(8) 4.60%
Raleigh, NC (.55%) (5.88%)
</TABLE>

_________________
* This column reflects the aggregate votes attributable to the combined
shares of Class A and Class B beneficially owned as a percentage of
the aggregate number of votes that may be cast by the holders of all
shares of BancShares' outstanding voting securities.

** The amounts and percentages of BancShares voting securities shown for
Frank B. Holding and Lewis R. Holding include shares of Class A and
Class B beneficially owned by certain other persons, as set forth in
the table above and the notes below, and as to which beneficial
ownership is disclaimed by Frank B. Holding and Lewis R. Holding. If
such amounts were not included in their beneficial ownership, Frank B.
Holding would beneficially own 2,358,265 shares (26.42%) and 117,900
shares (6.66%) of Class A and Class B, respectively, Lewis R. Holding
would beneficially own 1,172,409 shares (13.13%) and 325,931 shares
(18.42%) of Class A and Class B, respectively, and the combined
Class A and Class B percentage of total votes beneficially owned by
Frank B. Holding and Lewis R. Holding would be 11.40% and 17.15%,
respectively.

(1) Claire Holding Bristow exercises sole voting and investment power as
to 45,995 shares of Class A and 99,562 shares of Class B held on her
own behalf. She exercises shared voting and investment power as to an
additional 5,000 shares of Class A and 1,250 shares of Class B held in
a trust for her benefit in a nominee name by the Trust Department of
First Citizens Bank. All of such shares also are included in the
beneficial

<PAGE>

ownership shown above for her father, Frank B. Holding, who
disclaims beneficial ownership as to such shares.

(2) George H. Broadrick exercises sole voting and investment power as to
55,742 shares of Class A held on his own behalf and as to 953,806
shares of Class A and 262,041 shares of Class B held by him as sole
trustee of two irrevocable trusts for the benefit of the adult
daughters of Lewis R. Holding. He exercises shared voting and
investment power as to 245,500 shares of Class A and 61,375 shares of
Class B held by him and Carolyn S. Holding as co-trustees of four
irrevocable trusts for the benefit of Lewis R. Holding's adult
daughters, which shares also are included in the beneficial ownership
of Lewis R. Holding. Mr. Broadrick disclaims beneficial ownership as
to 10,000 shares of Class A and 2,500 shares of Class B included above
and owned by his spouse.

(3) Hope Holding Connell exercises sole voting and investment power as to
33,469 shares of Class A and 101,722 shares of Class B held on her own
behalf. She disclaims beneficial ownership as to 1,200 shares of
Class A and 6,250 shares of Class B held by her spouse on his own
behalf and/or as custodian for their minor son. She exercises shared
voting and investment power as to an additional 4,900 shares of
Class A and 1,225 shares of Class B held in a trust for her benefit in
a nominee name by the Trust Department of First Citizens Bank. All of
such shares also are included in the beneficial ownership shown above
for her father, Frank B. Holding, who disclaims beneficial ownership
as to such shares.

(4) Elizabeth C. Holding exercises sole voting and investment power as to
46,153 shares of Class A and 99,635 shares of Class B held on her own
behalf. She exercises shared voting and investment power as to an
additional 5,000 shares of Class A and 1,250 shares of Class B held in
a trust for her benefit in a nominee name by the Trust Department of
First Citizens Bank. All of such shares also are included in the
beneficial ownership shown above for her father, Frank B. Holding, who
disclaims beneficial ownership as to such shares.

(5) Frank B. Holding exercises sole voting and investment power as to
1,638,350 shares of Class A held on his own behalf. He disclaims
beneficial ownership as to 318,124 shares of Class A and 514,677
shares of Class B held by his spouse, adult son and daughters and
their spouses, and 24,700 shares of Class A and 6,175 shares of
Class B held in a nominee name by the Trust Department of First
Citizens Bank for the benefit of his adult son and daughters, all of
which shares are included above. He exercises shared voting and
investment power as to an aggregate of 598,239 shares of Class A and
111,725 shares of Class B held by the following corporations and other
entities which, for beneficial ownership purposes, are deemed
controlled by Mr. Holding: First Citizens Bancorporation of South
Carolina, Inc. (183,600 shares of Class A and 45,900 shares of
Class B); Fidelity BancShares (N.C.), Inc. (100,000 shares of
Class A); Southern BancShares (N.C.), Inc. (19,100 shares of Class A
and 19,775 shares of Class B); Southern Bank and Trust Company (46,000
shares of Class A); Goshen, Inc. (54,000 shares of Class A); The
Heritage Bank (23,628 shares of Class A); Yadkin Valley Company (1,300
shares of Class A and 325 shares of Class B); Yadkin Valley Life
Insurance Company (700 shares of Class A and 175 shares of Class B);
Twin States Farming, Inc. (4,900 shares of Class A and 1,225 shares of
Class B); The Robert P. Holding Foundation, Inc., a charitable
foundation of which Mr. Holding is a director, (134,682 shares of
Class A and 36,525 shares of Class B); and in a nominee name by the
Trust Department of First Citizens Bank (30,329 shares of Class A and
7,800 shares of Class B held in a fiduciary capacity for the benefit
of various third parties). Included in Frank B. Holding's beneficial
ownership are 267,011 shares of Class A and 44,825 shares of Class B
also shown as beneficially owned by his brother, Lewis R. Holding, of
which 30,329 shares of Class A and 7,800 shares of Class B also are
included in the beneficial ownership of James B. Hyler, Jr. (See the
table below), and an aggregate of 245,848 shares of Class A and
520,852 shares of Class B also are included in the ownership of Mr.
Holding's adult son and daughters, each of whom is listed individually
in the table above.

(6) Frank B. Holding, Jr. exercises sole voting and investment power as to
40,095 shares of Class A and 85,318 shares of Class B held on his own
behalf and 6,780 shares of Class A and 18,750 shares of Class B held
by him as custodian for his minor children. He exercises shared
voting and investment power as to an additional 4,900 shares of
Class A and 1,225 shares of Class B held in a trust for his benefit in
a nominee name by the

<PAGE>

Trust Department of First Citizens Bank, and he disclaims
beneficial ownership as to 3,700 shares of Class A and 650 shares
of Class B included above and held by his spouse. All of such
shares also are included in the beneficial ownership shown above
for his father, Frank B. Holding, who disclaims beneficial
ownership as to such shares.

(7) Lewis R. Holding exercises sole voting and investment power as to
610,935 shares of Class A and 207,706 shares of Class B held on his
own behalf. He disclaims beneficial ownership as to certain shares
included above and held by his spouse individually (48,963 shares of
Class A and 12,025 shares of Class B); by his spouse and George H.
Broadrick as co-trustees of four irrevocable trusts for the benefit of
his adult daughters (245,500 shares of Class A and 61,375 shares of
Class B) and by his adult daughters (26,728 shares of Class A and
1,163 shares of Class B). He exercises shared voting and investment
power as to an aggregate of 267,011 shares of Class A and 44,825
shares of Class B held by the following corporations and other
entities which, for beneficial ownership purposes, are deemed
controlled by Mr. Holding: Fidelity BancShares (N.C.), Inc. (100,000
shares of Class A); Yadkin Valley Company (1,300 shares of Class A and
325 shares of Class B); Yadkin Valley Life Insurance Company (700
shares of Class A and 175 shares of Class B); The Robert P. Holding
Foundation, Inc., a charitable foundation of which Mr. Holding is a
director (134,682 shares of Class A and 36,525 shares of Class B); and
in a nominee name by the Trust Department of First Citizens Bank
(30,329 shares of Class A and 7,800 shares of Class B held in a
fiduciary capacity for the benefit of various third parties).
Included in Lewis R. Holding's beneficial ownership are 267,011 shares
of Class A and 44,825 shares of Class B also shown as beneficially
owned by his brother, Frank B. Holding, of which 30,329 shares of
Class A and 7,800 shares of Class B also are included in the
beneficial ownership of James B. Hyler, Jr. (See the table below).

(8) Olivia B. Holding exercises sole voting and investment power as to
43,756 shares of Class A and 102,790 shares of Class B held on her own
behalf. She exercises shared voting and investment power as to an
additional 4,900 shares of Class A and 1,225 shares of Class B held in
a trust for her benefit in a nominee name by the Trust Department of
First Citizens Bank. All of such shares also are included in the
beneficial ownership shown above for her father, Frank B. Holding, who
disclaims beneficial ownership as to such shares.

As of July 31, 1995, the beneficial ownership of the voting
securities of BancShares by the directors, certain named executive
officers, and by all directors and executive officers as a group, of
BancShares and First Citizens Bank was as follows:

Beneficial Ownership* Combined
Class A and
Class A Common Class B. Common Class B Common
Name and Address and Percentage and Percentage Percentage of
of Beneficial Owner of Class of Class Total Votes**
<S> <C> <C> <C>

John M. Alexander, Jr. 1,012(1) 225(1) .01%
Raleigh, NC (.01%) (.01%)

Ted L. Bissett 7,142(2) 1,375(2) .08%
Spring Hope, NC (.08%) (.08%)

B. Irvin Boyle 700 175 .01%
Charlotte, NC (.01%) (.01%)

George H. Broadrick 1,265,048(3) 325,916(3) 17.40%
Charlotte, NC (14.17%) (18.42%)

H. Max Craig, Jr. 12,299(4) 3,550(4) .19%
Stanley, NC (.14%) (.20%)

<PAGE>

Betty M. Farnsworth 1,536(5) 250 .01%
Pilot Mountain, NC (.02%) (.01%)

Lewis M. Fetterman 12,787(6) 2,750(6) .15%
Clinton, NC (.14%) (.16%)

Frank B. Holding 2,579,413(7) 632,577(7) 34.11%
Smithfield, NC (28.89%) (35.75%)

Frank B. Holding, Jr. 55,475(8) 105,943(8) 4.70%
Raleigh, NC (.62%) (5.99%)

Lewis R. Holding 1,199,137(9) 327,094(9) 17.28%
Lyford Cay, Bahamas (13.43%) (18.49%)

Charles B. C. Holt 2,570(10) -0- .01%
Fayetteville, NC (.03)

James B. Hyler, Jr. 35,134(11) 7,900(11) .43%
Raleigh, NC (.39%) (.45%)

Gale D. Johnson 473 50 .01%
Dunn, NC (.01%) (.01%)

Freeman R. Jones 4,400 250 .02%
Midland, NC (.05%) (.01%)

Lucius S. Jones 1,000 -0- .01%
Wendell, NC (.01%)

I. B. Julian 14,000 3,500 .19%
Fayetteville, NC (.16%) (.20%)

Joseph T. Maloney, Jr. 22,452 5,400 .29%
Fayetteville, NC (.25%) (.31%)

J. Claude Mayo, Jr. 1,000 -0- .01%
Rocky Mount, NC (.01%)

William McKay 1,080(12) -0- .01%
Flat Rock, NC (.01%)

Brent D. Nash 13,341(13) -0- .04%
Tarboro, NC (.15%)

Lewis T. Nunnelee, II 600 450 .02%
Wilmington, NC (.01%) (.03%)

James M. Parker 1,595(14) -0- .01%
Raleigh, NC (.02%)

Talbert O. Shaw 117 -0- .01%
Raleigh, NC (.01%)

<PAGE>

R. C. Soles, Jr. 13,738 -0- .04%
Tabor City, NC (.15%)

David L. Ward, Jr. 30,600(15) 8,638(15) .45%
New Bern, NC (.34%) (.49%)

All directors, nominees for
director, and executive
officers as a group 4,690,220(16) 1,206,300(16) 64.42%(16)(17)
(35 persons) (52.51%)(17) (68.18%)
</TABLE>

__________________
* Except as otherwise stated in the footnotes following this table,
shares shown as beneficially owned, to the best of BancShares'
management's knowledge, are owned directly by the persons named and
such persons exercise sole voting and investment power with respect to
those shares.

** This column reflects the aggregate votes attributable to the combined
shares of Class A and Class B beneficially owned by each director,
nominee for director, and executive officer, and by the group, as a
percentage of the aggregate votes that may be cast by the holders of
all shares of BancShares' outstanding voting securities.

(1) John M. Alexander, Jr. exercises sole voting and investment power as
to 112 shares of Class A held on his own behalf. He exercises shared
voting and investment power as to 900 shares of Class A and 225 shares
of Class B held of record by Raleigh Tractor & Truck Company, of which
he is President.

(2) Ted L. Bissett exercises sole voting and investment power as to 5,486
shares of Class A and 1,075 shares of Class B held on his own behalf.
He exercises shared voting and investment power as to 1,656 shares of
Class A and 300 shares of Class B held by his children.

(3) For an explanation of the nature of the beneficial ownership of George
H. Broadrick, see footnote (2) in the previous table above.

(4) H. Max Craig, Jr. exercises sole voting and investment power as to 699
shares of Class A and 400 shares of Class B held on his own behalf.
He exercises shared voting and investment power as to 11,600 shares of
Class A and 3,150 shares of Class B held by Gaston County Dyeing
Machine Company, of which he is President and Chairman of the Board.

(5) Betty M. Farnsworth exercises sole voting and investment power as to
1,436 shares of Class A and 250 shares of Class B held on her own
behalf. She disclaims beneficial ownership as to 100 shares of
Class A held by an adult son.

(6) Lewis M. Fetterman exercises sole voting and investment power as to
10,026 shares of Class A and 2,200 shares of Class B held on his own
behalf. He disclaims beneficial ownership as to 2,761 shares of
Class A and 550 shares of Class B included above and held in trust for
his spouse.

(7) For an explanation of the nature of the beneficial ownership of
Frank B. Holding, see footnote (5) in the previous table above.

<PAGE>

(8) For an explanation of the nature of the beneficial ownership of
Frank B. Holding, Jr., see footnote (6) in the previous table above.

(9) For an explanation of the nature of the beneficial ownership of
Lewis R. Holding, see footnote (7) in the previous table above.

(10) Charles B. C. Holt exercises sole voting and investment power as to
1,966 shares of Class A held on his own behalf. He exercises shared
voting and investment power as to 139 shares of Class A held by him as
Trustee of the Holt Oil Company, Inc. Retirement Plan, and disclaims
beneficial ownership as to 465 shares of Class A held by his spouse.

(11) James B. Hyler, Jr. exercises sole voting and investment power as to
4,244 shares of Class A and 100 shares of Class B held on his own
behalf. In addition, he holds options exercisable within 60 days to
buy 561 shares of Class A. He exercises shared voting and investment
power as to certain shares held in a nominee name by the Trust
Department of First Citizens Bank, which shares, for beneficial
ownership purposes, are deemed controlled by Mr. Hyler (30,329 shares
of Class A and 7,800 shares of Class B held in a fiduciary capacity
for the benefit of various third parties); such shares also are
included in the beneficial ownership shown above for Lewis R. Holding
and Frank B. Holding.

(12) William McKay exercises sole voting and investment power as to 938
shares of Class A held on his own behalf, and shared voting and
investment power as to 142 shares of Class A held jointly with his
spouse.

(13) Brent D. Nash exercises sole voting and investment power as to 6,176
shares of Class A held on his own behalf. He disclaims beneficial
ownership as to 6,079 shares of Class A owned by his spouse and 1,086
shares of Class A owned by his daughter.

(14) James M. Parker exercises sole voting and investment power as to 1,041
shares of Class A held on his own behalf, and holds options
exercisable within 60 days to buy an additional 551 shares of Class A.

(15) David L. Ward, Jr. exercises sole voting and investment power as to
26,100 shares of Class A and 7,513 shares of Class B held on his own
behalf. He exercises shared voting and investment power as to 1,000
shares of Class A and 250 shares of Class B held by him and J. Troy
Smith, Jr. as Co-Trustees of the Ward and Smith, P.A. Profit-Sharing
Trust. He disclaims beneficial ownership as to 3,500 shares of
Class A and 875 shares of Class B owned by his spouse.

(16) Certain numbers of shares included in the beneficial ownership of
Frank B. Holding, Lewis R. Holding, James B. Hyler, Jr. and Frank B.
Holding, Jr. are reflected separately in the beneficial ownership of
each of such individuals shown above, but are included only once in
the total beneficial ownership shown for the group.

(17) Includes a total of 5,019 shares of Class A as to which the executive
officers included in the group hold options that may be exercised
within 60 days. The calculation of the percentage of Class A
beneficially owned by the group and the percentage of combined Class A
and Class B total votes is based on the 8,927,406 shares of Class A
outstanding at July 31, 1995, plus the 5,019 shares of Class A capable
of being issued within 60 days to the executive officers in the group
upon the exercise of their stock options pursuant to the 1994 Employee
Stock Purchase Plan. No stock options were issued to non-employee
members of the Board of Directors of First Citizens Bank or to
Lewis R. Holding, Frank B. Holding, or Frank B. Holding, Jr.

<PAGE>

INFORMATION ABOUT ALLIED BANK CAPITAL, INC.

Allied

Allied is a North Carolina corporation organized in March 1992 for the
purpose of becoming the savings bank holding company of Summit. On July 7,
1992, Allied became the parent holding company of Summit upon the
acquisition of all of the common stock of Summit issued in connection with
Summit's conversion from a North Carolina-chartered mutual savings bank to
a North Carolina-chartered capital stock savings bank. On January 28,
1994, Allied became the parent holding company of Peoples upon the
acquisition of all of the common stock of Peoples issued in connection with
Peoples' conversion from a North Carolina-chartered mutual savings bank to
a North Carolina-chartered capital stock savings bank. Allied's principal
business activities consist of the ownership of Summit and Peoples.

At June 30, 1995, Allied had total assets of approximately
$268.7 million, total deposits of approximately $218.1 million and total
shareholders' equity of approximately $31.1 million.

Summit and Peoples

Summit is a community-oriented financial institution which offers a
variety of financial services to meet the needs of the communities it
serves. Headquartered in Sanford, North Carolina, Summit currently
conducts business through five offices and one loan production office
located in Lee, Chatham, and Wake Counties, North Carolina. Summit is
principally engaged in the business of attracting deposits from the general
public and using such deposits, together with borrowings and other funds,
to make residential and, to a lesser extent, consumer and other loans,
primarily in Lee, Chatham and Wake Counties, North Carolina. Peoples is a
community-oriented financial institution headquartered in Wilmington, North
Carolina. Peoples conducts business through four offices located in New
Hanover and Pender Counties, North Carolina. Peoples offers a variety of
financial services to meet the needs of the communities it serves. Peoples
is primarily engaged in the business of attracting deposits from the
general public and using such deposits, together with borrowings and other
funds, to make residential and, to a lesser extent, consumer and other
loans, primarily in New Hanover and Pender Counties, North Carolina. The
deposits of Summit and Peoples are insured by the SAIF of the FDIC up to
the maximum amount permitted by law.

The principal office of Summit is located at 130 North Steele Street,
Sanford, North Carolina 27330, and its telephone number is (919) 775-7161.
The principal office of Peoples is located at 315 Market Street,
Wilmington, North Carolina 28401, and its telephone number is
(910) 763-9984.

Address and Additional Information

The principal office of Allied is located at 130 North Steele Street,
Sanford, North Carolina 27330, and its telephone number is (919) 775-7161.

Additional information with respect to Allied is included in Allied's
Annual Report on Form 10-K for the year ended December 31, 1994, and
Allied's Quarterly Reports on Form 10-Q

<PAGE>

for the three months ended March 31, 1995, and June 30, 1995, which are
incorporated herein by reference, and in Allied's 1994 Annual Report to
Shareholders, selected portions of which are incorporated herein by
reference. A copy of each of Allied's 1994 Annual Report to
Shareholders and Quarterly Report on Form 10-Q for the three months
ended June 30, 1995, accompanies this Prospectus/Proxy Statement.

Voting Securities and Beneficial Ownership Thereof

Set forth below is certain information regarding persons who were
known to management of Allied to own beneficially more than 5% of Allied's
voting securities as of June 30, 1995.

Title of Amount and Nature Percentage of
Class Name and Address Beneficial Ownership Class(1)
<S> <C> <C> <C>

Common John Hancock Advisors, Inc. 123,864(2) 5.47%
101 Huntington Avenue
Boston, MA 02199

Common Jeffrey S. Halis 200,339(3) 8.85%
500 Park Avenue
New York, NY 10022

Common A. Harold Ausley 218,126(4) 9.70%
130 N. Steele Street
Sanford, NC 27330
</TABLE>
____________
(1) The calculation of the percentage of class beneficially owned is based
on the 2,262,994 shares of Allied's Stock which currently are issued
and outstanding.

(2) The Southeastern Thrift & Bank Fund holds 32,864 shares and the John
Hancock Regional Bank Fund holds 91,000 shares. John Hancock
Advisors, Inc. ("JHA") possesses sole voting and investment control
over all shares owned by each Fund under advisory agreements. JHA is
an indirect subsidiary of the John Hancock Mutual Life Insurance
Company.

(3) Includes 188,439 shares owned by Tyndall Partners, L.P., a Delaware
limited partnership, and 11,900 shares owned by Madison Avenue
Partners, L.P., a Delaware limited partnership. Pursuant to the
Agreement of Limited Partnership of each of the aforementioned
partnerships, Jeffrey S. Halis possesses sole voting and investment
control over all shares owned by each limited partnership.

(4) Includes options to purchase 95,500 shares of Allied stock. Also
includes 63,232 shares of Allied Stock held by a tax-qualified savings
plan (the "Savings Plan") maintained by Allied for participants
thereunder which shares, for beneficial ownership purposes, are deemed
controlled by Mr. Ausley as a result of his exercise of shared voting
power with respect thereto in his capacity as a Trustee under the
Savings Plan.

<PAGE>

Set forth below is certain information regarding the beneficial
ownership of Allied Stock by directors and certain executive officers
individually and by directors and executive officers as a group.

<TABLE>
<CAPTION>
Title of Name of Amount and Nature Percentage
Class Beneficial Owner of Beneficial Ownership(1) of Class(2)
<S> <C> <C> <C>
Common A. Harold Ausley 218,126 9.70%

Common James L. Brewer 74,276 3.24

Common William J. Brinn, Jr. 111,324 4.87

Common Edwin A. Hubbard 86,266 3.76

Common Paul D. Johnson, Jr. 65,956 2.87

Common Del F. Jones 64,666 2.80

Common William N. Kingoff 55,852 2.45

Common Donald F. Pelling 91,164 3.94

Common Howard A. Penton, Jr. 58,642 2.57

Common Hugh P. Perry 107,146 4.67

Common Franklin E. Williams, Sr. 46,268 2.03

Common All Current Directors and Executive 907,154 33.98%
Officers as a Group (11 Persons)
</TABLE>
__________________
(1) All share ownership data is stated as of August 31, 1995. Each
person, to the best of management's knowledge, exercises sole voting
and investment power with respect to such shares, except for the
following shares over which the director, and each of the directors
and three executive officers of Allied included in the group,
indicated that he shares voting and/or investment power: Mr. Ausley -
78,116 shares; Mr. Brewer - 4,602 shares; Mr. Brinn - 7,880 shares;
Mr. Hubbard - 23,458 shares; Mr. Johnson - 6,000 shares; Mr. Jones -
43,790; Mr. Kingoff - 13,930 shares; Mr. Pelling - 11,144 shares; Mr.
Penton - 1,114 shares; Mr. Perry - 63,520 shares; Mr. Williams -
11,032 shares; and directors and officers as a group - 161,938 shares.

This column includes the number of shares which each director, and
all directors and the three executive officers of Allied included
in the group, for which each holds options to purchase that
are exercisable within 60 days of August 31, 1995: Mr. Ausley -
95,500 shares; Mr. Brewer - 32,574 shares; Mr. Brinn - 24,574
shares; Mr. Hubbard - 32,574 shares; Mr. Johnson -32,574 shares;
Mr. Jones - 46,934 shares; Mr. Kingoff - 20,316 shares; Mr.
Pelling - 48,048 shares; Mr. Penton - 20,316 shares; Mr. Perry -
32,574 shares; Mr. Williams - 20,316 shares; and directors and
officers as a group - 406,300 shares;

For information on the beneficial ownership of Allied Stock by
Mr. Ausley, see footnote 4 to the preceding table.

<PAGE>

(2) The calculation of the percentage of class beneficially owned is based
on the 2,262,994 shares of Allied Stock which were issued and
outstanding at August 31, 1995 plus the number of shares capable of
being issued to that individual (if any) and to directors and officers
as a group within 60 days of August 31, 1995, upon the exercise of
stock options held by each of them (if any) and by the group,
respectively.

MARKET PRICES AND DIVIDENDS

The Class A common stock of BancShares has been traded on the Nasdaq
National Market under the symbol "FCNCA" since 1986. As of June 30, 1995,
BancShares had 8,921,136 shares of its Class A common stock outstanding.
The Allied Stock has been traded on the Nasdaq National Market under the
symbol "ABCI" since 1992. As of June 30, 1995, there were 2,255,570 shares
of Allied Stock outstanding.

The following table presents quarterly information on the price range
of the Class A common stock of BancShares and the Allied Stock for the
periods indicated and indicates the high and low sales prices as reported
by the Nasdaq National Market. The prices are shown without retail
markups, markdowns or commissions.

<TABLE>
<CAPTION>
BancShares Allied
High Low High Low
<S> <C> <C> <C> <C>
1995:
Third Quarter $ $ $ $
Second Quarter 50.00 44.00 22.25 16.75
First Quarter 46.00 42.00 17.50 13.75

1994:
Fourth Quarter 46.50 41.50 14.75 13.00
Third Quarter 45.50 41.00 15.00 12.50
Second Quarter 44.50 40.00 13.125 10.125
First Quarter 45.00 40.00 11.25 10.25

1993:
Fourth Quarter 49.50 44.50 12.00 10.00
Third Quarter 50.00 47.50 10.125 8.75
Second Quarter 57.00 45.50 9.813 8.50
First Quarter 63.50 49.50 10.063 9.00

</TABLE>

On __________, 1995, the last sale prices of BancShares Common Stock
and Allied Stock on the Nasdaq National Market were $_____ and $_____,
respectively. On August 7, 1995, the last day before announcement of the
Merger, the last sale prices of BancShares Common Stock and Allied Stock on
the Nasdaq National Market were $49.00 and $23.375, respectively.

<PAGE>

As of June 30, 1995, there were 4,016 shareholders of record of the
BancShares Common Stock and there were 434 shareholders of record of the
Allied Stock.

The following table shows the cash dividends declared per share of
BancShares Common Stock for the indicated periods. BancShares has paid
cash dividends on its common stock since 1935.

Cash Dividend
Declared

1995:
Third Quarter . . . . . . . . . . . . . . . . . . $ .20

Second Quarter . . . . . . . . . . . . . . . . . .20

First Quarter . . . . . . . . . . . . . . . . . . .20
1994:

Fourth Quarter . . . . . . . . . . . . . . . . . .20

Third Quarter . . . . . . . . . . . . . . . . . . .175

Second Quarter . . . . . . . . . . . . . . . . . .175

First Quarter . . . . . . . . . . . . . . . . . . .175
1993:

Fourth Quarter . . . . . . . . . . . . . . . . . .175

Third Quarter . . . . . . . . . . . . . . . . . . .15

Second Quarter . . . . . . . . . . . . . . . . . .15

First Quarter . . . . . . . . . . . . . . . . . . .15

The timing and amount of future dividends will be within the
discretion of the Board of Directors of BancShares and will depend upon the
earnings of BancShares and its subsidiaries, their financial condition,
liquidity and capital requirements, applicable government regulations and
policies and other factors deemed relevant by the Board of Directors.
Subject to the foregoing, it is currently BancShares' anticipation that
cash dividends comparable to those paid during the past three years will
continue to be paid in the future. No assurances can be given, however,
that any dividends will be declared in the future or, if declared, what the
amount of such dividends would be or whether such dividends would continue
for future periods. The ability of BancShares to accumulate earnings for
the payment of dividends to its stockholders is substantially dependent
upon the ability of First Citizens Bank to pay dividends to BancShares.
First Citizens Bank's ability to pay dividends to BancShares is subject to
certain statutory and regulatory restrictions and the need to maintain
adequate capital. See "SUPERVISION, REGULATION AND GOVERNMENTAL POLICY --
Bank Regulation -- First Citizens Bank."

<PAGE>

Allied paid its first cash dividend in 1994. The following table
shows the cash dividends declared per share of Allied Stock for the
indicated periods.

Cash
Dividend
Declared

1995:
Third Quarter . . . . . . . $ .12

Second Quarter . . . . . . .12

First Quarter . . . . . . . .10
1994:
Fourth Quarter. . . . . . . .10

There can be no assurance that dividends would continue to be paid by
Allied in the future if the Merger were not consummated. The declaration,
payment and amount of any such future dividends would depend upon business
conditions, operating results, capital, reserve requirements, regulatory
authorizations and the consideration of other relevant factors by Allied's
Board of Directors. See "SUPERVISION, REGULATION AND GOVERNMENTAL POLICY
- -- Savings Institution Regulation." In addition, the number of shares of
BancShares Common Stock into which each share of Allied Stock will be
converted and the amount of cash or Debentures which a shareholder of
Allied may elect to receive for each of his or her shares of Allied Stock
will be reduced to the extent that cash dividends in an aggregate amount in
excess of $0.12 per share per calendar quarter or other distributions are
declared or paid by Allied between August 7, 1995, and the Effective Time.
See "THE MERGER - Exchange of Allied Stock."

SUPERVISION, REGULATION AND GOVERNMENTAL POLICY

Financial institutions and many of their affiliates are extensively
regulated under both federal and state law. The following is a brief
summary of certain statutes, rules, and regulations affecting BancShares,
Allied and their respective subsidiaries. This summary is qualified in its
entirety by reference to the particular statutory and regulatory provisions
referred to below and is not intended to be an exhaustive description of
the statutes or regulations applicable to BancShares' or Allied's
respective businesses. Supervision, regulation, and examination of
financial institutions by regulatory agencies is intended primarily for the
protection of depositors rather than holders of the stock of such
institutions.

Bank Holding Company Regulation

BancShares and Allied are bank holding companies, registered with the
Federal Reserve under the BHC Act. As such, BancShares, Allied and their
respective subsidiaries are subject to the supervision, examination, and
reporting requirements contained in the BHC Act and the regulations of the
Federal Reserve. The BHC Act requires that a bank holding company obtain
the prior approval of the Federal Reserve before (i) acquiring direct or
indirect ownership or control of more than 5% of the voting shares of any
bank, (ii) taking any action that causes a

<PAGE>

bank to become a subsidiary of the bank holding company, (iii) acquiring
all or substantially all of the assets of any bank, or (iv) merging or
consolidating with any other bank holding company.

The BHC Act further provides that the Federal Reserve may not approve
any transaction that would result in a monopoly or would be in furtherance
of any combination or conspiracy to monopolize or attempt to monopolize the
business of banking in any region of the United States, or the effect of
which may be substantially to lessen competition or to tend to create a
monopoly in any region of the country, or that in any other manner would be
in restraint of trade, unless the anti-competitive effects of the proposed
transaction are clearly outweighed by the public interest in meeting the
convenience and needs of the community to be served. The Federal Reserve
is also required to consider the financial and managerial resources and
future prospects of the bank holding companies and banks concerned and the
convenience and needs of the community to be served. Consideration of
financial resources generally focuses on capital adequacy and consideration
of convenience and needs issues includes the parties' performance under the
Community Reinvestment Act of 1977 (the "CRA"), both of which are discussed
below. See "- Capital Requirements" and "- Bank Regulation."

The BHC Act prohibits the Federal Reserve from approving a bank
holding company's application to acquire a bank or bank holding company
located outside the state in which the deposits of the banking subsidiary
were greatest on the date the company became a bank holding company, such
state being North Carolina in the case of BancShares and Allied, unless
such acquisition is specifically authorized by statute of the state in
which the bank or bank holding company to be acquired is located. Under
current North Carolina law, BancShares and Allied generally may acquire
banks or bank holding companies in any of the following states or
jurisdictions: Alabama, Arkansas, the District of Columbia, Florida,
Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, South
Carolina, Tennessee, Texas, Virginia, and West Virginia. Acquisitions in
other states are also possible if expressly authorized by the laws of the
state where the acquired bank is located or if acquired pursuant to federal
statutes permitting the interstate acquisition of failed or failing banks
or thrifts. See "- Recent Banking Legislation."

The BHC Act generally prohibits a bank holding company, with certain
exceptions, from engaging in activities other than banking, or managing or
controlling banks or other permissible subsidiaries, and from acquiring or
retaining direct or indirect control of any company engaged in any
activities other than those activities determined by the Federal Reserve to
be so closely related to banking, or managing or controlling banks, as to
be a proper incident thereto. In determining whether a particular activity
is permissible, the Federal Reserve must consider whether the performance
of such an 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. For example, factoring accounts
receivable, acquiring or servicing loans, leasing personal property,
conducting discount securities brokerage activities, performing certain
data processing services, acting as agent or broker in selling credit life
insurance, and certain other types of insurance underwriting activities
have all been determined by regulations of the Federal Reserve to be
permissible activities of bank holding companies. Pursuant to delegated
authority, the Federal Reserve Bank of Richmond has authority to approve
certain activities of holding companies within its district, including

<PAGE>

BancShares and Allied, provided the nature of the activity has been
approved by the Federal Reserve. Despite prior approval, the Federal
Reserve has the power to order a holding company or its subsidiaries to
terminate any activity or to terminate its ownership or control of any
subsidiary, when it has reasonable cause to believe that continuation of
such activity or such ownership or control constitutes a serious risk to
the financial safety, soundness or stability of any bank subsidiary of that
bank holding company.

Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve on any extensions of credit to
the bank holding company or any of its subsidiaries, investments in the
stock or securities thereof and the acceptance of such stock or securities
as collateral for loans to any borrower. A bank holding company and its
subsidiaries are also prevented from engaging in certain tie-in
arrangements in connection with any extension of credit, lease or sale of
property, or furnishing of services.

The Federal Reserve may issue cease and desist orders against bank
holding companies and non-bank subsidiaries to stop actions believed to
present a serious threat to a subsidiary bank. The Federal Reserve also
regulates certain debt obligations, changes in control of bank holding
companies, and capital requirements.

Under the provisions of the North Carolina Bank Holding Company Act of
1984, BancShares is registered with and subject to regulations of the NC
Commissioner. On September 1, 1994, BancShares became subject to the
jurisdiction of the West Virginia Board of Banking and Financial
Institutions (the "West Virginia Board") upon its acquisition of Marlinton
Bank. On February 2, 1995, BancShares became subject to jurisdiction of
the Virginia Bureau of Financial Institutions (the "Virginia Bureau") upon
its acquisition of FCB-VA. As a savings bank holding company, Allied is
subject to the jurisdiction and supervision of the Administrator.

Bank Regulation

First Citizens Bank. First Citizens Bank is a North Carolina-
chartered institution and is supervised and regulated by the NC
Commissioner, the NC Commission, and the FDIC. Deposits in First Citizens
Bank are insured either by the BIF or the SAIF of the FDIC up to the
maximum extent permitted by law. Approximately 70% and 30% of the deposits
in First Citizens Bank are insured by the BIF and the SAIF, respectively,
of the FDIC. First Citizens Bank also is subject to numerous state and
federal statutes and regulations which affect its businesses, activities
and operations.

The FDIC and the NC Commissioner regularly examine First Citizens Bank
and its operations. Each is given authority to approve or disapprove the
establishment of branches, mergers, consolidations, and other similar
corporate actions, and is given the right to prevent the continuance or
development of unsafe or unsound banking practices or other violations of
law.

Banks are subject to the CRA. Under the CRA, the appropriate federal
bank regulatory agency is required, in connection with its examination of a
bank, to assess such bank's record in meeting the credit needs of the
community served by that bank, including low- and moderate-income
neighborhoods. The regulatory agencies' assessment of the bank's record is
made

<PAGE>

available to the public. Further, such assessment is required of any
bank which has applied to (i) charter a national bank, (ii) obtain deposit
insurance coverage for a newly chartered institution, (iii) establish a new
branch office that will accept deposits, (iv) relocate an office, or
(v) merge or consolidate with, or acquire the assets or assume the
liabilities of, a federally regulated financial institution. In the case
of a bank holding company applying for approval to acquire a bank or other
bank holding company, the Federal Reserve will assess the record of each
subsidiary bank of the applicant bank holding company, and such records may
be the basis for denying the application. As of April 11, 1994, First
Citizens Bank had received an overall CRA rating of "outstanding."

