UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

                                    FORM 10-Q

(Mark One)
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended March 31, 1997
                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
    For the transition period from              Commission file number
                to                                      0-5583



                     UNITED CAROLINA BANCSHARES CORPORATION
             (Exact name of Registrant as specified in its Charter)

           North Carolina                            56-0954530
      (State of Incorporation)          (I.R.S. Employer Identification No.)

       127 West Webster Street
      Whiteville, North Carolina                       28472
(Address of principal executive offices)             (Zip Code)

                                 (910) 642-5131
              (Registrant's telephone number, including area code)


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. YES X NO

As of May 9, 1997,  there were  24,390,133  outstanding  shares of  Registrant's
$4.00 par value  common  capital  stock  which is the only  class of  securities
issued by the Registrant.


                                                              Page 1 of 28 pages

<PAGE>
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements

            United Carolina Bancshares Corporation and Subsidiaries
                           Consolidated Balance Sheets

                                                      March 31,     December 31,
                                                       1997            1996
                                                    ------------    ------------
                                                             (In thousands)
Assets:
   Cash and due from banks - noninterest-bearing     $   150,980    $   199,487
   Federal funds sold and other short-term
     investments                                          92,632         90,964
   Securities available for sale (amortized
     costs of $872,131,000 in 1997
     and $877,268,000 in 1996)                           869,359        877,432
   Investment securities (approximate market
     values of $45,548,000 in 1997
     and $47,334,000 in 1996)                             44,417         46,090
   Loans, net of unearned income                       3,215,839      3,149,697
      Less reserve for credit losses                     (48,266)       (46,138)
                                                     -----------    -----------
              Net loans                                3,167,573      3,103,559
                                                     -----------    -----------
   Premises and equipment                                 54,759         55,872
   Other assets                                          108,119        114,439
                                                     -----------    -----------
              Total assets                           $ 4,487,839    $ 4,487,843
                                                     ===========    ===========

Liabilities and stockholders' equity:
   Deposits:
      Noninterest-bearing demand deposits            $   609,696    $   633,014
      Interest-bearing deposits:
         NOW, savings, and money market deposits       1,477,074      1,449,133
         Certificates of deposit of
          $100,000 or more                               315,112        315,671
         Other time deposits                           1,636,770      1,651,608
                                                     -----------    -----------
              Total deposits                           4,038,652      4,049,426
   Short-term borrowings                                  39,862         42,521
   Mortgages and other notes payable                       2,251          2,273
   Other liabilities                                      48,226         43,154
                                                     -----------    -----------
              Total liabilities                        4,128,991      4,137,374
                                                     -----------    -----------
   Stockholders' equity:
      Preferred stock, par value $10 per share:
         Authorized 2,000,000 shares; none issued
      Common stock, par value $4 per share:
         Authorized 40,000,000 shares; issued
           24,386,811 shares in 1997 and
           24,316,631 shares in 1996                      97,547         97,267
      Surplus                                             52,722         51,676
      Retained earnings                                  210,488        201,596
      Unrealized losses on
          securities available for sale,
          net of deferred income taxes                    (1,909)           (70)
                                                     -----------    -----------
               Total stockholders' equity                358,848        350,469
                                                     -----------    -----------
               Total liabilities and
                 stockholders' equity                $ 4,487,839    $ 4,487,843
                                                     ===========    ===========


See accompanying Notes to Consolidated Financial Statements

                                       2

<PAGE>

                United Carolina Bancshares Corporation and Subsidiaries
                          Consolidated Statements of Income

                                                          Three Months Ended
                                                                March 31,
                                                        ------------------------
                                                            1997         1996
                                                        -----------   ----------
                                                         (Dollars in thousands
                                                       except per share amounts)
Interest income:
   Interest on loans                                       $ 71,581    $ 65,169
   Interest and dividends on:
      Taxable securities                                     12,785      11,227
      Tax-exempt securities                                     653         851
   Interest on federal funds sold and
       other short-term investments                             717       1,269
                                                             85,736      78,516
                                                           --------    --------
Interest expense:
   Interest on deposits                                      38,377      35,270
   Interest on short-term borrowings                            328         408
   Interest on long-term borrowings                              29          44
                                                           --------    --------
           Total interest expense                            38,734      35,722
                                                           --------    --------
Net interest income                                          47,002      42,794
Provision for credit losses                                   3,850       2,200
                                                           --------    --------
Net interest income after provision
  for credit losses                                          43,152      40,594
                                                           --------    --------

Noninterest income:
   Service charges on deposit accounts                        5,855       6,154
   Trust income                                               1,514       1,594
   Insurance commissions                                      1,893       1,533
   Mortgage banking fees                                      1,091       1,133
   Brokerage and annuity commissions                            810         566
   Other service charges, commissions, and fees               2,039       1,436
   Gains on mortgages originated for resale                     176         217
   Gains on trading account securities                            1        --
   Gains (losses) on dispositions of securities
      available for sale                                          3        (257)
   Gains on dispositions of investment securities              --            64
   Gains (losses) on dispositions of fixed assets                81        (539)
   Other operating income                                       214         266
                                                           --------    --------
           Total noninterest income                          13,677      12,167
                                                           --------    --------

Noninterest expenses:
   Personnel expense                                         21,128      21,751
   Occupancy expense                                          2,596       2,536
   Equipment expense                                          1,737       1,805
   Other operating expenses                                  10,622      10,113
                                                           --------    --------
           Total noninterest expenses                        36,083      36,205
                                                           --------    --------
Income before income taxes                                   20,746      16,556
   Income tax provision                                       7,467       6,003
                                                           --------    --------
Net income                                                 $ 13,279    $ 10,553
                                                           ========    ========

Per share data:
   Net income                                              $    .55    $     .44
                                                           ========    =========
   Cash dividends declared                                 $    .18    $     .18
                                                           ========    =========
   Book value at end of period                             $  14.71    $   13,55
                                                           ========    =========
Average number of shares outstanding                     24,360,323   24,140,761
                                                         ==========  ===========


See accompanying Notes to Consolidated Financial Statements

                                       3
<PAGE>

             United Carolina Bancshares Corporation and Subsidiaries
                 Consolidated Statements of Stockholders' Equity
                   Three Months Ended March 31, 1997 and 1996
<TABLE>
<CAPTION>

                                                                                                         Unrealized
                                                   Common Stock                                            Gains
                                             --------------------------                                  (Losses) on
                                              Number of      Aggregate                                    Securities       Total
                                               Shares          Par                          Retained      Available    Stockholders'
                                             Outstanding       Value         Surplus        Earnings     For Sale, Net     Equity
                                             -----------    -----------    -----------    -----------    ------------- ------------
                                                                           (Dollars in thousands)
<S>                                           <C>           <C>            <C>            <C>            <C>            <C>