North Carolina-chartered banks also are subject to restrictions under
state law upon their ability to pay dividends. Generally, a North Carolina
bank of a specified size may declare cash dividends out of its undivided
profits, so long as the bank's surplus is at least equal to 50% of its
paid-in capital stock. Under the foregoing restriction, the amount
available for payment of dividends as of June 30, 1995, by First Citizens
Bank to BancShares was approximately $304 million.

Federal bank regulatory agencies also have the general authority to
limit the dividends paid by insured banks and bank holding companies if
such payment may be deemed to constitute an unsafe and unsound practice.
The ability of First Citizens Bank to make funds available to BancShares
also is subject to restrictions imposed by federal law on the ability of
First Citizens Bank to extend credit to BancShares, to purchase the assets
thereof, to issue a guarantee, acceptance, or letter of credit on behalf
thereof, or to invest in the stock or securities thereof, or to take such
stock or securities as collateral for loans to any borrower.

Marlinton Bank and White Sulphur Springs Bank. As West Virginia
banking corporations, Marlinton Bank and White Sulphur Springs Bank are
subject to the supervision and regular examination by the FDIC and the West
Virginia Department of Banking. Areas of operation subject to regulation
by the FDIC and the West Virginia Department of Banking include reserves on
deposits, interest rates and other terms on deposits, investments, loans,
fiduciary activities, mergers, issuance of securities, payment of
dividends, establishment of branches and other aspects of operations.
While Marlinton Bank is not a member of the Federal Reserve, White Sulphur
Springs Bank is a member of the Federal Reserve, and, as such, is subject
to the supervision and regular examination by the Federal Reserve.

The ability of Marlinton Bank and White Sulphur Springs Bank to pay
dividends is subject to certain limitations of the State Banking Code of
West Virginia. The directors of any West Virginia-chartered banking
institution may quarterly, semiannually or annually, declare a dividend of
so much of the net profits of such banking institution as they shall judge
expedient, except that until the surplus fund of such banking institution
shall equal its common stock, no dividends shall be declared unless there
has been carried to the surplus fund not less than one-tenth part of such
banking institution's net profits of the preceding half year in the case of
quarterly or semiannual dividends, or not less than one-tenth part of its
net profits of the preceding two consecutive half-year periods in the case
of annual dividends. The prior approval of the Commissioner of Banking
shall be required if the total of all dividends declared by a West
Virginia-chartered banking institution in any calendar year shall exceed
the total of its net profits of that year combined with its retained net
profits of the preceding two years.

<PAGE>

Federal bank regulatory agencies also have the general authority to
limit the dividends paid by insured banks if such payment may be deemed to
constitute an unsafe and unsound practice.

FCB-VA

As a Virginia banking corporation organized under the Virginia Banking
Act, as amended, FCB-VA is subject to the supervision and regular
examination of the Federal Reserve, the Virginia Bureau, and the FDIC.
Areas of operation subject to regulation by the regulatory agencies include
corporate practices, such as payment of dividends, incurring debt and
acquisition of financial institutions and other companies, and affect
business practices, such as payment of interest on deposits, the charging
of interest on loans, types of business conducted and location of offices.
Deposits in FCB-VA are insured by the FDIC up to the maximum extent
permitted by law.

The amount of dividends payable by FCB-VA depends upon FCB-VA's
earnings and capital position, and is limited by federal and state law,
regulations and policies.

As a state member bank subject to the regulations of the Federal
Reserve, FCB-VA must obtain the approval of the Federal Reserve for any
dividend if the total of all dividends declared in any calendar year would
exceed the total of its net profits, as defined by the Federal Reserve, for
that year, combined with its retained net profits for the preceding two
years. In addition, FCB-VA may not pay a dividend in an amount greater
than its undivided profits then on hand after deducting its losses and bad
debts. For this purpose, bad debts are generally defined to include the
principal amount of loans which are in arrears with respect to interest by
six months or more unless such loans are fully secured and in the process
of collection. Moreover, for the purposes of this limitation, FCB-VA is
not permitted to add the balance in its allowance for loan losses account
to its undivided profits then on hand; however, it may net the sum of its
bad debts as so defined against the balance in its allowance for loan
losses account and deduct from undivided profits only bad debts as so
defined in excess of that account.

In addition, the Federal Reserve is authorized to determine under
certain circumstances relating to the financial condition of a national
bank, a state member bank or a bank holding company that the payment of
dividends would be an unsafe or unsound practice and to prohibit payment
thereof. The payment of dividends that depletes a bank's capital base
could be deemed to constitute such an unsafe or unsound practice. The
Federal Reserve has indicated that banking organizations should generally
pay dividends only out of current operating earnings.

Savings Institution Regulation

General. Summit and Peoples are North Carolina-chartered savings
banks, are members of the FHLB System, and their deposits are insured by
the SAIF of the FDIC. Summit and Peoples are subject to examination and
regulation by the FDIC and the Administrator and to regulations governing
such matters as capital standards, mergers, establishments of branch
offices, subsidiary investments and activities, and general investment
authority. Such examination and regulation is intended primarily for the
protection of depositors and the federal deposit insurance funds. As
subsidiaries of Allied, Summit and Peoples are indirectly subject to
regulation by the

<PAGE>

Federal Reserve. As such, regulations promulgated by the Federal
Reserve and applicable to Allied may affect activities of Summit and
Peoples.

As a creditor and a financial institution, each of Summit and Peoples
are subject to the CRA and to various regulations promulgated by the
Federal Reserve including, without limitation, regulations relating to
Equal Credit Opportunity, Reserves, Electronic Fund Transfers, Truth in
Lending, Availability of Funds and Truth in Savings. As creditors of loans
secured by real property and as owners of real property, financial
institutions, including Summit and Peoples, may be subject to potential
liability under various statutes and regulations applicable to property
owners generally, including statutes and regulations relating to the
environmental condition of real property. Summit and Peoples are also
subject to the usury laws of North Carolina and other states in which they
make loans. In North Carolina there are generally no maximum interest
rates applicable to first mortgage loans secured by the borrower's
residence. There are limitations on interest rates for other loans, such
as consumer loans, and limitations on the amounts of fees which may be
charged in connection with such loans.

The FDIC has extensive enforcement authority over North Carolina-
chartered savings banks, including Summit and Peoples. This enforcement
authority includes, among other things, the ability to assess civil money
penalties, to issue cease and desist or removal orders and to initiate
injunctive actions. In general, these enforcement actions may be initiated
in response to violations of laws and regulations and unsafe or unsound
practices.

The grounds for appointment of a conservator or receiver for a state
savings bank on the basis of an institution's financial condition include:
(i) insolvency, in that the assets of the savings bank are less than its
liabilities to depositors and others; (ii) substantial dissipation of
assets or earnings through violations of law or unsafe or unsound
practices; (iii) existence of an unsafe or unsound condition to transact
business; (iv) likelihood that the savings bank will be unable to meet the
demands of its depositors or to pay its obligations in the normal course of
business; and (v) insufficient capital or the incurring or likely incurring
of losses that will deplete substantially all of the institution's capital
with no reasonable prospect of replenishment of capital without federal
assistance.

Capital Requirements Applicable to Summit and Peoples. Upon their
conversions to North Carolina-chartered mutual savings banks in March 1992
and in May 1993, respectively, Summit and Peoples ceased to be subject to
the capital requirements of the Office of Thrift Supervision ("OTS") and
became subject to the capital requirements of the FDIC and the
Administrator. The FDIC imposes the same risk-based capital requirements
and leverage capital requirements on state chartered savings banks, such as
Summit and Peoples, as it imposes on state chartered commercial banks such
as First Citizens Bank. See "-Capital Requirements."

<PAGE>

The following table sets forth Summit's and Peoples' regulatory
capital position on June 30, 1995.

June 30, 1995
Summit Peoples
<S> <C> <C> <C> <C>
Total Shareholder's Equity $ 19,310 11.77% $ 9,652 9.42%

Regulatory Capital
Leverage:

Actual 19,310 11.77% 9,652 9.42%

Required 8,206 5.00% 5,121 5.00%

Excess $ 11,104 6.77% $ 4,531 4.42%

Risk-Based:

Actual 20,199 20.56% 10,047 18.01%

Required 7,858 8.00% 4,463 8.00%

Excess $ 12,341 12.56% $ 5,584 10.01%

Total Risk-Based Assets $ 98,229 $ 55,786

Adjusted Assets $ 164,127 $ 102,425

Total Assets $ 164,127 $ 102,425
</TABLE>

The Administrator requires total adjusted capital equal to at least 5%
of total adjusted assets. As of June 30, 1995, Summit and Peoples exceeded
this requirement with total adjusted capital to total adjusted assets of
11.77% and 9.42%, respectively.

Loans-to-One-Borrower. Summit and Peoples also are subject to the
Administrator's limitations on loans-to-one-borrower. Under these limits,
no loans and extensions of credit to any borrower outstanding at one time
and not fully secured by readily marketable collateral shall exceed 15% of
the unimpaired capital and unimpaired surplus of the savings institution.
Loans and extensions of credit fully secured by readily marketable
collateral may comprise an additional 10% of unimpaired capital and
unimpaired surplus. These limits also authorize savings institutions to
make loans-to-one-borrower, for any purpose, in an amount not to exceed
$500,000. A savings institution also is authorized to make loans-to-one-
borrower to develop domestic residential housing units, not to exceed the
lesser of $30 million or 30% of the savings institution's unimpaired
capital and unimpaired surplus, provided that (i) the purchase price of
each single-family dwelling in the development does not exceed $500,000;
(ii) the savings institution is in compliance with its fully phased-in
capital requirements; (iii) the loans comply with applicable loan-to-value
requirements; (iv) the aggregate amount of loans made under this authority
does not exceed 150% of unimpaired capital and surplus and (v) the
institution's

<PAGE>

regulator issues an order permitting the savings institution to use this
higher limit. These limits also authorize a savings institution to make
loans-to-one-borrower to finance the sale of real property acquired in
satisfaction of debts in an amount up to 50% of unimpaired capital and
surplus.

As of June 30, 1995, the largest aggregate amount of loans which
Summit and Peoples had to any one borrower was $1,519,722 and $1,376,036,
respectively. Summit and Peoples have no loans outstanding which their
respective managements believe violate the applicable loans-to-one-borrower
limits.

Federal Home Loan Bank System. The FHLB System provides a central
credit facility for member institutions. As members of the FHLB of
Atlanta, Summit and Peoples are required to own capital stock in the FHLB
of Atlanta in an amount at least equal to the greater of 1% of the
aggregate principal amount of its unpaid residential mortgage loans, home
purchase contracts and similar obligations at the end of each calendar
year, or 5% of its outstanding advances (borrowings) from the FHLB of
Atlanta. On June 30, 1995, Summit and Peoples were in compliance with this
requirement with investments in FHLB of Atlanta stock of $1,371,000 and
$806,000, respectively.

Recent federal provisions may have the effect of significantly
reducing the dividends that Summit and Peoples receive on their stock in
the FHLB of Atlanta. During fiscal 1994, 1993 and 1992, Summit recorded
dividend income of $84,000, $74,000 and $82,000, respectively, with respect
to its FHLB of Atlanta stock and Peoples recorded dividend income of
$47,853, $42,231 and $48,508, respectively, with respect to its FHLB of
Atlanta stock. Recently enacted federal law requires each FHLB to transfer
a certain amount of its reserves and undivided profits to the Resolution
Funding Corporation ("REFCORP"), the government entity established to raise
funds to resolve troubled savings association cases, in order to fund the
principal and a portion of the interest on REFCORP bonds and certain other
obligations. In addition, such recently enacted federal law requires each
FHLB to transfer a percentage of its annual net earnings to the Affordable
Housing Program. That amount will increase from 5% of the annual net
income of the FHLB in 1990 to at least 10% of its annual income in 1995 and
subsequent years. As a result of these requirements, the FHLB of Atlanta's
earnings may be reduced and Summit and Peoples may receive reduced
dividends on its FHLB of Atlanta stock in future periods.

Liquidity. Requirements of the Administrator provide that Summit and
Peoples must maintain a ratio of liquid assets to total assets of at least
10%. The computation of liquidity under North Carolina regulations allows
the inclusion of mortgage-backed securities and investments which, in the
judgment of the Administrator, have a readily marketable value, including
investments with maturities in excess of five years. On June 30, 1995, the
liquidity ratio of Summit and Peoples under the requirements of the
Administrator were 13.6% and 26.2%, respectively.

Restrictions on Dividends and Other Capital Distributions. North
Carolina-chartered stock savings banks such as Summit and Peoples may not
declare or pay a cash dividend on, or purchase 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

<PAGE>

applicable federal and state regulations. In addition, Summit and Peoples
may not declare or pay dividends without the prior written approval of the
Administrator.

North Carolina Regulations. As North Carolina-chartered savings
banks, Summit and Peoples derive authority from, and are regulated by, the
Administrator. The Administrator has the right to promulgate rules and
regulations necessary for the supervision and regulation of state savings
banks under his jurisdiction and for the protection of the public investing
in such institutions. The regulatory authority of the Administrator
includes, but is not limited to, the establishment of reserve requirements;
the regulation of the payment of dividends; the regulation of
incorporators, shareholders, directors, officers and employees; the
establishment of permitted types of withdrawable accounts and types of
contracts for savings programs, loans and investments; and the regulation
of the conduct and management of savings banks, chartering and branching of
institutions, mergers, conversions and conflicts of interest. North
Carolina law requires that Summit and Peoples maintain federal deposit
insurance as a condition of doing business.

The Administrator conducts regular annual examinations of Summit and
Peoples as well as other state-chartered savings institutions in North
Carolina. The purpose of such examinations is to insure that institutions
are being operated in compliance with applicable North Carolina law and
regulations and 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. The
Administrator is empowered to order the revocation of the license of an
institution if he finds that it has violated or is in violation of any
North Carolina law or regulation and that revocation is necessary in order
to preserve the assets of the institution and protect the interests of its
depositors. The Administrator has the power to issue cease and desist
orders if any person or institution is engaging in, or has engaged in, any
unsafe or unsound practice or unfair and discriminatory practice in the
conduct of its business or in violation of any other law, rule or
regulation.

Subject to limitation by the Administrator, North Carolina-chartered
savings institutions may make any loan or investment or engage in any
activity which is permitted to federally chartered institutions. In
addition to such lending authority, North Carolina-chartered savings banks
are authorized to invest funds, in excess of loan demand, in certain
statutorily permitted investments. Additionally, a North Carolina-
chartered savings bank is required to maintain general valuation allowances
and specific loss reserves in the same amounts as required by the federal
regulators.

In connection with the conversions of Summit and Peoples from mutual
to stock form, each subsidiary established a liquidation account for the
benefit of certain eligible account holders who maintained their accounts
in Summit or Peoples. In the event of a complete liquidation of either
Summit or Peoples, such account holders would be entitled to receive
liquidating distributions of any assets remaining after payment of all
creditors' claims (including claims of all depositors to the withdrawal
values of their deposit accounts, including accrued interest) before any
distributions are made on Allied Stock, equal to such holders' proportion
interest in the remaining liquidation account balance in accordance with
the regulations of the Administrator. The Merger is not considered to be a
liquidation of Allied or Summit or Peoples and as such will

<PAGE>

not affect the liquidation accounts at Summit or Peoples. Upon
consummation of the Merger, BancShares will assume the liquidation
accounts and the obligations of Summit and Peoples related thereto.

Capital Requirements

In December 1988, the Federal Reserve approved final risk-based
capital guidelines for bank holding companies, such as BancShares and
Allied, and state member banks. The new guidelines, which became effective
on March 15, 1989, were phased in over four years and are based on the
capital framework for international banking organizations developed by the
Basle Committee on Banking Regulations and Supervisory Practices. The FDIC
also has adopted substantially similar guidelines for state banks that are
not members of the Federal Reserve System, such as First Citizens Bank.

When the rules were fully phased-in at the end of 1992, the minimum
standard for the ratio of capital to risk-weighted assets, including
certain off-balance sheet obligations, such as standby letters of credit,
became 8%. At least half of this capital must consist of common equity,
retained earnings, and a limited amount of perpetual preferred stock, less
certain goodwill items ("Tier 1 capital"). The remainder ("Tier 2
capital") may consist of a limited amount of other preferred stock,
subordinated debt and a limited amount of loan loss reserves.

The Federal Reserve also has adopted, effective after December 31,
1990 a minimum (leverage) ratio of Tier 1 capital to total assets of 3%.
The 3% Tier 1 capital to total assets ratio constitutes the leverage
standard for bank holding companies and state member banks, and will be
used in conjunction with the risk-based ratio in determining the overall
capital adequacy of banking organizations. In proposing such standards,
the Federal Reserve emphasized that in all cases the suggested standards
are supervisory minimums and that an institution would be permitted to
maintain such minimum levels of capital only if it were a strong banking
organization, rated composite one under the CAMEL rating system for banks
or the BOPEC rating system for bank holding companies. The Federal Reserve
noted that most expansion-oriented banking organizations have maintained
leverage capital ratios of between 4% and 5% of total assets, and it is
likely that these ratios will be applied to BancShares. The FDIC also has
adopted the 3% leverage ratio requirement effective April 10, 1991.

As of June 30, 1995, BancShares had Tier 1 risk-adjusted, Tier 2 and
leverage capital of approximately 9.3%, 10.6% and 6.1%, respectively, all
in excess of the minimum requirements. After giving effect to the Merger,
at June 30, 1995, BancShares would have had Tier 1 risk-adjusted, Tier 2
and leverage capital of approximately 9.0%, 10.5% and 5.9%, respectively,
on a pro forma basis.

Recent Banking Legislation

In 1994, Congress passed the Interstate Banking Act. The Interstate
Banking Act permits adequately capitalized bank holding companies to
acquire control of banks in any state beginning in late 1995. States may
require the bank being acquired to have been in existence for a certain
length of time, but not in excess of five years. No bank may acquire more
than ten percent of nationwide insured deposits or thirty percent of any
state's insured deposits. States have the right

<PAGE>

to waive the thirty percent limit or legislate stricter deposit caps.
Beginning June 1, 1997, banks may establish a branch outside their home
state either by merger with an in-state bank or on a de novo basis under
the Interstate Banking Act. States may opt-in to such interstate
branching earlier or may opt-out of interstate branching by June 1,
1997. Under the Interstate Banking Act, establishing new branches in
another state will require that state's specific approval. North
Carolina passed legislation effective June 22, 1995, for early opt-in of
interstate branching. There can be no assurance as to what impact such
legislation or the Interstate Banking Act might have upon BancShares and
its subsidiaries.

The difficulties encountered nationwide by financial institutions
during the 1980s and early 1990s have prompted federal legislation designed
to reform the banking industry and to promote the viability of the industry
and of the deposit insurance system. Many of the provisions of the new
legislation did not become effective until December 1993. In addition,
many of the provisions will be implemented through the adoption of
regulations by the various federal banking agencies. Accordingly, the
precise effect of the legislation on BancShares cannot be assessed at this
time. Among such legislation was the Federal Deposit Insurance Corporation
Improvements Act of 1991 ("FDICIA"), which became effective on December 19,
1991, and which bolsters the deposit insurance fund, tightens bank
regulation, and trims the scope of federal deposit insurance as summarized
below.

FDIC Funding. FDICIA bolsters the bank deposit insurance fund with
$70 billion in borrowing authority and increases to $30 billion from
$5 billion the amount the FDIC can borrow from the United States Treasury
to cover the costs of bank failures. The loans, plus interest, would be
repaid by premiums that banks pay on domestic deposits over the next 15
years.

Bank Regulation. Under FDICIA, regulatory supervision is linked to
bank capital. Regulators established five capital levels for banks,
ranging from "well capitalized" to "critically undercapitalized." See
"--Enforcement Powers" for a discussion of the five capital levels.
Regulatory action becomes mandatory as capital falls. In addition,
regulators have adopted a new set of non-capital measures of bank safety,
such as underwriting standards and minimum earnings levels, which became
effective on December 1, 1993. The legislation also requires regulators to
perform annual on-site bank examinations, place limits on real estate
lending by banks, and tighten auditing standards.

Deposit Insurance. Effective January 1, 1994, FDICIA reduced the
scope of federal deposit insurance. The most significant change ends the
"too big to fail" doctrine under which the government protects all deposits
in most banks, including those exceeding the $100,000 insurance limit. The
FDIC's ability to reimburse uninsured deposits -- those over $100,000 --
was sharply limited. Beginning in December 1993, the Federal Reserve's
ability to finance banks with extended loans from its discount window also
was restricted. In addition, only the best capitalized banks are able to
offer insured brokered deposits or to insure accounts established under
employee pension plans. The legislation instructed the FDIC to change the
way it assesses banks for deposit insurance, moving from flat premiums to
fees that require banks engaging in risky practices to pay higher premiums
than conservatively managed banks.

Effective January 1, 1994, the FDIC increased the annual deposit
insurance assessment for all covered banks and thrifts thereby implementing
the risk-related deposit insurance system

<PAGE>

required by FDICIA. Under the FDIC risk-related deposit insurance
system, each insured depository institution is assigned to one of the
three categories, "well capitalized," "adequately capitalized," or
"undercapitalized" as defined in regulations promulgated pursuant to
FDICIA by the Federal Reserve, the FDIC, and the other federal bank
regulatory agencies. These categories are subdivided into three
subgroups based upon the FDIC's evaluations of the risk posed by the
depository institution, based in part on examinations by the
institution's primary federal and/or state regulator. The risk-related
system initially provided for assessments ranging from 0.23% for the
strongest institution and 0.31% for the weakest institutions. Effective
July 1, 1995, the FDIC reduced assessments to 0.04% for the strongest
banks. The new regulation leaves unchanged the 0.31% assessment rate
for the weakest banks and does not affect the deposit premiums paid on
SAIF insured deposits.

In order to recapitalize the SAIF, the FDIC currently is considering
a one-time assessment ranging up to 90 basis points for every $100 of
SAIF-assessable deposits. The potential assessment would be based on
SAIF-assessable deposits held as of March 31, 1995. As of such date, First
Citizens Bank held approximately $1,689,025,000 in SAIF-assessable deposits.

Enforcement Powers

Congress has provided the federal bank regulatory agencies with an
array of powers to enforce laws, rules, regulations, and orders. Among
other things, the agencies may require that institutions cease and desist
from certain activities, may preclude persons from participating in the
affairs of insured depository institutions, may suspend or remove deposit
insurance, and may impose civil money penalties against institution-
affiliated parties for certain violations.

Among other things, FDICIA required the federal banking agencies to
take "prompt corrective action" in respect of banks that do not meet
minimum capital requirements. FDICIA established five capital tiers:
"well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" and "critically undercapitalized," as
defined by regulations promulgated by the Federal Reserve, the FDIC, and
the other federal depository institution regulatory agencies. A depository
institution is well capitalized if it significantly exceeds the minimum
level required by regulation for each relevant capital measure, adequately
capitalized if it meets each such measure, undercapitalized if it fails to
meet any such measure, significantly undercapitalized if it is
significantly below such measure and critically undercapitalized if it
fails to meet any critical capital level set forth in the regulations. The
critical capital level must be a level of tangible equity capital equal to
not less than 2% of total assets and not more than 65% of the minimum
leverage ratio prescribed by regulation (except to the extent that 2% would
be higher than such 65% level). An institution may be deemed to be in a
capitalization category that is lower than is indicated by its actual
capital position if it receives an unsatisfactory examination rating.

Possible Legislative Changes

Legislative and regulatory proposals regarding changes in banking, and
the regulation of banks, savings institutions, and other financial
institutions, are considered from time to time by the executive branch of
the federal government, Congress, and various state governments, including
North Carolina, West Virginia and Virginia. Certain of these proposals, if
adopted, could significantly change the regulation of banks, savings
institutions, and the financial services industry generally. It cannot be
predicted whether any of these proposals will be adopted, and, if adopted,
how these will affect BancShares and its subsidiaries and Allied and its
subsidiaries.

<PAGE>

Effect of Governmental Policies

The earnings and business of BancShares and Allied are and will be
affected by the policies of various regulatory authorities of the United
States, especially the Federal Reserve. The Federal Reserve, among other
functions, regulates the supply of credit in response to general economic
conditions within the United States. The instruments of monetary policy
employed by the Federal Reserve for these purposes influence in various
ways the overall level of investments, loans, other extensions of credit
and deposits, and the interest rates paid on liabilities and received on
assets.

CAPITAL STOCK OF BANCSHARES

The 13,000,000 shares of capital stock authorized by the Certificate
of Incorporation of BancShares are divided into two classes of common stock
consisting of 11,000,000 shares of BancShares Common Stock and 2,000,000
shares of Class B common stock, par value $1.00 per share ("Class B
Stock"). Assuming that holders of 55% of the shares of Allied Stock elect
to receive BancShares Common Stock rather than cash in the Merger, it is
anticipated that 656,409 shares of BancShares Common Stock will be issued
in the Merger, resulting in approximately 9,577,545 shares of BancShares
Common Stock outstanding immediately after completion of the Merger.

The following is a brief summary of BancShares Common Stock and Class
B Stock, the relevant provisions of Delaware law and BancShares'
Certificate of Incorporation and Bylaws. The following discussion is not
intended to be a complete description of BancShares Common Stock and
Class B Stock and is qualified in its entirety by reference to the Delaware
General Corporation Law and BancShares' Certificate of Incorporation and
Bylaws. SHARES OF BANCSHARES COMMON STOCK AND CLASS B STOCK ARE NOT, AND
CANNOT BE, INSURED BY THE FDIC.

Voting Rights

The holders of BancShares Common Stock and Class B Stock generally
will possess exclusive voting rights in BancShares. Each holder of
BancShares Common Stock will be entitled to one vote for each share held of
record, and each holder of Class B Stock will be entitled to 16 votes for
each share so held. Except as otherwise provided by Delaware law, the vote
of a majority of shares voting on any matter is necessary for approval by
the stockholders. Holders of BancShares Common Stock and Class B Stock are
not entitled to cumulative voting rights and, therefore, holders of a
majority of shares voting in the election of directors may elect the entire
Board of Directors at a stockholders' meeting at which a quorum is present.
In that event, holders of the remaining shares will not be able to elect
any director to the Board of Directors.

Dividend Rights

Holders of BancShares Common Stock and Class B Stock are entitled to
receive dividends when, as, and if declared by the Board of Directors out
of funds legally available therefor. Dividends may be declared on
BancShares Common Stock without dividends being declared on

<PAGE>

the Class B Stock, and vice versa. Similarly, dividends declared and
paid on the BancShares Common Stock need not be equal in an amount to
any dividends paid on the Class B Stock, and vice versa.

Preemptive Rights

Holders of BancShares Common Stock and Class B Stock do not have any
preemptive or preferential right to purchase or subscribe for any
additional share thereof of BancShares common stock or any other securities
that may be issued by BancShares. Therefore, after completion of the
Merger, the Board of Directors may sell shares of BancShares capital stock
without first offering such shares to the existing shareholders of
BancShares.

Assessment and Redemption

The shares of BancShares Common Stock and Class B Stock presently
outstanding are, and the shares of BancShares Common Stock that will be
issued in connection with the Merger will be, fully paid and nonassessable.
There is no provision for redemption or conversion of BancShares Common
Stock or Class B Stock.

Liquidation Rights

In the event of a liquidation, dissolution, or winding-up of
BancShares, whether voluntary or involuntary, the holders of BancShares
Common Stock and Class B Stock would be entitled to share ratably in any of
the net assets or funds available for distribution to stockholders after
the satisfaction of all liabilities, or after adequate provision is made
therefor. The form of distribution would depend upon the nature of the
liquidation and the assets of BancShares at that time.

CERTAIN DIFFERENCES IN THE RIGHTS OF HOLDERS
OF ALLIED STOCK AND BANCSHARES COMMON STOCK

Upon consummation of the Merger, shareholders of Allied, other than
those shareholders who elect or are deemed to have elected under the
Agreement to receive cash or Debentures in lieu of BancShares Common Stock
for their shares or who exercise dissenters' rights, will become
shareholders of BancShares. Certain legal distinctions exist between
owning BancShares Common Stock and Allied Stock.

Allied is a North Carolina business corporation and the rights of the
holders of Allied Stock are governed by Chapter 55 of the North Carolina
General Statutes which is applicable to North Carolina business
corporations ("Chapter 55"). BancShares is a Delaware business corporation
and the rights of the holders of BancShares Common Stock are governed
solely by Delaware law.

Because of differences between North Carolina law and Delaware law,
the Merger will result in certain changes in the rights of Allied's
shareholders who receive BancShares Common Stock in exchange for their
Allied Stock. While it is not practical to describe all differences, those
basic differences which, in the opinion of Allied's management, will have
the most

<PAGE>

significant effect on the rights of Allied's shareholders if they
become shareholders of BancShares are discussed below.

The following is only a general summary of certain differences in the
rights of holders of BancShares Common Stock and those of holders of Allied
Stock. Shareholders should consult with their own legal counsel with
respect to specific differences and changes in their rights as shareholders
which will result from the proposed Merger.

Voting Rights

Each holder of BancShares Common Stock is entitled to one vote for
each share held of record, and each holder of BancShares' Class B Stock is
entitled to 16 votes for each share so held. The holders of BancShares
Common Stock and Class B Stock generally will possess exclusive voting
rights in BancShares. Except as otherwise provided by Delaware law, the
vote of a majority of shares voting on any matter is necessary for approval
by the stockholders. Holders of BancShares Common Stock will not be
entitled to cumulative voting rights and, therefore, holders of a majority
of shares voting in the election of directors may elect an entire Board of
Directors at a shareholders' meeting at which a quorum is present. In that
event, holders of the remaining shares will not be able to elect any
director to the Board of Directors.

Each holder of Allied Stock is entitled to one vote per share. The
holders of Allied Stock possess exclusive voting rights in Allied. Except
as otherwise provided by North Carolina law, the vote of a majority of
shares voting on any matter is necessary for approval by the stockholders.
Holders of Allied Stock are not entitled to cumulative voting rights and,
therefore, holders of a majority of shares voting in the election of
directors may elect an entire Board of Directors at a shareholders' meeting
at which a quorum is present. In that event, holders of the remaining
shares will not be able to elect any director to the Board of Directors.

Dividends

The shareholders of BancShares and Allied are entitled to dividends
when and if declared by their respective Boards of Directors, subject to
the restrictions described below. Pursuant to Chapter 55, Allied is
authorized to pay dividends as are declared by its Board of Directors,
provided that no such distribution results in its insolvency on a going
concern or balance sheet basis. Subject to certain restrictions under
Delaware law, dividends may be paid from BancShares' surplus or from its
net profits for the fiscal year in which the dividend is declared and/or
for the preceding fiscal year. See "MARKET PRICES AND DIVIDENDS."

Indemnification

BancShares. Delaware's General Corporation Law, Del. Code Ann.
Title 8 (Section Mark)(Section Mark)101 et seq. (the "General
Corporation Law"), contains provisions prescribing the extent to which
directors and officers shall or may be indemnified. Section 145(a) and
(b) of the General Corporation Law permit a corporation, with certain
exceptions, to indemnify a current or former officer or director against
liability if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, he
had no reasonable cause to believe his conduct was unlawful. A
corporation may

<PAGE>

not indemnify him in connection with a proceeding by or in the right of
the corporation in which he was adjudged liable to the corporation
unless and only to the extent that the Court of Chancery or the court in
which such action or suit was brought shall determine upon application
that, despite the adjudication of liability, but in view of all the
circumstances of the case, he is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.

Section 144(c) of the General Corporation Law requires a corporation
to indemnify an officer or director in the defense of any proceeding to
which he was a party against expenses actually and reasonably incurred to
the extent that he is successful on the merits or otherwise in his defense.
Indemnification under Subsections (a) and (b) of Section 145 of the General
Corporation Law (unless ordered by a court) shall be made by the
corporation only upon a determination that indemnification of the director
or officer was proper under the circumstances because he met the applicable
standard of conduct set forth in Sections (a) and (b). Such determination
may be made by (i) the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such proceeding, (ii) if
such quorum is not obtainable, or, even if obtainable if a quorum of
disinterested directors so directs, by independent legal counsel in a
written opinion, or (iii) by the stockholders of the corporation.

In addition, Section 145 of the General Corporation Law permits a
corporation to provide for indemnification of directors and officers in its
Articles of Incorporation or Bylaws or by contract or otherwise, against
liability in various proceedings, and to purchase and maintain insurance
policies on behalf of these individuals.

Allied. North Carolina law provides for the indemnification of
corporate directors and officers in accordance with the following
provisions:

Permissible Indemnification. Chapter 55 allows a corporation by
charter, bylaw, contract or resolution to indemnify or agree to indemnify
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 as summarized herein. 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 attorneys'
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.

The corporation may indemnify such person against expenses or liability
incurred only where such person conducted himself or herself in good faith;
reasonably believed (i) in the case of conduct in his or her official
corporate capacity, that his or her conduct was in the corporation's best
interests, and (ii) in all other cases, that his or her conduct was at
least not opposed to the corporation's best interests; and, in the case of
a criminal proceeding, he or she had no reasonable cause to believe his or
her conduct was unlawful; provided, however, that 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

<PAGE>

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, Chapter 55 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 or officer 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 in 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).

Parties Entitled to Indemnification. Chapter 55 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 BancShares and Allied. The Bylaws of BancShares
and Allied each provide for indemnification of its respective directors and
officers to the fullest extent permitted by law.

Indemnification under the Securities Act. Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to
directors, officers or persons controlling of BancShares or Allied,
BancShares and Allied have been informed that, in the opinion of the

<PAGE>

Commission, such indemnification is against public policy expressed in the
Securities Act and is, therefore, unenforceable.

OPINIONS

The validity of the issuance of the BancShares Common Stock will be
passed upon by Ward and Smith, P.A., Raleigh, North Carolina. Mr. John
A. J. Ward and Mr. David L. Ward, Jr., shareholders of Ward and
Smith, P.A., have a direct interest in BancShares stemming from ownership
of its common stock. David L. Ward, Jr. also serves on the Board of
Directors of BancShares. Poyner & Spruill, L.L.P., Rocky Mount, North
Carolina has served as counsel to Allied in connection with the Merger and
will pass upon certain matters on behalf of Allied.

The federal and North Carolina income tax consequences of the Merger
have been passed upon by KPMG Peat Marwick LLP, Raleigh, North Carolina.

EXPERTS

The consolidated financial statements of First Citizens BancShares,
Inc. and subsidiaries as of December 31, 1994 and 1993 and for each of the
years in the three-year period ended December 31, 1994, have been
incorporated by reference herein and in the Registration Statement 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.

The consolidated statements of financial condition of Allied
Bank Capital, Inc. as of December 31, 1994 and 1993, and the
consolidated statements of income, changes in stockholders
equity, and cash flows for each of the two years in the period ended
December 31, 1994 and for the three month period ended December 31, 1992
incorporated by reference in this registration statement, have been
incorporated herein in reliance on the report of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.

The consolidated financial statements of Allied for the one-year
period ended September 30, 1992, incorporated by reference in this
Prospectus/Proxy Statement have been audited by Deloitte & Touche, LLP,
independent auditors, as stated in their report incorporated by reference
herein, and have been so included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.

PROPOSALS OF SHAREHOLDERS

If the Merger is not consummated for any reason, Allied expects to
hold its 1996 annual meeting of shareholders in April 1996. In such event,
any proposal of a shareholder that is intended to be presented at the 1996
annual meeting of shareholders must be received by Allied at its main
office in Sanford, North Carolina no later than November 10, 1995 in order
that any such proposal be timely received for inclusion in the proxy
statement and appointment of proxy to be issued in connection with such
meeting.

<PAGE>

APPENDIX I

Agreement and Plan of Reorganization and Merger

<PAGE>

AGREEMENT AND PLAN

OF REORGANIZATION AND MERGER

By and Between

ALLIED BANK CAPITAL, INC.

and

FIRST CITIZENS BANCSHARES, INC.