Balance, January 1, 1997                      24,316,631    $    97,267    $    51,676    $   201,596    $       (70)   $   350,469
   Net income                                       --             --             --           13,279           --           13,279
   Cash dividends declared,
      $.18 per share                                --             --             --           (4,387)          --           (4,387)
    Issuance of common stock
       under stock option plans                   71,010            284          1,079           --             --            1,363
   Retirement of common stock                       (830)            (4)           (33)          --             --              (37)
   Unrealized losses on securities
      available for sale, net of
      applicable deferred income
      taxes                                         --             --             --             --           (1,839)        (1,839)
                                             -----------    -----------    -----------    -----------    -----------    -----------
Balance, March 31, 1997                       24,386,811    $    97,547    $    52,722    $   210,488    $    (1,909)   $   358,848
                                             ===========    ===========    ===========    ===========    ===========    ===========

Balance, January 1, 1996                      24,137,791    $    96,551    $    50,183    $   173,491    $     2,923    $   323,148
   Net income                                       --             --             --           10,553           --           10,553
   Cash dividends declared,
      $.18 per share                                --             --             --           (4,063)          --           (4,063)
    Issuance of common stock
       by pooled institution prior
       to merger                                  29,949            120            327             45           --              492
   Retirement of common stock                       (862)            (4)           (18)             2           --              (20)
   Unrealized losses on securities
      available for sale, net of
      applicable deferred income
      taxes                                         --             --             --             --           (2,698)        (2,698)
                                             -----------    -----------    -----------    -----------    -----------    -----------
Balance, March 31, 1996                       24,166,878    $    96,667    $    50,492    $   180,028    $       225    $   327,412
                                             ===========    ===========    ===========    ===========    ===========    ===========
</TABLE>

See accompanying Notes to Consolidated Financial Statements

                                       4

<PAGE>

               United Carolina Bancshares Corporation and Subsidiaries
                      Consolidated Statements of Cash Flows

                                                           Three Months Ended
                                                                March 31,
                                                         ----------------------
                                                           1997          1996
                                                         --------     ---------
                                                              (In thousands)
Increase  (decrease)  in cash and cash  equivalents: 
 Cash flows from operating activities:
   Net income                                            $  13,279    $  10,553
   Adjustments to reconcile net income to net cash
     provided by operating activities:
      Depreciation and amortization,
          net of accretion                                   2,605        2,476
      Provision for credit losses                            3,850        2,200
      Net (increase) decrease in loans
          originated for resale                                996       (1,842)
      Provision for deferred taxes and
          increase in taxes payable                          6,038        5,059
      (Increase) decrease in accrued interest
          receivable                                          (906)         343
      Increase in prepaid expenses                            (355)      (1,728)
      Decrease in other accounts receivable                  3,040        3,256
      Decrease in accrued interest payable                     (76)        (371)
      Increase (decrease) in accrued expenses                 (468)       1,451
      Decrease  in deferred loan fees,
           net of deferred costs                            (1,341)        (189)
      Other, net                                              (109)         838
                                                         ---------    ---------
           Total adjustments                                13,274       11,493
                                                         ---------    ---------
           Net cash provided by
               operating activities                         26,553       22,046
                                                         ---------    ---------
Cash flows from investing activities:
   Proceeds from maturities and issuer calls
      of securities available for sale                     135,641      236,585
   Proceeds from maturities and issuer calls
     of investment securities                                1,641        3,523
   Purchases of securities available for sale             (130,308)    (208,487)
   Net increase in loans outstanding                       (68,112)     (54,717)
   Purchases of premises and equipment                        (399)      (1,377)
   Proceeds from sales of premises and equipment                91          100
   Purchases and originations of mortgage
     loan servicing rights                                    (387)        (624)
   Sales of  foreclosed assets                                 727          189
   Other, net                                                5,002      (12,697)
                                                         ---------    ---------
           Net cash used by investing activities           (56,104)     (37,505)
                                                         ---------    ---------
Cash flows from financing activities:
   Net increase (decrease) in deposit accounts             (10,774)      73,833
   Net increase  (decrease) in federal funds
      purchased                                             (1,465)       3,375
   Net increase in securities sold under
     agreement to repurchase                                 2,117       33,104
   Net increase (decrease) in other
     short-term borrowings                                  (3,311)         714
   Repayments of mortgages and other
     notes payable                                             (22)        (146)
   Issuance of common stock                                    554          492
   Retirement of common stock                                 --             20
   Dividends paid                                           (4,387)      (4,063)
                                                         ----------   ---------
           Net cash provided (used)
           by financing activities                         (17,288)     107,289
                                                         ---------    ---------
Net increase (decrease) in cash and
     cash equivalents                                      (46,839)      91,830
Cash and cash equivalents at beginning of period           290,451      225,092
                                                         ---------    ---------
Cash and cash equivalents at end of period               $ 243,612    $ 316,922
                                                         =========    =========

                     Statement Continued on Next Page
                                       5
<PAGE>

Supplemental  disclosures of cash flow information: 
  Cash paid during the period for:
      Interest                                            $ 38,810     $ 36,093
                                                          ========     ========
      Income taxes                                        $  1,429     $    944
                                                          ========     ========
Significant noncash transactions:
   Loans transferred to real estate acquired
     in settlement of debt                                $    593     $    602
                                                          ========     ========
   Loans originated to facilitate the sale
     of foreclosed assets                                 $   --       $     45
                                                          ========     ========
   Unrealized losses on securities
     available for sale                                   $ (2,935)    $ (4,256)
                                                          ========     ========
   Investment securities transferred
     to available for sale portfolio
     in connection with business combinations             $   --       $ 36,646
                                                          ========     ========
  Available for sale securities transferred
     to investment portfolio in connection
     with business combinations                           $   --       $    240
                                                          ========     ========
   Tax benefits related to exercise
     of stock options                                     $    772     $   --
                                                          ========     ========
   Retirement of common stock in payment
     for shares acquired upon option exercise             $     37     $   --
                                                          ========     ========
   Prepaid assets transferred to fixed assets             $  9,000     $   --
                                                          ========     ========

See accompanying Notes to Consolidated Financial Statements

                                       6
<PAGE>

United Carolina Bancshares Corporation and Subsidiaries
Notes to Consolidated Financial Statements

Note 1.
      Basis of Presentation:

      The accompanying  consolidated financial statements,  which are unaudited,
reflect all adjustments which are, in the opinion of management, necessary for a
fair presentation of the financial  position at March 31, 1997, and December 31,
1996, and operating  results of United Carolina  Bancshares  Corporation and its
subsidiaries  for the  three-month  periods  ended March 31, 1997 and 1996.  All
adjustments  made  to  the  unaudited  financial  statements  were  of a  normal
recurring  nature.  The results of operations for the first three months of 1997
are not necessarily indicative of the results of operations for the entire year.


Note 2.
      Securities:

      The  following  is  a  summary  of  the  securities  portfolios  by  major
classification:
<TABLE>
<CAPTION>

                                                                                             March 31, 1997
                                                                          ----------------------------------------------------------
                                                                                                                         Approximate
                                                                         Amortized       Unrealized      Unrealized        Market
                                                                           Cost             Gains          Losses           Value
                                                                         ---------       ----------      -----------     -----------
                                                                                                 (In thousands)
<S>                                                                      <C>              <C>              <C>              <C>
Securities available for sale:
United States government securities                                      $800,056         $    429         $  2,312         $798,173
Obligations of United States government
   agencies and corporations                                               32,474               39              174           32,339
Mortgage-backed securities (1)                                             24,671               21              777           23,915
Obligations of states and political subdivisions                            1,100                2             --              1,102
Federal Home Loan Bank stock                                               13,429             --               --             13,429
Other securities                                                              401             --               --                401
                                                                                                                            --------
    Total securities available for sale                                  $872,131         $    491         $  3,263         $869,359
                                                                         ========         ========         ========         ========
Investment securities:
Obligations of states and political subdivisions                         $ 44,417         $  1,166         $     35         $ 45,548
                                                                         --------         --------         --------         --------
    Total investment securities                                          $ 44,417         $  1,166         $     35         $ 45,548
                                                                         ========         ========         ========         ========
<FN>
     (1) At March 31, 1997, UCB owned collateralized mortgage obligations issued
     by  the  Federal  Home  Loan  Mortgage  Corporation  (FHLMC)  which  had an
     amortized  cost  of  $8,371,000  and a  market  value  of  $8,198,000;  and
     collateralized mortgage obligations issued by the Federal National Mortgage
     Association  (FNMA) which had an amortized cost of $11,146,000 and a market
     value of $10,721,000.  UCB also owned  collateralized  mortgage obligations
     issued  by a private  issuer  and  guaranteed  by the  Government  National
     Mortgage  Association  (GNMA) which had an amortized cost of $303,000 and a
     market value of $312,000.  Other  mortgage-backed  pass-through  securities
     issued through various United States  government  agencies and corporations
     with a book value of $4,851,000 and a market value of $4,684,000  were also
     held at March 31,  1997.  At March  31,  1997,  none of the  collateralized
     mortgage  obligations  owned by UCB were  considered  high-risk  securities
     under current regulatory guidelines.
</FN>
</TABLE>
                                       7

<PAGE>

Notes to Consolidated Financial Statements (Continued)

Note 2.  Securities - Continued
<TABLE>
<CAPTION>
                                                                                              December 31, 1996
                                                                           ---------------------------------------------------------
                                                                                                                         Approximate
                                                                           Amortized       Unrealized     Unrealized       Market
                                                                             Cost             Gains         Losses          Value
                                                                           ---------       ----------     ----------     -----------
<S>                                                                        <C>              <C>            <C>             <C>
                                                                                                (In thousands)
 Securities available for sale:
 United States government securities                                        $784,943        $  1,882        $  1,125        $785,700
 Obligations of United States government
    agencies and corporations                                                 52,773              59             118          52,714
 Mortgage-backed securities                                                   25,846              34             570          25,310
 Obligations of states and political subdivisions                              1,100               2            --             1,102
 Federal Home Loan Bank stock                                                 12,200            --              --            12,200
   Other securities                                                              406            --              --               406
                                                                            --------        --------        --------        --------
     Total securities available for sale                                    $877,268        $  1,977        $  1,813        $877,432
                                                                            ========        ========        ========        ========
 Investment securities:
 Obligations of states and political subdivisions                           $ 46,090        $  1,286        $     42        $ 47,334
                                                                            --------        --------        --------        --------
Total investment securities                                                 $ 46,090        $  1,286        $     42        $ 47,334
                                                                            ========        ========        ========        ========
</TABLE>

Note 3.
      Loans:
      The consolidated  loan portfolio is summarized by major  classification as
follows:
                                                          March 31, December 31,
                                                            1997        1996
                                                         ---------  ------------
                                                             (In thousands)
Loans secured by real estate:
   Construction and land acquisition and
     development                                         $  339,626   $  297,921
   Secured by nonfarm, nonresidential properties            653,763      655,330
   Secured by farmland                                       81,458       82,097
   Secured by multifamily residences                         77,298       78,008
                                                         ----------   ----------
     Total loans secured by real estate, excluding
       loans secured by 1-4 family residences             1,152,178    1,113,356
                                                         ----------   ----------
   Revolving credit secured by 1-4 family residences        152,176      146,205
   Other loans secured by 1-4 family residences(1)          623,153      626,888
                                                         ----------   ----------
     Total loans secured by 1-4 family residences           775,329      773,093
                                                         ----------   ----------
     Total loans secured by real estate                   1,927,507    1,886,449
Commercial, financial, and agricultural loans
  excluding loans secured by real estate                    344,114      340,242
Loans to individuals for household, family, and
  other personal expenditures, excluding loans
  secured by real estate                                    829,796      824,569
All other loans                                             112,633       98,006
                                                         ----------   ----------
     Total loans                                          3,214,050    3,149,266
Net deferred origination costs                                1,789          431
                                                         ----------   ----------
     Loans, net of unearned income                       $3,215,839   $3,149,697
                                                         ==========   ==========

(1) Includes  $7,868,000 at March 31, 1997, and $8,864,000 at December 31, 1996,
in permanent  mortgages  originated  for sale in the secondary  market which are
stated at the lower of aggregate cost or market value. 

                                       8
<PAGE>

Notes to Consolidated Financial Statements (Continued)

Note 4.
      Nonperforming and Problem Assets:

      The following is a summary of nonperforming and problem assets:

                                                         March 31,  December 31,
                                                           1997         1996
                                                         ---------  ------------
                                                              (In thousands)

Foreclosed assets                                         $ 8,004        $ 7,493
Nonaccrual loans                                            2,430          2,473
                                                          -------        -------
        Total nonperforming assets                         10,434          9,966
Loans 90 days or more past due,
        excluding nonaccrual loans                         12,022          9,690
                                                          -------        -------
        Total problem assets                              $22,456        $19,656
                                                          =======        =======


     At March 31, 1997,  the recorded  investment  in loans that are  considered
impaired under Financial  Accounting  Statement No. 114 was  $2,430,000,  all of
which were on a  nonaccrual  basis.  Included in this amount was  $1,381,000  of
impaired loans for which $350,000 of the reserve for credit losses was assigned.
The average recorded  investment  during the first three months of 1997 in loans
classified as impaired at March 31, 1997, was approximately $2,414,000.  For the
three months ended March 31, 1997,  UCB  recognized no interest  income on these
impaired loans using the cash basis of accounting.