August 7, 1995

I-1

<PAGE>

AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
By and Between
ALLIED BANK CAPITAL, INC.
and
FIRST CITIZENS BANCSHARES, INC.

THIS AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
(hereinafter called "Agreement") is entered into as of the 7th
day of August, 1995, by and between ALLIED BANK CAPITAL, INC.
("Allied") and FIRST CITIZENS BANCSHARES, INC. ("BancShares").

WHEREAS, Allied is a North Carolina business
corporation with its principal office and place of business
located in Sanford, North Carolina; and,

WHEREAS, Allied is the sole shareholder of Peoples
Savings Bank, Inc., SSB, a North Carolina savings bank with its
principal office and place of business located in Wilmington,
North Carolina ("Peoples") and Summit Savings Bank, Inc., SSB, a
North Carolina savings bank with its principal office and place
of business located in Sanford, North Carolina ("Summit") (such
subsidiary corporations being sometimes referred to herein
collectively as the "Subsidiaries"); and,

WHEREAS, BancShares is a Delaware business corporation
with its principal office and place of business located in
Raleigh, North Carolina; and,

WHEREAS, BancShares is the sole shareholder of First-
Citizens Bank & Trust Company, a North Carolina banking
corporation with its principal office and place of business
located in Raleigh, North Carolina ("FCB"); and,

WHEREAS, BancShares and Allied have agreed that it is
in their mutual best interests and in the best interests of their
respective shareholders for Allied to be merged with and into
BancShares (the "Merger") with the effect that each of the
outstanding shares of Allied's $0.50 par value common stock
("Allied Stock") will be converted into newly issued shares of
BancShares' $1.00 par value Class A common stock ("BancShares
Stock") or the right to receive cash or a debenture as described
in Paragraph 1.5.a. below, all in the manner and upon the terms
and conditions contained in this Agreement; and,

WHEREAS, to effectuate the foregoing, BancShares and
Allied desire to adopt this Agreement as a plan of reorganization
in accordance with the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended; and,

I-2

<PAGE>

WHEREAS, Allied's Board of Directors has approved this
Agreement and will recommend to Allied's shareholders that they
approve the transactions described herein; and,

WHEREAS, BancShares' Board of Directors has approved
this Agreement and the transactions described herein, including
the issuance by BancShares of shares of its common stock to
Allied's shareholders to effectuate such transactions.

NOW, THEREFORE, in consideration of the premises, the
mutual benefits to be derived from this Agreement, and of the
representations, warranties, conditions, covenants and promises
herein contained, and subject to the terms and conditions hereof,
Allied and BancShares hereby adopt and make this Agreement and
mutually agree as follows:

ARTICLE I. PLAN OF MERGER

1.1. Names of Merging Corporations. The names of the
business corporations proposed to be merged are ALLIED BANK
CAPITAL, INC. ("Allied") and FIRST CITIZENS BANCSHARES, INC.
("BancShares").

1.2. Nature of Transaction. Subject to the provisions
of this Agreement, at the "Effective Time" (as defined in
Paragraph 1.8. below), Allied shall be merged into and with
BancShares (the "Merger").

1.3. Effect of Merger; Surviving Corporation. At the
Effective Time and by reason of the Merger, the separate
corporate existence of Allied shall cease while the corporate
existence of BancShares as the surviving corporation in the
Merger shall continue with all of its purposes, objects, rights,
privileges, powers and franchises, all of which shall be
unaffected and unimpaired by the Merger. The duration of the
corporate existence of BancShares, as the surviving corporation,
shall be perpetual and unlimited.

1.4. Assets and Liabilities of Allied. At the Effective
Time and by reason of the Merger, and in accordance with
applicable law, all of the property, assets and rights of every
kind and character of Allied (including without limitation all
real, personal or mixed property, all issued and outstanding
shares of capital stock of Peoples and Summit, all debts due on
whatever account, all other choses in action and every other
interest of or belonging to or due to Allied, whether tangible or
intangible) shall be transferred to and vest in BancShares, and
BancShares shall succeed to all the rights, privileges,
immunities, powers, purposes and franchises of a public or
private nature of Allied, all without any conveyance, assignment
or further act or deed; and, BancShares shall become responsible
for all of the liabilities, duties and obligations of every kind,
nature and description of Allied as of the Effective Time.
Immediately following the Merger, Peoples and Summit shall exist
as wholly-owned subsidiaries of BancShares.

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<PAGE>

1.5. Conversion and Exchange of Stock.

a. Conversion of Allied Stock. Except as otherwise
provided herein, at the Effective Time all rights of Allied's
shareholders with respect to all then outstanding shares of
Allied Stock shall cease to exist and the holders of shares of
Allied Stock shall cease to be, and shall have no further rights
as, shareholders of Allied. As consideration for and to
effectuate the Merger (and except as otherwise provided herein),
each such outstanding share of Allied Stock (other than shares
held by Allied, BancShares or any of their subsidiary
corporations or as to which "Dissenters Rights" (as defined in
Paragraph 1.5.h. below) are properly exercised as described in
Paragraph 1.5.h. below) shall be converted, without any action on
the part of the holder of such share, BancShares or Allied, into
(i) a number of shares of BancShares Stock equal to the "Exchange
Ratio" (as defined below), (ii) the right to receive cash in an
amount equal to the "Cash Factor" (as defined below), or (iii)
the right to receive one or more "Debentures" (as defined below)
in an aggregate principal amount equal to the "Cash Factor".
Except as otherwise provided herein, the form of consideration
into which each individual shareholder's shares of Allied Stock
will be converted will be determined in the manner described in
Paragraphs 1.5.b. and 1.5.c. below.

The "Cash Factor" shall be $25.25 per share of Allied
Stock. The "Exchange Ratio" shall be .531 of a share of
BancShares Stock for each share of Allied Stock. However,
notwithstanding anything contained herein to the contrary, (i) in
the event the "Average Closing Price" (as defined below) is less
than $45.13 per share, then the Exchange Ratio shall be adjusted
by multiplying the Exchange Ratio by a factor equal to $45.13
divided by the Average Closing Price, and (ii) in the event the
"Average Closing Price" is greater than $49.88 per share, then
the Exchange Ratio shall be adjusted by multiplying the Exchange
Ratio by a factor equal to $49.88 divided by the Average Closing
Price. In any such event the adjusted Exchange Ratio shall be a
number calculated as described above and rounded to three decimal
places. "Average Closing Price" shall mean the average of the
reported daily closing prices of BancShares Stock on the Nasdaq
National Market during the period of ten consecutive trading days
ending on the business day immediately preceding the date of the
special meeting of shareholders of Allied called (as provided in
Paragraph 6.1.a. below) for the purpose of approving this
Agreement and the Merger.

Notwithstanding anything contained herein to the
contrary, if during the period commencing on the date of this
Agreement and ending at the Effective Time Allied declares or
pays cash dividends in an aggregate amount in excess of $.12 per
share per calendar quarter or makes any other distributions on
Allied Stock (collectively, the "Cash Distributions"), then, for
purposes of this Agreement, the Cash Factor and the Exchange
Ratio shall be reduced by the per share amount of any such Cash
Distributions.

I-4

<PAGE>

A "Debenture" shall be an unsecured, subordinated
debenture of FCB having a maturity of three, five or ten years
from the Effective Time and substantially in the form attached
hereto as Schedule A. Each Debenture shall bear interest on its
principal amount from the Effective Time to maturity at a rate of
7.00% for three-year Debentures, 7.25% for five-year Debentures,
and 7.50% for ten-year Debentures. Interest shall be payable
semi-annually on each March 1 and September 1. The principal
amount of each Debenture shall be a whole dollar amount, and,
whenever the aggregate cash value to be represented by a
Debenture would be other than a whole dollar amount, the amount
of the Debenture shall be rounded upwards to the next whole
dollar.

b. Election of Consideration. By written notice to
BancShares in the manner described below, Allied's shareholders
individually may elect the form of consideration (shares of
BancShares Stock, the right to receive cash, or the right to
receive a Debenture) into which all their respective shares of
Allied Stock will be converted at the Effective Time as provided
in Paragraph 1.5.a. above (and, in the case of Debentures,
Allied's shareholders may select the maturity or maturities of
the Debenture(s) to be received). Within ten days following
approval of this Agreement and the Merger by Allied's
shareholders, Allied will mail written instructions to each of
its shareholders regarding the making of an election, together
with a form (a "Notice of Election") which each shareholder shall
be required to use for purposes of such election. Allied's
instructions shall specify a date by which a shareholder's
election must be made (the "Election Date", which shall be set by
BancShares but which, in no event, shall be less than 15 or more
than 30 days following the date the above instructions and form
are first distributed to Allied's shareholders). The above
instructions and Notice of Election distributed to Allied's
shareholders shall be provided by and in a form satisfactory to
BancShares.

In order to make an effective election, a shareholder
must deliver to BancShares a properly completed Notice of
Election on or before the close of its business on the Election
Date and in accordance with BancShares' instructions. Each
shareholder may elect only one form of consideration as to all
shares of Allied Stock held by the shareholder. Any shareholder
who does not make an election or whose Notice of Election is not
timely received by BancShares or otherwise is not made in
accordance with BancShares' instructions will be deemed to have
elected that all shares of the shareholder's Allied Stock be
converted into the right to receive cash.

c. Limit on Election; Proration of Cash, Debentures
and BancShares Stock. Notwithstanding anything contained herein
to the contrary, in no event shall shares of BancShares Stock be
issued (whether pursuant to shareholders' elections or proration)
for more

I-5

<PAGE>

than 55% or for less than 40% of the total outstanding
shares of Allied Stock.

(i) In the event the aggregate number of shares
of Allied Stock held by Allied's shareholders who have
effectively elected as provided above to receive shares of
BancShares Stock is more than 55% of the total outstanding shares
of Allied Stock, then, in the case of those shareholders who
effectively have elected (and who are deemed to have elected) to
receive BancShares Stock, BancShares will reduce on a pro rata
basis the numbers of shares of Allied Stock held by such
shareholders for which BancShares Stock will be issued such that
the aggregate number of shares of Allied Stock for which
BancShares Stock will be issued is not more than 55% of the total
outstanding shares of Allied Stock; and, the number of remaining
shares held by each such shareholder for which BancShares Stock
will be not be issued will be converted into either cash or a
Debenture (having a term of five years) as provided in Paragraph
1.5.a. above, at the option of the affected shareholder; and/or,

(ii) In the event the aggregate number of shares
of Allied Stock held by Allied's shareholders who have
effectively elected (and who are deemed to have elected) as
provided above to receive BancShares Stock and/or who have
properly exercised their Dissenters Rights is less than 40% of
the total outstanding shares of Allied Stock, then, in the case
of those shareholders who effectively have elected to receive
Debentures, BancShares will reduce on a pro rata basis the
numbers of shares of Allied Stock held by such shareholders to be
converted into Debentures such that the aggregate number of
shares of Allied Stock to be converted into BancShares Stock is
not less than 40% of the total outstanding shares of Allied
Stock; provided, further, that if after such proration of Allied
Stock the aggregate number of shares of Allied Stock held by
Allied's shareholders who have effectively elected as provided
above (or who have been deemed to have elected) to receive
BancShares Stock is less than 40% of the total outstanding shares
of Allied Stock, then, in the case of those shareholders who
effectively have elected (and who are deemed to have elected) to
receive cash, BancShares will reduce on a pro rata basis the
number of shares of Allied Stock held by such shareholders to be
converted into cash such that the aggregate number of shares of
Allied Stock to be converted into BancShares Stock is not less
than 40% of the outstanding shares of Allied Stock; and, the
number of remaining shares held by each such shareholder which
will not be converted into cash or Debentures, respectively, will
be converted into the right to receive BancShares Stock as
provided in Paragraphs 1.5.a. and 1.5.b. above.

d. Exchange and Payment Procedures. Following the
Effective Time, certificates representing shares of Allied Stock
outstanding at the Effective Time (herein sometimes referred to
as "Allied Certificates") shall evidence only the right of the
registered holder thereof to receive, and may be exchanged for,
(i) the form of consideration into which each individual
shareholder's shares of Allied Stock have been converted as
determined based on

I-6

<PAGE>

that shareholder's election and in the manner described in
Paragraphs 1.5.b. and 1.5.c. above, or (ii) in the case of
shareholders who properly have exercised Dissenters
Rights, cash in an amount determined as provided in
Paragraph 1.5.h. below.

At the Effective Time, BancShares shall issue and
deliver, or cause to be issued and delivered, to FCB, in its
capacity as the transfer agent of BancShares Stock (the "Transfer
Agent"), cash, certificates representing whole shares of
BancShares Stock, and Debentures, into which outstanding shares
of Allied Stock have been converted as provided above. As
promptly as practicable following the Effective Time, BancShares
shall send or cause to be sent to each former shareholder of
Allied of record immediately prior to the Effective Time written
instructions and transmittal materials (a "Transmittal Letter")
for use in surrendering Allied Certificates to the Transfer
Agent. Upon the proper surrender and delivery to the Transfer
Agent (in accordance with BancShares' above instructions, and
accompanied by a properly completed Transmittal Letter) by a
former shareholder of Allied of his or her Allied Certificate(s),
and in exchange therefor, the Transfer Agent shall as soon as
practicable, (i) in the case of a shareholder whose Allied Stock
has been converted into BancShares Stock or a Debenture, issue,
register and deliver to the shareholder a certificate evidencing
the number of shares of BancShares Stock, or a Debenture in the
aggregate principal amount, to which the shareholder is entitled
pursuant to Paragraph 1.5.a. above, and/or (ii) in the case of a
shareholder whose Allied Stock has been converted into the right
to receive cash, issue and deliver to the shareholder a check in
the amount of cash to which the shareholder is entitled pursuant
to Paragraph 1.5.a. above.

Following the Effective Time there shall be no further
transfers of Allied Stock on the stock transfer books of Allied
or the registration of any transfer of an Allied Certificate by
any holder thereof, and the surrender of each Allied Certificate
as provided herein must be made by or on behalf of its holder of
record at the Effective Time.

e. Antidilutive Adjustments. If, following the date
of this Agreement, BancShares shall change the number of
outstanding shares of BancShares Stock as a result of a dividend
payable in shares of BancShares Stock, a stock split, a
reclassification or other subdivision or combination of
outstanding shares, and if the record date of such event occurs
prior to the Effective Time, then an appropriate and
proportionate adjustment will be made to increase the number of
shares of BancShares Stock to be issued in exchange for each of
the shares of Allied Stock.

f. Treatment of Fractional Shares. No scrip or
certificates representing fractional shares of BancShares Stock
will be issued to any former shareholder of Allied, and, except
as provided below, no such shareholder will have any right to
vote or receive any dividend or other distribution on, or any
other right with respect to, any fraction of a share of
BancShares Stock resulting from the above exchange. In the event
the exchange of

I-7

<PAGE>

shares results in the creation of fractional shares, in
lieu of the issuance of fractional shares of
BancShares Stock, BancShares will deliver cash to the
Transfer Agent in an amount equal to the aggregate of
all fractional shares multiplied by the Average Closing Price,
and in such event the Transfer Agent shall divide such cash
among and remit it (without interest) to the former
shareholders of Allied in accordance with their respective
interests.

g. Surrender of Certificates. Subject to
Paragraph 1.5.i. below, no BancShares Stock certificate or cash
shall be delivered to any former shareholder of Allied unless and
until such shareholder shall have properly surrendered to the
Transfer Agent the Allied Certificate(s) formerly representing
his or her shares of Allied Stock, together with a properly
completed Transmittal Letter in such form as shall be provided to
the shareholder by BancShares for that purpose. Further, until
such Allied Certificate(s) are so surrendered, no dividend or
other distribution payable to holders of record of BancShares
Stock as of any date subsequent to the Effective Time shall be
delivered to the holder of such Allied Certificate(s). However,
subject to prior escheatment under applicable law, upon the
proper surrender of such Allied Certificate(s) the Transfer Agent
shall pay to the registered holder of the shares of BancShares
Stock represented by such Allied Certificate(s) the amount of any
such cash, dividends or distributions which have accrued but
remain unpaid with respect to such shares. Neither Allied,
BancShares nor the Transfer Agent shall have any obligation to
pay any interest on any such cash, dividends or distributions for
any period prior to such payment.

h. Dissenters. Any shareholder of Allied who
properly exercises the right of dissent and appraisal with
respect to the Merger as provided in Section 55-13-02 of the
North Carolina General Statutes ("Dissenters Rights") shall be
entitled to receive payment of the fair value of his or her
shares of Allied Stock in the manner and pursuant to the
procedures provided therein. Shares of Allied Stock held by
persons who exercise Dissenters Rights shall not be converted
into BancShares Stock or the right to receive cash or Debentures
in the manner provided in Paragraph 1.5.a. above. However, if
any shareholder of Allied who exercises Dissenters Rights shall
fail to perfect his or her right to receive cash as provided
above, or effectively shall waive or lose such right, then each
of his or her shares of Allied Stock, at BancShares' sole option,
shall be deemed to have been converted into BancShares Stock or
the right to receive cash or Debentures as of the Effective Time
as provided in Paragraph 1.5.a. above.

i. Lost Certificates. Any shareholder of Allied
whose certificate evidencing shares of Allied Stock has been
lost, destroyed, stolen or otherwise is missing shall be entitled
to receive a certificate representing the shares of BancShares
Stock to which he or she is entitled in accordance with and upon
compliance with conditions imposed by the Transfer Agent or
BancShares (including without limitation a requirement that the
shareholder provide a lost instruments indemnity or surety bond
in

I-8

<PAGE>

form, substance and amount satisfactory to the Transfer Agent
and BancShares).

j. Outstanding BancShares Stock. The status of the
shares of BancShares Stock which are outstanding immediately
prior to the Effective Time shall not be affected by the Merger.

1.6. Treatment of Allied Stock Options. Allied shall
trigger or cause to be triggered at the Effective Time and for
the benefit of participating employees or directors, as the case
may be, the limited stock appreciation rights provided under the
terms of the 1992 Incentive Stock Option Plan, as amended, the
1993 Nonstatutory Stock Option Plan for Independent Directors,
and the 1992 Nonstatutory Stock Option Plan for Independent
Directors, with respect to any options under such plans which are
outstanding and unexercised at the Effective Time (and which
options shall be limited to not more than 563,164 shares of
Allied Stock). The fair market value of each share of Allied
Stock for purposes of determining the value of such rights shall
be equal to the Cash Factor pursuant to Section 1.5 of this
Agreement. Allied shall deliver payment to option holders on
account of the exercise of limited stock appreciation rights
immediately prior to the Effective Time. Notwithstanding the
foregoing, Allied shall not be permitted to trigger or cause to
be triggered any limited stock appreciation rights with respect
to options that are not outstanding and unexercised as of the
date of this Agreement or which have been granted to employees or
directors not in employment of or service with Allied or the
Subsidiaries at the Effective Time. It is agreed that such cash
payments shall not be considered Cash Distributions.

1.7. Certificate of Incorporation, Bylaws and
Management. The Certificate of Incorporation and Bylaws of
BancShares in effect at the Effective Time shall be the
Certificate of Incorporation and Bylaws of BancShares as the
surviving corporation. The officers and directors of BancShares
in office at the Effective Time shall continue to hold such
offices until removed as provided by law or until the election or
appointment of their respective successors.

1.8. Closing; Effective Time. The closing of the
transactions contemplated by this Agreement (the "Closing") shall
take place at the offices of BancShares in Raleigh, North
Carolina, or at such other place as BancShares shall designate,
on a date mutually agreeable to Allied and BancShares (the
"Closing Date") after the expiration of any and all required
waiting periods following the effective date of required
approvals of the Merger by governmental or regulatory authorities
(but in no event more than 60 days following the expiration of
all such required waiting periods). At the Closing, BancShares
and Allied shall take such actions (including without limitation
the delivery of certain closing documents and the execution of a
Certificate of Merger under Delaware law) as are required herein
and as otherwise shall be required by law to consummate the
Merger and cause it to become effective.

I-9

<PAGE>

Subject to the terms and conditions set forth herein
(including without limitation the receipt of all required
approvals of governmental and regulatory authorities), the Merger
shall become effective on the date and at the time (the
"Effective Time") specified in the Certificate of Merger filed
with the appropriate governmental body in accordance with law;
provided, however, that the Effective Time shall in no event be
more than ten days following the Closing Date.

1.9. No Approval of Merger by Shareholders of BancShares.
As BancShares is a Delaware corporation no approval of the
shareholders of BancShares is required, pursuant to Sections
251(f) and 252(e) of the Delaware General Corporation Law, in as
much as (i) this Agreement does not amend in any respect the
Certificate of Incorporation of BancShares, (ii) each share of
BancShares Stock and each share of BancShares Class B common
stock outstanding immediately prior to the Effective Time is to
be an identical outstanding share of BancShares after the
Effective Time, and (iii) the authorized unissued shares of
BancShares Stock to be issued under the Plan of Merger contained
in this Agreement do not exceed 20% of the shares of BancShares
Stock outstanding immediately prior to the Effective Time.

ARTICLE II. REPRESENTATIONS AND WARRANTIES OF ALLIED

Except as otherwise specifically provided herein or as
"Previously Disclosed" to BancShares, Allied hereby makes the
following representations and warranties to BancShares.
("Previously Disclosed" shall mean, as to Allied, the disclosure
of information in a letter delivered by Allied to BancShares
specifically referring to this Agreement and arranged in
paragraphs corresponding to the Sections, subsections and items
of this Agreement applicable thereto, and which letter has been
delivered prior to the execution of this Agreement. Information
shall be deemed Previously Disclosed for the purpose of a given
Paragraph, subparagraph or item of this Agreement only to the
extent a specific reference thereto is made in connection with
disclosure of such information at the time of such delivery.)

2.1. Organization; Standing; Power. Allied, Peoples and
Summit each (i) is duly organized and incorporated, validly
existing and in good standing (as a business corporation or a
savings bank, respectively) under the laws of the State of North
Carolina; (ii) has all requisite power and authority (corporate
and other) to own, lease and operate its properties and to carry
on its business as now is being conducted; (iii) is duly
qualified to do business and is in good standing in each other
jurisdiction in which the character of the properties owned,
leased or operated by it therein or in which the transaction of
its business makes such qualification necessary, except where
failure so to qualify would not have a material adverse effect on
Allied; and, (iv) is not transacting business or operating any
properties owned or leased by it in violation of any provision of
federal, state or local law or any rule or regulation promulgated
thereunder, which violation would have a material adverse effect
on Allied.

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<PAGE>

2.2. Capital Stock. Allied's authorized capital stock
consists of 5,000,000 shares of preferred stock, $1.00 par value
per share, none of which are issued and outstanding, and
20,000,000 shares of common stock, $0.50 par value per share of
which 2,258,194 shares are issued and outstanding and constitute
Allied's only outstanding securities.

Peoples' authorized capital stock consists of 10,000
shares of common stock, $1.00 par value ("Peoples Stock"), of
which 100 shares are issued and outstanding and constitute
Peoples' only outstanding securities. All outstanding shares of
Peoples Stock are owned beneficially and of record by Allied.

Summit's authorized capital stock consists of 5,000,000
shares of preferred stock, none of which is issued and
outstanding, and 20,000,000 shares of common stock, no par value
per share ("Summit Stock"), of which 100 shares are issued and
outstanding and constitute Summit's only outstanding securities.
All outstanding shares of Summit Stock are owned beneficially and
of record by Allied.

Each outstanding share of Allied Stock, Peoples Stock
and Summit Stock (i) has been duly authorized and is validly
issued and outstanding, and is fully paid and nonassessable, and
(ii) has been issued in compliance with applicable requirements
of the Securities Act of 1933, as amended (the "1933 Act"), and
(iii) has not been issued in violation of the preemptive rights
of any shareholder. The Allied Stock has been registered with
the Securities and Exchange Commission ("SEC") under the
Securities Exchange Act of 1934, as amended (the "1934 Act").
The Peoples Stock and the Summit Stock is not subject to the
registration and reporting requirements of the 1934 Act.

2.3. Principal Shareholders. No person or entity is known
to Allied to beneficially own, directly or indirectly, more than
5% of the outstanding shares of Allied Stock.

2.4. Subsidiaries. Peoples and Summit are Allied's only
direct subsidiaries (the "Subsidiaries"). The Subsidiaries have
no direct subsidiaries. Except for equity issues reflected in
Allied's or a Subsidiary's investment portfolio, Allied and the
Subsidiaries do not own any stock or other equity interest in any
other corporation, service corporation, joint venture,
partnership or other entity.

2.5. Convertible Securities, Options, Etc. Allied and the
Subsidiaries do not have any outstanding (i) securities or other
obligations (including debentures or other debt instruments)
which are convertible into shares of Allied Stock, Peoples Stock
or Summit Stock or any other securities of Allied, Peoples or
Summit, (ii) options, warrants, rights, calls or other
commitments of any nature which entitle any person to receive or
acquire any shares of Allied Stock, Peoples Stock

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<PAGE>

or Summit Stock or any other securities of Allied,
Peoples or Summit, or (iii) plan, agreement or other
arrangement pursuant to which shares of Allied Stock,
Peoples Stock or Summit Stock or any other securities of
Allied, Peoples or Summit or options, warrants, rights,
calls or other commitments of any nature pertaining
thereto, have been or may be issued.

2.6. Authorization and Validity of Agreement. This
Agreement has been duly and validly approved by Allied's Board of
Directors. Subject only to approval of this Agreement by the
shareholders of Allied in the manner required by law (as
contemplated by Paragraph 6.1.a. below), (i) Allied has the
corporate power and authority to execute and deliver this
Agreement and to perform its obligations and agreements and carry
out the transactions described herein, (ii) all corporate
proceedings and approvals required to authorize Allied to enter
into this Agreement and to perform its obligations and agreements
and carry out the transactions described herein have been duly
and properly completed or obtained, and (iii) this Agreement
constitutes the valid and binding agreement of Allied enforceable
in accordance with its terms (except to the extent enforceability
may be limited by (A) applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in
effect which affect creditors' rights generally, (B) legal and
equitable limitations on the availability of injunctive relief,
specific performance and other equitable remedies, and
(C) general principles of equity and applicable laws or court
decisions limiting the enforceability of indemnification
provisions).

2.7. Validity of Transactions; Absence of Required Consents
or Waivers. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions described
herein, nor compliance by Allied with any of its obligations or
agreements contained herein, will: (i) conflict with or result in
a breach of the terms and conditions of, or constitute a default
or violation under any provision of, the Articles or Certificate
of Incorporation or Bylaws, of Allied or either of the
Subsidiaries, or any material contract, agreement, lease,
mortgage, note, bond, indenture, license, or obligation or
understanding (oral or written) to which Allied or either of the
Subsidiaries is bound or by which any of them or its business,
capital stock or any of its properties or assets may be affected;
(ii) result in the creation or imposition of any lien, claim,
interest, charge, restriction or encumbrance upon any of the
properties or assets of Allied or either of the Subsidiaries;
(iii) violate any applicable federal or state statute, law, rule
or regulation, or any judgment, order, writ, injunction or decree
of any court, administrative or regulatory agency or governmental
body; (iv) result in the acceleration of any obligation or
indebtedness of Allied or either of the Subsidiaries; or,
(v) interfere with or otherwise adversely affect the ability of
Allied or either of the Subsidiaries to carry on its business as
presently conducted, or interfere with or otherwise adversely
affect the ability of either BancShares or FCB to carry on such
business after the Effective Time.

No consents, approvals or waivers are required to be
obtained from any person or entity in connection with Allied's
execution and delivery of this Agreement, or the performance of
its obligations or agreements or the consummation of the
transactions

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<PAGE>

described herein, except for required approvals of Allied's
shareholders as described in Paragraph 7.1.c. below and of
governmental or regulatory authorities as described in
Paragraph 7.1.a. below.

2.8. Allied Books and Records. Allied's and the
Subsidiaries' books of account and business records have been
maintained in substantial compliance with all applicable legal
and accounting requirements and in accordance with good business
practices, and such books and records are complete and reflect
accurately in all material respects Allied's and the
Subsidiaries' respective items of income and expense and all of
their respective assets, liabilities and stockholders' equity.
The respective minute books of Allied and the Subsidiaries
accurately reflect in all material respects the corporate actions
which their respective shareholders and board of directors, and
all committees thereof, have taken during the time periods
covered by such minute books. All such minute books have been or
will be made available to BancShares and its representatives.

2.9. Allied Reports. Since January 1, 1990, Allied and the
Subsidiaries each has filed all reports, registrations and
statements, together with any amendments required to be made with
respect thereto, that were required to be filed with (i) the
Board of Governors of the Federal Reserve System (the "FRB"),
(ii) the Federal Deposit Insurance Corporation (the "FDIC"),
(iii) the Office of Thrift Supervision ("OTS"), (iv) the
Administrator of the North Carolina Savings Institutions Division
(the "Administrator"), (v) the SEC (including all reports
required to be filed under the 1934 Act), or (vi) any other
governmental or regulatory authorities having jurisdiction over
Allied or the Subsidiaries, but not including Internal Revenue
Service, Department of Labor, or Pension Benefit Guarantee
Corporation filings that relate to tax or Employee Retirement
Income Security Act of 1974 matters covered by Paragraph 2.11.
and 2.25. below. All such reports, registrations and statements
filed by Allied or the Subsidiaries with the FRB, the FDIC, the
OTS, the Administrator, the SEC or other such regulatory
authority are collectively referred to herein as the "Allied
Reports." As of their respective dates, the Allied Reports
complied in all material respects with all the statutes, rules
and regulations enforced or promulgated by the regulatory
authority with which they were filed and did not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading; and, none of Allied or the
Subsidiaries has been notified that any such Allied Reports were
deficient in any material respect as to form or content.
Following the date of this Agreement, Allied shall deliver to
BancShares, simultaneous with the filing thereof, a copy of each
report, registration, statement or other regulatory filing made
by Allied, or the Subsidiaries with the FRB, the FDIC, the OTS,
the Administrator, the SEC or any other regulatory authority.

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<PAGE>

2.10. Allied Financial Statements. Allied has delivered
to BancShares a copy of (i) its audited consolidated balance
sheets as of December 31, 1993 and December 31, 1994, and its
consolidated statements of operations, changes in stockholders'
equity and cash flows for the years ended December 31, 1992,
December 31, 1993 and December 31, 1994, together with notes
thereto (collectively, the "Allied Financial Statements"), and
(ii) its unaudited consolidated balance sheet as of June 30, 1995
and its statement of operations for the six months ended June 30,
1995 (the "Allied Interim Financial Statements"); and, following
the date of this Agreement, Allied promptly will deliver to
BancShares all other annual or interim financial statements
prepared by or for Allied or the Subsidiaries. The Allied
Financial Statements and the Allied Interim Financial Statements
(including any related notes and schedules thereto) (i) are in
accordance with Allied's books and records, and (ii) were
prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the
periods indicated and present fairly Allied's consolidated
financial condition, assets and liabilities, results of
operations, changes in stockholders' equity and changes in cash
flows as of the dates indicated and for the periods specified
therein. The Allied Financial Statements have been audited by
Coopers & Lybrand L.L.P., Allied's independent certified public
accountants.

2.11. Tax Returns and Other Tax Matters. (i) Allied and
each of the Subsidiaries have timely filed or caused to be filed
all federal, state and local income tax returns and reports which
are required by law to have been filed, and, to the best
knowledge and belief of management of Allied, all such returns
and reports were true, correct and complete and contained all
material information required to be contained therein; (ii) all
federal, state and local income, profits, franchise, sales, use,
occupation, property, excise, withholding, employment and other
taxes (including interest and penalties), charges and assessments
which have become due from or been assessed or levied against
Allied or either of the Subsidiaries or their respective
properties have been fully paid or, if not yet due, a reserve or
accrual which is adequate in all material respects for the
payment of all such taxes to be paid and the obligation for such
unpaid taxes is reflected on the Allied Financial Statements;
(iii) the income, profits, franchise, sales, use, occupation,
property, excise, withholding, employment and other tax returns
and reports of Allied and the Subsidiaries have not been subject
to audit by the Internal Revenue Service (the "IRS") or the
Department of Tax and Revenue of the State of North Carolina in
the last ten years and neither Allied nor either of the
Subsidiaries has received any indication of the pendency of any
audit or examination in connection with any such tax return or
report and have no knowledge that any such return or report is
subject to adjustment; and (iv) neither Allied nor the
Subsidiaries has executed any waiver or extended the statute of
limitations (or been asked to execute a waiver or extend a
statute of limitation) with respect to any tax year, the audit of
any such tax return or report or the assessment or collection of
any tax.

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<PAGE>

2.12. Absence of Material Adverse Changes or Certain
Other Events.

(i) Since December 31, 1994, Allied and the
Subsidiaries have conducted their respective businesses only in
the ordinary course, and there has been no material adverse
change, and there has occurred no event or development and there
currently exists no condition or circumstance which, with the
lapse of time or otherwise, may or could cause, create or result
in a material adverse change, in or affecting the financial
condition of Allied or either of the Subsidiaries or in their
results of operations, prospects, business, assets, loan
portfolio, investments, properties or operations.

(ii) Since December 31, 1994, and other than
in the ordinary course of its business, neither Allied nor either
of the Subsidiaries has incurred any material liability or
engaged in any material transaction or entered into any material
agreement, increased the salaries, compensation or general
benefits payable to its employees, suffered any loss, destruction
or damage to any of its properties or assets, or made a material
acquisition or disposition of any assets or entered into any
material contract or lease.

2.13. Absence of Undisclosed Liabilities. Allied and
the Subsidiaries do not have any liabilities or obligations,
whether known or unknown, matured or unmatured, accrued,
absolute, contingent or otherwise, whether due or to become due
(including without limitation tax liabilities or unfunded
liabilities under employee benefit plans or arrangements), other
than (i) those reflected in the Allied Financial Statements or
the Allied Interim Financial Statements, or (ii) obligations or
liabilities incurred in the ordinary course of their business
since June 30, 1995 and which are not, individually or in the
aggregate, material to Allied or the Subsidiaries.

2.14. Compliance with Existing Obligations. Allied and
the Subsidiaries each has performed in all material respects all
obligations required to be performed by it under, and it is not
in default in any respect under, or in violation in any respect
of, the terms and conditions of its respective Articles or
Certificate of Incorporation or Bylaws, and/or any contract,
agreement, lease, mortgage, note, bond, indenture, license,
obligation, understanding or other undertaking (whether oral or
written) to which it is bound or by which its business, capital
stock or any property or asset may be affected.

2.15. Litigation and Compliance with Law.

(a) There are no actions, suits, arbitrations,
controversies or other proceedings or investigations (or, to the
best knowledge and belief of management of Allied and the
Subsidiaries, any facts or circumstances which reasonably could
result in such), including without limitation any such action by
any governmental or regulatory authority, which currently exist
or are ongoing, pending or, to the best knowledge and belief of

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<PAGE>

management of Allied and the Subsidiaries, threatened,
contemplated or probable of assertion, against, relating to or
otherwise affecting Allied or the Subsidiaries or any of their
properties, assets or employees which, if determined adversely,
could result in liability on the part of Allied or either of the
Subsidiaries for, or subject Allied or either of the Subsidiaries
to, monetary damages, fines or penalties or an injunction, or
which could have a material adverse effect on the financial
condition, results of operations, prospects, business, assets,
loan portfolio, investments, properties or operations of Allied
or either of the Subsidiaries or on the ability of Allied to
consummate the Merger.

(b) Allied and the Subsidiaries have all licenses,
permits, orders, authorizations or approvals ("Permits") of any
federal, state, local or foreign governmental or regulatory body
that are material to or necessary for the conduct of their
business or to own, lease and operate their properties; all such
Permits are in full force and effect; no violations are or have
been recorded in respect of any such Permits; and no proceeding
is pending or, to the best knowledge of management of Allied and
the Subsidiaries, threatened or probable of assertion to suspend,
cancel, revoke or limit any Permit.

(c) Neither Allied nor either of the Subsidiaries is
subject to any supervisory agreement, enforcement order, writ,
injunction, capital directive, supervisory directive, memorandum
of understanding or other similar agreement, order, directive,
memorandum or consent of, with or issued by any regulatory or
other governmental authority (including without limitation the
FRB, the FDIC or the Administrator) relating to its financial
condition, directors or officers, employees, operations, capital,
regulatory compliance or otherwise; there are no judgments,
orders, stipulations, injunctions, decrees or awards against
Allied or either of the Subsidiaries which in any manner limit,
restrict, regulate, enjoin or prohibit any present or past
business or practice of Allied or the Subsidiaries; and, neither
Allied nor either of the Subsidiaries has been advised and has no
reason to believe that any regulatory or other governmental
authority or any court is contemplating, threatening or
requesting the issuance of any such agreement, order, injunction,
directive, memorandum, judgment, stipulation, decree or award.

(d) Neither Allied nor either of the Subsidiaries is
in violation or default in any material respect under, and has
complied in all material respects with, all laws, statutes,
ordinances, rules, regulations, orders, writs, injunctions or
decrees of any court or federal, state, municipal or other
governmental or regulatory authority having jurisdiction or
authority over it or its business operations, properties or
assets (including without limitation all provisions of North
Carolina law relating to usury, the Consumer Credit Protection
Act, and all other laws and regulations applicable to extensions
of credit by the Subsidiaries) and, to the knowledge of Allied
and the Subsidiaries, there is no basis for any claim by any
person or

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<PAGE>

authority for compensation, reimbursement or damages or
otherwise for any violation of any of the foregoing.

2.16. Real Properties. Allied has Previously Disclosed
to BancShares a listing of all real property owned or leased by
Allied or either of the Subsidiaries (including the Subsidiaries'
banking facilities and all other real estate or foreclosed
properties, including improvements, thereon owned by the
Subsidiaries) (the "Real Property") and all leases pertaining to
any such Real Property to which Allied or either of the
Subsidiaries is a party (the "Real Property Leases"). With
respect to all Real Property owned by Allied or either of the
Subsidiaries, Allied or the Subsidiary has good and marketable
fee simple title to such Real Property and owns the same free and
clear of all mortgages, liens, leases, encumbrances, title
defects and exceptions to title other than (i) the lien of
current taxes not yet due and payable, and (ii) such
imperfections of title and restrictions, covenants and easements
(including utility easements) which do not materially affect the
value of the Real Property and which do not and will not
materially detract from, interfere with or restrict the present
or future use of the properties subject thereto or affected
thereby. With respect to each Real Property Lease (i) such lease
is valid and enforceable in accordance with its terms, (ii) there
currently exists no circumstance or condition which constitutes
an event of default by Allied or either of the Subsidiaries (as
lessor or lessee) or its respective lessor or which, with the
passage of time or the giving of required notices will or could
constitute such an event of default, and (iii) subject to any
required consent of Allied or the Subsidiary's lessor, each such
Real Property Lease may be assigned to BancShares and the
execution and delivery of this Agreement does not constitute an
event of default thereunder.

To the best of the knowledge and belief of management
of Allied and the Subsidiaries, the Real Property (excluding
other real estate owned) complies in all material respects with
all applicable federal, state and local laws, regulations,
ordinances or orders of any governmental authority, including
those relating to zoning, building and use permits, and the Real
Property (excluding other real estate owned) may be used under
applicable zoning ordinances for commercial banking facilities as
a matter of right rather than as a conditional or nonconforming
use.

All improvements and fixtures included in or on the
Real Property are in good condition and repair, ordinary wear and
tear excepted, and there does not exist any condition which
interferes (or will interfere after the Merger) with BancShares
use or affects the economic value thereof.

2.17. Loans, Accounts, Notes and Other Receivables.
(a) All loans, accounts, notes and other receivables
reflected as assets on Allied's and the Subsidiaries' books and
records (A) have resulted from bona fide business transactions in
the ordinary course of the Subsidiaries' operations, (B) in all
material respects were made in accordance with the Subsidiaries'
standard loan policies and procedures, and (C) are owned by the

I-17

<PAGE>

Subsidiaries free and clear of all liens, encumbrances,
assignments, participation or repurchase agreements or other
exceptions to title or to the ownership or collection rights of
any other person or entity.

(b) All records of the Subsidiaries regarding all
outstanding loans, accounts, notes and other receivables, and all
other real estate owned, are accurate in all material respects,
and, with respect to each loan which the Subsidiaries' loan
documentation indicates is secured by any real or personal
property or property rights ("Loan Collateral"), such loan is
secured by valid, perfected and enforceable liens on all such
Loan Collateral having the priority described in the
Subsidiaries' records of such loan.

(c) To the best knowledge of management of Allied and
the Subsidiaries, each loan reflected as an asset on Allied's and
the Subsidiaries' books, and each guaranty therefor, is the
legal, valid and binding obligation of the obligor or guarantor
thereon, and no defense, offset or counterclaim has been asserted
with respect to any such loan or guaranty.

(d) Allied has Previously Disclosed to BancShares (i)
a written listing of each loan, extension of credit or other
asset of the Subsidiaries which, as of June 30, 1995, is
classified by the FRB, the FDIC, the Administrator or by either
of the Subsidiaries as "Loss," "Doubtful," "Substandard" or
"Special Mention" (or otherwise by words of similar import), or
which either of the Subsidiaries has designated as a special
asset or for special handling or placed on any "watch list"
because of concerns regarding the ultimate collectibility or
deteriorating condition of such asset or any obligor or Loan
Collateral therefor, and (ii) a written listing of each loan or
extension of credit of either of the Subsidiaries which, as of
June 30, 1995, was past due more than 60 days as to the payment
of principal and/or interest, or as to which any obligor thereon
(including the borrower or any guarantor) otherwise was in
default, is the subject of a proceeding in bankruptcy or
otherwise has indicated any inability or intention not to repay
such loan or extension of credit. Each such listing is accurate
and complete as of the date indicated.

(e) The Subsidiaries' reserve for possible loan losses
(the "Loan Loss Reserve") has been established in conformity with
GAAP, sound banking practices and all applicable requirements,
rules and policies of the FRB, the FDIC and the Administrator
and, in the best judgment of management of Allied and the
Subsidiaries, is reasonable in view of the size and character of
the Subsidiaries' loan portfolios, current economic conditions
and other relevant factors, and is adequate to provide for losses
relating to or the risk of loss inherent in the Subsidiaries'
loan portfolios and other real estate owned.

2.18. Securities Portfolio and Investments. All
securities owned by Allied and the Subsidiaries (whether owned of
record or beneficially) are held free and clear of all mortgages,

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<PAGE>

liens, pledges, encumbrances or any other restriction or rights
of any other person or entity, whether contractual or statutory,
which would materially impair the ability of Allied or either of
the Subsidiaries to dispose freely of any such security and/or
otherwise to realize the benefits of ownership thereof at any
time. There are no voting trusts or other agreements or
undertakings to which Allied or either of the Subsidiaries is a
party with respect to the voting of any such securities. With
respect to all "repurchase agreements" to which either of the
Subsidiaries has "purchased" securities under agreement to
resell, such Subsidiary has a valid, perfected first lien or
security interest in the government securities or other
collateral securing the repurchase agreement, and the value of
the collateral securing each such repurchase agreement equals or
exceeds the amount of the debt owed to the Subsidiary which is
secured by such collateral.

Except for fluctuations in the market values of United
States Treasury and agency or municipal securities, since June
30, 1995, there has been no significant deterioration or material
adverse change in the quality, or any material decrease in the
value, of Allied's or the Subsidiaries' securities portfolios as
a whole.

2.19. Personal Property and Other Assets. All assets of
Allied and the Subsidiaries (including without limitation all
banking equipment, data processing equipment, vehicles, and all
other personal property located in any office of or used by
Allied or either of the Subsidiaries in the operation of its
business) are owned by Allied or either of the Subsidiaries free
and clear of all liens, encumbrances, leases, title defects or
exceptions to title. All of Allied's or either of the
Subsidiaries' personal property material to its business is in
good operating condition and repair, ordinary wear and tear
excepted.

2.20. Patents and Trademarks. Allied and each of the
Subsidiaries own, possess or have the right to use any and all
patents, licenses, trademarks, trade names, copyrights, trade
secrets and proprietary and other confidential information
necessary to conduct their business as now conducted; and,
neither Allied nor either of the Subsidiaries has violated, and
currently is not in conflict with, any patent, license,
trademark, trade name, copyright or proprietary right of any
other person or entity.

2.21. Environmental Matters.

(a) Allied has Previously Disclosed to BancShares
copies of all written reports, correspondence, notices or other
materials, if any, in its possession pertaining to environmental
surveys or assessments of the Real Property or any of the
Subsidiaries' Loan Collateral and any improvements thereon, or to
any violation of "Environmental Laws" (as defined below) on,
affecting or otherwise involving the Real Property, any Loan
Collateral or otherwise involving Allied or either of the
Subsidiaries.

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<PAGE>

(b) There has been no presence, use, production,
generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, reporting, testing, processing,
emission, discharge, release, threatened release, control,
removal, clean-up or remediation of any "Hazardous Substances"
(as defined below) by any person prior to the date hereof on,
from or relating to the Real Property or, to the best of the
knowledge and belief of management of Allied and the
Subsidiaries, the Loan Collateral, which constitutes a violation
of any Environmental Laws.

(c) Neither Allied nor either of the Subsidiaries has
violated any federal, state or local law, rule, regulation,
order, permit or other requirement relating to health, safety or
the environment or imposing liability, responsibility or
standards of conduct applicable to environmental conditions (all
such laws, rules, regulations, orders and other requirements
being herein collectively referred to as "Environmental Laws"),
and there has been no violation of any Environmental Laws
(including, to the best of the knowledge and belief of management
of Allied and the Subsidiaries, any violation with respect to or
relating to any Loan Collateral) by any other person or entity
for whose liability or obligation with respect to any particular
matter or violation Allied or either of the Subsidiaries is or
may be responsible or liable.

(d) Neither Allied nor either of the Subsidiaries is
subject to any claims, demands, causes of action, suits,
proceedings, losses, damages, penalties, liabilities,
obligations, costs or expenses of any kind and nature which arise
out of, under or in connection with, or which result from or are
based upon the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution,
labeling, reporting, testing, processing, emission, discharge,
release, threatened release, control, removal, clean-up or
remediation of any Hazardous Substances on, from or relating to
the Real Property or, to the best of the knowledge and belief of
management of Allied and the Subsidiaries, any Loan Collateral by
any person or entity.

(e) No facts, events or conditions relating to the
Real Property or, to the best knowledge of management of Allied
and the Subsidiaries, any Loan Collateral, or the operations of
Allied or the Subsidiaries at any of their office locations, will
prevent, hinder or limit continued compliance with Environmental
Laws, or give rise to any investigatory, emergency removal,
remedial or corrective actions, obligations or liabilities
(whether accrued, absolute, contingent, unliquidated or
otherwise) pursuant to Environmental Laws.

For purposes of this Agreement, "Environmental
Laws" shall include:

(i) all federal, state and local
statutes, regulations, ordinances, orders, decrees, and similar
provisions having the force or effect of law,

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<PAGE>

(ii) all contractual agreements, and

(iii) all common law,

concerning public health and safety, worker health and safety,
and pollution or protection of the environment, including without
limitation all standards of conduct and bases of obligations
relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution,
labeling, reporting, testing, processing, discharge, release,
threatened release, control, emergency removal, clean-up or
remediation of any Hazardous Substances (including without
limitation the Comprehensive Environmental Response, Compensation
and Liability Act, the Superfund Amendment and Reauthorization
Act, the Federal Insecticide, Fungicide and Rodenticide Act, the
Hazardous Materials Transportation Act, the Resource Conservation
and Recovery Act, the Clean Water Act, the Clean Air Act, the
Toxic Substances Control Act, any "Superfund" or "Superlien" law,
the Americans with Disabilities Act, and the Occupational Safety
and Health Act), as such may now or at any time hereafter be
defined or in effect.

For purposes of this Agreement, "Hazardous
Substances" shall include hazardous, toxic or otherwise regulated
materials, substances or wastes; chemical substances or mixtures;
pesticides; pollutants; contaminants; toxic chemicals; oil or
other petroleum products, byproducts, or constituents (including
but not limited to crude oil, diesel oil, fuel oil, gasoline,
lubrication oil, oil refuse, oil mixed with other waste, oil
sludge, and all other liquid hydrocarbons regardless of specific
gravity); asbestos or asbestos containing material; flammable
explosives; polychlorinated biphenyls ("PCBs") or any material
containing PCBs; radioactive materials; biological micro
organisms, viruses, fungi, spores; environmental tobacco smoke;
radon or radon gas; formaldehyde or any material containing
formaldehyde; fumigants; any material or substance comprising or
contributing to conditions known as "sick building syndrome,"
"building-related illness" or similar conditions or exposures;
and/or any hazardous, toxic, regulated or dangerous waste,
substance or material defined as such by the United States
Environmental Protection Agency or any other federal, state or
local governmental agency or political subdivision thereof, or
for the purpose of or by any Environmental Laws, as now or at any
time hereafter may be in effect.

2.22. Absence of Brokerage or Finders Commissions.
(i) All negotiations relative to this Agreement and the
transactions described herein have been carried on by Allied
directly with BancShares; (ii) no person or firm has been
retained by or has acted on behalf of, pursuant to any agreement,
arrangement or understanding with, or under the authority of,
Allied or its Board of Directors, as a broker, finder or agent or
has performed similar functions or otherwise is or may be
entitled to receive or claim a brokerage fee or other commission
in connection with or as a result of the transactions described
herein; and, (iii) Allied has not agreed to pay any brokerage fee
or other commission to any person

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<PAGE>

or entity in connection with or as a result of the transactions
described herein.

2.23. Material Contracts. Other than a benefit plan or
employment agreement Previously Disclosed to BancShares pursuant
to Paragraph 2.25. below, neither Allied nor either of the
Subsidiaries is a party to or bound by any agreement (i)
involving money or other property in an amount or with a value in
excess of $50,000, (ii) which is not to be performed in full
prior to December 31, 1995, (iii) which calls for the provision
of goods or services to Allied or either of the Subsidiaries and
cannot be terminated without material penalty upon written notice
to the other party thereto, (iv) which is material to Allied or
either of the Subsidiaries and was not entered into in the
ordinary course of business, (v) which involves hedging, options
or any similar trading activity, or interest rate exchanges or
swaps, (vi) which commits Allied or either of the Subsidiaries to
extend any loan or credit (with the exception of letters of
credit, lines of credit and loan commitments extended in the
ordinary course of the Subsidiaries' business), (vii) which
involves the purchase or sale of any assets of Allied or either
of the Subsidiaries, or the purchase, sale, issuance, redemption
or transfer of any capital stock or other securities of Allied or
either of the Subsidiaries, or (viii) with any director, officer
or principal shareholder of Allied or the Subsidiaries (including
without limitation any consulting agreement, but not including
any agreement relating to loans or other banking services which
were made in the ordinary course of the Subsidiaries' business
and on substantially the same terms and conditions as were
prevailing at that time for similar agreements with unrelated
persons).

Neither Allied nor either of the Subsidiaries is in
default in any material respect, and there has not occurred any
event which with the lapse of time or giving of notice or both
would constitute such a default, under any contract, lease,
insurance policy, commitment or arrangement to which it is a
party or by which it or its property is or may be bound or
affected or under which it or its property receives benefits,
where the consequences of such default would have a material
adverse effect on the financial condition, results of operations,
prospects, business, assets, loan portfolio, investments,
properties or operations of Allied or either of the Subsidiaries.

2.24. Employment Matters; Employee Relations. Allied
and each of the Subsidiaries (i) has paid in full to or accrued
on behalf of all its respective directors, officers and employees
all wages, salaries, commissions, bonuses, fees and other direct
compensation for all labor or services rendered, including all
wages, salaries, commissions, bonuses, fees and other direct
compensation for all labor or services performed by them to the
date of this Agreement and all vacation pay, sick pay, severance
pay and other amounts promised to the extent required by law or
Allied's or the Subsidiaries' existing policies or practices, and
(ii) is in material compliance with all applicable federal, state
and local laws, statutes, rules and regulations with regard to

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<PAGE>

employment and employment practices, terms and conditions, and
wages and hours and other compensation matters; and, no person
has, to the knowledge of management of Allied or the
Subsidiaries, asserted that Allied or the Subsidiaries is liable
in any amount for any arrearages in wages or employment taxes or
for any penalties for failure to comply with any of the
foregoing.

There is no action, suit or proceeding by any
person pending or, to the best knowledge of management of Allied
or the Subsidiaries, threatened, against Allied or the
Subsidiaries (or any of their respective employees), involving
employment discrimination, sexual harassment, wrongful discharge
or similar claims.

Neither Allied nor the Subsidiaries is a party to
or bound by any collective bargaining agreement with any of its
employees, any labor union or any other collective bargaining
unit or organization. There is no pending or threatened labor
dispute, work stoppage or strike involving Allied or the
Subsidiaries and any of its employees, or any pending or
threatened proceeding in which it is asserted that Allied or the
Subsidiaries has committed an unfair labor practice; and, neither
Allied nor the Subsidiaries is aware of any activity involving it
or any of its employees seeking to certify a collective
bargaining unit or engaging in any other labor organization
activity.

2.25. Employment Agreements; Employee Benefit Plans.

(a) Allied has Previously Disclosed to BancShares a
true and complete list of all bonus, deferred compensation,
pension, retirement, profit-sharing, thrift, savings, employee
stock ownership, stock bonus, stock purchase, restricted stock
and stock option plans; all employment and severance contracts;
all medical, dental, health, and life insurance plans; all
vacation, sickness and other leave plans, disability and death
benefit plans; and all other employee benefit plans, contracts,
or arrangements maintained or contributed to by Allied or either
of the Subsidiaries for the benefit of any employees, former
employees, directors, former directors or any of their
beneficiaries (collectively, the "Plans"). True and complete
copies of all Plans, including, but not limited to, any trust
instruments and/or insurance contracts, if any, forming a part
thereof, and all amendments thereto, previously have been
supplied to BancShares. Neither Allied nor either of the
Subsidiaries maintains, sponsors, contributes to or otherwise
participates in any "Employee Benefit Plan" within the meaning
of (Section Mark) 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), any "Multiemployer
Plan" within the meaning of (Section Mark) 3(37) of ERISA, or
any "Multiple Employer Welfare Arrangement" within the
meaning of (Section Mark) 3(40) of ERISA. Each Plan which
is an "employee pension benefit plan" within the meaning of
(Section Mark) 3(2) of ERISA and which is intended to be
qualified under (Section Mark) 401(a) of the Internal Revenue
Code of 1986, as amended (the "Code") has received or
applied for a favorable determination letter from the IRS and
neither Allied nor either of the Subsidiaries is aware of any
circumstances reasonably likely to

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<PAGE>

result in the revocation or denial of any such favorable
determination letter. All reports and returns with
respect to the Plans (and any Plans previously maintained
by Allied or either of the Subsidiaries) required to be
filed with any governmental department, agency, service or
other authority, including without limitation Internal Revenue
Service Form 5500 (Annual Report), have been properly and
timely filed.

(b) All "Employee Benefit Plans" maintained by or
otherwise covering employees or former employees of Allied or the
Subsidiaries, to the extent subject to ERISA, currently are, and
at all times have been, in compliance with all material
provisions and requirements of ERISA. There is no pending or
threatened litigation relating to any Plan or any such Plan
previously maintained by Allied or either of the Subsidiaries.
Neither Allied nor either of the Subsidiaries has engaged in a
transaction with respect to any Plan that could subject Allied or
either of the Subsidiaries to a tax or penalty imposed by either
(Section Mark) 4975 of the Code or (Section Mark) 502(i) of ERISA.

(c) Allied has delivered to BancShares a true, correct
and complete copy (including copies of all amendments thereto) of
each retirement plan of the Subsidiaries which is intended to be
a plan qualified under Section 401(a) of the Code (collectively,
the "Retirement Plans"), together with true, correct and complete
copies of the summary plan descriptions relating to the
Retirement Plans, the most recent determination letters received
from the IRS regarding the Retirement Plans, and the most recent
Annual Reports (Form 5500 series) and related schedules, if any,
for the Retirement Plans.

The Retirement Plans are qualified under
the provisions of (Section Mark) 401(a) of the Code, the
trusts under the Retirement Plans are exempt trusts under
(Section Mark) 501(a) of the Code, and determination letters
have been issued or applied for with respect to the
Retirement Plans to said effect, including determination
letters covering the current terms and provisions of the
Retirement Plans. There are no issues relating to said
qualification or exemption of the Retirement Plans
currently pending before the IRS, the United States
Department of Labor, the Pension Benefit Guaranty
Corporation or any court. The Retirement Plans and the
administration thereof meet (and have met since the
establishment of the Retirement Plans) all of the applicable
requirements of ERISA, the Code and all other laws, rules
and regulations applicable to the Retirement Plans and do not
violate (and since the establishment of the Retirement Plans
have not violated) any of the applicable provisions of ERISA,
the Code and such other laws, rules and regulations.
Without limiting the generality of the foregoing, all reports
and returns with respect to the Retirement Plans required to
be filed with any governmental department, agency, service or
other authority have been properly and timely filed.
There are no issues or disputes with respect to the
Retirement Plans or the administration thereof currently
existing between Allied, the Subsidiaries, or any trustee
or other fiduciary thereunder, and any governmental agency,
any current or former

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<PAGE>

employee of Allied or either of the Subsidiaries or
beneficiary of any such employee or any other person or
entity. No "reportable event" within the meaning of
(Section Mark) 4043(b) of ERISA has occurred at any time
with respect to the Retirement Plans. Notwithstanding the
foregoing, Peoples maintains a defined benefit pension plan
and a 401(k) profit sharing plan which are multiple
employer plans as described in Section 413(c) of the Code,
and neither Allied nor its Subsidiaries is making any
warranty or representation concerning whether the plans of
the other adopting employers (not affiliated with Allied) of
said multiple employer plans are qualified, and any breach
of any warranty or representation made in this subparagraph
which is solely a result of an issue, action, deficiency
or violation with respect to such other plan or plans of
such other (non-affiliated) employers shall not be
considered a breach of this subparagraph (c).

(d) No liability under subtitle C or D of Title IV of
ERISA has been or is expected to be incurred by Allied or either
of the Subsidiaries with respect to the Retirement Plans or with
respect to any other ongoing, frozen or terminated defined
benefit pension plan currently or formerly maintained by Allied
or either of the Subsidiaries. Neither Allied nor either of
the Subsidiaries presently contributes to a "Multiemployer
Plan" or has contributed to such a plan within the five
calendar years since December 31, 1989. All contributions
required to be made pursuant to the terms of each of the
Plans (including without limitation the Retirement Plans and
any other "pension plan" (as defined in (Section Mark) 3(2)
of ERISA, provided such plan is intended to qualify under
the provisions of Section 401(a) of the Code) maintained
by Allied or either of the Subsidiaries) have been timely
made. Neither the Retirement Plans nor any other "pension
plan" maintained by Allied or either of the Subsidiaries have
an "accumulated funding deficiency" (whether or not waived)
within the meaning of (Section Mark) 412 of the Code or
(Section Mark) 302 of ERISA. Neither Allied nor either of
the Subsidiaries has provided, and is not required to
provide, security to any "pension plan" or to any "Single
Employer Plan" pursuant to (Section Mark) 401(a)(29) of the
Code. Under the Retirement Plans and any other
"pension plan" maintained by Allied or either of the
Subsidiaries as of the last day of the most recent plan year
ended prior to the date hereof, the actuarially determined
present value of all "benefit liabilities," within the
meaning of (Section Mark) 4001(a)(16) of ERISA (as
determined on the basis of the actuarial assumptions contained
in the plan's most recent actuarial valuation) did not
exceed the then current value of the assets of such plan, and
there has been no material change in the financial condition
of any such plan since the last day of the most recent plan
year.

(e) There are no restrictions on the rights of Allied
or either of the Subsidiaries to amend or terminate any Plan
without incurring any liability thereunder. Neither the
execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will (except as otherwise
specifically provided herein) (i) result in any payment to any
person (including without limitation any severance compensation
or payment, unemployment compensation, "golden parachute" or
"change in control" payment, or

I-25

<PAGE>

otherwise) becoming due under any plan or agreement to
any director, officer, employee or consultant, (ii)
increase any benefits otherwise payable under any plan or
agreement, or (iii) result in any acceleration of the time of
payment or vesting of any such benefit.

2.26. Insurance. Allied and the Subsidiaries have in
effect a "banker's blanket bond" and such other policies of
general liability, casualty, directors and officers liability,
employee fidelity, errors and omissions and other property and
liability insurance as has been Previously Disclosed to
BancShares (the "Policies"). The Policies provide coverage in
such amounts and against such liabilities, casualties, losses or
risks as is customary or reasonable for entities engaged in the
businesses of Allied or either of the Subsidiaries or as is
required by applicable law or regulation; and, in the reasonable
opinion of management of Allied and the Subsidiaries, the
insurance coverage provided under the Policies is considered
reasonable and adequate in all respects for Allied and the
Subsidiaries. Each of the Policies is in full force and effect
and is valid and enforceable in accordance with its terms, and is
underwritten by an insurer of recognized financial responsibility
and which is qualified to transact business in North Carolina;
and, Allied and the Subsidiaries have taken all requisite actions
(including the giving of required notices) under each such Policy
in order to preserve all rights thereunder with respect to all
matters. Neither Allied nor the Subsidiaries is in default under
the provisions of, has received notice of cancellation or
nonrenewal of or any premium increase on, or has any knowledge of
any failure to pay any premium on or any inaccuracy in any
application for any Policy. There are no pending claims with
respect to any Policy, and neither Allied nor the Subsidiaries
has knowledge of any facts or of the occurrence of any event that
is reasonably likely to form the basis for any such claim.

2.27. Insurance of Deposits. All deposits of each of
the Subsidiaries are insured by the Savings Association Insurance
Fund of the FDIC to the maximum extent permitted by law, all
deposit insurance premiums due from the Subsidiaries to the FDIC
have been paid in full in a timely fashion, and, to the best of
the knowledge and belief of Allied and the Subsidiaries'
executive officers, no proceedings have been commenced or are
contemplated by the FDIC or otherwise to terminate such
insurance.

2.28. Affiliates. Allied has Previously Disclosed to
BancShares a listing of those persons deemed by Allied and its
counsel as of the date of this Agreement to be "Affiliates" of
Allied as that term is defined in Rule 405 promulgated under the
1933 Act, including persons, trust, estates or other entities
related to persons deemed to be Affiliates of Allied.

2.29. Obstacles to Regulatory Approval or Tax Treatment.
To the best of the knowledge and belief of management of Allied
and the Subsidiaries, there exists no fact or condition
(including the Subsidiaries' record of compliance with the
Community Reinvestment

I-26

<PAGE>

Act) relating to Allied or either of the Subsidiaries that
may reasonably be expected to (i) prevent or materially
impede or delay BancShares or Allied from obtaining the
regulatory approvals required in order to consummate
transactions described herein, or (ii) prevent the Merger
from qualifying to be a tax-free reorganization
under Section 368(a)(1)(A) of the Code; and, if any such
fact or condition becomes known to Allied or the
Subsidiaries, Allied shall promptly (and in any event
within three days after obtaining such knowledge)
communicate such fact or condition to the Vice Chairman of
BancShares.

2.30. Disclosure. To the best of the knowledge and
belief of management of Allied and the Subsidiaries, no written
statement, certificate, schedule, list or other written
information furnished by or on behalf of Allied or either of the
Subsidiaries at any time to BancShares in connection with this
Agreement (including without limitation the statements contained
herein), when considered as a whole, contains or will contain any
untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements
herein or therein, in light of the circumstances under which they
were made, not misleading. Each document delivered or to be
delivered by Allied or either of the Subsidiaries to BancShares
is or will be a true and complete copy of such document,
unmodified except by another document delivered thereby.

ARTICLE III. REPRESENTATIONS AND WARRANTIES OF BANCSHARES

Except as otherwise specifically described herein or as
"Previously Disclosed" to Allied, BancShares hereby makes the
following representations and warranties to Allied. ("Previously
Disclosed" shall mean, as to BancShares, the disclosure of
information in a letter delivered by BancShares to Allied
specifically referring to this Agreement and arranged in
paragraphs corresponding to the Sections, subsections and items
of this Agreement applicable thereto, and which letter has been
delivered prior to the execution of this Agreement. Information
shall be deemed Previously Disclosed for the purpose of a given
Paragraph, subparagraph or item of this Agreement only to the
extent a specific reference thereto is made in connection with
disclosure of such information at the time of such delivery.)

3.1. Organization; Standing; Power. BancShares (i) is duly
organized and incorporated, validly existing and in good standing
(as a business corporation) under the laws of Delaware, (ii) has
all requisite power and authority (corporate and other) to own
its respective properties and conduct its business as now being
conducted, (iii) is duly qualified to do business and is in good
standing in each other jurisdiction in which the character of the
properties owned or leased by it therein or in which the
transaction of its business makes such qualification necessary,
except where failure so to qualify would not have a material
adverse effect on BancShares and its subsidiaries considered as
one enterprise, and (iv) is not transacting business, or
operating any

I-27

<PAGE>

properties owned or leased by it, in violation of any
provision of federal or state law or any rule or regulation
promulgated thereunder, which violation would have a
material adverse effect on BancShares and its subsidiaries
considered as one enterprise.

3.2. Capital Stock. BancShares' authorized capital stock
consists of 11,000,000 shares of BancShares Stock and 2,000,000
shares of $1.00 par value per share Class B common stock. As of
July 31, 1995, an aggregate of 8,927,406 shares of BancShares
Stock had been issued and were outstanding, and 1,769,251 shares
of Class B common stock had been issued and were outstanding.
BancShares' outstanding capital stock has been duly authorized
and validly issued, and is fully paid and nonassessable, and the
shares of BancShares Stock issued to Allied's shareholders
pursuant to this Agreement, when issued as described herein,
will be duly authorized, validly issued, fully paid and
nonassessable.

3.3. Convertible Securities, Options, Etc. Except as
Previously Disclosed to Allied, BancShares has no outstanding
(i) securities or other obligations (including debentures or
other debt instruments) which are convertible into shares of
BancShares Stock or any other securities of BancShares,
(ii) options, warrants, rights, calls or other commitments of any
nature which entitle any person to receive or acquire any shares
of BancShares Stock or any other securities of Bancshares, or
(iii) plan, agreement or other arrangement pursuant to which
shares of BancShares Stock or any other securities of BancShares,
or options, warrants, rights, calls or other commitments of any
nature pertaining thereto, have been or may be issued.

3.4. Authorization and Validity of Agreement. This
Agreement has been duly and validly approved by BancShares' Board
of Directors. (i) BancShares has the corporate power and
authority to execute and deliver this Agreement and to perform
its obligations and agreements and carry out the transactions
described herein, (ii) all corporate proceedings required to be
taken to authorize BancShares to enter into this Agreement and to
perform its respective obligations and agreements and carry out
the transactions described herein have been duly and properly
taken, and (iii) this Agreement constitutes the valid and binding
agreement of BancShares enforceable in accordance with its terms
(except to the extent enforceability may be limited by
(A) applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws from time to time in effect which affect
creditors' rights generally, (B) legal and equitable limitations
on the availability of injunctive relief, specific performance
and other equitable remedies, and (C) general principles of
equity and applicable laws or court decisions limiting the
enforceability of indemnification provisions).

3.5. Validity of Transactions; Absence of Required Consents
or Waivers. Except where the same would not have a material
adverse effect on BancShares and its subsidiaries considered as
one enterprise, neither the execution and delivery of this
Agreement, nor the consummation of the transactions described
herein, nor

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<PAGE>

compliance by BancShares with any of its obligations or
agreements contained herein, will: (i) conflict with or result
in a breach of the terms and conditions of, or constitute
a default or violation under any provision of,
BancShares' Certificate of Incorporation or Bylaws, or
any contract, agreement, lease, mortgage, note, bond,
indenture, license, or obligation or understanding (oral or
written) to which BancShares is bound or by which it, its
business, capital stock or any of its respective properties
or assets may be affected; (ii) result in the creation or
imposition of any lien, claim, interest, charge,
restriction or encumbrance upon any of BancShares'
properties or assets; (iii) violate any applicable federal
or state statute, law, rule or regulation, or any order,
writ, injunction or decree of any court, administrative or
regulatory agency or governmental body; (iv) result in the
acceleration of any obligation or indebtedness of BancShares;
or, (v) interfere with or otherwise adversely affect
BancShares' ability to carry on its business as presently
conducted.

No consents, approvals or waivers are required to be
obtained from any person or entity in connection with BancShares'
execution and delivery of this Agreement, or the performance of
its obligations or agreements or the consummation of the
transactions described herein, except for required approvals of
governmental or regulatory authorities described in
Paragraph 7.1.a. below.

3.6. BancShares Reports. Since January 1, 1990, and where
the failure to file has had or could have a material and adverse
effect on BancShares and its subsidiaries considered as one
enterprise, BancShares and its consolidated subsidiaries have
filed all reports, registrations and statements, together with
any amendments that were required to be made with respect
thereto, that were required to be filed with (i) the SEC,
(ii) the FRB, (iii) the FDIC, (iv) the North Carolina
Commissioner of Banks (the "North Carolina Commissioner"), and
(v) any other governmental or regulatory authorities having
jurisdiction over BancShares or its subsidiaries. All such
reports and statements filed with the SEC, the FRB, the FDIC, the
North Carolina Commissioner or other such regulatory authority
are collectively referred to herein as the "BancShares Reports."
As of their respective dates, the BancShares Reports complied in
all material respects with all the statutes, rules and
regulations enforced or promulgated by the regulatory authority
with which they were filed and did not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading; and, BancShares has not been
notified that any such BancShares Reports were deficient in any
material respect as to form or content. Following the date of
this Agreement, BancShares shall deliver to Allied upon its
request a copy of any report, registration, statement or other
regulatory filing made by BancShares or any of BancShares'
subsidiaries with the SEC, the FRB, the FDIC, the North Carolina
Commissioner or any other such regulatory authority.

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<PAGE>

3.7. BancShares Financial Statements. BancShares has
delivered to Allied a copy of (i) BancShares' audited
consolidated balance sheets as of December 31, 1993 and
December 31, 1994, and its consolidated statements of income,
changes in shareholders' equity, and cash flows for the years
ended December 31, 1992, December 31, 1993 and December 31, 1994
(the "BancShares Financial Statements"), and (ii) BancShares'
unaudited consolidated balance sheet as of June 30, 1995 and its
consolidated statement of operations for the six months ended
June 30, 1995 (the "BancShares Interim Financial Statements").
The BancShares Financial Statements and the BancShares Interim
Financial Statements were prepared in accordance with GAAP
applied on a consistent basis throughout the periods indicated,
the BancShares Financial Statements have been audited and
certified by BancShares' independent accountants, KPMG Peat
Marwick, and the BancShares Financial Statements and the
BancShares Interim Financial Statements present fairly
BancShares' consolidated financial condition, assets and
liabilities, results of operations, changes in shareholders'
equity and changes in cash flows as of the dates and for the
periods specified therein.

3.8. Absence of Material Adverse Changes. Since December
31, 1994, there has been no material adverse change, and there
has occurred no event or development and there currently exists
no condition or circumstance which, with the lapse of time or
otherwise, may or could cause, create or result in a material
adverse change, in or affecting BancShares' consolidated
financial condition or results of operations, or in its
prospects, business, assets, loan portfolio, investments,
properties or operations.

3.9. Absence of Brokerage or Finders Commissions. (i) All
negotiations relative to this Agreement and the transactions
described herein have been carried on by BancShares directly with
Allied; (ii) no person or firm has been retained by or has acted
on behalf of, pursuant to any agreement, arrangement or
understanding with, or under the authority of, BancShares or its
Board of Directors, as a broker, finder or agent or has performed
similar functions or otherwise is or may be entitled to receive
or claim a brokerage fee or other commission in connection with
or as a result of the transactions described herein; and,
(iii) BancShares has not agreed to pay any brokerage fee or other
commission to any person or entity in connection with or as a
result of the transactions described herein.