Note 5.
      Reserve for Credit Losses:

      The following  table sets forth the analysis of the  consolidated  reserve
for credit losses:


                                                           Three Months Ended
                                                                 March 31,
                                                         ----------------------
                                                          1997             1996
                                                         -------        -------
                                                             (In thousands)

Balance, beginning of period                             $ 46,138      $ 43,464
     Provision for credit losses                            3,850         2,200
     Recovery of losses previously charged off              1,172           788
     Losses charged to reserve                             (2,894)       (2,070)
                                                         --------      --------
Balance, end of period                                   $ 48,266      $ 44,382
                                                         ========      ========

                                       9

<PAGE>

Notes to Consolidated Financial Statements (Continued)

Note 6.
      Short-Term Borrowings:

      The  following  table  sets  forth  certain  data  with  respect  to UCB's
short-term borrowings:
<TABLE>
<CAPTION>

                                                       March 31, 1997                                 December 31, 1996
                                             or For the Three Months Then Ended                  or For the Year Then Ended
                                         --------------------------------------------   --------------------------------------------
                                                    Securities               Federal               Securities              Federal
                                                    Sold Under    Treasury    Home                 Sold Under  Treasury      Home
                                         Federal     Agreement     Tax and    Loan       Federal   Agreement   Tax and       Loan
                                           Funds         to          Loan     Bank        Funds        to        Loan        Bank
                                         Purchased   Repurchase     Notes    Advances   Purchased  Repurchase    Notes     Advances
                                         ---------   ----------   --------   --------   ---------  ----------  ----------  ---------
                                                                           (Dollars in thousands)

<S>                                        <C>         <C>         <C>       <C>        <C>         <C>         <C>         <C>

Balance outstanding at end
  of period                                $10,455     $17,975     $11,432   $   --     $11,920     $15,858     $14,743     $  --
Maximum amount outstanding
  at any month-end during
  the period                                14,925      17,975      11,432       --      29,250      40,040      15,625      20,000
Average balance outstanding
  during the period                         13,496       4,734       9,499       --      17,481       6,426       7,004       5,027
Average interest rate paid
  during the period                           4.88%       4.09%       5.03%      -- %      5.19%       4.41%       4.92%       5.72%
Average interest rate payable
  at end of period                            6.88%       5.31%       5.67%      -- %      6.88%       4.72%       5.04%        -- %
</TABLE>

      Federal  funds  purchased  represent   unsecured   borrowings  from  other
financial institutions by UCB's subsidiary banks for their own temporary funding
requirements.

      Securities  sold  under  agreement  to  repurchase   represent  short-term
borrowings by UCB's subsidiary  banks with maturities  ranging from 1 to 89 days
collateralized by securities of the United States government or its agencies.

      Treasury Tax and Loan Notes consist of the balances  outstanding  in UCB's
subsidiary  banks'  treasury  tax and loan  depository  note  accounts  that are
payable on demand to the United States Treasury and  collateralized by qualified
debt  securities.  Interest on borrowings  under these  arrangements  is payable
monthly at 1/4% below the  average  federal  fund rate as quoted by the  Federal
Reserve Board.

      Federal Home Loan Bank advances represent borrowings from the Federal Home
Loan Bank of Atlanta by UCB's North Carolina  subsidiary  bank pursuant to lines
of credit  collateralized by a blanket lien on qualifying loans secured by first
mortgages on 1-4 family  residences.  These advances have an initial maturity of
less than one year with interest payable monthly.


                                       10
<PAGE>

Notes to Consolidated Financial Statements (Continued)

Note 7.
      Mortgages and Other Notes Payable:

      Mortgages  payable  totaled  $79,000  at March 31,  1997,  and  $97,000 at
December 31, 1996.  The  mortgages  bear  interest at annual rates  ranging from
8.75%  to  10%  and  are   collateralized   by  premises  with  book  values  of
approximately $539,000 at March 31, 1997, and $540,000 at December 31, 1996. The
mortgages are payable primarily in monthly installments  totaling  approximately
$3,000, including interest.

      Advances  from  the  Federal  Home  Loan  Bank  of  Atlanta  with  initial
maturities  of more than one year  totaled  $2,172,000  at March 31,  1997,  and
$2,176,000 at December 31, 1996.  The advances are  collateralized  by a blanket
lien on qualifying loans secured by first mortgages on 1-4 family residences and
bear  interest  at rates  ranging  from 3.50% to 8.15%,  payable  monthly,  with
principal due at various maturities.


Note 8.
      Income Taxes:

      The  effective  tax rate on income  before  income taxes is lower than the
combined  statutory federal and state rates primarily because interest earned on
investments in debt instruments of state,  county,  and municipalities is exempt
from  federal   income  tax  and   partially   exempt  from  state  income  tax.
Substantially all income earned on securities of the United States government or
its agencies is exempt from state income taxes.


                                       11
<PAGE>

Notes to Consolidated Financial Statements (Continued)

Note 9.
      Supplementary Income Statement Information:

      The  following  is a  breakdown  of items  included  in  "Other  operating
expenses" on the consolidated statements of income:

                                                              Three Months Ended
                                                                   March 31,
                                                              ------------------
                                                               1997       1996
                                                              --------   -------
                                                                 (In thousands)
Other operating expenses:
  Data processing fees and software expense                    $ 1,778   $ 1,472
  Professional services                                          1,465     1,013
  Telephone expense                                              1,055       888
  Postage and delivery                                           1,046     1,038
  Marketing and business development                             1,041     1,140
  Printing, stationery, and supplies                               820       926
  Amortization of goodwill and other intangible assets             551       639
  Insurance and taxes, other than taxes on income                  448       385
  Noncredit losses                                                 436       231
  Travel expense                                                   435       451
  Amortization of capitalized mortgage servicing rights            289       218
  FDIC deposit insurance premiums                                  101        67
  Donations                                                         27       105
  Other expenses                                                 1,130     1,540
                                                               -------   -------
      Total other operating expenses                           $10,622   $10,113
                                                               =======   =======


Note 10.
      Per Share Data:

      Earnings per share are computed  based on the weighted  average  number of
shares  outstanding  during each period.  Cash  dividends per share are computed
based on the historical  number of shares  outstanding  at date of  declaration.
Book values per share are computed based on the number of shares  outstanding at
the end of each  period.  Dilution of earnings  per share that would result from
the exercise of all outstanding stock options was immaterial.