3.10. Obstacles to Regulatory Approval or Tax Treatment.
To the best of the knowledge and belief of the executive officers
of BancShares, no fact or condition (including FCB's record of
compliance with the Community Reinvestment Act) relating to
BancShares exists that may reasonably be expected to (i) prevent
or materially impede or delay BancShares or Allied from obtaining
the regulatory approvals required in order to consummate
transactions described herein, or (ii) prevent the Merger from
qualifying to be a tax-free reorganization under
Section 368(a)(1)(A) of the Code; and, if any such fact or
condition becomes known to the executive officers of BancShares,
BancShares promptly (and in any event

I-30

<PAGE>

within three days after obtaining such knowledge) shall
communicate such fact or condition to the President of
Allied.

3.11. Disclosure. To the best of the knowledge and
belief of BancShares, no written statement, certificate,
schedule, list or written information furnished by or on behalf
of BancShares at any time to Allied in connection with this
Agreement (including without limitation the statements contained
herein), when considered as a whole, contains or will contain any
untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements
herein or therein, in light of the circumstances under which they
were made, not misleading. Each document delivered or to be
delivered by BancShares to Allied is or will be a true and
complete copy of such document, unmodified except by another
document delivered by BancShares.

3.12. Tax Returns and Other Tax Matters. (i) BancShares
and each of its subsidiaries have timely filed or caused to be
filed all federal, state and local income tax returns and reports
which are required by law to have been filed, and, to the best
knowledge and belief of management of BancShares, all such
returns and reports were true, correct and complete and contained
all material information required to be contained therein;
(ii) all federal, state and local income, profits, franchise,
sales, use, occupation, property, excise, withholding, employment
and other taxes (including interest and penalties), charges and
assessments which have become due from or been assessed or levied
against BancShares or any of its subsidiaries or their respective
properties have been fully paid or, if not yet due, a reserve or
accrual which is adequate in all material respects for the
payment of all such taxes to be paid and the obligation for such
unpaid taxes is reflected on the BancShares Financial Statements;
(iii) the tax returns and reports of BancShares and its
subsidiaries have not been subject to audit by the IRS or the
Department of Tax and Revenue of the State of North Carolina in
the last ten years and neither BancShares nor any of its
subsidiaries has received any indication of the pendency of any
audit or examination in connection with any tax return or report
and have no knowledge that any such return or report is subject
to adjustment; and (iv) neither BancShares nor any of its
subsidiaries has executed any waiver or extended the statute of
limitations (or been asked to execute a waiver or extend a
statute of limitation) with respect to any tax year, the audit of
any tax return or report or the assessment or collection of any
tax.

3.13. Litigation and Compliance with Law.

(a) There are no actions, suits, arbitrations,
controversies or other proceedings or investigations (or, to the
best knowledge and belief of management of BancShares, any facts
or circumstances which reasonably could result in such),
including without limitation any such action by any governmental
or regulatory authority, which currently exist or are ongoing,
pending or, to the best knowledge and belief of management of
BancShares, threatened, contemplated or probable of assertion,
against,

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<PAGE>

relating to or otherwise affecting BancShares or its
subsidiaries or any of their properties, assets or employees
which, if determined adversely, could result in liability on the
part of BancShares or any of its subsidiaries for, or subject
BancShares or any of its subsidiaries to, monetary damages, fines
or penalties or an injunction, or which could have a material
adverse effect on the financial condition, results of operations,
prospects, business, assets, loan portfolio, investments,
properties or operations of BancShares on a consolidate basis or
on the ability of BancShares to consummate the Merger.

(b) BancShares and its subsidiaries have all Permits
of any federal, state, local or foreign governmental or
regulatory body that are material to or necessary for the conduct
of their business or to own, lease and operate their properties;
all such Permits are in full force and effect; no violations are
or have been recorded in respect of any such Permits; and no
proceeding is pending or, to the best knowledge of management of
BancShares, threatened or probable of assertion to suspend,
cancel, revoke or limit any Permit.

(c) Neither BancShares nor any of its subsidiaries is
subject to any supervisory agreement, enforcement order, writ,
injunction, capital directive, supervisory directive, memorandum
of understanding or other similar agreement, order, directive,
memorandum or consent of, with or issued by any regulatory or
other governmental authority (including without limitation the
FRB, the FDIC or the North Carolina Commissioner) relating to its
financial condition, directors or officers, employees,
operations, capital, regulatory compliance or otherwise; there
are no judgments, orders, stipulations, injunctions, decrees or
awards against BancShares or any of its subsidiaries which in any
manner limit, restrict, regulate, enjoin or prohibit any present
or past business or practice of BancShares or its subsidiaries;
and, neither BancShares nor any of its subsidiaries has been
advised and has no reason to believe that any regulatory or other
governmental authority or any court is contemplating, threatening
or requesting the issuance of any such agreement, order,
injunction, directive, memorandum, judgment, stipulation, decree
or award.

(d) Neither BancShares nor any of its subsidiaries is
in violation or default in any material respect under, and has
complied in all material respects with, all laws, statutes,
ordinances, rules, regulations, orders, writs, injunctions or
decrees of any court or federal, state, municipal or other
governmental or regulatory authority having jurisdiction or
authority over it or its business operations, properties or
assets (including without limitation all provisions of North
Carolina law relating to usury, the Consumer Credit Protection
Act, and all other laws and regulations applicable to extensions
of credit by its subsidiaries) and, to the knowledge of
BancShares, there is no basis for any claim by any person or
authority for compensation, reimbursement or damages or otherwise
for any violation of any of the foregoing.

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<PAGE>

3.14. Employee Benefit Plans.

(a) Each plan maintained for the benefit of
employees of Bancshares or FCB which is an "employee pension
benefit plan" within the meaning of (Section Mark) 3(2) of
ERISA and which is intended to be qualified under (Section
Mark) 401(a) of the Code has received a favorable
determination letter from the IRS and neither BancShares nor
FCB is aware of any circumstances reasonably likely to result
in the revocation or denial of any such favorable
determination letter. All reports and returns with respect
to any "employee benefit plans", within the meaning of
Section 3(3) of ERISA, of BancShares or FCB (and any
such plans previously maintained by BancShares or its
subsidiaries) required to be filed with any governmental
department, agency, service or other authority, including
without limitation Internal Revenue Service Form 5500
(Annual Report), have been properly and timely filed.

(b) All "Employee Benefit Plans" maintained by or
otherwise covering employees or former employees of BancShares or
its subsidiaries, to the extent subject to ERISA, currently are,
and at all times have been, in compliance with all material
provisions and requirements of ERISA. There is no pending or
threatened litigation relating to any Plan maintained by
BancShares or any of its subsidiaries and any such plan
previously maintained by BancShares or any of its subsidiaries.
Neither BancShares nor any of its subsidiaries have engaged in a
transaction with respect to any such plan that could subject
BancShares or any of its subsidiaries to a tax or penalty imposed
by either Section 4975 of the Code or Section 502(i) of ERISA.

(c) The FCB retirement plan and any other
"employee pension benefit plans" intended to be qualified
under Section 401(a) of the Code which are maintained by
Bancshares or its subsidiaries ("FCB Retirement Plans") are
qualified under the provisions of (Section Mark) 401(a) of
the Code, the trusts under the FCB Retirement Plans are
exempt trusts under (Section Mark) 501(a) of the Code, and
determination letters have been issued with respect to the
FCB Retirement Plans to said effect, including
determination letters covering the current terms and
provisions of the FCB Retirement Plans. There are no
issues relating to said qualification or exemption of the
FCB Retirement Plans currently pending before the IRS, the
United States Department of Labor, the Pension Benefit
Guaranty Corporation or any court. The FCB Retirement Plans
and the administration thereof meet (and has met since the
establishment of the FCB Retirement Plans) all of the
applicable requirements of ERISA, the Code and all other
laws, rules and regulations applicable to the FCB Retirement
Plans and does not violate (and since the establishment
of the FCB Retirement Plans has not violated) any of
the applicable provisions of ERISA, the Code and such
other laws, rules and regulations. Without limiting the
generality of the foregoing, all reports and returns with
respect to the FCB Retirement Plans required to be filed
with any governmental department, agency, service or other
authority have been properly and timely filed. There are
no issues or disputes with respect to the FCB
Retirement Plans or the administration

I-33

<PAGE>

thereof currently existing between BancShares, its
subsidiaries, or any trustee or other fiduciary thereunder,
and any governmental agency, any current or former employee
of BancShares or any of its subsidiaries or beneficiary of
any such employee or any other person or entity. No
"reportable event" within the meaning of (Section Mark)
4043(b) of ERISA has occurred at any time with respect to
the FCB Retirement Plans.

(d) All contributions required to be made pursuant
to the terms of each of the plans (including without
limitation the FCB Retirement Plans and any other "pension
plan" (as defined in (Section Mark) 3(2) of ERISA)
maintained by BancShares or any of it subsidiaries)
have been timely made. Neither the FCB Retirement Plans nor
any other "pension plan" maintained by BancShares or any of
its subsidiaries have an "accumulated funding deficiency"
(whether or not waived) within the meaning of (Section Mark)
412 of the Code or (Section Mark) 302 of ERISA. Neither
BancShares nor any of its subsidiaries has provided,
and is not required to provide, security to any "pension
plan" or to any "Single Employer Plan" pursuant to (Section
Mark) 401(a)(29) of the Code. Under the FCB Retirement
Plans and any other "pension plan" maintained by BancShares
or any of its subsidiaries as of the last day of the most
recent plan year ended prior to the date hereof, the
actuarially determined present value of all "benefit
liabilities," within the meaning of (Section Mark)
4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in the plan's most recent
actuarial valuation) did not exceed the then current value of
the assets of such plan, and there has been no material change
in the financial condition of any such plan since the last
day of the most recent plan year. No liability under
subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by BancShares or any of its
subsidiaries with respect to any such plan or with respect
to any other ongoing, frozen or terminated defined benefit
pension plan. Neither BancShares nor any of its subsidiaries
presently contributes to a "Multiemployer Plan" or has
contributed to such a plan since December 31, 1989.

3.15. Insurance. BancShares and its subsidiaries
have in effect a "banker's blanket bond" and such other policies
of general liability, casualty, directors and officers liability,
employee fidelity, errors and omissions and other property and
liability insurance (the "FCB Policies"). The FCB Policies
provide coverage in such amounts and against such liabilities,
casualties, losses or risks as is customary or reasonable for
entities engaged in the businesses of BancShares or any of its
subsidiaries or as is required by applicable law or regulation;
and, in the reasonable opinion of management of BancShares, the
insurance coverage provided under the FCB Policies is considered
reasonable and adequate in all respects for BancShares and its
subsidiaries. Each of the FCB Policies is in full force and
effect and is valid and enforceable in accordance with its terms,
and is underwritten by an insurer of recognized financial
responsibility and which is qualified to transact business in the
applicable jurisdiction; and, BancShares and its subsidiaries
have taken all requisite actions (including the giving of
required notices) under each such FCB Policy in order to preserve
all rights thereunder with respect to

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<PAGE>

all matters. Neither BancShares nor its subsidiaries
is in default under the provisions of, has received
notice of cancellation or nonrenewal of or any premium
increase on, or has any knowledge of any failure to pay
any premium on or any inaccuracy in any application for
any FCB Policy. There are no pending claims with respect to
any FCB Policy, and neither BancShares nor any of its
subsidiaries has knowledge of any facts or of the occurrence
of any event that is reasonably likely to form the basis
for any such claim.

3.16. BancShares Books and Records. BancShares' and
its subsidiaries' books of account and business records have
been maintained in substantial compliance with all applicable
legal and accounting requirements and in accordance with good
business practices, and such books and records are complete and
reflect accurately in all material respects BancShares' and its
subsidiaries' respective items of income and expense and all of
their respective assets, liabilities and stockholders' equity.
The respective minute books of BancShares and its subsidiaries
accurately reflect in all material respects the corporate actions
which their respective shareholders and board of directors, and
all committees thereof, have taken during the time periods
covered by such minute books. All such minute books have been or
will be made available to Allied and its representatives.

3.17. No Shareholder Approval. As BancShares is a
Delaware corporation no approval of the shareholders of
BancShares is required, pursuant to Sections 251(f) and 252(e) of
the Delaware General Corporation Law, in as much as (i) this
Agreement does not amend in any respect the Certificate of
Incorporation of BancShares, (ii) each share of BancShares Stock
and each share of BancShares Class B common stock outstanding
immediately prior to the Effective Time is to be an identical
outstanding share of BancShares after the Effective Time, and
(iii) the authorized unissued shares of BancShares Stock to be
issued under the Plan of Merger contained in this Agreement do
not exceed 20% of the shares of BancShares Stock outstanding
immediately prior to the Effective Time.

ARTICLE IV. COVENANTS OF ALLIED

4.1. Affirmative Covenants of Allied. Allied hereby
covenants and agrees as follows with BancShares:

a. "Affiliates" of Allied. Allied will cause each
Affiliate Previously Disclosed to BancShares to execute and
deliver to BancShares prior to the Closing a written agreement
(the "Affiliates' Agreement") relating to restrictions on shares
of BancShares Stock to be received by such Affiliates pursuant to
this Agreement and which Affiliates' Agreement shall be in form
and content reasonably satisfactory to BancShares and
substantially in the form attached as Schedule B to this
Agreement. Certificates for the shares of BancShares Stock
issued to Affiliates of Allied

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<PAGE>

shall bear a restrictive legend (substantially in the form
as shall be set forth in the Affiliates' Agreement)
with respect to the restrictions applicable to such
shares.

b. Conduct of Business Prior to Effective Time.
While the parties recognize that the operation of Allied until
the Effective Time is the responsibility of Allied and its Board
of Directors and officers, Allied agrees that, between the date
of this Agreement and the Effective Time, Allied will carry on
its business, in and only in the regular and usual course in
substantially the same manner as such business heretofore was
conducted, and, to the extent consistent with such business and
within its ability to do so, Allied agrees that it and, where
applicable, each of the Subsidiaries, will:

(i) preserve intact their present business
organization, keep available their present officers and
employees, and preserve their relationships with customers,
depositors, creditors, correspondents, suppliers, and others
having business relationships with them;

(ii) maintain all of their properties and
equipment in customary repair, order and condition, ordinary wear
and tear excepted;

(iii) maintain their books of account and
records in the usual, regular and ordinary manner in accordance
with sound business practices applied on a consistent basis;

(iv) comply with all laws, rules and
regulations applicable to them, their properties, assets or
employees and to the conduct of their business;

(v) not change their existing loan
underwriting guidelines, policies or procedures except as may be
required by law;

(vi) continue to maintain in force insurance
such as is described in Paragraph 2.26. above; not modify any
bonds or policies of insurance in effect as of the date hereof
unless the same, as modified, provides substantially equivalent
coverage; and, not cancel, allow to be terminated or, to the
extent available, fail to renew, any such bond or policy of
insurance unless the same is replaced with a bond or policy
providing substantially equivalent coverage; and,

(vii) promptly provide to BancShares such
information about Allied and each of the Subsidiaries and their
financial condition, results of operations, prospects,
businesses, assets, loan portfolio, investments, properties or
operations, as BancShares reasonably shall request.

c. Periodic Information Regarding Loans. Each new
extension of credit by either of the Subsidiaries in excess of
$100,000 (excluding single-family residential mortgage loans

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originated to secondary market specifications) will be submitted
to BancShares within 10 business days after the Subsidiary's
issuance of a commitment on such loan.

Additionally, Allied agrees to make available and
provide to BancShares the following information with respect to
each of the Subsidiaries' loans and other extensions of credit
(such assets herein referred to as "Loans") as of July 31, 1995
and as of the end of each month thereafter until the Effective
Time, such information for each month to be in form and substance
as is usual and customary in the conduct of the Subsidiary's
business and to be furnished within 25 days of the end of each
month ending after the date hereof, except as otherwise provided:

(i) a list of Loans past due for 60 days or more
as to principal or interest;

(ii) within 25 days after each fiscal quarter end,
an analysis of the Loan Loss Reserve and
management's assessment of the adequacy of
the Loan Loss Reserve, which analysis and
assessment shall include a list of all
classified or "watch list" Loans, along with
the outstanding balance and amount
specifically allocated to the Loan Loss
Reserve for each such classified or "watch
list" Loan;

(iii) a list of Loans in nonaccrual status;

(iv) a list of all Loans over $50,000 without
principal reduction for a period of longer
than one year;

(v) a list of all foreclosed real property or
other real estate owned and all repossessed
personal property;

(vi) a list of reworked or restructured Loans over
$50,000 and still outstanding, including
original terms, restructured terms and
status; and

(vii) a list of any actual or threatened litigation
by or against each of the Subsidiaries
pertaining to any Loans or credits, which
list shall contain a description of
circumstances surrounding such litigation,
its present status and management's
evaluation of such litigation.

d. Notice of Certain Changes or Events. Following
the execution of this Agreement and up to the Effective Time,
Allied promptly will notify BancShares in writing of and provide
to it such information as it shall request regarding (i) any
material

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<PAGE>

adverse change in its consolidated financial condition,
consolidated results of operations, prospects, business,
assets, loan portfolio, investments, properties or
operations, or of the actual or prospective occurrence of any
condition or event which, with the lapse of time or
otherwise, may or could cause, create or result in any such
material adverse change, or of (ii) the actual or
prospective existence or occurrence of any condition or event
which, with the lapse of time or otherwise, has caused or
may or could cause any statement, representation or warranty
of Allied herein to be or become inaccurate,
misleading or incomplete, or which has resulted or may or
could cause, create or result in the breach or violation of
any of Allied's covenants or agreements contained herein or
in the failure of any of the conditions described in
Paragraphs 7.1. or 7.3. below.

e. Accruals for Loan Loss Reserve and
Expenses. Allied will cooperate with BancShares and, not later
than the Effective Time, Allied will make such appropriate
accounting entries in its books and records and take such other
actions as BancShares shall, in its sole discretion, deem to be
necessary or desirable in anticipation of the Merger, including
without limitation additional provisions to each of the
Subsidiaries' Loan Loss Reserve or accruals or the creation of
reserves for employee benefit and Merger-related expenses. Any
such accounting entries which are requested by BancShares and not
in the usual course of business for Allied or the Subsidiaries,
shall not be counted towards calculation of net earnings for
purposes of the Peoples Savings Bank MBO program.

f. Consents to Assignment of Leases. Allied will use
its best efforts to obtain all required consents of its lessors
to the assignment to BancShares of Allied's rights and
obligations under any personal property leases, each of which
consents shall be in such form as shall be specified by
BancShares.

g. Ratification of Agreement by Board of Directors.
Management of Allied will submit this Agreement to its Board of
Directors for ratification and approval at its next regularly
scheduled meeting following the date hereof.

h. Further Action; Instruments of Transfer. Allied
covenants and agrees with BancShares that it (i) will use its
best efforts in good faith to take or cause to be taken all
action required of it or the Subsidiaries hereunder as promptly
as practicable so as to permit the consummation of the
transactions described herein at the earliest possible date,
(ii) shall perform all acts and execute and deliver to BancShares
all documents or instruments required herein or as otherwise
shall be reasonably necessary or useful to or requested of Allied
in consummating such transactions, and, (iii) will cooperate with
BancShares in every way in carrying out, and will pursue
diligently the expeditious completion of, such transactions.

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<PAGE>

i. Periodic Reports. Until the Effective Time,
Allied will provide BancShares with an income statement and a
statement of condition for each Subsidiary within 25 days after
month end.

4.2. Negative Covenants of Allied. Allied hereby covenants
and agrees that, between the date hereof and the Effective Time,
neither Allied nor either of the Subsidiaries will do any of the
following things or take any of the following actions without the
prior written consent and authorization of the Vice Chairman of
BancShares.

a. Amendments to Articles of Incorporation or Bylaws.
Neither Allied nor either of the Subsidiaries will amend its
Articles or Certificate of Incorporation or Bylaws.

b. Change in Capital Stock. Neither Allied nor
either of the Subsidiaries will (i) make any change in its
authorized capital stock, or create any other or additional
authorized capital stock or other securities, or (ii) issue,
sell, purchase, redeem, retire, reclassify, combine or split any
shares of its capital stock or other securities (including
securities convertible into capital stock), or enter into any
agreement or understanding with respect to any such action.

c. Options, Warrants and Rights. Neither Allied nor
either of the Subsidiaries will grant or issue any options,
warrants, calls, puts or other rights of any kind relating to the
purchase, redemption or conversion of shares of its capital stock
or any other securities (including securities convertible into
capital stock) or enter into any agreement or understanding with
respect to any such action.

d. Dividends. Neither Allied nor either of the
Subsidiaries will declare or pay any dividends on the outstanding
shares of capital stock or make any other distributions on or in
respect of any shares of its capital stock or otherwise to its
shareholders except as may be allowed pursuant to Paragraph
1.5.a. above.

e. Employment, Benefit or Retirement Agreements or
Plans. Except as required by law, neither Allied nor either of
the Subsidiaries will (i) enter into or become bound by any oral
or written contract, agreement or commitment for the employment
or compensation of any director, officer, employee or consultant
which is not immediately terminable by Allied or either of the
Subsidiaries without cost or other liability on no more than 30
days' notice; (ii) adopt, enter into or become bound by any new
or additional profit-sharing, bonus, incentive, change in control
or "golden parachute," stock option, stock purchase, pension,
retirement, insurance (hospitalization, life or other), paid
leave (sick leave, vacation leave or other) or similar contract,
agreement, commitment, understanding, plan or arrangement
(whether formal or informal) with respect to or which provides
for benefits for any of its current or former directors,
officers, employees or consultants; or (iii) enter into or become
bound by any contract

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<PAGE>

with or commitment to any labor or trade union or
association or any collective bargaining group.

f. Increase in Compensation. With the exception of
reasonable and customary increases in annual salary and annual
officer and employee bonuses based on fiscal year 1995 based on
merit and effected at such times and in such manner and amounts
as shall be consistent with their past compensation policies and
practices, neither Allied nor either of the Subsidiaries will
increase the compensation or benefits of, or pay any bonus or
other special or additional compensation to, any of its
directors, officers, employees or consultants; provided, however,
that all bonuses for fiscal year 1995 paid under the Summit
Savings Bank, Inc., SSB bonus program shall not exceed $100,000.

Notwithstanding the foregoing, BancShares agrees
that the Peoples Savings Bank MBO program shall continue for
calendar year 1995 as currently written, but under no
circumstances shall the amount paid under the 1995 MBO program
exceed $100,000.
Notwithstanding the foregoing, BancShares agrees
that for purposes of Summit's Independent Directors Retirement
Plan and Peoples' Independent Director Retirement Plan
(collectively the "Directors Retirement Plans"), at the Effective
Time, all "Participants" in the Director Retirement Plans will be
entitled to 100% of their respective "Retirement Fees" at their
respective "Termination Dates". BancShares also agrees to allow
the Summit Directors Retirement Plan to be amended at or prior to
the Effective Time, to increase the "Retirement Fee" from $12,000
to $14,400, with a further cost of living increase in such amount
every two years thereafter based upon the percentage increase in
the Consumer Price Index.

g. Accounting Practices. Neither Allied nor either
of the Subsidiaries will make any changes in its accounting
methods, practices or procedures or in depreciation or
amortization policies, schedules or rates heretofore applied
(except as required by GAAP or governmental regulations).

h. Acquisitions; Additional Branch Offices. Neither
Allied nor either of the Subsidiaries will directly or indirectly
(i) acquire or merge with, or acquire any branch or all or any
significant part of the assets of, any other person or entity,
(ii) open any new branch office, or (iii) enter into or become
bound by any contract, agreement, commitment or letter of intent
relating to, or otherwise take or agree to take any action in
furtherance of, any such transaction or the opening of a new
branch office.

i. Changes in Business Practices. Except as may be
required by the FRB, the FDIC, the Administrator or any other
governmental or other regulatory agency or as shall be required
by applicable law, regulation or this Agreement, neither Allied
nor either of the Subsidiaries will (i) change in any material
respect the nature of its business or the manner in which it
conducts its

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<PAGE>

business, (ii) discontinue any material portion or line of
its business, or (iii) change in any material respect its
lending, investment, asset-liability management or other
material banking or business policies (except to the extent
required by Paragraphs 4.1.b. and 4.1.e. above).

j. Exclusive Merger Agreement. Neither Allied nor
either of the Subsidiaries will, directly or indirectly, through
any person (i) encourage, solicit or attempt to initiate or
procure discussions, negotiations or offers with or from any
person or entity (other than BancShares) relating to a merger or
other acquisition of Allied or the purchase or acquisition of any
Allied Stock, any Peoples Stock or any Summit Stock, any branch
office of either of the Subsidiaries or all or any significant
part of Allied's or either of the Subsidiaries' assets; or
provide assistance to any person in connection with any such
offer; (ii) except to the extent required by law, disclose to any
person or entity any information not customarily disclosed to the
public concerning Allied or either of the Subsidiaries or their
respective business, or afford to any other person or entity
access to its properties, facilities, books or records;
(iii) sell or transfer any branch office of either of the
Subsidiaries or all or any significant part of Allied's or either
of the Subsidiaries' assets to any other person or entity; or
(iv) enter into or become bound by any contract, agreement,
commitment or letter of intent relating to, or otherwise take or
agree to take any action in furtherance of, any such transaction.

k. Acquisition or Disposition of Assets. Neither
Allied nor either of the Subsidiaries will:

(i) Sell or lease (as lessor), or enter into
or become bound by any contract, agreement, option or commitment
relating to the sale, lease (as lessor) or other disposition of
any real estate; or sell or lease (as lessor), or enter into or
become bound by any contract, agreement, option or commitment
relating to the sale, lease (as lessor) or other disposition of
any equipment or any other fixed or capital asset (other than
real estate) having a book value or a fair market value,
whichever is greater, of more than $50,000 for any individual
item or asset, or more than $100,000 in the aggregate for all
such items or assets;

(ii) Purchase or lease (as lessee), or enter
into or become bound by any contract, agreement, option or
commitment relating to the purchase, lease (as lessee) or other
acquisition of any real property; or purchase or lease (as
lessee), or enter into or become bound by any contract,
agreement, option or commitment relating to the purchase, lease
(as lessee) or other acquisition of any equipment or any other
fixed assets (other than real estate) having a purchase price, or
involving aggregate lease payments, in excess of $50,000 for any
individual item or asset, or more than $100,000 in the aggregate
for all such items or assets;

(iii) Enter into any purchase commitment for
supplies or services which calls for prices of goods or fees for

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<PAGE>

services materially higher than current market prices or fees or
which obligates Allied or either of the Subsidiaries for a period
longer than 12 months;

(iv) Except in the ordinary course of its
business consistent with its past practices, sell, purchase or
repurchase, or enter into or become bound by any contract,
agreement, option or commitment to sell, purchase or repurchase,
any loan or other receivable or any participation in any loan or
other receivable; or
(v) Sell or dispose of, or enter into or
become bound by any contract, agreement, option or commitment
relating to the sale or other disposition of, any other asset
(whether tangible or intangible, and including without limitation
any trade name, trademark, copyright, service mark or
intellectual property right or license); or assign its right to
or otherwise give any other person its permission or consent to
use or do business under corporate name of Allied or either of
the Subsidiaries or any name similar thereto; or release,
transfer or waive any license or right granted to it by any other
person to use any trademark, trade name, copyright, service mark
or intellectual property right.

l. Debt; Liabilities. Except in the ordinary course
of its business consistent with its past practices, neither
Allied nor either of the Subsidiaries will (i) enter into or
become bound by any promissory note, loan agreement or other
agreement or arrangement pertaining to its borrowing of money,
(ii) assume, guarantee, endorse or otherwise become responsible
or liable for any obligation of any other person or entity, or
(iii) incur any other liability or obligation (absolute or
contingent).

m. Liens; Encumbrances. Neither Allied nor either of
the Subsidiaries will mortgage, pledge or subject any of its
assets to, or permit any of its assets to become or (with the
exception of those liens and encumbrances specifically described
in the Allied Disclosure Statement) remain subject to, any lien
or any other encumbrance (other than in the ordinary course of
business consistent with its past practices in connection with
securing of public funds deposits, repurchase agreements or other
similar operating matters).

n. Waiver of Rights. Waive, release or compromise
any material rights in its favor (except in the ordinary course
of business) except in good faith for fair value in money or
money's worth, nor waive, release or compromise any rights
against or with respect to any of its officers, directors or
shareholders or members of families of officers, directors or
shareholders.

o. Other Contracts. Enter into or become bound by
any contracts, agreements, commitments or understandings (other
than those described elsewhere in this Paragraph 4.2.) (i) for or
with respect to any charitable contributions; (ii) with any
governmental or regulatory agency or authority; (iii) pursuant to
which Allied, or either of the Subsidiaries would assume,
guarantee, endorse or

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<PAGE>

otherwise become liable for the debt, liability or
obligation of any other person or entity; (iv) which is
entered into other than in the ordinary course of its
business; or (v) which, in the case of any one
contract, agreement, commitment or understanding and whether
or not in the ordinary course of its business, would obligate
or commit Allied or either of the Subsidiaries to make
expenditures of more than $10,000 (other than contracts,
agreements, commitments or understandings entered into in
the ordinary course of either of the Subsidiaries' lending
operations).

p. Deposit Liabilities. Allied and the Subsidiaries
shall not make any change in their current deposit policies,
including pricing and acceptance, and shall not take any actions
designed to materially decrease the aggregate level of deposits
as of the date of this Agreement.

ARTICLE V. COVENANTS OF BANCSHARES

BancShares hereby covenants and agrees as follows with
Allied:

5.1. Ratification of Agreement by Board of Directors.
Management of BancShares will submit this Agreement to its Board
of Directors for ratification and approval at its next regularly
scheduled meeting following the date hereof.

5.2. Nasdaq Notification of Listing of Additional Shares of
BancShares Stock. As soon as possible after the Effective Time,
BancShares shall file with Nasdaq such notifications and other
materials (and shall pay such fees) as shall be required for the
listing on the Nasdaq National Market of the shares of BancShares
Stock to be issued to Allied's shareholders.

5.3. Employees; Severance Payments; Employee Benefits.

a. Employment of Allied Employees. Provided they
remain employed by Allied or one of its Subsidiaries at the
Effective Time, BancShares will attempt in good faith, but shall
have no obligation, to locate suitable positions with FCB for and
to offer employment with FCB to, all employees of Allied and its
Subsidiaries. Any employment so offered by BancShares to an
employee of Allied or one of its Subsidiaries shall be in such a
position, at such location within FCB's state-wide branch system,
and for such rate of compensation as BancShares or FCB shall
determine in its sole discretion. Each such person's employment
shall be on an "at-will" basis, and nothing in this Agreement
shall be deemed to constitute an employment agreement with any
such person or to obligate BancShares or FCB to employ any such
person for any specific period of time or in any specific
position or to restrict BancShares' or FCB's right to terminate
the employment of any such person at any time and for any reason
satisfactory to it.

b. Severance Compensation. Allied will be
permitted to pay severance compensation to any employee of Allied
or one of the Subsidiaries at the Effective Time who is not
offered employment by BancShares or FCB. The amount of such
compensation

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shall be equal to the amount of such employee's accrued
but unused vacation leave, plus an amount equal to (i) three
month's salary or normal wages (at the person's then
current salary or wage rate) in the case of employees who
have total continuous, full years of service with Allied
or the Subsidiaries of less than 5 years, or (ii) four
month's salary or wages (at the person's then current salary
or wage rate) in the case of employees who have total
continuous, full years of service with Allied or the
Subsidiaries of 5 years or more. Notwithstanding anything
contained herein to the contrary, no payment of severance
compensation pursuant to this Paragraph 5.3.b. shall be
made to any person who does not remain an employee of
Allied or one of the Subsidiaries at the Effective Time.
Any payment of severance compensation shall be made by
Allied or the Subsidiaries at the Effective Time. No
severance compensation shall be paid pursuant to this
Paragraph 5.3.b. to any employee of Allied or either
Subsidiary who is party to a written employment or
change-in-control agreement with Allied or either Subsidiary.

c. Employee Benefits. Except as otherwise
provided herein, any employee of Allied or the Subsidiaries who
becomes an employee of FCB at the Effective Time (a "New
Employee") shall become entitled to receive all employee benefits
and to participate in all benefit plans provided by BancShares or
FCB on the same basis and subject to the same eligibility and
vesting requirements, and to the same conditions, restrictions
and limitations, as generally are in effect and applicable to
other newly hired employees of BancShares or FCB. However, each
New Employee shall be given credit for his or her full years of
service with Allied and the Subsidiaries for purposes of (i)
entitlement to vacation and sick leave and for participation in
all FCB welfare, insurance and other fringe benefit plans, and
(ii) eligibility for participation and vesting in BancShares'
Section 401(k) savings plan and in its defined benefit pension
plan (the "Pension Plan"); provided, however, that in no event
shall any New Employee be entitled to or be given credit for past
service with Allied or the Subsidiaries for purposes of the
calculation or determination of benefits under the Pension Plan.
For purposes of FCB's health insurance coverage, New Employees
will be able to participate without regard to pre-existing
condition requirements under FCB's health insurance plan, to the
extent any such condition at the Effective Time would have been
covered under the health insurance plans of Allied or the
Subsidiaries.

BancShares will grant to each New Employee a pro
rata amount of sick leave and vacation leave, in accordance with
BancShares standard leave policies, for the period between the
Effective Time and the end of the calendar year during which the
Effective Time occurs. Each New Employee will be permitted to
carry over accrued and unused sick leave and vacation leave to
the extent such carryover would be consistent with and would not
exceed limitations imposed by BancShares' leave policies.

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<PAGE>

d. Treatment of Allied Compensation and Benefit
Plans and Agreements. BancShares agrees to assume the existing
obligations of Allied related to any deferred directors' fee
plans, with pro rata adjustment to be made for the cessation or
adjustment of amounts deferred by each individual director, if
applicable, as allowed under the plan.

BancShares agrees to assume the existing
obligations of the Directors Retirement Plans. BancShares agrees
that all directors currently participating in the Directors
Retirement Plans will be fully vested at the Effective Time
regardless of years of service.

BancShares will not assume the 1994 Allied Bank
Capital, Inc. Management Recognition Plan and, therefore, at the
Effective Time, such plan will cease to exist.

BancShares agrees to assume at the Effective Time,
as successor plan sponsor, the existing qualified defined
contribution plans of the Subsidiaries and to merge such plans
(or cause such plans to be merged) with the qualified defined
contribution plan maintained for employees of BancShares and/or
FCB, and to fully vest affected participants thereunder, in
accordance with applicable provisions of the Code and ERISA. In
vesting affected participants, BancShares shall at a minimum
treat as fully vested any participant who was employed by Allied
or either of the Subsidiaries at the Effective Time. In the
alternative, BancShares agrees to permit Allied or the
Subsidiaries to terminate such plans prior to the Effective Time,
and in such event BancShares agrees to complete the process of
terminating such plans in accordance with applicable provisions
of ERISA and the Code. In either event, BancShares further
agrees to assume or to cause FCB and/or its employees to assume
as of the Effective Time any and all administrative and fiduciary
duties with respect to the day-to-day operation of such plans,
including the duties of trustee.

BancShares agrees to assume at the Effective Time, as
successor plan sponsor, the existing qualified defined benefit
plans of the Subsidiaries, and to provide for the prompt
termination of such plans in "Standard Terminations" in
accordance with the provisions of Section 4041 of ERISA and the
applicable provisions of the Code. Allied and the Subsidiaries
agree that the will take such actions in advance of the Effective
Time as may be necessary to cease benefit accruals as of the
Effective Time and BancShares agrees that if Allied and the
Subsidiaries establish a proposed date of termination for the
plans, whether such date is before or after the Effective Time,
BancShares will use its best efforts to make certain that all
applicable filings with the IRS and the Pension Benefit Guaranty
Corporation ("PBGC") are made on a timely basis so as to preserve
the effectiveness of such termination date. BancShares agrees
that following its assumption of the plans and in the course of
administering the plan terminations, it will not amend either
plan to permit a reversion of assets to BancShares or FCB or any
other "employer", and that it

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<PAGE>

will retain for purposes of distributing assets upon plan
termination the interest rate and mortality assumptions
provided by Section 417(e)(3)(B) of the Code and
applicable regulations of the PBGC. BancShares further agrees
to assume or to cause FCB and/or its employees to assume as
of the Effective Time any and all administrative and fiduciary
duties with respect to the day-to-day operation of such
plans, including the duties of trustee.