                                       12
<PAGE>

Notes to Consolidated Financial Statements (Continued)

Note 11.
      Statements of Cash Flows:

      For purposes of the statements of cash flows,  UCB considers cash and cash
equivalents  to include cash and due from banks,  federal funds sold,  and other
short-term investments.

Note 12.
      Legal Proceedings:

      Various legal  proceedings  are pending or threatened  against UCB and its
subsidiaries. All the foregoing are routine proceedings,  pending or threatened,
which are  incidental  to the  ordinary  course  of UCB's and its  subsidiaries'
business. In the judgment of management and its counsel, none of such pending or
threatened  legal  proceedings  will  have  a  material  adverse  effect  on the
consolidated financial position of UCB and its subsidiaries.

Note 13.
      Mergers and Acquisitions:

      On November 1, 1996, UCB entered into a definitive agreement to merge into
Southern National  Corporation  ("SNC"),  headquartered in Winston-Salem,  North
Carolina.  Under the terms of the agreement, UCB shareholders will receive 1.135
shares  (subject to possible  upward  adjustment)  of SNC common  stock for each
share of UCB common stock owned. Concurrent with the execution of the agreement,
UCB  granted  SNC an option to  purchase  up to  4,828,960  shares of UCB common
stock,  subject to  adjustment,  at an exercise  price of $30.50 per share.  The
exercise of the option is permitted  only upon the  occurrence of certain events
which  generally  relate to an actual or proposed  acquisition of UCB by a third
party or the  acquisition  by a third  party of a  significant  interest  in the
equity of UCB. The merger was approved by  shareholders  on April 22, 1997, and,
subject to regulatory approval, is expected to be consummated July 1, 1997.

      On August 30, 1996, UCB issued 37,123 shares of common stock to consummate
the  merger  of  Tomlinson  Insurors,   Inc.,  a  general  insurance  agency  in
Fayetteville,  North  Carolina,  into  UCB's  North  Carolina  subsidiary  bank.
Tomlinson  Insurors  had total  assets of  $361,000  at the date the  merger was
consummated.  The merger was accounted for as a  pooling-of-interests;  however,
due to the  immateriality  of the transaction in relation to UCB's  consolidated
financial position and operating results, prior period financial statements have
not been restated.

      Effective  March 29,  1996,  UCB  consummated  a merger  with  Triad  Bank
headquartered  in Greensboro,  North Carolina.  Triad Bank had 13 branch offices
with $207.4  million in total assets and $188.1 million in total deposits at the
merger date.  Under terms of the agreement,  UCB exchanged  1,595,125  shares of
common stock for all of the outstanding shares of Triad common stock. The merger
was accounted for as a pooling-of-interests.

                                       13
<PAGE>

Notes to Consolidated Financial Statements (Continued)

      Effective January 25, 1996, UCB consummated a merger with Seaboard Savings
Bank, Inc., headquartered in Plymouth, North Carolina. Seaboard had three branch
offices with $46.3 million in total assets and $40.7  million in total  deposits
at the merger date.  Under the terms of the  agreement,  UCB  exchanged  418,641
shares of common  stock for all of the  outstanding  shares of  Seaboard  common
stock. The merger was accounted for as a pooling-of-interests.


                                       14
<PAGE>


Item 2: Management's Discussion and Analysis of Financial Condition and Results
        of Operations

Results of Operations - Three Months Ended March 31, 1997, Compared to 1996

Summary
         Net income totaled $13,279,000, or $.55 per share, for the three months
ended March 31, 1997. For the comparable quarter of 1996, net income amounted to
$10,553,000,  or $.44 per  share.  The  1996  results  included  the  effect  of
nonrecurring charges and expenses totaling $1,554,000,  net of applicable income
tax  benefits,  incurred in connection  with the  completion of the mergers with
Seaboard  Savings Bank and Triad Bank during the quarter.  Excluding the effects
of the items  related to the  mergers,  on a pro forma  basis,  earnings for the
first quarter of 1996 amounted to $12,107,000, or $.50 per share.

Net Interest Income
         Net interest income increased $4,208,000, or 9.8%, for the three months
ended March 31, 1997,  compared to the first quarter of 1996. This was due to an
increase of $401,505,000, or 10.6%, in the level of average earning assets along
with an increase in the percentage of earning assets comprised of loans.  Loans,
which  have  higher  yields  than other  investments,  made up 76.42% of average
earning  assets  during  the first  quarter  of 1997  compared  to 75.61% in the
comparable period of 1996.  Partially offsetting the effect of the earning asset
increases was an increase of  $329,120,000,  or 10.5%, in the average balance of
interest-bearing  liabilities along with a shift in the mix of  interest-bearing
deposits  to a higher  percentage  of  consumer  certificates  of deposit  which
generally  bear  higher  interest  rates  than NOW,  savings,  and money  market

                                       15
<PAGE>

deposits.  As a result of these factors, the net tax-equivalent yield on earning
assets  decreased  to 4.61% in the first  quarter of 1997 from 4.62% in the same
period of 1996.
         Interest  income from loans  increased  $6,412,000,  or 9.8%,  over the
first  three  months of 1996 due to an increase of  $337,223,000,  or 11.8%,  in
average  loans  outstanding  which more than offset the effect of the decline in
the  tax-equivalent  yield on average loans  outstanding  to 9.11% from 9.20% in
1996. The decrease in the yield on the loan portfolio for 1997 was the result of
a lower  prevailing  prime  lending rate which  averaged  8.27% during the first
quarter of 1997  compared to 8.34% in the first three  months of 1996 as well as
lower rates on new fixed rate  consumer  loans  compared to the average rates on
loans in the existing portfolio. Approximately 33% of UCB's loans outstanding at
March 31, 1997, had floating interest rates, most of which varied with the prime
rate.
         Interest income from investment securities and securities available for
sale for the first three months of 1997 increased $1,360,000, or 11.3%, from the
first three months of 1996. This was due to an increase in the aggregate average
balance  of  investment   securities  and  securities   available  for  sale  of
$101,606,000,  or 12.3%, from the  corresponding  period of 1996 which more than
offset the effect of the decline in the  tax-equivalent  yield on the  aggregate
portfolio to 6.02% from 6.09% a year earlier. Interest income from federal funds
sold and other short-term  investments  totaled $717,000 in the first quarter of
1997, a decrease of $552,000  from the same period of 1996.  This was the result
of a decrease  of  $37,324,000  in the  average  balances  invested as well as a
decrease in the average  yield to 5.21% for the first three  months of 1997 from
5.48% in 1996.