At the Effective Time, all New Employees will have
the option of participating in FCB's health and dental programs.
The cost of such health insurance shall be equal to the cost for
any FCB employee. In addition, all New Employees shall have
access to all benefits applicable to a new FCB employee at the
identical cost. Any non-retained employee shall be allowed to
participate in the FCB Health and Dental Plan through the
exercise of his or her respective COBRA rights, and for COBRA
purposes the FCB Health and Dental Plan shall be considered a
successor plan to the health care plans for Allied and the
Subsidiaries so that any "qualified beneficiaries" within the
meaning of Section 4980 of the Code with respect to the plans of
Allied and the Subsidiaries shall be treated as a "qualified
beneficiary" under the FCB Health and Dental Plan.

FCB shall provide appropriate training and
educational opportunities to all New Employees in order to
provide such employees a reasonable opportunity to assimilate
with the operations of FCB.

BancShares agrees to honor and assume Allied's
obligation pursuant to the Supplemental Income Agreement by and
between Allied and A. Harold Ausley dated November 1, 1989.
Termination of employment pursuant to Mr. Ausley's existing
employment agreement with Summit shall be considered to be
equivalent to termination for reason other than death or
attainment of age 65 under Paragraph 4 of the Supplemental Income
Agreement.

BancShares agrees to honor and assume Allied's
obligation pursuant to the Supplemental Income Agreement by and
between Allied and Del F. Jones dated August 1, 1990.
Termination of employment pursuant to Mr. Jones' existing
employment agreement with Summit shall be considered to be
equivalent to termination for reason other than death or
attainment of age 65 under Paragraph 4 of the Supplemental Income
Agreement.

BancShares acknowledges the existence of the
Executive Bonus Plan of Allied for the benefit of A. Harold
Ausley and Del F. Jones which consists of whole life insurance
policies with base amounts of $100,000 and $50,000, respectively.
The cash value and death benefits pursuant to such policies are
owned by Mr. Ausley and Mr. Jones, but the annual premiums are
paid by Allied on behalf of Mr. Ausley and Mr. Jones. BancShares
agrees that any further premium payments on such policies will
cease as of the Effective Time, thereby giving Mr. Ausley and Mr.
Jones the option of either cashing out the policies or continuing
payment as they individually deem appropriate.

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e. Modification or Reduction in Payments.
BancShares agrees to allow Allied and the Subsidiaries to amend
paragraph 10(g) of each of the existing employment agreements
with A. Harold Ausley, Donald F. Pelling and Del F. Jones to
eliminate the provisions requiring modification or reduction in
payments under certain circumstances in the event such
modification or reduction would exceed in value the excise taxes
the officer otherwise would be required to pay under Section 4999
of the Code absent such modification or reduction.

5.4. Board of Directors.

a. Appointment of Director. Following the
Effective Time, BancShares' Board of Directors will appoint one
member of Allied's Board of Directors (who will be selected
solely by BancShares) to serve as a director of BancShares until
the next meeting of shareholders at which members of BancShares'
Board of Directors are elected. Thereafter, such person shall be
nominated and recommended for election as a director of
BancShares for a one-year term at such meeting of BancShares'
shareholders and at each of the next three consecutive meetings
at which directors are elected. During the period he serves as a
BancShares director, BancShares' Board of Directors also shall
appoint such person to serve as a director of FCB. Such person's
continued service as a director of BancShares and FCB shall be
subject to customary regulatory approvals, his qualification to
serve as a director under applicable banking regulations and
BancShares' and FCB's bylaws, and, in the case of BancShares, to
election by BancShares' shareholders.

For his services as a director of BancShares
and FCB, the person appointed as described above, provided he
remains a director of BancShares and FCB and further provided he
not be serving as a director or advisory director of another
financial institution or financial institution holding company,
shall be compensated until the end of such person's fourth
elected one-year term as a director of BancShares at the rates in
effect on March 31, 1995 for directors of Allied and the
Subsidiaries. Thereafter, if such person continues to serve as a
director of BancShares and/or FCB, he shall be compensated in
accordance with BancShares' and FCB's then current fee schedule.

b. Local Advisory Board. Each of the members of
Allied's Board of Directors at the Effective Time (other than the
director who is elected to BancShares' Board as provided above
and directors who do not desire to serve as such, and excluding
A. Harold Ausley and Donald F. Pelling), and each of Royce N.
Angel and R. Allen Rippy, shall be appointed to serve for a term
of four years following the Effective Time as a member of a local
advisory board for one of FCB's banking offices in the former
geographic market of one of the Subsidiaries. Each person so
appointed, shall diligently discharge his duties as an advisory
board member and promote in good faith BancShares' and FCB's best
interests. For their services as advisory board members, each
person so appointed, provided he remains a director of the
advisory board and provided

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further he not be serving as a director or advisory
director of another financial institution or financial
institution holding company, shall be compensated at the
rate in effect on March 31, 1995 for directors of Allied and
the Subsidiaries. Following his fourth year of service,
each such person's continued service as an advisory director
will be at FCB's pleasure and will be subject to FCB's
normal policies and procedures regarding the appointment and
service of advisory directors, and each such person who
continues to serve as an advisory direct will receive fees
for such service in accordance with FCB's then current
schedule of advisory board fees.

5.5. Indemnification of Directors and Officers. After
the Effective Time, without releasing any insurance carrier and
after exhaustion of all applicable director and liability
insurance coverage for Allied or the Subsidiaries and their
respective directors and officers, BancShares shall indemnify,
hold harmless and defend the directors and officers of Allied and
the Subsidiaries in office at the Effective Time, to the same
extent as it indemnifies its own directors and officers, from and
against any and all claims, disputes, demands, causes of action,
suits, proceedings, losses, damages, liabilities, obligations,
cost and expenses of every kind and nature including without
limitation reasonable attorneys fees and legal costs and expenses
therewith whether known or unknown and whether now existing or
hereafter arising which may be threatened against, incurred,
undertaken, received or paid by such persons in connection with
or which arise out of or result from or are based upon any action
or failure to act by such person in the ordinary scope of his
duties as a director or officer of Allied or the Subsidiaries
through the Effective Time; provided, however, that BancShares
shall not be obligated to indemnify such person for (i) any act
not available for statutory or permissible indemnification under
Delaware or North Carolina law, (ii) any act of self-dealing in
violation of federal or state law, (iii) any act or omission
which is ultimately determined to have constituted a breach of
any implied or actual duty of fair dealing in connection with a
lending obligation (such claims being commonly referred to as
lender liability claims), (iv) any penalty, decree, order,
finding or other action imposed or taken by any regulatory
authority, (v) any violation or alleged violation of any federal
or state law, rule, regulation, order, decree or policy
applicable to banks and bank holding companies, (vi) any
violation or alleged violation of federal or state securities
laws, or (vii) any claim of sexual or other unlawful harassment,
or any form of employment discrimination prohibited by federal or
state law.

The indemnification provided by this Paragraph 5.5.e.
is the sole indemnification provided by BancShares to the
directors and officers of Allied and the Subsidiaries for service
in such positions up to and through the Effective Time.

This Paragraph 5.5.e. is intended to create personal
rights in the directors and officers of Allied and the
Subsidiaries, who shall be deemed to be third-party beneficiaries

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hereof. Notwithstanding any other provision of this Agreement,
at the Effective Time, the indemnification rights provided herein
shall not be extinguished but shall instead survive.

ARTICLE VI. MUTUAL AGREEMENTS

6.1. Shareholders Meeting; Registration Statement; Proxy
Statement/Prospectus.

a. Meeting of Shareholders. Allied shall cause a
special meeting of its shareholders (the "Shareholders Meeting")
to be duly called and held as soon as practicable (but in no
event less than 20 business days following the mailing to
Allied's shareholders of the "Proxy Statement/Prospectus"
described below) for the purpose of Allied's shareholders voting
on the approval of the Merger and the ratification and adoption
of this Agreement. In connection with the call and conduct of
and all other matters relating to the Shareholders Meeting
(including the solicitation of proxies), Allied fully comply with
all provisions of applicable law and regulations and with its
Articles or Certificate of Incorporation and Bylaws.

b. Preparation and Distribution of Proxy Statement/
Prospectus. BancShares and Allied jointly shall prepare a "Proxy
Statement/Prospectus" for distribution to Allied's shareholders
as the proxy statement relating to Allied's solicitation of
proxies for use at the Shareholders Meeting and as BancShares'
prospectus relating to the offer and distribution of BancShares
Stock as described herein. The Proxy Statement/Prospectus shall
be in such form and shall contain or be accompanied by such
information regarding the Shareholders Meeting, this Agreement,
the parties hereto, the Merger and other transactions described
herein as is required by applicable law and regulations and
otherwise as shall be agreed upon by BancShares and Allied.
BancShares shall include the Proxy Statement/Prospectus as the
prospectus in its "Registration Statement" described below; and,
BancShares and Allied shall cooperate with each other in good
faith and shall use their best efforts to cause the Proxy
Statement/Prospectus to comply with any comments of the SEC
thereon.

Allied will mail the Proxy Statement/Prospectus to its
shareholders not less than 20 business days prior to the
scheduled date of the Shareholders Meeting; provided, however,
that no such materials shall be mailed to Allied's shareholders
unless and until BancShares shall have determined to its own
satisfaction that the conditions specified in Paragraph 7.3.d.
below have been satisfied and shall have approved such mailing.

c. Registration Statement and "Blue Sky" Approvals.
As soon as practicable following the execution of this Agreement,
BancShares shall prepare and file with the SEC a registration
statement on Form S-4 (or on such other form as BancShares shall
determine to be appropriate) (the "Registration Statement")
covering the BancShares Stock to be issued to shareholders of

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Allied pursuant to this Agreement. Additionally, BancShares
shall take all such other actions, if any, as shall be required
by applicable state securities or "blue sky" laws (i) to cause
the BancShares Stock to be issued upon consummation of the
Merger, and at the time of the issuance thereof, to be duly
qualified or registered (unless exempt) under such laws, (ii) to
cause all conditions to any exemptions from qualification or
registration under such laws to have been satisfied, and (iii) to
obtain any and all required approvals or consents to the issuance
of such stock.
BancShares shall deliver to Allied and its counsel a
preliminary draft of the Registration Statement and the Proxy
Statement/Prospectus not later than 30 days after the date of
this Agreement.

d. Recommendation of Allied's Board of Directors.
Unless due to a material change in circumstances or for any other
reason Allied's Board of Directors reasonably believes that such
a recommendation would violate the directors' duties or
obligations as such to Allied or to its shareholders, Allied's
Board of Directors shall recommend to and actively encourage
Allied's shareholders that they vote their shares of Allied Stock
at the Shareholders Meeting to ratify and approve this Agreement
and the Merger, and the Proxy Statement/Prospectus mailed to
Allied's shareholders will so indicate and state that Allied's
Board of Directors considers the Merger to be advisable and in
the best interests of Allied and its shareholders.

e. Information for Proxy Statement/Prospectus and
Registration Statement. BancShares and Allied each agrees to
promptly respond, and to use its best efforts to cause its
directors, officers, accountants and affiliates to promptly
respond, to requests by any other such party and its counsel for
information for inclusion in the various applications for
regulatory approvals and in the Proxy Statement/Prospectus.
BancShares and Allied each hereby covenants with the other that
none of the information provided by it for inclusion in the Proxy
Statement/Prospectus will, at the time of its mailing to Allied's
shareholders, contain any untrue statement of a material fact or
omit any material fact required to be stated therein or necessary
in order to make the statements contained therein, in light of
the circumstances under which they were made, not misleading;
and, at all times following such mailing up to and including the
Effective Time, none of such information contained in the Proxy
Statement/Prospectus, as it may be amended or supplemented, will
contain any untrue statement of a material fact or omit any
material fact required to be stated therein or necessary in order
to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.

6.2. Regulatory Approvals. Within 60 days after the date of
this Agreement, BancShares and Allied each shall prepare and
file, or cause to be prepared and filed, all applications for
regulatory approvals and actions as may be required of them,
respectively, by applicable law and regulations with respect to
the transactions

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described herein (including applications to the FRB, the
FDIC and the North Carolina Commissioner and to any other
applicable federal or state banking, securities or other
regulatory authority). Each such party shall use
their respective best efforts in good faith to obtain all
necessary regulatory approvals required for
consummation of the transactions described herein. Each
such party shall cooperate with each other party in the
preparation of all applications to regulatory authorities
and, upon request, promptly shall furnish all documents,
information, financial statements or other material that
may be required by any other party to complete any such
application; and, before the filing therefor, each party to
this Agreement shall have the right to review and comment on
the form and content of any such application to be filed by
any other party. Should the appearance of any of the
officers, directors, employees or counsel of any of the
parties hereto be requested by any other party or by any
governmental agency at any hearing in connection with any
such application, such party shall promptly use its best
efforts to arrange for such appearance.

6.3. Access. Following the date of this Agreement and to
and including the Effective Time, Allied shall provide BancShares
and its employees, accountants, counsel or other representatives,
access to all its books, records, files and other information
(whether maintained electronically or otherwise), to all its
properties and facilities, and to all its employees, accountants,
counsel and consultants as BancShares shall, in its sole
discretion, consider to be necessary or appropriate; provided,
however, that any investigation or reviews conducted by
BancShares shall be performed in such a manner as will not
interfere unreasonably with Allied's or the Subsidiaries' normal
operations or with their relationship with their customers or
employees, and shall be conducted in accordance with procedures
established by the parties having due regard for the foregoing.

6.4. Costs. Subject to the provisions of Paragraph 8.3.
below, and whether or not this Agreement shall be terminated or
the Merger shall be consummated, BancShares and Allied each shall
pay its own legal, accounting and financial advisory fees and all
its other costs and expenses incurred or to be incurred in
connection with the execution and performance of its obligations
under this Agreement or otherwise in connection with this
Agreement and the transactions described herein (including
without limitation all accounting fees, legal fees, filing fees,
printing costs, travel expenses, and, in the case of Allied, all
fees owed to Legg Mason Wood Walker, Incorporated ("Legg Mason")
and to Friedman, Billings, Ramsey & Co., Inc. ("FBR") and the
cost of Allied's "Fairness Opinions" described in
Paragraph 7.1.d. below. However, subject to the provisions of
Paragraph 8.3. below, all costs incurred in connection with the
preparation, printing and mailing of the Proxy
Statement/Prospectus, including but not limited to printing and
postage expenses, shall be deemed to be incurred and shall be
paid fifty percent (50%) by Allied and fifty percent (50%) by
BancShares but shall not exceed $20,000 for Allied.

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6.5. Announcements. Allied and BancShares each agrees that
no person other than the parties to this Agreement is authorized
to make any public announcements or statements about this
Agreement or any of the transactions described herein, and that,
without the prior review and consent of the others (which consent
shall not unreasonably be denied or delayed), no party hereto may
make any public announcement, statement or disclosure as to the
terms and conditions of this Agreement or the transactions
described herein, except for such disclosures as may be required
incidental to obtaining the prior approval of any regulatory
agency or official to the consummation of the transactions
described herein. However, notwithstanding anything contained
herein to the contrary, prior review and consent shall not be
required if in the good faith opinion of counsel to BancShares
any such disclosure by BancShares is required by law or otherwise
is prudent.

6.6. Confidentiality. BancShares and Allied each agrees
that it shall treat as confidential and not disclose to any
unauthorized person any documents or other information obtained
from or learned about the other during the course of the
negotiation of this Agreement and the carrying out of the events
and transactions described herein (including any information
obtained during the course of any due diligence investigation or
review provided for herein or otherwise) and which documents or
other information relates in any way to the business, operations,
personnel, customers or financial condition of such other party;
and, that it will not use any such documents or other information
for any purpose except for the purposes for which such documents
and information were provided to it and in furtherance of the
transactions described herein. However, the above obligations of
confidentiality shall not prohibit the disclosure of any such
document or information by any party to this Agreement to the
extent (i) such document or information is then available
generally to the public or is already known to the person or
entity to whom disclosure is proposed to be made (other than
through the previous actions of such party in violation of this
Paragraph 6.6), (ii) such document or information was available
to the disclosing party on a nonconfidential basis prior to the
same being obtained pursuant to this Agreement, (iii) disclosure
is required by subpoena or order of a court or regulatory
authority of competent jurisdiction, or by the SEC or other
regulatory authorities in connection with the transactions
described herein, or (iv) to the extent that, in the reasonable
opinion of legal counsel to such party, disclosure otherwise is
required by law.

In the event this Agreement is terminated for any
reason, then each of the parties hereto immediately shall return
to the other party all copies of any and all documents or other
written materials or information (including computer generated
and stored data) of or relating to such other party which were
obtained from them during the course of the negotiation of this
Agreement and the carrying out of the events and transactions
described herein (whether during the course of any due diligence
investigation or review provided for herein or otherwise) and
which documents or

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other information relates in any way to the business,
operations, personnel, customers or financial condition of
such other party.

The parties' obligations of confidentiality under this
Paragraph 6.6 shall survive and remain in effect following any
termination of this Agreement.

6.7. Environmental Studies. At its option, BancShares may
cause to be conducted Phase I environmental assessments of the
Real Property, the real estate subject to any Real Property
Lease, or the Loan Collateral, or any portion thereof, together
with such other studies, testing and intrusive sampling and
analyses as BancShares shall deem necessary or desirable
(collectively, the "Environmental Survey"); provided, however,
that the Environmental Survey, as much as possible, shall be
performed in such a manner as will not interfere unreasonably
with Allied's or the Subsidiaries' normal operations. BancShares
shall attempt in good faith to complete all such Phase I
environmental assessments within sixty (60) days following the
date of this Agreement and thereafter to conduct and complete any
such additional studies, testing, sampling and analyses as
promptly as practicable. Subject to the provisions of Paragraph
8.3. below, the costs of the Environmental Survey shall be paid
by BancShares. If (i) the final results of any Environmental
Survey (or any related analytical data) reflect that there likely
has been any discharge, disposal, release or emission by any
person of any Hazardous Substance on, from or relating to any of
the Real Property, real estate subject to a Real Property Lease
or Loan Collateral at any time prior to the Effective Time, or
that any action has been taken or not taken, or a condition or
event likely has occurred or exists, with respect to any of the
Real Property, real estate subject to a Real Property Lease or
Loan Collateral which constitutes or would constitute a violation
of any Environmental Laws, and if, (ii) based on the advice of
its legal counsel or other consultants, BancShares believes that
Allied or either of the Subsidiaries, or, following the Merger,
BancShares or FCB, could become responsible for the remediation
of such discharge, disposal, release or emission or for other
corrective action with respect to any such violation, or that
Allied or either of the Subsidiaries, or, following the Merger,
BancShares or FCB, could become liable for monetary damages
(including without limitation any civil or criminal penalties or
assessments) resulting therefrom (or that, in the case of any of
the Loan Collateral, Allied or either of the Subsidiaries, or,
following the Merger, BancShares or FCB, could incur any such
liability if it acquired title to such Loan Collateral), and if,
(iii) based on the advice of their legal counsel or other
consultants, BancShares believes the amount of expenses or
liability which either of them could incur or for which either of
them could become responsible or liable on account of any and all
such remediation, corrective action or monetary damages at any
time or over any period of time could equal or exceed an
aggregate of $250,000 over any period of time, then BancShares
shall give Allied prompt written notice thereof (together with
all information in its possession relating thereto) and, at
BancShares' sole option and discretion, at any time thereafter
and up to the Effective Time, it may terminate this

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Agreement without further obligation or liability to
Allied or its shareholders.

6.8. Tax-Free Reorganization. BancShares and Allied each
undertakes and agrees to use its best efforts to cause the Merger
to qualify as a tax-free "reorganization" within the meaning of
Section 368(a)(1)(A) of the Code and that it shall not
intentionally take any action that would cause the Merger to fail
to so qualify.

6.9. Transition Team. BancShares and Allied shall create a
transition team comprised of staff and representatives of Allied
and the Subsidiaries and staff and representatives of BancShares
and FCB (the "Transition Team"). The purpose of the Transition
Team shall be to provide detailed guidance to BancShares in
fulfilling and consummating the Merger, to maintain open lines of
communication between the Subsidiaries and FCB, and to handle
customer inquiries regarding the Merger. A member of the
Transition Team who is a representative of FCB shall be on site
on a daily basis at the Subsidiaries' main offices in Sanford and
Wilmington to serve as a liaison between FCB and the Subsidiaries
until the Effective Time, provided, however, that the
representative shall not interfere unreasonably with the
Subsidiaries' normal operations. The Transition Team shall meet
at and operate out of the Subsidiaries' offices as necessary
until the Effective Time. Members of the Transition Team shall
receive no compensation for such service.

ARTICLE VII. CONDITIONS PRECEDENT TO MERGER

7.1. Conditions to all Parties' Obligations.
Notwithstanding any other provision of this Agreement
to the contrary, the obligations of each of the parties to
this Agreement to consummate the transactions described herein
shall be conditioned upon the satisfaction of each of
the following conditions precedent on or prior to the Closing
Date:

a. Approval by Governmental or Regulatory
Authorities; No Disadvantageous Conditions. (i) The Merger and
other transactions described herein shall have been approved, to
the extent required by law, by the FRB, the FDIC and the North
Carolina Commissioner, and by all other governmental or
regulatory agencies or authorities having jurisdiction over such
transactions, (ii) no governmental or regulatory agency or
authority shall have withdrawn its approval of such transactions
or imposed any condition on such transactions or conditioned its
approval thereof, which condition is reasonably deemed by
BancShares to be materially disadvantageous or burdensome or to
so adversely impact the economic or business benefits of this
Agreement to BancShares as to render it inadvisable for it to
consummate the Merger; (iii) the 15-day or 30-day waiting period,
as applicable, required following necessary approvals by the FRB
and the FDIC for review of the transactions described herein by
the United States Department of Justice shall have expired, and,
in connection with such review, no objection to

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the Merger shall have been raised; and (iv) all other
consents, approvals and permissions, and the satisfaction
of all of the requirements prescribed by law or regulation,
necessary to the carrying out of the transactions contemplated
herein shall have been procured.

b. Adverse Proceedings, Injunction, Etc. There
shall not be (i) any order, decree or injunction of any court or
agency of competent jurisdiction which enjoins or prohibits the
Merger or any of the other transactions described herein or any
of the parties hereto from consummating any such transaction,
(ii) any pending or threatened investigation of the Merger or any
of such other transactions by the United States Department of
Justice, or any actual or threatened litigation under federal
antitrust laws relating to the Merger or any other such
transaction, (iii) any suit, action or proceeding by any person
(including any governmental, administrative or regulatory
agency), pending or threatened before any court or governmental
agency in which it is sought to restrain or prohibit Allied or
BancShares from consummating the Merger or carrying out any of
the terms or provisions of this Agreement, or (iv) any other
suit, claim, action or proceeding pending or threatened against
Allied or BancShares or any of their respective officers or
directors which shall reasonably be considered by Allied or
BancShares to be materially burdensome in relation to the
proposed Merger or materially adverse in relation to the
financial condition, results of operations, prospects,
businesses, assets, loan portfolio, investments, properties or
operations of either such corporation, and which has not been
dismissed, terminated or resolved to the satisfaction of all
parties hereto within 90 days of the institution or threat
thereof.

c. Approval by Boards of Directors and Shareholders.
The Boards of Directors of Allied and BancShares shall have duly
approved, adopted and ratified this Agreement by appropriate
resolutions, and the shareholders of Allied shall have duly
approved, ratified and adopted this Agreement at the Shareholders
Meeting, all to the extent required by and in accordance with the
provisions of this Agreement, applicable law, and applicable
provisions of their respective Articles or Certificate of
Incorporation and ByLaws.

d. Fairness Opinions. Allied shall have received
from each of its financial advisors, Legg Mason and FBR, a
written opinion (collectively, the "Fairness Opinions"), dated as
of a date prior to the mailing of the Proxy Statement/Prospectus
to Allied's shareholders in connection with the Shareholders
Meeting, to the effect that the consideration to be received by
Allied's shareholders in the Merger is fair, from a financial
point of view, to Allied and its shareholders; and, Legg Mason
and FBR each shall have delivered a letter to Allied, dated as of
a date within ten business days preceding the Closing Date, to
the effect that it remains its opinion that the terms of the
Merger are fair, from a financial point of view, to Allied and
its shareholders.

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e. Tax Opinion. BancShares and Allied shall
have received an opinion of KPMG Peat Marwick LLP, in
form and substance satisfactory to them, substantially to the
effect that: (i) for federal income tax purposes,
consummation of the Merger will constitute a "reorganization"
as defined in (Section Mark) 368(a)(1)(A) of the Code;
(ii) no taxable gain will be recognized by a shareholder
of Allied upon such shareholder's receipt of solely
BancShares Stock in exchange for his or her Allied Stock;
(iii) dividend income or gain, if any, will be
recognized by a shareholder of Allied who receives
BancShares Stock and either cash or Debentures in exchange
for his or her Allied Stock pursuant to Paragraph 1.5.b.
above, limited to an amount not in excess of the amount
of cash or the fair market value of Debentures received;
(iv) the basis of the BancShares Stock received by the
shareholder in the Merger will have the same basis as his
or her Allied Stock surrendered in exchange therefor decreased
by the amount of cash or the fair market value of
Debentures received, if any, and increased by the amount
of dividend income or gain recognized, if any, in the
exchange; (v) if Allied Stock is a capital asset in the
hands of the shareholder at the Effective Time, then the
holding period of the BancShares Stock received by the
shareholder in the Merger will include the holding period
of Allied Stock surrendered in exchange therefor; (vi)
cash or Debentures received by a shareholder who
receives solely cash or Debentures pursuant to Paragraph
1.5.a. above will be treated as a distribution in
redemption of his or her Allied Stock subject to the
limitations of Section 302 of the Code; and (vii) a
shareholder who receives cash in lieu of a fractional
share of BancShares Stock will recognize gain or loss equal
to any difference between the amount of cash received and the
shareholder's basis in the fractional share interest. In
rendering its opinion, KPMG Peat Marwick LLP may rely on
representations contained in certificates of officers of
BancShares and Allied.

f. Nasdaq Listing. Bancshares shall have satisfied
all requirements for the shares of Bancshares Stock to be issued
to the shareholders of Allied in connection with the Merger to be
listed on the Nasdaq National Market as of the Effective Time.

g. No Termination or Abandonment. This Agreement
shall not have been terminated or abandoned by any party hereto.

7.2. Additional Conditions to Allied's Obligations.
Notwithstanding any other provision of this Agreement to the
contrary, Allied's separate obligation to consummate the
transactions described herein shall be conditioned upon the
satisfaction of each of the following conditions precedent on or
prior to the Closing Date:

a. Material Adverse Change. There shall not have
been any material adverse change in the consolidated financial
condition, results of operations, prospects, businesses, assets,
loan portfolio, investments, properties or operations of
BancShares and its consolidated subsidiaries considered as one
enterprise and there shall not have occurred any event or
development and there shall not exist any condition or
circumstance which, with the lapse

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of time or otherwise, may or could cause, create or
result in any such material adverse change.

b. Compliance with Laws. BancShares shall have
complied in all material respects with all federal and state laws
and regulations applicable to the transactions described herein
and where the violation of or failure to comply with any such law
or regulation could or may have a material adverse effect on the
consolidated financial condition, results of operations,
prospects, businesses, assets, loan portfolio, investments,
properties or operations of BancShares and its consolidated
subsidiaries considered as one enterprise.

c. BancShares' Representations and Warranties and
Performance of Agreements; Officers' Certificate. Unless waived
in writing by Allied as provided in Paragraph 10.2. below, each
of the representations and warranties of BancShares contained in
this Agreement shall have been true and correct as of the date
hereof and shall remain true and correct on and as of the
Effective Time with the same force and effect as though made on
and as of such date, except (i) for changes which are not, in the
aggregate, material and adverse to the consolidated financial
condition, results of operations, prospects, businesses, assets,
loan portfolio, investments, properties or operations of
BancShares and its consolidated subsidiaries considered as one
enterprise, and (ii) as otherwise contemplated by this Agreement;
and BancShares shall have performed in all material respects all
of its obligations, covenants and agreements hereunder to be
performed by it on or before the Closing Date.

Allied shall have received a certificate dated as of
the Closing Date and executed by BancShares and its Vice Chairman
and Chief Financial Officer to the foregoing effect and as to
such other matters as may be reasonably requested by Allied.

d. Legal Opinion of BancShares' Counsel. Allied
shall have received from Ward and Smith, P.A., counsel for
BancShares, a written opinion dated as of the Closing Date and
substantially in the form of Schedule C attached hereto or
otherwise in form and substance reasonably satisfactory to
Allied.

e. Other Documents and Information from
BancShares. BancShares shall have provided to Allied correct and
complete copies of its Bylaws, Certificate of Incorporation and
board resolutions (all certified by its Secretary), together with
certificates of the incumbency of its officers and such other
closing documents and information as may be reasonably requested
by Allied or its counsel.

f. Certificate of Merger; Other Actions. A
Certificate of Merger in the form described in Paragraph 1.8.
above shall have been duly executed and delivered by BancShares
as provided in that Paragraph.

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g. Acceptance by Allied's Counsel. The form and
substance of all legal matters described herein or related to the
transactions contemplated herein shall be reasonably acceptable
to Allied's legal counsel.

7.3. Additional Conditions to BancShares' Obligations.
Notwithstanding any other provision of this Agreement to the
contrary, BancShares' obligations to consummate the transactions
described herein shall be conditioned upon the satisfaction of
each of the following conditions precedent on or prior to the
Closing Date:

a. Material Adverse Change. There shall not have
occurred any material adverse change in the consolidated
financial condition, results of operations, prospects,
businesses, assets, loan portfolio, investments, properties or
operations of Allied and there shall not have occurred any event
or development and there shall not exist any condition or
circumstance which, with the lapse of time or otherwise, may or
could cause, create or result in any such material adverse
change.

b. Compliance with Laws. Allied shall have complied
in all material respects with all federal and state laws and
regulations applicable to the transactions described herein and
where the violation of or failure to comply with any such law or
regulation could or may have a material adverse effect on the
consolidated financial condition, results of operations,
prospects, businesses, assets, loan portfolio, investments,
properties or operations of BancShares or Allied.

c. Allied's Representations and Warranties and
Performance of Agreements; Officers' Certificate. Unless waived
in writing by BancShares as provided in Paragraph 10.2. below,
each of the representations and warranties of Allied contained in
this Agreement shall have been true and correct as of the date
hereof and shall remain true and correct at and as of the
Effective Time with the same force and effect as though made on
and as of such date, except (i) for changes which are not, in the
aggregate, material and adverse to the consolidated financial
condition, results of operations, prospects, businesses, assets,
loan portfolio, investments, properties or operations of Allied
and the Subsidiaries considered as one enterprise, and (ii) as
otherwise contemplated by this Agreement; and Allied shall have
performed in all material respects all its obligations, covenants
and agreements hereunder to be performed by it on or before the
Closing Date.

BancShares shall have received a certificate dated as
of the Closing Date and executed by Allied and its President and
Chief Financial Officer to the foregoing effect and as to such
other matters as may be reasonably requested by BancShares.

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d. Effectiveness of Registration Statement;
Compliance with Securities and Other "Blue Sky"
Requirements. The Registration Statement shall be effective
under the 1933 Act and no stop order suspending the effectiveness
of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or
threatened by the SEC. BancShares shall have taken all such
other actions, if any, as it shall consider to be required by
applicable state securities laws (i) to cause the BancShares
Stock to be issued upon consummation of the Merger and at the
time of the issuance thereof, to be duly qualified or registered
(unless exempt) under such laws, (ii) to cause all conditions to
any exemptions from qualification or registration under such laws
to have been satisfied, and (iii) to obtain any and all required
approvals or consents with respect to the issuance of such stock,
and any such required approvals or consents shall have been
obtained and shall remain in effect.

e. Agreements from Allied Affiliates. BancShares
shall have received the written Affiliates' Agreements in form
and content satisfactory to BancShares and signed by all persons
Previously Disclosed to BancShares or who otherwise are deemed by
BancShares or its counsel to be Affiliates of Allied as provided
in Paragraph 4.1.a. above.

f. Legal Opinion of Allied's Counsel. BancShares
shall have received from Poyner & Spruill L.L.P., counsel to
Allied, a written opinion, dated as of the Closing Date and
substantially in the form of Schedule D attached hereto or
otherwise in form and substance reasonably satisfactory to
BancShares.

g. Other Documents and Information from Allied.
Allied shall have provided to BancShares correct and complete
copies of Allied's Articles of Incorporation, Bylaws and board
and shareholder resolutions (all certified by Allied's
Secretary), together with certificates of the incumbency of
Allied's officers and such other closing documents and
information as may be reasonably requested by BancShares or its
counsel.

h. Consents to Assignment of Property Leases. Allied
shall have obtained all required consents to the assignment to
BancShares of its rights and obligations under any personal
property lease material to the business of Allied or either of
the Subsidiaries and any Real Property Lease, and such consents
shall be in such form and substance as shall be satisfactory to
BancShares; and, each of the lessors of Allied and the
Subsidiaries shall have confirmed in writing that neither Allied
nor either of the Subsidiaries is in default under the terms and
conditions of any personal property lease or any Real Property
Lease.

i. Certificate of Merger; Other Actions. A
Certificate of Merger in the form described in Paragraph 1.8.
above shall have been duly executed and delivered by Allied as
provided in that Paragraph.

j. Acceptance by BancShares' Counsel. The form and
substance of all legal matters described herein or related to the

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transactions contemplated herein shall be reasonably acceptable
to BancShares' legal counsel.

ARTICLE VIII. TERMINATION; BREACH; REMEDIES

8.1. Mutual Termination. At any time prior to the Effective
Time (and whether before or after approval hereof by the
shareholders of Allied), this Agreement may be terminated by the
mutual agreement of BancShares and Allied. Upon any such mutual
termination, all obligations of Allied and BancShares hereunder
shall terminate and each party shall pay costs and expenses as
provided in Paragraph 6.4. above.

8.2. Unilateral Termination. This Agreement may be
terminated by either BancShares or Allied (whether before or
after approval hereof by Allied's shareholders) upon written
notice to the other parties and under the circumstances described
below.

a. Termination by BancShares. This Agreement may be
terminated by BancShares by action of its Board of Directors or
Executive Committee:

(i) if any of the conditions to the
obligations of BancShares (as set forth in Paragraph 7.1. or 7.3.
above) shall not have been satisfied or effectively waived in
writing by BancShares by March 31, 1996 (except to the extent
that the failure of such condition to be satisfied has been
caused by the failure of BancShares to satisfy any of its
obligations, covenants or agreements contained herein);

(ii) if Allied shall have violated or failed
to fully perform any of its obligations, covenants or agreements
contained in Article IV or Article VI herein in any material
respect;

(iii) if BancShares determines at any time
that any of Allied's representations or warranties contained in
Article II above or in any other certificate or writing delivered
pursuant to this Agreement shall have been false or misleading in
any material respect when made, or that there has occurred any
event or development or that there exists any condition or
circumstance which has caused or, with the lapse of time or
otherwise, may or could cause any such representations or
warranties to become false or misleading in any material respect;

(iv) if, notwithstanding BancShares'
satisfaction of its obligations under Paragraphs 6.1.b., 6.1.c.
and 6.1.e. above, Allied's shareholders do not ratify and approve
this Agreement and approve the Merger at the Shareholders
Meeting;

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parties hereto, the parties hereto agree that the dates
set forth in this Paragraph 8.2.a. shall be extended by
mutual agreement for up to an additional 60 days;

(vi) if the average of the reported closing
prices of BancShares Stock on the Nasdaq National Market for the
10 consecutive trading days ending 30 days prior to the date of
the Special Meeting is less than $42.00; or,

(vii) under the circumstances described in
Paragraph 6.7. above.