                                       16

<PAGE>

         Interest expense on deposits increased $3,107,000, or 8.8% in the three
months  ended March 31,  1997,  compared to 1996.  The average  balance of total
interest-bearing deposits increased $334,737,000, or 10.8%, in the first quarter
of 1997 compared to 1996. This was the result of an increase of $131,261,000, or
9.6%, in the average balances of certificates of deposit less than $100,000,  an
increase of $90,719,000,  or 41.3%, in average certificates of deposit issued in
denominations greater than $100,000,  and an increase of $112,757,000,  or 7.5%,
in the average balances of NOW, savings,  money market accounts,  and other time
deposits.  The overall interest rate paid on average  interest-bearing  deposits
decreased  to 4.55% for the first  quarter of 1997 from 4.59% in the same period
of 1996.
         The  average  interest  rate paid on short-  and  long-term  borrowings
during the first  three  months of 1997  decreased  to 4.83% from 5.11% in 1996,
principally due to a decrease in rates on Federal Funds purchased and securities
sold under  agreement  to  repurchase.  The average  balances of borrowed  funds
decreased  by  $5,617,000  in the first  quarter of 1997 from the  corresponding
period of 1996.

Provision and Reserve for Credit Losses
         The provision for credit  losses  amounted to $3,850,000  for the three
months ended Marcha 31, 1997,  compared to $2,200,000 in 1996. Net credit losses
amounted to $1,722,000,  or .22% of average loans outstanding,  on an annualized
basis, during the first three months of 1997 compared to $1,282,000,  or .18% of
average loans outstanding,  on an annualized basis, for the comparable period of
1996. The increase in net credit losses  resulted  primarily from an increase in
losses on consumer loans.

                                       17

<PAGE>

         Nonperforming   assets  (foreclosed   assets,   nonaccrual  loans,  and
restructured loans) totaled $10,434,000, or .32% of loans and foreclosed assets,
at March 31,  1997,  compared  to  $9,966,000,  or .32% of loans and  foreclosed
assets,  at December 31, 1996.  Loans 90 days or more past due that  continue to
accrue interest totaled $12,022,000 at March 31, 1997, compared to $9,690,000 at
December 31, 1996.
         At March 31, 1997, the recorded investment in loans that are considered
impaired under FAS 114 was $2,430,000,  all of which were on a nonaccrual basis.
Included in this amount was  $1,381,000 of impaired  loans for which $350,000 of
the reserve for credit  losses was  assigned.  The average  recorded  investment
during the first three months of 1997 in loans  classified  as impaired at March
31, 1997, was  approximately  $2,414,000.  For the three months ended Marcha 31,
1997, UCB  recognized no interest  income on these impaired loans using the cash
basis of accounting.
         In addition to the  nonperforming  and problem assets  described above,
which included loans considered impaired under FAS 114, UCB had loans to various
borrowers  totaling  approximately  $16,844,000  at March  31,  1997,  for which
management  has  serious  concerns  regarding  the ability of the  borrowers  to
continue to comply with present loan repayment  terms which could result in some
or all of these loans  becoming  classified as problem  assets.  These  concerns
resulted from various credit  considerations,  including the financial position,
operating results and cash flow of the borrowers, and the current estimated fair
value of the underlying collateral.
         The reserve for credit  losses  amounted  to  $48,266,000,  or 1.50% of
loans outstanding, at March 31, 1997, compared to $46,138,000, or 1.46% of loans
outstanding, at December 31,

                                       18

<PAGE>

1996. In determining  the level of the reserve for credit   losses,   management
takes into  consideration  loan volumes  and outstandings, loan loss experience,
delinquency  trends, risk  ratings  assigned  to nonconsumer  loans,  identified
problem loans, the present and expected economic conditions in  general, and, in
particular, how such  conditions relate to UCB. In management's  opinion,  UCB's
reserve for credit  losses was adequate to absorb losses from the loan portfolio
at  March 31, 1997;  however,  adverse  changes in the  economic  conditions  in
UCB's  market  area  could lead to a decline in the overall  quality of the loan
portfolio and necessitate  future  additions to the reserve  for credit  losses.
Also,  examiners  from bank regulatory  agencies periodically  review UCB's loan
portfolio  and may require the  corporation  to charge off loans and/or increase
the reserve for credit losses to reflect their assessment of the  collectibility
of loans in the portfolio  based on information available to them at the time of
their examination.

Noninterest Income and Expense
         Total noninterest income increased  $1,510,000,  or 12.4%, in the first
three  months of 1997 over the same period of 1996.  Service  charges on deposit
accounts decreased  $299,000,  or 4.9%,  principally due to lower levels of fees
collected for excessive  withdrawals  and below minimum  balances on savings and
certain types of checking accounts. Other service charges, commissions, and fees
increased  $1,085,000 to $7,347,000  during the first quarter of 1997  primarily
due to increases in insurance commissions,  fees for the use of automated teller
machines,  and brokerage and annuity  commissions.  Commissions from the general
insurance  agency  operations  increased  $228,000,  or 19.5%,  primarily as the
result of the merger with an insurance agency in  Fayetteville,  North Carolina,
in August 1996.  Fees collected for the use of UCB's

                                       19

<PAGE>

automated  teller  machines   increased   $375,000,   or  111.6%,   due  to  the
implementation  of a convenience fee on transactions  performed by noncustomers.
The consumer debit card program produced  $243,000 in merchant fee income during
the first  quarter  of 1997,  an  increase  of  $115,000,  or 89.7%,  over 1996.
Brokerage  and  annuity  commissions  earned  during  the first  quarter of 1997
increased $244,000, or 43.1%, over 1996 due to increased mutual fund and annuity
sales volume.
         Gains on sales of mortgage loans into the secondary  market amounted to
$176,000 in the first  quarter of 1997 compared to gains of $217,000 a year ago.
Gains on the sale of securities  available for sale totaled  $3,000 in the three
months ended March 31,  1997,  compared to losses of $257,000 in the same period
of 1996.  The 1996  losses  were  recorded  to  write-down  the value of certain
securities  obtained in a merger with  another  financial  institution  to their
current  estimated  realizable  value.  These  securities,  which  consisted  of
structured notes and other investments with derivative features,  did not comply
with UCB's investment policy and were therefore  reclassified at the merger date
from  investment  securities  to available for sale  securities.  They were then
disposed of during the second  quarter of 1996.  In  addition,  gains of $64,000
were recorded on sales of securities  classified as held to maturity  during the
first quarter of 1996.  These sales were also the result of securities  acquired
in the mergers that did not comply with UCB's investment policies.  Gains on the
disposition  of fixed assets  totaled  $81,000  during the first quarter of 1997
compared  to losses of $539,000  in the  similar  period of 1996.  The 1996 loss
included  $568,000 in  write-downs  on fixed  assets  related to the two mergers
completed during the first quarter

                                       20

<PAGE>

of the year.
         Total noninterest  expenses  decreased  $122,000,  or .3%, in the three
months  ended  March  31,  1997,  compared  to the same  period  of 1996.  Total
personnel expense decreased  $623,000 in the three-month period of 1997 compared
to 1996. Regular and part-time  salaries increased by $894,000,  or 6.0%, in the
1997  period due to  increases  in base  compensation  and an increase of 30, or
1.6%,  in the  average  number of  full-time  equivalent  employees  while other
compensation  expense  decreased   $1,140,000,   or  75.2%,   primarily  due  to
nonrecurring  merger charges totaling $945,000 recorded during the first quarter
of 1996.  Employee  benefits  expense  for the first  quarter  of 1997  declined
$360,000 (8.1%) from 1996 primarily due to decreased medical claims of $397,000,
or 26.8%, from the prior year and declines in plan  administration  expenses and
other costs related to providing  employee medical benefits that totaled $24,000
in the  aggregate.  Medical  claims during 1996 were  significantly  affected by
several large claims.
         Occupancy  expense increased  $60,000,  or 2.4%, during the first three
months of 1997 as compared to 1996.  Repairs and maintenance  expense  increased
$36,000,  or  8.0%,  primarily  due  to  increased   maintenance   contracts  on
facilities.  Rental expense increased  $16,000,  or 1.8% while real estate taxes
increased $19,000, or 7.4%, due primarily to revaluations by taxing authorities.
         Equipment expense decreased $68,000,  or 3.8%, for the first quarter of
1997 as  compared to the same period of 1996.  Repairs and  maintenance  expense
decreased  $52,000,  or 7.6%,  and  purchases of  noncapitalized  furniture  and
equipment  decreased  $48,000,  or 58.0%.  These decreases were primarily due to
increased costs during 1996 associated with  modifications  made to the branches
acquired in the 1996 mergers. Equipment rental expense increased $32,000 (28.7%)
over  1996  primarily  due to new  computer  and voice  communication  equipment
installed during the latter part of 1996.

                                       21

<PAGE>

         Other operating expenses increased $509,000,  or 5.0%, during the first
three months of 1997 as compared to 1996.  Professional services expense for the
first quarter of 1997 increased  $452,000,  or 44.6%,  primarily due to expenses
related to the  installation  and maintenance of central  computer  applications
software.
         Outside data processing fees increased $306,000,  or 20.8%, compared to
1996 primarily due to increased  software  amortization  expense  ($303,000,  or
88.3%  increase) and expenses for the consumer  debit card  transaction  program
($115,000 increase). The increases in software amortization reflect the purchase
of  a  new  central  computer  software  system  which  replaced  existing  core
applications  software,  the installation of which took place in the latter half
of 1996. These increased expenses were partially offset by a decrease of $57,000
(19.1%) in software  maintenance  expense due to the  expiration of contracts on
replaced software.
         The   amortization  of  capitalized   mortgage  loan  servicing  rights
increased  $71,000,  or 32.6%, from the prior year due to purchases of servicing
rights  and  the  capitalization  of  originated  servicing.  Telephone  expense
increased  $167,000,  or 18.8%,  as a result of  increased  use of an  automated
response  telephone  system  and  a  staffed   bank-by-phone   customer  service
department,  both of which are accessible by toll-free numbers.  Amortization of
deposit-base  premiums decreased $88,000,  or 18.9% compared to 1996 principally
due to the  elimination of  amortization on a branch that was sold in the latter
half of 1996. Stationery and supplies expense decreased $106,000, or 11.4%, from
1996.  The 1996  expense was  impacted by the costs of  converting  the checking
accounts  of  customers  of  merged  banks.  Increases  in other  categories  of
noninterest expenses were generally the result of increases in the costs related
to purchased services.

                                       22

<PAGE>

Income Tax Provision
         The provision  for income tax increased  $1,464,000 in the three months
ended March 31, 1997, compared to the corresponding period of 1996. The increase
in the income tax  provision  was  principally  the net result of an increase of
$4,190,000 in pre-tax income.
         The effective  income tax rate on income before taxes is lower than the
combined  statutory federal and state rates primarily because interest earned on
investments  in debt  instruments of states,  counties,  and  municipalities  is
exempt  from  federal  income  tax and may be  exempt  from  state  income  tax.
Substantially all income earned on securities of the United States government or
its agencies is exempt from state income taxes. In addition,  the 1996 effective
tax rate  was  higher  than  that  experienced  in the  current  year due to the
nondeductibility  of certain  merger-related  expenses incurred during the first
quarter of 1996.

Financial Condition
         The financial  condition of the Corporation,  with respect to liquidity
and dividends at March 31, 1997,  has not changed  significantly  since December
31, 1996.  At March 31, 1997,  stockholders'  equity  amounted to 8.00% of total
assets  compared to 7.81% at December  31, 1996.  At March 31,  1997,  UCB had a
ratio of core  capital to  risk-weighted  assets of  approximately  11.29% and a
ratio of total capital to risk-weighted assets of approximately 12.54%, computed
using the Federal Reserve guidelines for risk-based capital requirements,  and a
ratio of  quarter-end  core capital to average total assets for the three months
ended March 31, 1997, of 7.91%.
         On  an  annualized  basis,  net  income  as  a  percentage  of  average
stockholders'  equity  amounted  to 15.18%  for the first  three  months of 1997
compared  to  13.04%  for the same  period