However, before BancShares may terminate this Agreement
for any of the reasons specified above in (i), (ii) or (iii) of
this Paragraph 8.2.a., it shall give written notice to Allied as
provided herein stating its intent to terminate and a description
of the specific breach, default, violation or other condition
giving rise to its right to so terminate, and, such termination
by BancShares shall not become effective if, within 30 days
following the giving of such notice, Allied shall cure such
breach, default or violation or satisfy such condition to the
reasonable satisfaction of BancShares. In the event Allied
cannot or does not cure such breach, default or violation or
satisfy such condition to the reasonable satisfaction of
BancShares within such 30-day period, BancShares shall have 30
days to notify Allied of its intention to terminate this
Agreement. A failure to so notify Allied will be deemed to be a
waiver by BancShares of the breach, default or violation pursuant
to Paragraph 10.2. below.

b. Termination by Allied. This Agreement may be
terminated by Allied:

(i) if any of the conditions of the
obligations of Allied (as set forth in Paragraph 7.1. or 7.2.
above) shall not have been satisfied or effectively waived in
writing by Allied by March 31, 1996 (except to the extent that
the failure of such condition to be satisfied has been caused by
the failure of Allied to satisfy any of its obligations,
covenants or agreements contained herein);

(ii) if BancShares shall have violated or
failed to fully perform any of its obligations, covenants or
agreements contained in Article V or Article VI herein in any
material respect;

(iii) if Allied determines that any of
BancShares' representations and warranties contained in Article
III herein or in any other certificate or writing delivered
pursuant to this Agreement shall have been false or misleading in
any material respect when made, or that there has occurred any
event or development or that there exists any condition or
circumstance which has caused or, with the lapse of time or
otherwise, may or could cause any such representations or
warranties to become false or misleading in any material respect;

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(iv) if, subject to Allied's satisfaction of
its obligations contained in Paragraphs 6.1.a., 6.1.b., 6.1.d.
and 6.1.e above, its shareholders do not ratify and approve this
Agreement and approve the Merger at the Shareholders Meeting; or,

(v) if the Merger shall not have become
effective on or before March 31, 1996, unless such date is
extended as evidenced by the written mutual agreement of the
parties hereto; provided, however, that in the event there is a
delay of not more than 30 days caused by circumstances beyond the
control of the parties hereto, the parties hereto agree that the
dates set forth in this Paragraph 8.2.a. shall be extended by
mutual agreement for up to an additional 60 days.

However, before Allied may terminate this Agreement for
any of the reasons specified above in clause (i), (ii) or (iii)
of this Paragraph 8.2.b., it shall give written notice to
BancShares as provided herein stating its intent to terminate and
a description of the specific breach, default, violation or other
condition giving rise to its right to so terminate, and, such
termination by Allied shall not become effective if, within 30
days following the giving of such notice, BancShares shall cure
such breach, default or violation or satisfy such condition to
the reasonable satisfaction of Allied. In the event BancShares
cannot or does not cure such breach, default or violation or
satisfy such condition to the reasonable satisfaction of Allied
within such 30-day period, Allied shall have 30 days to notify
BancShares of its intention to terminate this Agreement. A
failure to so notify BancShares will be deemed to be a waiver by
Allied of the breach, default or violation pursuant to
Paragraph 10.2. below.

8.3. Breach; Remedies. Except as otherwise provided below,
in the event of a breach by Allied of any of its representations
or warranties contained in Article II of this Agreement or in any
other certificate or writing delivered pursuant to this
Agreement, or in the event of its failure to perform or violation
of any of its obligations, agreements or covenants contained in
Articles IV or VI of this Agreement, then BancShares' sole right
and remedy shall be to terminate this Agreement prior to the
Effective Time as provided in Paragraph 8.2. above, or, in the
case of a failure to perform or violation of any obligations,
agreements or covenants, to seek specific performance thereof.

Likewise, and except as otherwise provided below, in
the event of a breach by BancShares of any of its representations
or warranties contained in Article III of this Agreement, or in
the event of its failure to perform or violation of any of its
obligations, agreements or covenants contained in Articles V or
VI of this Agreement, then Allied's sole right and remedy shall
be to terminate this Agreement prior to the Effective Time as
provided in Paragraph 8.2. above, or, in the case of a failure to
perform or violation of any obligations, agreements or covenants,
to seek specific performance thereof.

Notwithstanding anything contained herein to the
contrary, if either party to this Agreement breaches this
Agreement

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by wilfully or intentionally failing to perform or
violating any of its obligations, agreements or
covenants contained in Articles IV, V or VI of this
Agreement, such party shall be obligated to pay all
expenses of the other party described in Paragraph 6.4,
together with other damages recoverable at law or in
equity.

ARTICLE IX. INDEMNIFICATION

9.1. Agreement to Indemnify. Allied and BancShares hereby
agree that in the event this Agreement is terminated for any
reason and the Merger is not consummated, then they will
indemnify each other as provided below.

a. By Allied. Allied shall indemnify, hold harmless
and defend BancShares from and against any and all claims,
disputes, demands, causes of action, suits, proceedings, losses,
damages, liabilities, obligations, costs and expenses of every
kind and nature, including without limitation reasonable
attorneys' fees and legal costs and expenses in connection
therewith, whether known or unknown, and whether now existing or
hereafter arising, which may be threatened against, incurred,
undertaken, received or paid by BancShares:

(i) in connection with or which arise out of
or result from or are based upon (A) Allied's operations or
business transactions or its relationship with any of its
employees, or (B) Allied's failure to comply with any statute or
regulation of any federal, state or local government or agency
(or any political subdivision thereof) in connection with the
transactions described in this Agreement;
(ii) in connection with or which arise out of
or result from or are based upon any fact, condition or
circumstance that constitutes a breach by Allied of, or any
inaccuracy, incompleteness or inadequacy in, any of its
representations or warranties under or in connection with this
Agreement, or any failure of Allied to perform any of its
covenants, agreements or obligations under or in connection with
this Agreement;

(iii) in connection with or which arise out of
or result from or are based upon any information provided by
Allied which is included in the Proxy Statement/Prospectus and
which information causes the Proxy Statement/Prospectus at the
time of its mailing to Allied's shareholders to contain any
untrue statement of a material fact or to omit any material fact
required to be stated therein or necessary in order to make the
statements contained therein, in light of the circumstances under
which they were made, not false or misleading; and,

(iv) in connection with or which arise out of
or result from or are based upon the presence, use, production,
generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, reporting, testing, processing,
emission, discharge, release, threatened release, control,
removal, clean-up

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or remediation on, from or relating to the Real Property by
Allied or any other person of any Hazardous
Substances, or any action taken or any event or
condition occurring or existing with respect to the Real
Property which constitutes a violation of any Environmental
Laws by Allied or any other person.

b. By BancShares. BancShares shall indemnify, hold
harmless and defend Allied from and against any and all claims,
disputes, demands, causes of action, suits, proceedings, losses,
damages, liabilities, obligations, costs and expenses of every
kind and nature, including without limitation reasonable
attorneys' fees and legal costs and expenses in connection
therewith, whether known or unknown, and whether now existing or
hereafter arising, which may be threatened against, incurred,
undertaken, received or paid by Allied:

(i) in connection with or which arise out of
or result from or are based upon (A) BancShares' operations or
business transactions or its relationship with any of its
employees, or (B) BancShares' failure to comply with any statute
or regulation of any federal, state or local government or agency
(or any political subdivision thereof) in connection with the
transactions described in this Agreement;

(ii) in connection with or which arise out of
or result from or are based upon of any fact, condition or
circumstance that constitutes a breach by BancShares of, or any
inaccuracy, incompleteness or inadequacy in, any of its
representations or warranties under or in connection with this
Agreement, or any failure of BancShares to perform any of its
covenants, agreements or obligations under or in connection with
this Agreement; and,

(iii) in connection with or which arise out of
or result from or are based upon any information provided by it
which is included in the Proxy Statement/Prospectus and which
information causes the Proxy Statement/Prospectus at the time of
its mailing to Allied's shareholders to contain any untrue
statement of a material fact or to omit any material fact
required to be stated therein or necessary in order to make the
statements contained therein, in light of the circumstances under
which they were made, not false or misleading.

9.2. Procedure for Claiming Indemnification.

a. By BancShares. If any matter subject to
indemnification hereunder arises in the form of a claim against
BancShares, its successors and assigns (collectively,
"Indemnitee") (herein referred to as a "Third Party Claim"), the
applicable Indemnitee promptly shall give notice and details
thereof, including copies of all pleadings and pertinent
documents, to Allied. Within 15 days of such notice, Allied
either (i) shall pay the Third Party Claim either in full or upon
agreed compromise or (ii) shall notify the applicable Indemnitee
and BancShares that Allied disputes the Third Party Claim and
intends to defend against it, and thereafter shall so defend and
pay any adverse final

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judgment or award in regard thereto. Such defense shall be
controlled by Allied and the cost of such defense shall
be borne by Allied except that the applicable Indemnitee
shall have the right to participate in such defense at its own
expense and provided that Allied shall have no right in
connection with any such defense or the resolution of any
such Third Party Claim to impose any cost, restriction,
limitation or condition of any kind upon any of the
parties comprising Indemnitee hereunder. BancShares agrees
that it shall cooperate in all reasonable respects in the
defense of any such Third Party Claim, including making
personnel, books and records relevant to the Third Party
Claim available to Allied without charge therefor except for
out-of-pocket expenses. If Allied fails to take action
within 15 days as hereinabove provided or, having taken such
action, thereafter fails diligently to defend and resolve
the Third Party Claim, the parties comprising Indemnitee
shall have the right to pay, compromise or defend the Third
Party Claim and to assert the indemnification provisions
hereof. Each of the parties comprising Indemnitee also
shall have the right, exercisable in good faith, to
take such action as may be necessary to avoid a
default prior to the assumption of the defense of the Third
Party Claim by Allied.

b. By Allied. If any matter subject to
indemnification hereunder arises in the form of a claim against
Allied or its successors and assigns (herein referred to as a
"Third Party Claim"), Allied promptly shall give notice and
details thereof, including copies of all pleadings and pertinent
documents, to BancShares. Within 15 days of such notice,
BancShares either (i) shall pay the Third Party Claim either in
full or upon agreed compromise or (ii) shall notify Allied that
BancShares disputes the Third Party Claim and intends to defend
against it, and thereafter shall so defend and pay any adverse
final judgment or award in regard thereto. Such defense shall be
controlled by BancShares and the cost of such defense shall be
borne by BancShares except that Allied shall have the right to
participate in such defense at its own expense and provided that
BancShares shall have no right in connection with any such
defense or the resolution of any such Third Party Claim to impose
any cost, restriction, limitation or condition of any kind upon
Allied. Allied agrees that it shall cooperate in all reasonable
respects in the defense of any such Third Party Claim, including
making personnel, books and records relevant to the Third Party
Claim available to BancShares without charge therefor except for
out-of-pocket expenses. If BancShares fails to take action
within 15 days as hereinabove provided or, having taken such
action, thereafter fails diligently to defend and resolve the
Third Party Claim, Allied shall have the right to pay, compromise
or defend the Third Party Claim and to assert the indemnification
provisions hereof. Allied also shall have the right, exercisable
in good faith, to take such action as may be necessary to avoid a
default prior to the assumption of the defense of the Third Party
Claim by BancShares.

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ARTICLE X. MISCELLANEOUS PROVISIONS

10.1. Survival of Representations, Warranties,
Indemnification and Other Agreements.

a. Representations, Warranties and Other Agreements.
None of the representations, warranties or agreements herein
shall survive the effectiveness of the Merger, and no party shall
have any right after the Effective Time to recover damages or any
other relief from any other party to this Agreement by reason of
any breach of representation or warranty, any nonfulfillment or
nonperformance of any agreement contained herein, or otherwise;
provided, however, that the parties' agreements contained in
Paragraph 6.6. above, BancShares' covenants contained in Article
V, and BancShares' representation and warranty contained in
Paragraph 3.2 above, shall survive the effectiveness of the
Merger.

b. Indemnification. The parties' indemnification
agreements and obligations pursuant to Paragraph 9.1. above shall
become effective only in the event this Agreement is terminated,
and neither of the parties shall have any obligations under
Paragraph 9.1. in the event of or following consummation of the
Merger.

10.2. Waiver. Any term or condition of this Agreement
may be waived (except as to matters of regulatory approvals and
approvals required by law), either in whole or in part, at any
time by the party which is, and whose shareholders are, entitled
to the benefits thereof; provided, however, that any such waiver
shall be effective only upon a determination by the waiving party
(through action of its Board of Directors) that such waiver would
not adversely affect the interests of the waiving party or its
shareholders; and, provided further, that no waiver of any term
or condition of this Agreement by any party shall be effective
unless such waiver is in writing and signed by the waiving party
or as provided in Paragraphs 8.2.a. and 8.2.b. above, or be
construed to be a waiver of any succeeding breach of the same
term or condition. No failure or delay of any party to exercise
any power, or to insist upon a strict compliance by any other
party of any obligation, and no custom or practice at variance
with any terms hereof, shall constitute a waiver of the right of
any party to demand full and complete compliance with such terms.

10.3. Amendment. This Agreement may be amended,
modified or supplemented at any time or from time to time prior
to the Effective Time, and either before or after its approval by
the shareholders of Allied, by an agreement in writing approved
by a majority of the Boards of Directors of BancShares and Allied
executed in the same manner as this Agreement; provided however,
that, except with the further approval of Allied's shareholders
of that change or as otherwise provided herein, following
approval of this Agreement by Allied's shareholders no change may
be made in the Cash Factor or the Exchange Ratio.

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10.4. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been
duly given if delivered personally or by courier, or mailed by
certified mail, return receipt requested, postage prepaid, and
addressed as follows:

a. If to Allied, to:

Allied Bank Capital, Inc.
130 North Steele Street
Sanford, North Carolina 27336

Attention: Mr. A. Harold Ausley
President
With copy to: Michael S. Colo, Esq.
Poyner & Spruill L.L.P.
130 South Franklin Street
Rocky Mount, North Carolina 27802

b. If to BancShares, to:

First Citizens BancShares, Inc.
3128 Smoketree Court
Raleigh, North Carolina 27604

Attention: Mr. Kenneth A. Black
Vice President

With copy to: Alexander M. Donaldson, Esq.
Ward and Smith, P.A.
Suite 2400, Two Hannover Square
Fayetteville Street Mall
Raleigh, North Carolina 27601

10.5. Further Assurance. Allied and BancShares each
agree to furnish to the other such further assurances with
respect to the matters contemplated herein and their respective
agreements, covenants, representations and warranties contained
herein, including the opinion of legal counsel, as such other
party may reasonably request.

10.6. Headings and Captions. Headings and captions of
the sections and paragraphs of this Agreement have been inserted
for convenience of reference only and do not constitute a part
hereof.

10.7. Entire Agreement. This Agreement (including all
schedules and exhibits attached hereto and all documents
incorporated herein by reference) contains the entire agreement
of the parties with respect to the transactions described herein
and supersedes any and all other oral or written agreement(s)
heretofore made, and there are no representations or inducements
by or to, or any agreements between, any of the parties hereto
other than those contained herein in writing.

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10.8. Severability of Provisions. The invalidity or
unenforceability of any term, phrase, clause, paragraph,
restriction, covenant, agreement or other provision hereof shall
in no way affect the validity or enforceability of any other
provision or part hereof.

10.9. Assignment. This Agreement may not be assigned by
any party hereto except with the prior written consent of the
other parties hereto.

10.10. Counterparts. Any number of counterparts of this
Agreement may be signed and delivered, each of which shall be
considered an original and which together shall constitute one
agreement.

10.11. Governing Law. This Agreement is made in and
shall be construed and enforced in accordance with the laws of
North Carolina.

10.12. Inspection. Any right of BancShares hereunder to
investigate or inspect the assets, books, records, files and
other information of Allied in no way shall establish any
presumption that BancShares should have conducted any
investigation or that such right has been exercised by
BancShares, its agents, representatives or others. Any
investigations or inspections that have been made by BancShares
or its agents, representatives or others prior to the Closing
Date shall not be deemed in any way in derogation or limitation
of the covenants, representations and warranties made by or on
behalf of Allied in this Agreement.

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IN WITNESS WHEREOF, Allied and BancShares each has
caused this Agreement to be executed in its name by its duly
authorized officers and its corporate seal to be affixed hereto
as of the date first above written.

ALLIED BANK CAPITAL, INC.

By: ________________________________
A. Harold Ausley
President

ATTEST:

Secretary

[CORPORATE SEAL]

FIRST CITIZENS BANCSHARES, INC.

By:
Kenneth A. Black
Vice President
ATTEST:

Secretary

[CORPORATE SEAL]

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SCHEDULES TO AGREEMENT AND PLAN OF
REORGANIZATION AND MERGER

SCHEDULE DESCRIPTION

A Form of FCB Subordinated Debenture

B Form of Affiliate's Letter

C Form of Legal Opinion of Counsel
for BancShares
D Form of Legal Opinion of Counsel
for Allied

Allied Bank Capital, Inc., agrees to furnish supplementally a
copy of any omitted schedule upon request

<PAGE>

APPENDIX II

Opinions of Legg Mason Wood Walker, Incorporated and
Friedman, Billings, Ramsey & Co., Inc.

<PAGE>

[ FORM OF OPINION ]

__________ __, 1995

Board of Directors
Allied Bank Capital, Inc.
130 North Steele Street
Sanford, North Carolina 27330

Gentlemen:

Allied Bank Capital, Inc. ("Allied") and First Citizens
BancShares, Inc. ("BancShares") have entered into an Agreement and
Plan of Reorganization and Merger dated August 7, 1995 (the "Agreement")
pursuant to which Allied will be merged with and into BancShares (the
"Merger"). Under the Agreement, each shareholder of Allied shall have
the option, subject to the limitation set forth below, to receive (a)
100% cash at $25.25 per share for each share of Allied common
stock ("Allied Stock"), (b) 100% Class A common stock ("Common Stock")
of BancShares at an exchange ratio of .531 shares of BancShares Common
Stock for each share of Allied Stock, subject to adjustment if the
market value of BancShares Common Stock is less than $45.13 per share
or greater than $49.88 per share, or (c) 100% unsecured subordinated
debentures of First Citizens Bank & Trust Company, with a principal
amount equal to $25.25 multiplied by the number of Allied shares to be
exchanged, the maturity choices and other terms of which are set
forth in the Agreement. In the event, and only in the event, that
the number of Allied shares elected to be exchanged for BancShares
Common Stock is less than 40% or more than 55% of the total number of
outstanding shares of Allied Stock, a pro-ration will be effected so
that at least 40% but not more than 55% of the total
consideration is in the form of BancShares Common Stock. If the
number of Allied shares electing to receive BancShares Common Stock
exceeds 55%, then Allied shareholders shall have the option of
receiving either cash or unsecured subordinated debentures to arrive at
such 55% ratio. If the number of Allied shares electing to receive
BancShares Common Stock is less than 40%, then common stock will be
substituted first for debentures and then, if necessary, for cash to
arrive at such 40% ratio. BancShares also will offer $25.25 per
share for each outstanding granted and unexercised Allied stock
option, with holders of Allied stock options receiving, immediately
prior to the closing of the Merger, a net payment from Allied equal to
the difference between the individual option prices applicable to each
option holder and $25.25 per share. You have requested our opinion as
to the

<PAGE>

Board of Directors
__________ __, 1995
Page 2

fairness, from a financial point of view, to the shareholders
of Allied of the consideration to be paid to such shareholders in the
Merger.

Legg Mason Wood Walker, Incorporated ("Legg Mason"), as part
of its investment banking business, is continually engaged in the
valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities,
and private placements. Legg Mason is familiar with Allied, having
served as financial advisor and stand-by underwriter to Allied in
connection with its conversion from mutual-to-stock form in 1992 and in
connection with its acquisition of a mutual savings bank in a
merger conversion in 1994. Legg Mason is familiar with BancShares,
having served as financial advisor to BancShares in connection with its
proposed acquisition of another financial institution in 1995. Legg
Mason has served as financial advisor to Allied in connection with
the Merger and will receive a fee for its services which is
contingent upon the consummation of the Merger. In the ordinary
course of its securities business, Legg Mason makes a market in the
equity securities of Allied, and trades such securities for the accounts
of its customers, and therefore may from time to time hold a long or
short position in such securities. Legg Mason follows both Allied and
BancShares from a research perspective.

In arriving at its opinion, Legg Mason (i) reviewed the
Agreement, certain publicly available business and financial
information for Allied and BancShares and certain other financial
statements, data, reports and analyses for Allied and BancShares
prepared by their respective managements, including the 1995 budget of
Allied and BancShares; (ii) discussed the current operations,
financial condition and prospects of Allied and BancShares with the
managements of Allied and BancShares; (iii) reviewed the reported market
prices and historical trading activity of Allied and BancShares
Common Stock and compared certain financial and stock market
information for Allied and BancShares with similar information for
certain other financial institutions, the securities of which
are publicly-traded; (iv) reviewed the financial terms of certain
recent business combinations involving financial institutions that
Legg Mason deemed comparable in whole or in part; and (v)
performed such other studies and analyses as Legg Mason considered
appropriate.

Legg Mason relied without independent verification upon
the accuracy and completeness of all the financial and other
information reviewed by it for purposes of its opinion. In that
regard, Legg Mason assumed that the financial forecasts were
reasonably prepared on a basis reflecting the best currently available
judgments and estimates of the managements of Allied and BancShares.
Legg Mason did not make or obtain an independent evaluation or
appraisal of the assets or liabilities of Allied or BancShares nor was
it furnished with any such evaluation or appraisal.

<PAGE>

Board of Directors
__________ __, 1995
Page 3

Based upon and subject to the foregoing, it is our opinion
that as of the date hereof the consideration to be received by the
shareholders of Allied in the Merger is fair, from a financial point of
view, to such shareholders.

Very truly yours,

LEGG MASON WOOD WALKER, INCORPORATED

<PAGE>

Board of Directors
Allied Bank Capital, Inc.
Page 1

[FORM OF FBR OPINION]

Board of Directors
Allied Bank Capital, Inc.
130 North Steele Street
Sanford, NC 27330-3918

Board of Directors:

You have requested that Friedman, Billings, Ramsey & Co., Inc. ("FBR")
provide you with its opinion as to the fairness from a financial point
of view to the holders of common stock ("Stockholders") of Allied Bank
Capital, Inc. ("Allied" or the "Company") of the Consideration (as
hereinafter defined) to be received by them pursuant to the Agreement
and Plan of Reorganization and Merger between Allied and First Citizens
BancShares, Inc. ("First Citizens" or "BancShares"), dated August 7,
1995 (the "Merger Agreement"), pursuant to which Allied will be merged
with and into BancShares (the "Merger"). The Agreement provides, among
other things, that each issued and outstanding share of common stock of
Allied, par value $1.00 per share, (other than such shares held directly
or indirectly by Allied, BancShares and their respective subsidiaries in
a non-fiduciary capacity by Allied) shall be converted into the right to
receive $25.25 per share subject to certain limitations of either cash,
BancShares Class A common stock, par value $1.00 per share, or unsecured
subordinated debentures of First-Citizens Bank and Trust Company, a
wholly owned subsidiary of BancShares (the "Consideration"). For
Stockholders choosing to receive Class A common stock: the number of
shares of BancShares Class A common stock which will be exchanged for
each share of Allied common stock in the Merger will equal 0.531 if the
average closing price of BancShares Class A common stock is between
$45.13 and $49.88 for the ten trading days ending the day prior to the
stockholders' meeting of Allied to consider the Merger. In the event the
average closing price is below $45.13 or above $49.88 for the same
ten-trading-day period, the exchange ratio will be adjusted. At least
40% but not more than 55% of the Consideration will be in the form of
BancShares Class A common stock with the remaining portion of the
Consideration consisting of cash or subordinated debentures. The Merger
will be considered at a special meeting of the stockholders of Allied.
The terms of the Merger are more fully set forth in the Merger
Agreement.

In delivering this opinion, FBR, has completed the following tasks:

1. reviewed Allied's Annual Reports to Stockholders and Allied's
Annual Reports on Form 10-K filed with the Securities and
Exchange Commission (the "SEC") for the fiscal years ended
December 31, 1992 through 1994;

2. reviewed BancShares' Annual Reports to Stockholders and
BancShares' Annual Reports on Form 10-K filed with the SEC for
the fiscal years ended December 31, 1992 through 1994;

<PAGE>

Board of Directors
Allied Bank Capital, Inc.
Page 2

3. reviewed the Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 1995 and June 30, 1995 filed with the
SEC by Allied and BancShares;

4. discussed the historical and current operations, financial
condition and prospects of Allied and BancShares with the
managements of Allied and BancShares;

5. reviewed the reported market prices and trading activity for
Allied's common stock and BancShares Class A common stock and
compared them with those of certain financial institutions (or
their holding companies) that FBR deemed to be reasonably
comparable to Allied and BancShares;

6. compared the results of operations and financial condition of
Allied and BancShares with those of certain publicly-traded
financial institutions (or their holding companies) that FBR
deemed to be reasonably comparable to Allied and BancShares;

7. reviewed the financial terms, to the extent publicly available,
of certain acquisition transactions that FBR deemed to be
reasonably comparable;

8. reviewed an executed copy of the Merger Agreement; and

9. performed such other analyses and reviewed and analyzed such
other information as FBR deemed appropriate.

In rendering this opinion, FBR did not assume responsibility for
independently verifying, and did not independently verify, any
financial or other information concerning Allied and BancShares
furnished to it by Allied and BancShares or the publicly-available
financial and other information regarding Allied, BancShares and other
financial institutions (or their holding companies). FBR has assumed
that all such information is accurate and complete. FBR has further
relied on the assurances of management of Allied and BancShares that
they are not aware of any facts that would make such financial or other
information relating to such entities inaccurate or misleading. With
respect to financial forecasts for Allied and BancShares provided to FBR
by their respective managements, FBR has assumed, for purposes of this
opinion, that the forecasts have been reasonably prepared on bases
reflecting the best available estimates and judgments of their
respective managements at the time of preparation as to the future
financial performance of Allied and BancShares and that they provide a
reasonable basis upon which FBR can form its opinion. FBR has assumed
that there has been no material change in Allied's or BancShares'
assets, financial condition, result of operations, business or prospects
since June 30, 1995. FBR did not undertake an independent appraisal of
the assets or liabilities of Allied or BancShares nor was

<PAGE>

Board of Directors
Allied Bank Capital, Inc.
Page 3

FBR furnished with any such appraisals. FBR is not an expert in the
evaluation of allowances for loan losses and did not review any
individual credit files of Allied or BancShares. FBR's conclusions and
opinion are necessarily based upon economic, market and other conditions
and the information made available to FBR as of the date of this
opinion. FBR expresses no opinion on matters of a legal, regulatory,
tax or accounting nature related to the Merger.

FBR, as part of its institutional brokerage, research and investment
banking practice, is regularly engaged in the valuation of securities
and the evaluation of transactions in connection with initial and
secondary offerings, mutual-to-stock conversions of savings
institutions, mergers and acquisitions of commercial banks, savings
institutions and savings and loan holding companies, as well as business
valuations for other corporate purposes for financial institutions and
real estate related companies. As specialists in the valuation of
securities of financial institutions, FBR has experience in, and
knowledge of, North Carolina and the surrounding regional markets for
thrift and bank securities and institutions operating in North Carolina
and the surrounding areas.

FBR has acted as a financial advisor to Allied in connection with the
transaction described herein and will receive a fee for services
rendered which is contingent upon the consummation of the Merger. In
the ordinary course of FBR's business, it may effect transactions in the
securities of Allied or BancShares for its own account and/or for the
accounts of its customers and, accordingly, may at any time hold long or
short positions in such securities. From time to time, principals
and/or employees of FBR may also have positions in the securities.

This letter is solely for the information of the Board of Directors of
Allied in its consideration of the Merger Agreement. This letter may
not be relied upon by any other person or used for any other purpose,
reproduced, disseminated, quoted from or referred to without FBR's prior
written consent. It is understood that this letter is directed solely
to the Board of Directors of Allied and is not intended to be, and does
not constitute, a recommendation to any Stockholder as to how such
Stockholder should vote with respect to the Merger.

<PAGE>

Board of Directors
Allied Bank Capital, Inc.
Page 4

Based upon and subject to the foregoing, as well as any such other
matters as we consider relevant, it is FBR's opinion that the
Consideration is fair, from a financial point of view, to the
Stockholders of Allied.

Very truly Yours,

FRIEDMAN, BILLINGS, RAMSEY & CO., INC.

By: _____________________________________
Emanuel J. Friedman
Chairman

<PAGE>

APPENDIX III

EXCERPT 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:

III-1

<PAGE>

(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a
party 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 as permitted by
G.S. 55-12-01, 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;

(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 voting 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.

III-2

<PAGE>

(b) A beneficial shareholder may assert dissenters' rights as to
shares held on his behalf only if:

(1) He submits to the corporation the record shareholder's written
consent to the dissent not 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.

III-3

<PAGE>

(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 certificated shares must be deposited;

(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 cancelled 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 cancelled or modified by the taking of the proposed corporate
action.

III-4

<PAGE>

(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 sent a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand
procedure.

(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

III-5

<PAGE>

(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 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 an 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.

III-6

<PAGE>

(Section Mark) 55-13-31. Court costs and counsel fees.

(a) The court in 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

(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.

III-7

<PAGE>

PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Directors and Officers

Delaware's General Corporation Law, Del. Code Ann. Title 8 (Section
Mark)(Section Mark)101 et seq. (the "General Corporation Law"), contains
provisions prescribing the extent to which directors and officers shall
or may be indemnified. Section 145(a) and (b) of the General Corporation
Law permit a corporation, with certain exceptions, to indemnify a
current or former officer or director against liability if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to
any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. A corporation may not indemnify him in
connection with a proceeding by or in the right of the corporation in
which he was adjudged liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability, but in view of all the circumstances of the
case, he is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper.

The Bylaws of the Registrant provide for the indemnification of
directors and officers to the maximum extent permitted by law.

Item 21. Exhibits and Financial Statement Schedules.

The following exhibits and financial statement schedules are filed as
part of this Registration Statement.

(a) Exhibits

Exhibit Number
pursuant to
Item 601 of
Regulation S-K Description of Exhibit
<S> <C>
2 Agreement and Plan of Reorganization and Merger by and between First Citizens
BancShares, Inc. and Allied Bank Capital, Inc. (included as and incorporated by
reference from Appendix I to the Prospectus/Proxy Statement filed as a part of
the Registration Statement)

5 Opinion of Ward and Smith, P.A. as to the legality of the securities to be registered

8 Opinion of KPMG Peat Marwick LLP as to tax matters

<PAGE>

23(a) Consent of Ward and Smith, P.A. (contained in its opinion submitted as Exhibit 5 hereto)

23(b) Consents of KPMG Peat Marwick LLP

23(c) Consent of Coopers & Lybrand L.L.P.

23(d) Consent of Legg Mason Wood Walker, Incorporated

23(e) Consent of Friedman, Billings, Ramsey & Co., Inc.

23(f) Consent of Deloitte & Touche, LLP

24 Power of Attorney

99 Form of appointment of proxy to be used in connection with the Special Meeting
of Shareholders of Allied Bank Capital, Inc.

</TABLE>

(b) Financial Statement Schedules

All financial statements schedules are omitted as substantially all the
required information is contained in the registrant's consolidated
financial statements which are incorporated herein by reference or is
not applicable.

Item 22. Undertakings

(a) The undersigned registrant hereby undertakes:

(1) to file, during any period in which offers
or sales are being made, a post-effective amendment to
this registration statement: (i) to include any
prospectus required by Section 10(a)(3) of the
Securities Act of 1933; (ii) to reflect in the
prospectus any facts or events arising after the
effective date of the registration statement (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement; and (iii) to include any
material information with respect to the plan of
distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;

(2) that, for the purpose of determining any
liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities
offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide
offering thereof;

(3) to remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.

(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement
shall be deemed to be a new registration statement
relating to the securities offered herein, and the
offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

(c) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 (the "Securities Act")
may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and
Exchange

<PAGE>

Commission such indemnification is against
public policy as expressed in the Securities Act and
is, therefore, unenforceable.

In the event that a claim for indemnification against
such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling
person in connection with the securities being
registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction, the question whether such indemnification
by it is against public policy as expressed in the
Securities Act and will be governed by the final
adjudication of such issue.

(d) The Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into
the Prospectus pursuant to Items 4, 10(b), 11 or 13 of
this Form, within one business day of receipt of such
request, and to send the incorporated documents by
first class mail or other equally prompt means. This
includes information contained in documents filed
subsequent to the effective date of the Registration
Statement through the date of responding to the
request.

(e) The registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a
transaction, and the company being acquired involved
therein, that was not the subject of and included in
the Registration Statement when it became effective.

<PAGE>

SIGNATURES

Pursuant to the requirement of the Securities Act, the
registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Raleigh, State of North Carolina, on September 25, 1995.

FIRST CITIZENS BANCSHARES, INC.

By: /s/ James B. Hyler, Jr.
James B. Hyler, Jr.
Vice Chairman of the Board

Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.

Date: September 25, 1995 By: /s/ Lewis R. Holding
Lewis R. Holding, Chairman of the
Board (Principal Executive
Officer)
Date: September 25, 1995 By: /s/ Kenneth A. Black
Kenneth A. Black, Vice President and
Treasurer (Principal Financial
Officer and Principal Accounting
Officer)

Date: September 25, 1995 By: /s/ John M. Alexander, Jr.
John M. Alexander, Jr.
Director

Date: September 25, 1995 By: /s/ Ted L. Bissett
Ted L. Bissett
Director
Date: September 25, 1995 By: /s/ B. Irvin Boyle
B. Irvin Boyle
Director

Date: September 25, 1995 By: /s/ George H. Broadrick
George H. Broadrick
Director

Date: September 25, 1995 By: /s/ H. Max Craig, Jr.
H. Max Craig, Jr.
Director

Date: September 25, 1995 By: /s/ Betty M. Farnsworth
Betty M. Farnsworth
Director

Date: September 25, 1995 By: /s/ Lewis M. Fetterman
Lewis M. Fetterman
Director

Date: September 25, 1995 By: /s/ Frank B. Holding
Frank B. Holding
Executive Vice Chairman of the Board

Date: September 25, 1995 By: /s/ Frank B. Holding, Jr.
Frank B. Holding, Jr.
Director

Date: September 25, 1995 By: /s/ Charles B. C. Holt
Charles B. C. Holt
Director
<PAGE>

Date: September 25, 1995 By: /s/ James B. Hyler, Jr.
James B. Hyler, Jr.
Vice Chairman of the Board
Date: September 25, 1995 By: /s/ Gale D. Johnson
Gale D. Johnson
Director

Date: September 25, 1995 By: /s/ Freeman R. Jones
Freeman R. Jones
Director

Date: September 25, 1995 By: /s/ Lucius S. Jones
Lucius S. Jones
Director
Date: September 25, 1995 By: /s/ I. B. Julian
I. B. Julian
Director

Date: September 25, 1995 By: /s/ Joseph T. Maloney, Jr.
Joseph T. Maloney, Jr.
Director

Date: September 25, 1995 By: /s/ J. Claude Mayo, Jr.
J. Claude Mayo, Jr.
Director

Date: September 25, 1995 By: /s/ William McKay
William McKay
Director

Date: September 25, 1995 By: /s/ Brent D. Nash
Brent D. Nash
Director
Date: September 25, 1995 By: /s/ Lewis T. Nunnelee, II
Lewis T. Nunnelee, II
Director

Date: September 25, 1995 By: /s/ Talbert O. Shaw
Talbert O. Shaw
Director

Date: September 25, 1995 By: /s/ R. C. Soles, Jr.
R. C. Soles, Jr.
Director

Date: September 25, 1995 By: /s/ David L. Ward, Jr.
David L. Ward, Jr.
Director

<PAGE>

EXHIBITS

EXHIBIT INDEX

<TABLE>
Exhibit Number
Pursuant to
Item 601 of
Regulation S-K Description Page No.
<S> <C> <C>
2 Agreement and Plan of Reorganization and
Merger by and between First Citizens
BancShares, Inc. and Allied Bank Capital, Inc.
(included as and incorporated by reference
from Appendix I to the Prospectus/Proxy
Statement filed as a part of the Registration
Statement)

5 Opinion of Ward and Smith, P.A. as to the
legality of the securities to be registered

8 Opinion of KPMG Peat Marwick LLP as to tax matters

23(a) Consent of Ward and Smith, P.A. (contained in
its opinion submitted as Exhibit 5 hereto)

23(b) Consents of KPMG Peat Marwick LLP

23(c) Consent of Coopers & Lybrand L.L.P.