                                       23

<PAGE>

of 1996. Cash dividends  declared  represented 33.04% of net income in the first
quarter of 1997 compared to 38.50% for the three months ended March 31, 1996.
         At March 31, 1997, UCB owned debt securities that had not been rated by
a rating agency with a book value of $399,000. In addition, debt securities with
a book  value of  $152,000  were  owned at March  31,  1997,  that had less than
investment grade ratings.  Included in the unrated  securities were bonds with a
book value of $360,000 that are  collateralized by U.S.  government  securities.
Substantially  all of these investments were securities issued by municipalities
located within UCB's market area. It is management's opinion that no more than a
normal risk of loss exists on these securities. Accounting and Regulatory Issues
         In March 1995, the FASB issued Financial  Accounting  Standards No. 121
(FAS  121),  "Accounting  for  the  Impairment  of  Long-Lived  Assets  and  for
Long-Lived Assets to Be Disposed Of," which establishes accounting standards for
the  impairment of long-lived  assets,  certain  identifiable  intangibles,  and
goodwill  related  to those  assets  to be held  and  used  and for  those to be
disposed  of.  This  statement  requires  that  long-lived  assets  and  certain
intangibles   be  reviewed  for  impairment   whenever   events  or  changes  in
circumstances  indicate  that the  carrying  value  may not be  recoverable.  An
impairment loss should be recognized if the sum of the undiscounted  future cash
flows is less than the carrying amount of the asset. Those assets to be disposed
of are to be  reported  at the lower of the  carrying  amount or fair value less
costs to sell. UCB adopted FAS 121 on January 1, 1996,  with no material  effect
on the consolidated financial statements.
         In October 1995, the FASB issued Financial Accounting Standards No. 123
(FAS 123), "Accounting for Stock-Based Compensation," which encourages companies
to account for stock

                                       24

<PAGE>

compensation  awards  based on their  fair  value  at the  date the  awards  are
granted.  The  resulting  compensation  cost would be shown as an expense on the
income statement.  Companies may choose to continue to measure  compensation for
stock-based  plans using the intrinsic value method of accounting  prescribed by
APB  Opinion  No.  25 (APB 25),  "Accounting  for  Stock  Issued to  Employees."
Entities  electing  to  continue  the  accounting  prescribed  in APB 25 will be
required to disclose in the notes to the  financial  statements  what net income
and  earnings  per  share  would  have  been if the fair  value-based  method of
accounting  defined in FAS 123 had been applied.  UCB adopted FAS 123 on January
1, 1996, and elected to continue to measure compensation cost using APB 25.
         In September 1996, the FASB issued Financial  Accounting  Standards No.
125 (FAS 125),  "Accounting for Transfers and Servicing of Financial  Assets and
Extinguishments  of Liabilities,"  which  establishes  accounting  standards for
determining  when a  liability  should be  considered  extinguished  through the
transfer of assets to a creditor or setting aside assets dedicated to eventually
settling a liability.  The statement  provides  conditions for  determining if a
transferor  has  surrendered  control  over  transferred  financial  assets  and
requirements  for  derecognizing  a  liability  when  it  is  extinguished.  The
statement  also  requires  the  recognition  of  either a  servicing  asset or a
servicing liability when an entity undertakes an obligation to service financial
assets. Such servicing assets or liabilities shall be amortized in proportion to
and  over  the  period  of the  estimated  net  servicing  income  or  loss,  as
appropriate.  FAS 125 is  effective  for  transfers  and  servicing of financial
assets and extinguishments of liabilities  occurring after December 31, 1996, to
be only  applied on a  prospective  basis.  The  adoption  of FAS 125  effective
January  1,  1997,  had no impact on UCB's  financial  condition  or  results of
operations.

                                       25

<PAGE>

         In February 1997, the FASB issued  Financial  Accounting  Standards No.
128 (FAS 128),  "Earnings per Share," which establishes  standards for computing
and  presenting  earnings per share (EPS) and applies to entities  with publicly
held common  stock.  This  statement  simplifies  the  standards  for  computing
earnings per share previously found in APB Opinion No. 15, "Earnings per Share,"
and makes them  comparable  to  international  EPS  standards.  It replaces  the
presentation  of primary EPS with a presentation  of basic EPS. It also requires
dual  presentation of basic and diluted EPS on the face of the income  statement
for all entities with complex capital  structures and requires a  reconciliation
of the numerator and  denominator of the basic EPS  computation to the numerator
and denominator of the diluted EPS computation.
         Basic  EPS  excludes  dilution  and  is  computed  by  dividing  income
available to common stockholders by the weighted-average number of common shares
outstanding  for the period.  Diluted EPS reflects the  potential  dilution that
could occur if securities (purchase options,  warrants,  convertible securities,
or contingent  stock  agreements) or other  contracts to issue common stock were
exercised or  converted  into common stock or resulted in the issuance of common
stock that then shared in the earnings of the equity. Diluted EPS is computed in
a similar manner as fully diluted EPS pursuant to Opinion 15.
         FAS 128 is effective for financial  statements for periods ending after
December 15, 1997,  including  interim  periods,  with earlier  application  not
permitted.  The  application of FAS 128 is not anticipated to have a significant
impact on the presentation of UCB's results of operations.
         In conjunction  with the FASB's project  concerning the presentation of
EPS (FAS 128),  the Board issued  Financial  Accounting  Standards  No. 129 (FAS
129),  "Disclosure of Information about Capital Structure." FAS 129 includes the
disclosure requirements regarding capital

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<PAGE>

structure  and related  disclosures  previously  required by APB Opinion No. 10,
"Omnibus  Opinion - 1966," APB Opinion No. 15,  "Earnings per Share,  " and FASB
Statement  No. 47,  "Disclosure  of  Long-Term  Obligations"  and applies  these
requirements to all entities, public and nonpublic, that have issued securities.
The statement  requires  disclosure in the  financial  statements  the pertinent
rights and  privileges,  including any liquidation  preferences,  of the various
securities  outstanding  and the number of such shares  issued upon  conversion,
exercise, or satisfaction of required conditions during at least the most recent
annual fiscal period and any subsequent  interim periods  presented.  FAS 129 is
effective for financial  statements  for periods ending after December 15, 1997.
The  application of FAS 129 will have no impact on the current  presentation  of
UCB's financial condition or results of operations.
         The FASB  also  issues  exposure  drafts  for  proposed  statements  of
financial accounting standards. Such exposure drafts are subject to comment from
the  public,  to  revisions  by the FASB,  and to final  issuance by the FASB as
statements of financial accounting standards. Management considers the effect of
any proposed statements on the corporation's  consolidated  financial statements
and monitors the status of any changes to issued exposure drafts and to proposed
effective dates.
         UCB and its  subsidiaries  are subject to regulation and examination by
state and federal bank regulatory agencies and are subject to the accounting and
disclosure requirements of the Securities and Exchange Commission.  There are no
pending material regulatory recommendations or actions concerning UCB with which
management has not complied.

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<PAGE>





                                    SIGNATURE




      Pursuant to the  requirements of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                     UNITED CAROLINA BANCSHARES CORPORATION



May 12, 1997                           By /s/ John F. Watson
                                              -------------------------     
                                              Controller



May 12, 1997                           By /s/ Ronald C. Monger
                                              -------------------------
                                              Executive Vice President/
                                              Chief Financial Officer




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