23(d) Consent of Legg Mason Wood Walker, Incorporated

23(e) Consent of Friedman, Billings, Ramsey & Co., Inc.

23(f) Consent of Deloitte & Touche, LLP

24 Power of Attorney

99 Form of appointment of proxy to be used in
connection with the Special Meeting of
Shareholders of Allied Bank Capital, Inc.
</TABLE>

<PAGE>

September 27, 1995

Board of Directors
First Citizens BancShares, Inc.
239 Fayetteville Street
Raleigh, North Carolina 27601

RE: Registration Statement on Form S-4 to Effect
Acquisition of Allied Bank Capital, Inc.
Our File 91R0036(O)

Ladies and Gentlemen:

We have acted as counsel to First Citizens BancShares, Inc.
("BancShares") in connection with its proposed acquisition (the
"Acquisition") of Allied Bank Capital, Inc., Sanford, North
Carolina ("Allied"). As part of the Acquisition, BancShares will
file with the Securities and Exchange Commission a Registration
Statement on Form S-4 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"),
pursuant to which shares of BancShares' Class A common stock,
$1.00 par value (the "Common Stock"), are to be registered.

In our capacity as counsel, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the
certificate of incorporation and bylaws of BancShares, (ii) the
corporate resolutions and other records of actions taken by the
Board of Directors or the Executive Committee of the Board of
Directors of BancShares pertaining to the Acquisition, (iii) the
Agreement and Plan of Reorganization and Merger by and between
BancShares and Allied dated August 7, 1995 (the "Agreement"),
(iv) the Registration Statement, (v) the relevant provisions of
the Securities Act, Chapters 54C and 55 of the North Carolina
General Statutes, Title 8, Chapter 1 of the Delaware Code
Annotated, the Bank Holding Company Act of 1956, as amended, and
the regulations promulgated under all of the aforementioned
statutes, and (vi) such other documents, records, certificates,
papers and legal matters as we have considered necessary as the
basis for the opinions given herein. In addition, we have made
reasonable inquiries of the officers of BancShares as to all
relevant items. In all

<PAGE>

Board of Directors
September 27, 1995
Page 2

examinations of documents, we have assumed the
genuineness of all original documents and all signatures
and the conformity to original documents of all copies
submitted to us as certified, conformed or photostatic copies.

On the basis of such examination (and subject to the Registration
Statement becoming and remaining effective, approval of the
Acquisition by Allied shareholders, receipt of all required
regulatory approvals and consummation of the Acquisition on the
terms and in the manner described in the Agreement), we are of
the opinion that the shares of Common Stock to be issued to
Allied's shareholders, upon the issuance thereof in accordance
with the terms and conditions of the Agreement, will be legally
and validly issued, fully paid and nonassessable.

This opinion is furnished by us solely for your benefit in
connection with the transaction described herein and may not be
quoted or relied upon by, nor copies be delivered to, any other
person or entity, or used for any other purposes, without our
prior express written consent. We hereby expressly disclaim any
duty or responsibility to update this opinion or the information
upon which it is based after the date hereof.

We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and the reference to our firm in the
Prospectus/Proxy Statement, which is a part of the Registration
Statement, under the section entitled "Opinions".

Yours very truly,

/s/ Ward and Smith, P.A.

WARD AND SMITH, P.A.

<PAGE>

September 25, 1995

Board of Directors
Allied Bank Capital, Inc.
130 North Steele Street
Sanford, North Carolina 27336

Board of Directors
First Citizens BancShares, Inc.
239 Fayetteville Street Mall
Raleigh, North Carolina 27601

Gentlemen:

You have requested our opinion as to the federal and North
Carolina income tax consequences resulting from a plan pursuant
to which Allied Bank Capital, Inc. ("Allied") will be merged with
and into First Citizens BancShares, Inc. ("BancShares"),
whereupon the separate existence of Allied will cease (the
"Merger"). Pursuant to the Merger, the shareholders of Allied
will receive newly issued shares of BancShares Class A common
stock ("BancShares Common Stock") in exchange for their Allied
common stock ("Allied Stock"). Alternatively, each shareholder
of Allied may elect to receive a specified amount of cash or
unsecured, subordinated debentures of First Citizens Bank
("Debentures") in lieu of BancShares Common Stock for each (but
not less than all) of his or her shares of Allied Stock.
Following the Merger, and after any interim steps as may be
necessary or advisable, Allied's wholly-owned savings bank
subsidiaries, Summit Savings Bank, Inc., SSB ("Summit") and
Peoples Savings Bank, Inc., SSB ("Peoples") will be merged with
and into First-Citizens Bank & Trust Company ("First Citizens
Bank"), the wholly-owned banking subsidiary of BancShares (the
"Bank Mergers").

You have submitted for our consideration certain representations
as to the proposed transaction, a copy of the Agreement and Plan
of Reorganization and Merger dated as of August 7, 1995 (the
"Plan") and a copy of the Form S-4 Registration Statement to be
filed with the Securities and Exchange Commission on or about
September 22, 1995. We have not reviewed the legal documents
necessary to effectuate the steps to be undertaken and we assume
that all steps will be effectuated under state and federal law
and will be consistent with the legal documentation and with the
list of steps submitted to us.

<PAGE>

Board of Directors
September 25, 1995
Page 2

Facts

BancShares is a registered bank holding company organized under
the laws of the state of Delaware and headquartered in Raleigh,
North Carolina. BancShares' authorized capital stock consists of
two classes, represented by 11,000,000 shares of Class A Common
Stock, $1.00 par value of which 8,921,136 shares were issued and
outstanding at June 30, 1995 and 2,000,000 shares of Class B
Common Stock, $1.00 par value, of which 1,769,251 shares were
issued and outstanding at June 30, 1995. Class A common
shareholders are entitled to one vote for each share of stock
while Class B common shareholders are entitled to sixteen votes
per share. First Citizens Bank, a North Carolina corporation, is
a wholly-owned commercial bank subsidiary of BancShares.

Allied is a registered bank holding company organized under the
laws of the state of North Carolina. Its authorized capital
stock consists of two classes, represented by 20,000,000 shares
of Common Stock, $.50 par value of which 2,247,590 shares were
issued and outstanding at June 30, 1995 and 5,000,000 shares of
preferred stock, $1.00 par value no shares of which were issued
and outstanding at June 30, 1995. Summit and Peoples are wholly-
owned North Carolina-chartered capital stock savings bank
subsidiaries of Allied.

For valid business purposes, pursuant to the Plan, Allied will be
merged with and into BancShares, with BancShares as the surviving
entity. Following the Merger, Summit and Peoples will be merged
with and into First Citizens Bank, with First Citizens Bank as
the surviving entity. Upon consummation of the Merger, each
share of Allied Stock (excluding any shares held by dissenting
shareholders) will be converted into the right to receive,
subject to adjustment and proration as described below, either
(i) if timely elected by the shareholder in the manner prescribed
in the Plan, 0.531 shares of newly issued BancShares Common
Stock, (ii) cash in the amount of $25.25 or (iii) if timely
elected by the shareholder in the manner prescribed in the Plan,
unsecured, subordinated Debentures in the principal amount of
$25.25. The Exchange Ratio shall not be adjusted unless the
Market Value, as defined in the Plan, of BancShares Common Stock
is less than $45.13 per share or more than $49.88 per share. The
Exchange Ratio into which each share of Allied Stock will be
converted, and the amount of cash or Debentures which a
shareholder of Allied may elect to receive for each share of
Allied Stock, shall be reduced on a per share basis to the extent
that cash dividends in an aggregate amount in excess of $0.12 per
share per calendar quarter or other distributions are declared or
paid by Allied between August 7, 1995 and the Effective Time, as
defined in the Plan; however, Allied does not intend to declare
or pay cash dividends on Allied Stock in excess of such
limitation until the Plan is terminated.

<PAGE>
Board of Directors
September 25, 1995
Page 3

Under North Carolina law, stockholders of Allied will have
dissenters' rights in connection with the Merger. Stockholders
who properly exercise their dissenters' rights will be entitled
to receive the fair value of their shares from Allied in
accordance with Sections 55-13-01 through 55-13-31 of the North
Carolina General Statutes. A record holder of Allied's Stock may
assert dissenters' rights as to fewer than all shares registered
in his or her name only if he or she dissents with respect to all
shares beneficially owned by any one person and notifies Allied
in writing of the name and address of each person on whose behalf
he or she asserts dissenters' rights.

In the event Allied shareholders elect to receive cash or
Debentures in lieu of BancShares Common Stock, or properly
exercise their dissenters' rights, for more than 60% of the
outstanding shares of Allied Stock, the Debentures will be
prorated among all of the shareholders of Allied electing to
receive Debentures to the extent necessary to preserve the non-
taxable status of the Merger so that the total number of shares
paid for in Debentures and cash will not equal or exceed 60% of
the shares of Allied Stock. If after such proration of
Debentures, the aggregate number of outstanding shares of Allied
Stock held by shareholders of Allied who elect to receive cash
and Debentures, or properly exercise their dissenters' rights,
still exceeds 60% of the shares of Allied Stock, the cash will be
prorated among all of the shareholders of Allied electing to
receive cash so that the total number of shares of Allied Stock
paid for in cash and Debentures will not equal or exceed 60% of
the shares of Allied Stock. In the event Allied shareholders
elect to receive BancShares Common Stock in lieu of cash or
Debentures for more than 55% of the shares of Allied Stock, the
BancShares Common Stock will be prorated among all of Allied's
shareholders electing to receive BancShares Common Stock so that
the total number of shares of Allied Stock converted into shares
of BancShares Common Stock will not exceed 55% of the outstanding
shares of Allied Stock. In the event of such proration of
BancShares Common Stock, shares of Allied Stock will be converted
into either cash or a Debenture having a term of five years and a
fixed interest rate of 7.25%.

If the Merger is consummated and if a shareholder of Allied
elects or is deemed to have elected to receive a Debenture in
exchange for his or her shares of Allied Stock, First Citizens
Bank will issue unsecured, subordinated Debentures which shall
entitle the holder to semi-annual interest payments in cash on
the principal amount of the Debenture. Each Debenture shall
mature, at the option of the shareholder, on the third, fifth or
tenth anniversary of the Effective Time, as defined in the Plan.
Debentures with a maturity of three years shall bear interest at
a fixed rate of 7.00% per annum, Debentures with a maturity of
five years shall bear interest at a fixed rate of 7.25% per annum
and Debentures with a maturity of ten years shall bear interest
at a fixed rate of 7.50% per annum. Interest shall commence to
accrue on the effective date of the Merger, with the first
interest payment being payable on March 1, 1996 and the next
interest payment being payable on September 1, 1996. Subsequent
interest payments shall be payable on the anniversaries of the
foregoing interest payment

<PAGE>

Board of Directors
September 25, 1995
Page 4

dates. Interest shall cease to accrue on and after the maturity date of
the Debenture. Principal shall be paid at maturity upon surrender of
the Debenture. In the case of each shareholder whose shares of Allied
Stock are converted into the right to receive a Debenture, the
shareholder shall have the option of electing to receive Debentures in
any combination of term and interest rate. Interest on the Debenture
shall be payable to the registered owners of the Debentures as of the
tenth day prior to each such interest payment date.

The Debentures will be fully registered as to principal and
interest on the Debenture register maintained for that purpose by
First Citizens Bank. The Debentures are non-negotiable and non-
transferable and are not redeemable prior to maturity; provided,
however, (i) upon the death of the registered owner thereof, the
Debentures owned by the decedent shall be transferable by the
representative of the estate of the decedent upon receipt of such
documentation as may be required by First Citizens Bank, or, at
the option of such representative, such Debenture shall be
redeemed by First Citizens Bank for the principal amount thereof
plus accrued interest to the redemption date, and (ii) the
Debentures may be transferred to any member of a Allied
shareholder's immediate family (i.e., spouses and their children)
or to an inter vivos trust for the benefit of any member of such
family.

The Debentures will be unsecured obligations of First Citizens
Bank and will not be eligible as collateral for loans made by
First Citizens Bank. The Debentures will not be deposits of First
Citizens Bank and will not be insured by the FDIC or any other
government agency.

No fractional shares of BancShares Common Stock will be issued in
connection with the Merger. In the event that the Merger results
in the creation of fractional shares, in lieu of the issuance of
fractional shares of BancShares Common Stock, BancShares will
deliver cash to its transfer agent in an amount equal to the
aggregate market value of all such fractional shares. The
transfer agent will subsequently divide such cash among and remit
it, without interest, to the former shareholders of Allied in
accordance with their respective interests.

The Merger and the Bank Mergers are subject to the receipt of
regulatory approval from appropriate parties, including the North
Carolina Commissioner of Banks, the North Carolina Banking
Commission, the Administrator of the North Carolina Savings
Institutions Division, and the Board of Governors of the Federal
Reserve System.

<PAGE>
Board of Directors
September 25, 1995
Page 5

In addition to the foregoing statement of facts, the following
representations have been made:

a) The fair market value of BancShares Common Stock and other
consideration received by the shareholders of Allied will be
approximately equal to the fair market value of Allied Stock
surrendered in the Merger.

b) There is no plan or intention by the shareholders of Allied
to sell, exchange or otherwise dispose of any of the BancShares
Common Stock received in the Merger.

c) BancShares has no plan or intention to reacquire any of its
stock issued in the Merger.

d) BancShares has no plan or intention to sell or otherwise
dispose of any of the assets of Allied acquired in the Merger,
except for dispositions made in the ordinary course of business
or transfers described in Section 368(a)(2)(C) of the Internal
Revenue Code of 1986 (the "Code").

e) The liabilities of Allied assumed by BancShares and the
liabilities to which the transferred assets of Allied are subject
were incurred by Allied in the ordinary course of its business.

f) Following the Merger, BancShares will continue the
historical business of Allied or use a significant portion of the
historic business assets of Allied in a business.

g) BancShares, Allied and the shareholders of Allied will pay
their respective expenses, if any, incurred in connection with
the Merger.

h) There is no intercorporate indebtedness existing between
BancShares and Allied that was issued, acquired, or will be
settled at a discount.

i) No two parties to the transaction are investment companies
as defined in Section 368(a)(2)(F)(iii) and (iv).

j) The fair market value of the assets of Allied transferred to
BancShares will equal or exceed the sum of the liabilities
assumed by BancShares, plus the amount of liabilities, if any, to
which the transferred assets are subject.

k) Allied is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of
the Code.

<PAGE>

Board of Directors
September 25, 1995
Page 6

l) The payment of cash in lieu of fractional shares of
BancShares Common Stock is not separately bargained for
consideration, rather it is merely to save the expense and
inconvenience of issuing and transferring fractional share
interests. The total cash consideration in lieu of fractional
shares will be less than one percent of the total consideration
paid in the transaction and no Allied shareholder who elects to
exchange his or her Allied Stock for BancShares Common Stock will
receive cash for more than one share of BancShares Common Stock.

m) None of the compensation received by any shareholder-
employees of Allied will be separate consideration for, or
allocable to, any of their shares of Allied Stock; none of the
shares of BancShares Common Stock received by any shareholder-
employee of Allied will be separate consideration for, or
allocable to, any employment agreement; and the compensation to
be paid to any shareholder-employees of Allied will be for
services actually rendered and will be commensurate with amounts
paid to third parties bargaining at arm's length for similar
services.

n) The fair market value of First Citizens Bank Common Stock
received by BancShares, the sole shareholder of Summit and
Peoples at the time of the Bank Mergers, will be approximately
equal to the fair market value of Summit and Peoples Stock
surrendered in the Bank Mergers.

o) There is no plan or intention by the shareholder of Summit
or Peoples to sell, exchange or otherwise dispose of any of the
First Citizens Bank Common Stock received in the Bank Mergers.

p) First Citizens Bank has no plan or intention to reacquire
any of its stock issued in the Bank Mergers.

q) First Citizens Bank has no plan or intention to sell or
otherwise dispose of any of the assets of Summit or Peoples
acquired in the Bank Mergers, except for dispositions made in the
ordinary course of business or transfers described in Section
368(a)(2)(C) of the Internal Revenue Code of 1986 (the "Code").

r) The liabilities of Summit and Peoples assumed by First
Citizens Bank and the liabilities to which the transferred assets
of Summit and Peoples are subject were incurred by Summit and
Peoples in the ordinary course of its business.

s) Following the Bank Mergers, First Citizens Bank will
continue the historical business of Summit and Peoples or use a
significant portion of the historic business assets of Summit and
Peoples in a business.

t) First Citizens Bank, Summit and Peoples will pay their
respective expenses, if any, incurred in connection with the Bank
Mergers.

u) There is no intercorporate indebtedness existing between
First Citizens Bank and either Summit or Peoples that was issued,
acquired, or will be settled at a discount.

<PAGE>
Board of Directors
September 25, 1995
Page 7

v) No two parties to the Bank Mergers are investment companies
as defined in Section 368(a)(2)(F)(iii) and (iv).

w) The fair market value of the assets of Summit transferred to
First Citizens Bank will equal or exceed the sum of the
liabilities assumed by First Citizens Bank, plus the amount of
liabilities, if any, to which the transferred assets are subject.

x) The fair market value of the assets of Peoples transferred
to First Citizens Bank will equal or exceed the sum of the
liabilities assumed by First Citizens Bank, plus the amount of
liabilities, if any, to which the transferred assets are subject.

y) Neither Summit nor Peoples is under the jurisdiction of a
court in a Title 11 or similar case within the meaning of Section
368(a)(3)(A) of the Code.

z) The total adjusted basis of the assets of Summit transferred
to First Citizens Bank will equal or exceed the sum of the
liabilities assumed by First Citizens Bank, plus the amount of
liabilities, if any, to which the transferred assets are subject.

aa) The total adjusted basis of the assets of Peoples
transferred to First Citizens Bank will equal or exceed the sum
of the liabilities assumed by First Citizens Bank, plus the
amount of liabilities, if any, to which the transferred assets
are subject.

Opinion

FEDERAL INCOME TAX CONSEQUENCES

Based solely on the above facts and representations, it is our
opinion that:

1) Provided that the Merger of Allied with and into
BancShares, as contemplated by the Plan, qualifies as a statutory
merger under North Carolina and Delaware law, the Merger will
constitute a tax-free reorganization within the meaning of
Section 368(a)(1)(A) of the Code.

2) Each of Allied and BancShares will be a party to the
reorganization within the meaning of Section 368(b).

3) No gain or loss will be recognized by Allied upon the
transfer of its assets, subject to its liabilities, to BancShares
in the Merger. Sections 357(a) and 361(a).

<PAGE>

Board of Directors
September 25, 1995
Page 8

4) No gain or loss will be recognized by BancShares upon the
receipt of the assets of Allied, subject to Allied's liabilities
in the Merger. Section 1032(a).

5) The basis of the assets of Allied in the hands of
BancShares will be the same as the basis of such assets in the
hands of Allied immediately prior to the Merger. Section 362(b).

6) The holding period of the assets of Allied in the hands of
BancShares will include the period during which such assets were
held by Allied immediately prior to the Merger. Section
1223(2).

7) No gain or loss will be recognized by the shareholders of
Allied upon receipt of BancShares Common Stock (including any
fractional share interests to which they may be entitled) solely
in exchange for their holdings of Allied Stock. Section
354(a)(1). Gain, if any, will be recognized by a shareholder of
Allied who receives BancShares Common Stock and either cash or
Debentures in exchange for his or her Allied Stock pursuant to
the Plan. Such gain will be limited to an amount not in excess
of the amount of cash or the fair market value of Debentures
received. Section 356(a). If the exchange has the effect of the
distribution of dividend (determined with the application of
Section 318(a)), then the amount of gain recognized that is not
in excess of the shareholder's ratable amount of undistributed
earnings and profits will be treated as a dividend. Section
356(a)(2). The determination of whether the exchange has the
effect of the distribution of a dividend will be made in
accordance with the principles set forth in Commissioner v.
Clark, 489 U.S. 726 (1989). Rev. Rul. 93-61, 1993-30 I.R.B. 10.
Loss, if any, will not be recognized by a shareholder who
receives BancShares Common Stock and cash or Debentures in
exchange for his or her Allied Stock pursuant to the Plan.
Section 356(c).

8) The basis of the BancShares Common Stock to be received by
the shareholders of Allied (and any fractional share interests to
which they may be entitled) will be the same as the basis in
Allied Stock surrendered in the exchange decreased by the amount
of cash or Debentures received, if any, and increased by the
amount of dividend income or gain recognized, if any, in the
exchange. Section 358(a)(1).

9) The holding period of the BancShares Common Stock received
by the shareholders of Allied (and any fractional share interests
to which they may be entitled) will include the holding period of
Allied Stock prior to the exchange, provided that the Allied
Stock is held as a capital asset in the hands of the shareholders
of Allied on the date of the exchange. Section 1223(1).

10) The tax attributes enumerated in Section 381(c), including
any earnings and profits or a deficit of earnings and profits,
will be taken into account by BancShares following the Merger.

11) The payment of cash in lieu of fractional share interests of
BancShares Common Stock will be treated as if the fractional
shares of BancShares Common Stock were distributed as part of the
exchange to the Allied shareholders and then redeemed by
BancShares. The cash payments will

<PAGE>
Board of Directors
September 25, 1995
Page 9

be treated as having been received as distributions in full payment
for the stock redeemed as provided in Section 302(a) of the Code.
Rev. Rul. 66-365, 1966-2 C.B. 116 and Rev. Proc. 77-41, 1977-2 C.B.
574.

12) Where a Allied shareholder receives solely cash for his or
her Allied Stock pursuant to his or her election to receive cash
or pursuant to his or her exercise of statutory dissenter's
rights, such cash will be treated as having been received by the
shareholder as a distribution in redemption of his or her stock
subject to the tests of Section 302 of the Code.

13) Where a Allied shareholder receives solely Debentures for
his or her Allied Stock, such Debentures will be treated as
having been received by the shareholder as a distribution in
redemption of his or her stock subject to the tests of Section
302 of the Code.

14) Provided that the mergers of Summit and Peoples with and
into First Citizens Bank, as contemplated by the Plan, qualify as
one or more statutory mergers under North Carolina law, the Bank
Mergers will constitute one or more tax-free reorganizations
within the meaning of Section 368(a)(1)(A) of the Code.

15) Each of First Citizens Bank, Summit and Peoples will be a
party to the reorganization within the meaning of Section 368(b).

16) No gain or loss will be recognized by Summit or Peoples upon
the transfer of its assets, subject to its liabilities, to First
Citizens Bank in the Bank Mergers. Sections 357(a) and 361(a).

17) No gain or loss will be recognized by First Citizens Bank
upon the receipt of the assets of Summit or Peoples, subject to
the respective liabilities of Summit and Peoples in the Bank
Mergers. Rev. Rul. 57-278, 1957-1 C.B. 124.

18) The basis of the assets of Summit and Peoples in the hands
of First Citizens Bank will be the same as the basis of such
assets in the hands of Summit and Peoples immediately prior to
the Bank Mergers. Section 362(b).

19) The holding period of the assets of Summit and Peoples in
the hands of First Citizens Bank will include the period during
which such assets were held by Summit and Peoples immediately
prior to the Merger. Section 1223(2).

20) No gain or loss will be recognized by BancShares as a result
of the Bank Mergers. Section 354(a)(1).

<PAGE>
Board of Directors
September 25, 1995
Page 10

21) The tax attributes enumerated in Section 381(c), including
any earnings and profits or a deficit of earnings and profits,
will be taken into account by First Citizens Bank following the
Bank Mergers.

NORTH CAROLINA INCOME TAX CONSEQUENCES

It is our opinion that the State of North Carolina will, for
North Carolina income tax purposes, treat the Merger and the Bank
Mergers in an identical manner as they are treated by the
Internal Revenue Service for federal income tax purposes.
N.C.G.S. 105-130.2, 105-130.3, 105-130.5, 105-134.1, 105-134.2,
105-134.5, 105-134.6, 105-134.7 and 105-228.23.

The opinions expressed above are rendered only with respect to
the specific matters discussed herein, and we express no opinion
with respect to any other federal or state income tax or legal
aspect of the offering. If any of the above-stated facts,
circumstances, or assumptions are not entirely complete or
accurate, it is imperative that we be informed immediately, as
the inaccuracy or incompleteness could have a material effect on
our conclusions. In rendering our opinion, we are relying upon
the relevant provisions of the Internal Revenue Code of 1986, as
amended, the regulations thereunder, and judicial and
administrative interpretations thereof, which are subject to
change or modification by subsequent legislative, regulatory,
administrative, or judicial decisions. Any such changes could
also have an effect on the validity of our opinion. We assume no
duty to inform you of any changes in our opinion due to any
change in law or fact that may subsequently occur or come to our
attention.

Sincerely,

KPMG Peat Marwick LLP

Sheldon M. Fox, Partner

<PAGE>

TAX ADVISORS' CONSENT

Board of Directors
Allied Bank Capital, Inc.

Board of Directors
First Citizens BancShares, Inc.

We consent to the inclusion of our tax opinion dated September
25, 1995, regarding the federal and North Carolina income tax
consequences of the Merger, in Exhibit No. 8 of the Form S-4
Registration Statement to be filed with the Securities and
Exchange Commission, and to the quotation or summarization of our
tax opinion and the references to our firm under the headings
"SUMMARY - Certain Income Tax Consequences", "THE MERGER -
Certain Income Tax Consequences" and "Opinions" in the
Prospectus/Proxy Statement.

/s/ KPMG Peat Marwick LLP

KPMG Peat Marwick LLP

Raleigh, North Carolina
September 26, 1995

<PAGE>

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors
First Citizens BancShares, Inc.:

We consent to incorporation by reference in the Registration Statement
of First Citizens BancShares, Inc. on Form S-4 relating to the
acquisition of Allied Bank Capital, Inc. of our report dated
January 23, 1995, relating to the consolidated statements of
condition of First Citizens BancShares, Inc. and Subsidiaries as of
December 31, 1994 and 1993, and the related consolidated statements of
income, changes in shareholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1994, which report
appears in the December 31, 1994 Annual Report to Shareholders and is
incorporated by reference in the Form 10-K of First Citizens
BancShares, Inc., and the reference to our firm under the heading
"Experts" in the prospectus.

/s/ KPMG Peat Marwick LLP

KPMG Peat Marwick LLP

Raleigh, North Carolina
September 25, 1995

<PAGE>

Coopers Coopers & Lybrand L.L.P.
& Lybrand a professional services firm

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in this registration
statement on Form S-4 (File No. ________) of our report dated January
27, 1995, on our audits of the consolidated financial statements of
Allied Bank Capital, Inc. We also consent to the reference to our firm
under the caption "Experts."

/s/ Coopers & Lybrand L.L.P.

(SIGNATURE OF COOPERS & LYBRAND L.L.P.)

Raleigh, North Carolina
September 25, 1995

<PAGE>

Exhibit 23(d)

Consent of Legg Mason Wood Walker, Inc.

We hereby consent to the inclusion of our fairness opinion as part
of the Registration Statement of Form S-4 of First Citizens BancShares,
Inc.

/s/ Legg Mason Wood Walker, Inc.

(Signature of Legg Mason Wood Walker, Inc.)

September 19, 1995

<PAGE>

EXHIBIT 23(e)

We hereby consent to the use of our name and to the description of our
opinion letter, dated the date of the Proxy Statement/Prospectus
referred to below, under the caption "The Merger -- Opinions of
Financial Advisors" in, and to the inclusion of such opinion letter as
Appendix III to, the Proxy Statement/Prospectus of Allied which Proxy
Statement/Prospectus is part of the Registration Statement on Form S-4
of First Citizens BancShares, Inc. By giving such consent we do not
thereby admit that we are experts with respect to any part of such
Registration Statement within the meaning of the term "expert" as used
in, or that we come within the category of persons whose consent is
required under, the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission promulgated
thereunder.

Friedman, Billings, Ramsey & Co., Inc.

By /s/ Nicholas J. Nichols
_______________________________
Executive Vice President

<PAGE>

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in this Registration
Statement of First Citizens Bancshares, Inc. on Form S-4 of our report
dated November 6, 1992 relating to the consolidated financial statements
of Allied Bank Capital, Inc., for the year ended September 30, 1992
incorporated by reference in their Annual Report on Form 10-K for
the year ended December 31, 1994 and to the reference to us under the
heading Experts in the Prospectus/Proxy Statement, which is part of
this Registration Statement.

/s/ Deloitte & Touche LLP

Raleigh, North Carolina
September 27, 1995

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each of First
Citizens BancShares, Inc., and the several undersigned Officers
and Directors thereof whose signatures appear below hereby makes,
constitutes and appoints James B. Hyler, Jr., its and his or her
true and lawful attorney, with full power of substitution to
execute, deliver and file in its or his or her name and on its or
his or her behalf, and in each of the undersigned Officer's and
Director's capacity or capacities as shown below,
(a) Registration Statement on Form S-4 (or other appropriate
form) with respect to the registration under the Securities Act
of 1933, as amended, of the shares of Class A common stock of
First Citizens BancShares, Inc., par value $1.00 per share, to be
issued in connection with the acquisition of Allied Bank Capital,
Inc. and all documents in support thereof or supplemental thereto
and any and all amendments, including any and all post-effective
amendments, to the foregoing (hereinafter called the
"Registration Statement"), and (b) such registration statements,
petitions, applications, consents to service of process or other
instruments, any and all documents in support thereof or
supplemental thereto, and any and all amendments or supplements
to the foregoing, as may be necessary or advisable to qualify or
register the securities covered by said Registration Statement;
and each of First Citizens BancShares, Inc. and said Officers and
Directors hereby grants to said attorney, full power and
authority to do and perform each and every act and thing
whatsoever as said attorney may deem necessary or advisable to
carry out fully the intent of this power of attorney to the same
extent and with the same effect as First Citizens BancShares,
Inc. might or could do, and as each of said Officers and
Directors might or could do personally in his or her capacity or
capacities as aforesaid, and each of First Citizens BancShares,
Inc. and said Officers and Directors hereby ratifies and confirms
all acts and things which said attorney might do or cause to be
done by virtue of this power of attorney and its or his or her
signatures as the same may be signed by said attorney to any or
all of the following (and/or any and all amendments and
supplements to any or all thereof): such Registration Statement
filed under the Securities Act of 1933, as amended, and all such
registration statements, petitions, applications, consents to
service of process and other instruments, and any all documents
in support thereof or supplemental thereto, filed under such
securities laws, regulations and requirements as may be
applicable.

IN WITNESS WHEREOF, First Citizens BancShares, Inc. has
caused this power of attorney to be signed on its behalf, and
each of the undersigned Officers and Directors in the capacity or
capacities noted has hereunto set his or her hand on the date
indicated below.

FIRST CITIZENS BANCSHARES, INC.
(Registrant)

By: /s/ James B. Hyler, Jr.
James B. Hyler, Jr.,
Vice Chairman and Chief
Operating Officer

Date: August 30, 1995

<PAGE>

Signature Capacity Date

/s/ Kenneth A. Black Vice President August 30, 1995
Kenneth A. Black and Treasurer
(Principal
Financial Officer
and Principal
Accounting
Officer)
/s/ John M. Alexander, Jr. Director August 30, 1995
John M. Alexander, Jr.

/s/ Ted L. Bissett Director August 30, 1995
Ted L. Bissett

/s/ B. Irvin Boyle Director August 30, 1995
B. Irvin Boyle

/s/ George H. Broadrick Director August 30, 1995
George H. Broadrick

/s/ H. Max Craig, Jr. Director August 30, 1995
H. Max Craig, Jr.

/s/ Betty M. Farnsworth Director August 30, 1995
Betty M. Farnsworth

/s/ Lewis M. Fetterman Director August 30, 1995
Lewis M. Fetterman

/s/ Frank B. Holding Executive Vice August 30, 1995
Frank B. Holding Chairman of the
Board

/s/ Frank B. Holding, Jr. Director August 30, 1995
Frank B. Holding, Jr.

/s/ Lewis R. Holding Chairman of the August 30, 1995
Lewis R. Holding Board (Principal
Executive
Officer)

/s/ Charles B.C. Holt Director August 30, 1995
Charles B.C. Holt

/s/ Gale D. Johnson Director August 30, 1995
Gale D. Johnson

/s/ Freeman R. Jones Director August 30, 1995
Freeman R. Jones

<PAGE>

Signature Capacity Date

/s/ Lucius S. Jones Director August 30, 1995
Lucius S. Jones

/s/ I. B. Julian Director August 30, 1995
I. B. Julian

/s/ Joseph T. Maloney, Jr. Director August 30, 1995
Joseph T. Maloney, Jr.

/s/ J. Claude Mayo, Jr. Director August 30, 1995
J. Claude Mayo, Jr.

/s/ William McKay Director August 30, 1995
William McKay

/s/ Brent D. Nash Director August 30, 1995
Brent D. Nash

/s/ Lewis T. Nunnelee, II Director August 30, 1995
Lewis T. Nunnelee, II

/s/ Talbert O. Shaw Director August 30, 1995
Talbert O. Shaw

/s/ R. C. Soles, Jr. Director August 30, 1995
R. C. Soles, Jr.

/s/ David L. Ward, Jr. Director August 30, 1995
David L. Ward, Jr.

<PAGE>

REVOCABLE PROXY

ALLIED BANK CAPITAL, INC.

Special Meeting of Shareholders
_______________, 1995

Proxy Solicited by Board of Directors

The undersigned hereby appoints
__________________________________________,
__________________ and _______________with full powers of substitution, to
act as attorneys and proxies to vote all shares of common stock of
Allied Bank Capital, Inc. ("Allied") that the undersigned is entitled to
vote at the Special Meeting of Shareholders to be held at the
_____________________, _________________________,
_______________________, Sanford, North Carolina, on ______________,
__________________, 1995 at ____ __.m., at any adjournments thereof, as
follows:

1. Proposed Merger. Approval of the Agreement and Plan of
Reorganization and Merger dated August 7, 1995 (the
"Agreement") between First Citizens BancShares, Inc.
("BancShares") and Allied, pursuant to which Allied will merge
with and into BancShares. Each outstanding share of Allied's
common stock will be converted into the right to receive either
(i) $25.25 in cash, (ii) 0.531 newly issued shares of
BancShares Class A common stock or (iii) $25.25 in unsecured,
subordinated debentures (subject to adjustment and to proration
as described in the Agreement).
[ ] FOR [ ] AGAINST [ ] ABSTAIN

2. Transaction of any other business that may properly come before
the meeting.

The Board of Directors of Allied recommends a vote "FOR" the proposals
listed above.

<PAGE>

THIS PROXY WILL BE VOTED AS DIRECTED ABOVE. IF NO INSTRUCTIONS ARE
GIVEN, THIS PROXY WILL BE VOTED "FOR" PROPOSAL 1.

This proxy may be revoked at any time before it is exercised by filing
with Allied either an instrument revoking it or a duly executed proxy
bearing a subsequent date or by attending the Special Meeting and voting
in person.

The undersigned acknowledges receipt from Allied, prior to the execution
of this proxy, of the Notice of Special Meeting and a Prospectus/Proxy
Statement dated ________________, 1995.

Dated: _________________________, 1995

______________________________
Signature of Shareholder

Please date and sign your name exactly as your name appears on this
proxy. If shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee or guardian,
please give full title. If shareholder is a corporation, please sign in
full corporate name by the president or other authorized officer. If
shareholder is a partnership, please sign in partnership name by
authorized person.

PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED POSTAGE
PREPAID ENVELOPE.